National Industrial Recovery Act
National Industrial Recovery Act
United States 1933
The National Recovery Administration, or NRA, was instituted in the wake of the passage of the National Industrial Recovery Act (NIRA) into law in 1933. The NIRA was one of the earliest efforts by President Franklin D. Roosevelt and his administration to ease the economic depression into which theUnited States had been plunged when the stock market crashed in 1929. The purpose of the NIRA was to encourage the formation of industrial cartels. Supposedly, the existence of cartels would put a stop to the cutthroat price-cutting that was integral to competitive business practices at the time yet would still allow businesses a reasonable profit; with these profits, they could afford to employ greater numbers of workers. In exchange, however, businesses had to set up a code, one of whose provisions, Section 7a, granted workers in that industry the right to bargain collectively "with representatives of their own choosing." Once the government cracked the door on collective bargaining, it was soon knocked down by labor organizers, who convinced workers that the president was essentially calling on them to join unions.
- 1919: With the formation of the Third International (Comin-tern), the Bolshevik government of Russia establishes its control over communist movements worldwide.
- 1924: In the United States, Secretary of the Interior Albert B. Fall, along with oil company executives Harry Sinclair and Edward L. Doheny, is charged with conspiracy and bribery in making fraudulent leases of U.S. Navy oil reserves at Teapot Dome, Wyoming. The resulting Teapot Dome scandal clouds the administration of President Warren G. Harding.
- 1929: On "Black Friday" in October, prices on the U.S. stock market, which had been climbing wildly for several years, suddenly collapse. Thus begins the first phase of a world economic crisis and depression that will last until the beginning of World War II.
- 1931: Financial crisis widens in the United States and Europe, which reel from bank failures and climbing unemployment levels. In London, armies of the unemployed riot.
- 1934: Austrian chancellor Engelbert Dollfuss, who aligns his nation with Mussolini's Italy, establishes a fascist regime in an attempt to keep Austria out of the Nazi orbit. Austrian Nazis react by assassinating Dollfuss.
- 1934: Dionne sisters, the first quintuplets to survive beyond infancy, are born in Canada.
- 1937: Japan attacks China, and annexes most of that nation's coastal areas.
- 1939: After years of loudly denouncing one another (and quietly cooperating), the Nazis and Soviets sign a nonaggression pact in August. This clears the way for the Nazi invasion of Poland, and for Soviet action against Finland. (Stalin also helps himself to a large portion of Poland.)
- 1942: Axis conquests reach their height in the middle of this year. The Nazis control a vast region from Normandy to the suburbs of Stalingrad, and from the Arctic Circle to the edges of the Sahara. To the east, the Japanese "Co-Prosperity Sphere" encompasses territories from China to Burma to the East Indies, stretching deep into the western Pacific.
- 1945: April sees the death of three leaders Roosevelt passes away on 12 April; the Italians execute Mussolini and his mistress on 28 April; and Hitler (along with Eva Braun, propaganda minister Josef Goebbels, and Goebbels's family) commits suicide on 30 April.
- 1949: Establishment of North Atlantic Treaty Organization (NATO).
Event and Its Context
Economic Crisis in the United States
When Franklin D. Roosevelt (1882-1945) was sworn in as president in 1933, the economy of the United States was near total collapse. After declaring a bank holiday, Roosevelt and his administration set about creating policy to stimulate the economy. The Roosevelt administration was not the sole actor on this stage, however; at the instigation of the American Federation of Labor (AFL), Senator Hugo Black (1886-1971) of Alabama introduced legislation in April 1933 to decrease the workweek to 30 hours, a law that the Senate promptly approved. Roosevelt's advisors were opposed to this unilateral adjustment of wages and hours, however. They believed that it was bad policy for the government to arbitrarily set wages and hours; moreover, they were convinced that the United States Supreme Court would find such legislation unconstitutional. Therefore, the president's advisers sought to create mechanisms that facilitated a planned adjustment of factory output, hours, and wages based upon the rationalization of competitive conditions. Rather than oppose the Black bill, however, the administration proposed to replace it with another piece of legislation that would utilize this idea of rationalizing business competition.
