National Recovery Administration (NRA)

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NATIONAL RECOVERY ADMINISTRATION (NRA)

On June 16, 1933, President Franklin D. Roosevelt signed the National Industrial Recovery Act (NIRA), an ambitious effort to hasten recovery from the Depression and cure economic ills through public works spending and industrial self-government. The program for industrial self-government, which harked back to World War I when business and government had cooperated through the War Industries Board to mobilize American industry for war, was based on the assumption that businessmen, coordinated and assisted by the federal government, could bring about industrial recovery and social progress. Under industrial self-government, representatives of business, labor, and government would draft agreements, or codes, of "fair" business and labor practices for each of the nation's major industries. Among other things, the codes could include provisions for controls on prices, production, and marketing and were required to include provisions for minimum wages, maximum hours, and the right of workers to organize and bargain collectively. Through the codes, it was hoped, cutthroat competition, overproduction, labor conflict, and deflationary prices would be checked, leading the nation into a new era of prosperity and industrial harmony.

Roosevelt entrusted responsibility for implementing industrial self-government to the newly formed National Recovery Administration (NRA). Headed by Hugh S. Johnson, a former army officer and businessman, it had to chart a path through a bewildering maze of conflicting business and labor pressures. Less prosperous industries, such as cotton textiles and petroleum, generally favored codification in the hope that it would restore profitability. More prosperous industries, for example steel and automobiles, were less interested in codification than in putting brakes on it to forestall unwanted government interference. There were inter-industry conflicts between new and declining industries and intra-industry conflicts between large and small firms, regions or sections, and manufacturers and distributors. Moreover, labor expected to benefit greatly from the NIRA, while many businessmen were determined to minimize the influence of unions.

Johnson was in a difficult position for dealing with the conflicting pressures. The NIRA included coercive measures such as federal licensing and presidential authority to impose or modify codes to keep business, which under the ideology of industrial self-government would have the dominant voice, from turning code making into an orgy of profit taking at the expense of workers and consumers. But concerned about the constitutionality of NRA, Johnson was reluctant to use the coercive features out of fear they could lead the U.S. Supreme Court to rule against the NRA. In addition, he believed businessmen had to have the prospect of reasonable profits if they were to afford the higher labor costs inherent in NRA. Thus Johnson decided to depend upon the voluntary cooperation of business in codification and hope it would not lose sight of the public interest in its desire to restore profitability.

The NRA initially concentrated on those industries that were either strong supporters of industrial self-government or sufficiently organized through trade associations to permit speedy codification. The code for the cotton textile industry was the first to be completed. Approved by Roosevelt in July 1933, it provided for collective bargaining, reduced working days, and minimum wages. It also abolished child labor, achieving something that neither law nor constitutional amendment had been able to do in forty years. Despite these gains for labor, the Cotton Textile Institute, the industry trade association, dominated the drafting process and fashioned a code to its liking with the strong backing of Johnson, who wanted to get the industry codified quickly and use this bell-weather industry to let business know it had nothing to fear from the NRA. As a result, the industry got nearly everything it wanted, including strong production controls and industry dominance of the code enforcement agency.

During the summer and fall of 1933 codes for the nation's other largest industries as well as hundreds of smaller industries were drafted. With some exceptions, they followed the general pattern of the cotton textile code. Businessmen possessed a monopoly of information about their own industries, and when combined with "a lack of state capacity" and the weakness of labor, they held sway in the code-making process. Labor received some benefits in the form of maximum hours, minimum wages, and the right to have unions, although in many cases the wages were at very low levels, and unions were circumscribed by crippling qualifications or the steadfast determination of business to resist unionization on anything but its own terms. In return for these small concessions to workers, business got all manner of price, production, and marketing restrictions and was largely invested with the enforcement of the codes. The code for the burlesque industry even went so far as to restrict the number of times a stripper could remove her clothes each day. For the most part, representatives of organized labor and spokesmen for consumers were largely ignored in the drafting process and had little standing with the code authorities, the bodies that were charged with enforcement of the codes and were dominated by trade association members. In effect, when the nation was mired in the Depression and in need of immediate expansion of production, jobs, and income, the NRA permitted business to put in place restrictive policies that would actually hinder recovery.