Theoretical Basis of the National Recovery Act
The National Industrial Recovery Act, passed early in the summer during the famous First Hundred Days of the administration, was planned to "encourage national industrial recovery, to foster fair competition, and to provide for the construction of certain useful public works." In fact, the purpose of the act was to help steady the economy. The intent was to foster confidence on the part of the American public by stabilizing wages and creating more full-time jobs in which to earn these wages. President Roosevelt and Labor Secretary Frances Perkins (1882-1965) were less interested in supporting unionism than in raising labor standards. However, to gain the support of organized labor for the bill, Section 7a was added at the insistence of AFL president William Green (1873-1952), who thought the clause would guarantee workers the right to bargain collectively, which had long been a goal of the AFL.
To achieve these ends, advisors to Roosevelt proposed to allow the creation of a number of cartels, which were to be self-regulating and would allow members to control output, prices, and wages within the industry. When Roosevelt assumed the office of the presidency, fully 25 percent of American workers were without jobs, and many of those who had retained jobs were working only part-time. Advisors close to the president placed much of the blame for this condition upon the competitive nature of capitalism, in which companies tried both to increase sales of their product by cutting prices, and to control the costs of doing business by cutting wages.
To end this trend, members of the "brain trust" (an informal group of advisors consisting of Raymond Moley, Rexford G. Tugwell, and Adolph A. Berle, Jr.) proposed to allow industries to form cartels and regulate output among themselves, which would also allow them to regulate the wages of their workers at a higher rate than was the current practice at the time. Although Roosevelt's cousin (and political idol) Theodore Roosevelt made his reputation through his "trust-busting" activities, he had in fact broken up only those trusts that he determined were "bad" for the country. Rather than break up monopolies, however, the younger Roosevelt proposed to encourage their growth, as long as these cartels agreed to abide by certain conditions. Firms wishing to form a cartel had to submit their code to the administration for approval. These firms also had to pledge that they would not engage in monopolistic practices, especially those practices concerned with consumer prices, which would have to be submitted to the government for its approval. Members of a cartel were also restrained from prohibiting other firms within the industry from joining the cartel. Members within each cartel also had to agree to abide by Section 7a of the act, which guaranteed employees the rights of organization and collective bargaining.
To monitor this legislation, a new government agency was mandated, the National Recovery Administration (NRA). The NRA was led by a retired brigadier general, Hugh Johnson (1882-1942), who had served as the War Department representative on the War Labor Board during World War I. After resigning his commission in 1919, Johnson worked for financier Bernard Baruch and as an executive with Moline Plow. From his experience with government planning in World War I, Johnson became firmly convinced of the desirability of a government-business partnership in the management of the country's economy. Because of his service with the War Labor Board, Johnson also realized that the cooperation of labor was required in this endeavor, and to that end he recruited a leading labor lawyer, Donald Richberg, to assist him in the administration of the agency.
For the administration's point man in the Senate, Robert Wagner (1877-1953), Section 7a was the heart of the bill; indeed, he stated that he could not support the bill without its inclusion. Wagner had long been an advocate of legislative and administrative action to achieve fundamental social change. Wagner had been frustrated during the Hoover years (1928-1932) and complained that the potential of law to play a constructive role was limited by the belief that its role was to prevent certain behaviors, rather than to encourage others. Senator Wagner viewed the NIRA as a means of freeing the law from these fetters.
Passage of the NIRA into Law
In what was to become typical Roosevelt fashion, several different groups both within and without the administration were working on recovery legislation. Once the groups had developed plans, Roosevelt called them into the White House to work together to prepare the bill he would submit to Congress.The group that advised Roosevelt on recovery legislation consisted of Secretary of Labor Frances Perkins, Director of the Budget Lewis W. Douglas, Rexford G. Tugwell, assistant Secretary of Commerce John Dickinson, Senator Robert Wagner, and General Hugh Johnson and Donald Richberg from the proposed NRA. This group worked out a bill that the president submitted to Congress on 17 May; by 13 June the NIRA was passed by both houses of Congress, and the president signed it into law three days later.