As industries were drafting specific codes, they were asked by the NRA to adhere to a voluntary blanket code (the President's Reemployment Agreement) that Johnson introduced for all industries in July 1933. Providing for minimum wages and maximum hours, it was designed to speed codification, which was lagging in many industries, and inject some badly needed confidence into the economy. The code was to be in effect from August 1 to December 31, 1933, or until the employer's specific industry was codified. Businessmen who agreed to abide by the blanket code were to display the symbol of the NRA, a Blue Eagle accompanied by the words "We Do Our Part," on a placard in their window or on their products. Consumers were to give their business only to those firms that adhered to the code.

Johnson mobilized the nation behind the Blue Eagle with a war mobilization psychology reminiscent of the liberty bond drives of 1917 and 1918. The NRA orchestrated a great outpouring of ballyhoo and patriotic appeal replete with radio speakers, motorcades, torchlight processions, mass rallies, parades, and a nationwide speaking tour by Johnson. Businessmen and the public quickly enlisted in the NRA's army of Depression fighters. The Blue Eagle appeared on posters, billboards, flags, movie screens, magazines, newspapers, and numerous products. Beauty contestants had the Blue Eagle stamped on their thighs, and in Philadelphia fans cheered a new professional football team dubbed the Eagles after the NRA's icon. The Blue Eagle campaign was a success. The national surge around it helped quicken the pace of code drafting, and, according to NRA data, payrolls grew. The boomlet, however, did not last. Neither government nor private spending injected enough purchasing power into the economy to sustain it, and before long many of those who had been recently hired were again unemployed.

By the fall of 1933, the NRA was mired in controversy. Johnson, a highly emotional individual and prone to erratic behavior, drank too much, appeared to have an improper relationship with his secretary, and feuded with other government officials, businessmen such as Henry Ford who refused to cooperate with the NRA, and members of the press. Economists and consumer representatives claimed that businessmen were raising prices faster than wages. Labor leaders charged that businessmen were perverting workers' right to form unions by herding them into company unions. Problems with code compliance were widespread, and when the NRA did respond it seemed to crack down on the "little guy" and permit larger firms to violate the codes at will. In the cotton textile industry, for example, mill owners fired employees and rehired them as "apprentices," who could be paid less than the minimum wage. Former President Herbert Hoover and Senator Huey P. Long of Louisiana compared the NRA to fascism, an absurd charge but one many took seriously. Even many of the business supporters of industrial self-government began to lose confidence in the NRA as the agency's labor and consumer advisory boards started to raise disturbing questions about code provisions and call for greater participation by labor and consumer groups in the code authorities. If business could not run industrial self-government as it saw fit, many businessmen preferred to see the NRA scrapped. Reflecting the growing disenchantment with the NRA, many said the initials NRA had come to mean "No Recovery Allowed"; to others, they stood for "National Run Around."

The controversy engulfing NRA came to center on the price problem and labor policy. The NRA offered business the prospect of higher profits through price increases, and Johnson believed price increases were necessary if business was to afford the higher wages workers had been promised. Consequently, he consented to numerous price protection provisions in codes, including price controls through prohibition of sales below costs and, in a few industries, direct price-fixing. Taking advantage of these provisions, business began to raise prices substantially.

Opposition to the price-control measures developed quickly. Within the NRA the Consumers' Advisory Board and the Research and Planning Division criticized the price concessions made to business and called for Johnson to protect the interests of consumers. On Capitol Hill, Senators William Borah of Idaho and Gerald Nye of North Dakota charged that NRA's price policies were undercutting small businesses by eliminating the lower prices they often used to compete with larger firms. The National Industrial Recovery Board, a special board set up in early 1934 to look into the price issue, also lashed out at the NRA for hurting small businesses. Unable to quiet the growing clamor over prices, Johnson issued Office Memorandum 228 on June 7, 1934. It prohibited price-fixing arrangements in future codes, but because more than 90 percent of NRA-subject industries had already been codified, the memorandum had little practical effect. Nevertheless, it indicated that future NRA price policy would no longer be directed at large-scale price regulation.

In the matter of labor policy, the NRA followed a pro-management approach. Labor read Section 7a of the NIRA, which gave workers the right to have unions led by representatives of their own choosing, to mean workers could form their own independent unions and that if a union successfully organized a majority of workers in a company it could speak for all the workers. Johnson, meanwhile, said that workers were free to have a union, whether it be an independent or a company union, or not have a union, that employers were not under any obligation to reach an agreement with a union, and that individuals or minorities were free to do their own bargaining and make agreements separate from the union. Encouraged by Johnson's interpretation of Section 7a, business used company unions, multiple representation (more than one union representing workers in a company), the open or nonunion shop, and intimidation of workers to resist the organizing drives of those favoring independent unions. Except for limited gains in the coal, automobile, and steel industries, most organizing drives were unsuccessful.