Differing Attitudes of Labor and Management Toward the NIRA
Labor enthusiastically embraced Section 7a of the legislation. William Green, president of the AFL, described the section as a "Magna Carta" for labor, and Daniel Tobin, president of the International Brotherhood of Teamsters (IBT), declared the bill as "about as good, or better, than we expected." Most famously, organizers from John L. Lewis's United Mine Workers (UMW) used Section 7a to appeal to unorganized workers, telling them, "The President wants you to join the union." Workers in the second half of 1933 and 1934 responded to these appeals in huge numbers, not only in mine work and other already established craft unions, but also in industries that had heretofore been unorganized, particularly automobile, rubber, and electrical manufacturing.
Management, on the other hand, was not enthusiastic about reintroducing labor unions into their businesses, particularly after just having rid themselves of most of them in the early 1920s. To maintain the appearance of worker representation (part of the "American Plan" proposed to members by the National Association of Manufacturers), many companies had adopted the practice of hosting company unions. Through these paternalistic organizations, companies were able to control most areas of employer/employee relations, while at the same time denying workers the right to collective bargaining. Because Section 7a did not outlaw company unions but merely stated that workers had the right to choose a union, companies attempted to "encourage" workers to choose the company union as their bargaining representative. Many workers resisted this ploy, however, and sought representation from unions affiliated with the AFL. Workers employed in unorganized sectors of the manufacturing economy were particularly adamant in seeking out independent unions, even though the AFL had no craft union for them to join. Workers in the automobile and rubber industries were particularly insistent. Workers in the Firestone and Goodyear Rubber plants formed federal unions, as did automobile workers in Cleveland and Toledo, Ohio, and other minor automobile manufacturing centers around the Midwest. (Federal unions were a kind of protoindustrial union, where the AFL organized workers while negotiating jurisdictional control of the workers organized.)
Legacy of the NIRA
As a result, the various industrial boards set up to administer price and production controls spent much of their time adjudicating labor-management disputes instead. The resultant backlog discouraged not only management but also the labor unions, which had been the greatest proponents of the NIRA. The ultimate result was that the legislation was in fact a dead issue even before the United States Supreme Court administered the coup de grâ ce in 1935 by declaring the act unconstitutional. Despite what may be termed the failure of the NIRA, however, the legislation introduced institutions that remained a part of the government-labor-business sphere during the remainder of the New Deal era and beyond. The most important aspect of the NIRA that remained was the National Labor Board, which was transformed slightly by the Wagner Act of 1935 and remains the major institution at the government level handling labor-management disputes to this day. Perhaps most importantly, the NIRA signaled a change in government policy towards labor-management disputes, in that it could no longer be assumed that the federal government would merely allow business to use the courts to control their labor problems.
Green, William (1870-1952): The second president of the American Federation of Labor, this former coal miner was the conservative voice of labor during the New Deal years. Green supported the NIRA and the agency that the legislation created, the National Recovery Administration, but quickly became disenchanted with the lack of results.
Johnson, Hugh (1882-1942): In 1933 President Franklin D.Roosevelt appointed Johnson as the person to lead the National Recovery Agency that had been created by the National Industrial Recovery Act. Johnson was responsible for leading the agency's effort to organize industries under the fair trade codes that trade associations set up by companies within these industries. Both industry and labor quickly became disenchanted with the agency, however, and had stopped supporting the agency well before the Supreme Court declared it unconstitutional in 1935. Johnson later became an administrator with the Works Progress Administration, before leaving government to work for the Scripps-Howard newspaper chain.
Lewis, John L. (1880-1969): Lewis was long-time president of the United Mine Workers (1920-1960). Autocratic in his methods, Lewis saw the well-being of his union threatened by the antiunion drives of the 1920s. With the passage of the NIRA in 1933, particularly Section 7a, Lewis instructed his organizers to tell miners that "the President wants you to join the Union."
Roosevelt, Franklin Delano (1882-1945): Following in the footsteps of his cousin Theodore Roosevelt, Franklin Roosevelt assumed the office of the presidency in 1933, during the depths of the Great Depression. Roosevelt was swayed by arguments that one of the causes for the depression was cutthroat competition by businesses, which caused overproduction. Roosevelt's disappointment with the Supreme Court decision abolishing the NRA led him to "pack" the Supreme Court with justices whose viewpoints aligned with his own.
Wagner, Robert F. (1877-1953): A native of Germany, Wagner served in the New York legislature and as a Supreme Court justice in that state. In 1926 Wagner was elected to the United States Senate, were he became labor's strongest advocate in that body. In 1933 Wagner helped write the National Industrial Recovery Act and insisted upon the clause known as Section 7a, which granted workers the right to join a union "of their own choosing." Franklin D. Roosevelt appointed Wagner as the first chairman of the National Recovery Administration.
Badger, Anthony J. The New Deal: The Depression Years,1933-1940. New York: Noonday Press, 1989.
Brinkley, Alan. The End of Reform: New Deal Liberalism in Recession and War. New York: Alfred A. Knopf, 1995.
—Gregory M. Miller
National Industrial Recovery Act (1933)
James G. Pope
When Franklin D. Roosevelt was inaugurated in March 1933, almost 13 million workers—about 25 percent of the workforce—were unemployed. Industrial production was barely half what it had been in 1929. While millions faced starvation, dairy farmers poured fresh milk into the dirt to dramatize the fact that overproduction and cutthroat competition had driven milk prices so low that the farmers could not recover their costs.
To pull the nation out of this crisis, the new administration developed a strategy with two central elements: (1) spreading the available work among larger numbers of employees and (2) increasing the purchasing power of the people. To spread the work available to more workers, the government would limit the number of hours already-employed workers could work, thus reducing the labor performed by these workers and forcing employers to hire new employees from among the unemployed. To increase purchasing power, the government would establish minimum wage rates and launch a public works program (construction projects including schools, hospitals, and bridges) that would pump federal funds into the economy. Instead of restricting hours and wages directly through legislation, the administration proposed to work through private trade associations, which had been unsuccessfully attempting to reduce hours and regulate competition on their own.
On June 16, 1933, President Franklin D. Roosevelt signed the National Industrial Recovery Act (NIRA) (P.L. 73-67, 48 Stat. 195) into law to counter what the act called the "national emergency" that had resulted in "widespread unemployment and disorganization of industry." The act was intended to encourage
cooperative action among trade groups, to induce and maintain united action of labor and management under adequate governmental sanctions and supervision, to eliminate unfair competitive practices, to promote the fullest possible utilization of the present productive capacity of industries, ... to increase the consumption of industrial and agricultural products by increasing purchasing power, to reduce and relieve unemployment, [and] to improve standards of labor.
CODES OF FAIR COMPETITION
The NIRA called on private businesses, organized in trade associations, to propose industrial "Codes of Fair Competition" for their industries. Normally, antitrust laws would have prohibited such anticompetitive practices, but the act exempted the codes from antitrust restrictions. Upon approval by the president, the codes became legally binding on all participants in the industry concerned. The act gave the president extensive power to shape the codes. If he wished, he could demand that the trade association accept changes as a condition for his approval. In the event that he received no acceptable code for an industry, he could hold hearings and impose a code of his own.
Later, the act would be criticized for its alleged lack of effective enforcement mechanisms. But on paper those mechanisms appeared strong. The act commanded the district attorneys of the United States to obtain court orders barring code violations. In addition, violators could be criminally prosecuted and punished by fines of up to $500 per violation. Most impressively, the act empowered the president to require that all businesses in an industry obtain a federal license as a condition of doing business in or affecting interstate commerce. Having done so, he could then revoke the license of any code violator—the business equivalent of a death sentence.
To administer the recovery program, President Roosevelt established the National Recovery Administration (NRA), headed by General Hugh S. Johnson. Early on, Johnson decided to rely on consensus and voluntary consent instead of using the act's mechanisms for imposing and enforcing the fair competition codes. The president embraced this conciliatory policy. Johnson feared that if he attempted to force businesses to cooperate, the courts, which at that time tended to restrict economic regulation, might declare the act unconstitutional. Instead of using the law to force compliance, Johnson sought to mobilize public opinion in support of the codes. Businesses that complied would display a blue eagle, the emblem of the NRA, on their product labels or in store windows. Violators would be denied this privilege, triggering a consumer boycott.