To adjudicate disputes arising out of Section 7a, Roosevelt in August 1933 established the National Labor Board (NLB). Before long, however, Johnson and the NLB were at odds, for the NLB refused to support his position on multiple representation and was less tolerant of company unions. Frustrated by the intransigence of business and the failure to gain the full support of NRA, labor increasingly looked to strikes rather than the NRA to advance its interests. As strikes spread, Johnson rushed into disputes in the automobile, coal, textile, and steel industries, helping to arrange settlements that generally left labor disappointed and convinced that the NRA was a tool of management. In response to labor's criticism of NRA's policies, Roosevelt in June 1934 replaced the NLB with the National Labor Relations Board. Separate from NRA, it was to investigate and mediate labor disputes and hold elections for workers to decide what representation they desired, relegating the NRA to a secondary position in labor policy.

By the summer of 1934 it was obvious that Johnson, now on the verge of physical and mental collapse, had outlasted his usefulness. Officials inside and outside of the NRA said they could no longer work with Johnson, and heeding their warnings that he was dragging down NRA, Roosevelt removed him from the NRA in September. Johnson's removal eliminated a major sore spot for the NRA, but the more fundamental problems regarding policy remained.

Some believed the program of industrial self-government was so bankrupt it should be allowed to expire in June 1935 when the NRA's two-year charter was scheduled for renewal. Others concluded that Roosevelt should let the NRA die and preserve its best features through separate enactments. Roosevelt decided in February 1935 to ask Congress to renew the NRA on a more progressive basis than the original version, with specific requests for retaining Section 7a, restriction of price and production controls, and the application of the antitrust laws against monopolies. By this time Congress was cooling toward the NRA. Six weeks of hearings in the spring of 1935 by the Senate Finance Committee, which was stacked with opponents of the agency, provided critics with a field day to attack NRA. The hearings were accompanied by the release of a damaging report from the Brookings Institution. While granting that the NRA might have instilled some optimism into the economy in the summer of 1933, it castigated the program for retarding recovery, hurting wage earners, and reducing the volume of production. The combination of the Finance Committee's hearings and the Brookings report shattered what was left of the NRA's support on Capitol Hill.

Before Congress could act on Roosevelt's request, the Supreme Court brought an abrupt end to the NRA. Johnson had avoided testing the constitutionality of the NRA out of fear the court would rule against the agency. Roosevelt, however, believed the NRA's constitutionality must be confirmed if the codes were to be enforced. He choose a case involving the Schechter brothers of Brooklyn, New York, who had violated the live poultry code by ignoring wage and hour regulations, filing false sales and price reports, and selling diseased chickens. For the latter reason it came to be known as the "sick chicken" case. Johnson's original concern proved correct. On May 27, 1935, in a nine to nothing decision, the justices found that Title I of NIRA, the enabling measure for NRA, was an invalid delegation of legislative power to the president and an unconstitutional regulation of intrastate commerce. The ideal of industrial self-government did not die completely with the NRA, though. During the next two years Congress passed legislation continuing NRA-type price-and-production controls for the coal, petroleum, and retail trades industries. But beyond these industries, there was little support for industrial self-government as a means for overall economic recovery or social progress.

In its early months the NRA helped check the deflationary spiral and provided a temporary psychological boost to the economy and the nation's spirit. It also consolidated social innovations like the abolition of child labor, the right of workers to have unions, and the elimination of unfair trade practices. But ultimately the NRA failed. Its failure can be explained in part by Johnson's leadership. In the final analysis, however, the NRA failed because of its underlying premise. Industrial self-government was grounded in the belief that the various segments of the economy could look beyond their own interests and work together for the national welfare. This belief was naïve in the case of organized business. Starved for profits and often unwilling to accept labor as even a junior partner, it pursued its own interests and used the NRA to restrict production, raise prices, and thwart labor's aspirations. If the NRA had endured, the likely result, in the words of Ellis Hawley, "would have been economic stagnation, permanent unemployment, and the perpetuation of a depression standard of living, at least for the majority of the people."

See Also: BUSINESSMEN; COLLECTIVE BARGAINING; CONSUMERISM; JOHNSON, HUGH; NATIONAL INDUSTRIAL RECOVERY ACT (NIRA); NATIONAL LABOR RELATIONS BOARD (NLRB); SUPREME COURT.

BIBLIOGRAPHY

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John Kennedy Ohl

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National Recovery Administration (NRA)

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National Recovery Administration (NRA)