During the two years of the program's existence, more than 500 codes were enacted. The standard code contained wage and hours provisions, the essential elements of Roosevelt's recovery strategy. In return for accepting these provisions, businesses in many industries insisted on adding production restrictions and price minimums. Unwilling to use the act's compulsory mechanisms, the NRA had no alternative but to go along. In especially disorganized industries, such provisions might have helped to avoid destructive price declines. But historians believe that in most industries these provisions held back recovery and promoted the interests of the largest and most powerful corporations at the expense of others. The maximum hours provisions did force some work sharing, and it is possible that as many as 2 million unemployed workers obtained jobs as a result. On the other hand, it does not appear that the wage minimums were sufficient to offset price increases.
LABOR UNDER THE BLUE EAGLE
Section 7(a) of the NIRA required that each code prohibit employers from interfering with the workers' right to organize unions. This was the first such protection ever to appear in a generally applicable national statute. Regarded by many as a symbolic concession to labor, section 7(a) turned out to be the act's most contentious provision and arguably the most influential in the long run. As of early 1933, the unionized labor was down to fewer than 3 million members from a high of more than 5 million in 1920. But the year 1933 saw a spectacular upsurge in union organizing. In some industries, like coal and garment manufacturing, this recovery was already far along before section 7(a) was enacted. But in the great mass production industries of automobile, steel, and rubber, where previous organizing efforts had been crushed by mass firings and blacklisting, the upsurge came only after section 7(a) gave workers the confidence to organize.
By themselves, these early gains meant little. The unions had yet to win recognition or contracts from their employers. Employers interpreted section 7(a) to permit the establishment of company-dominated unions, and the Roosevelt administration agreed. Many employers also discharged workers and refused to recognize unions in violation of section 7(a), but the administration was reluctant to bring enforcement actions or even to withdraw the blue eagle. As a result, the unions that made lasting gains during the NIRA period did so through strike action. For example, the United Mine Workers (UMW) increased its membership by more than 300,000—by far the largest gain of any union—but only after local activists organized a powerful strike movement against opposition not only from the coal operators but also from their own union president, John L. Lewis. Unfortunately for the miners, Lewis, who had hand picked the labor representatives on the NRA coal boards, used the boards to defeat competing unions and to consolidate his dictitorial control over the miners' union. This development contributed to the loss of democracy in other industrial unions, which looked to the mine workers for leadership and support.
COURT CHALLENGE AND THE FAILURE OF THE NRA CODES
On May 27, 1935, the day known as "Black Monday" to supporters of the New Deal , the U.S. Supreme Court struck down the act's code-making provisions in A.L.A. Schechter Poultry Corp. v. United States. Hugh Johnson had been correct to fear the unconstitutionality of forcing industries to accept the codes. After Schechter, Congress replaced the NIRA with more narrowly focused statutes. Under these statutes, government agencies, instead of representative boards, carried out regulatory and enforcement functions. Examples include the National Labor Relations Act of 1935, which protected the workers' right to organize unions, and the Fair Labor Standards Act of 1938, which set minimum wages and minimum hours.
The verdict of historians on the codes has been largely negative. Most agree that they did little to stimulate recovery, and that they tended to benefit large businesses at the expense of consumers and (although this is less clear) small businesses and labor as well. The reasons for failure are disputed. Some historians focus on the absence of strong presidential leadership to counter the demands of special interests and to ensure effective enforcement. Others point to the lack of clear legal directives in the act itself. Such directives could have prevented large corporations from shaping the codes to their benefit. Still others charge that the act embraced an overly ambitious concept of social cooperation and failed to confront the reality that groups with their own special interests tend to conflict with each other. But the act never received a genuine test. From the outset, administrators feared that the Supreme Court would hold the act unconstitutional. To avoid a constitutional confrontation, they refrained from using its strong provisions for shaping and enforcing codes. In a sense, then, the Supreme Court defeated the NIRA long before the Schechter decision finished it off.
One important piece of the NIRA did survive the Schechter decision. The act established an ambitious public works program and created the Public Works Administration (PWA) to administer it. Established barely a decade after the notorious corruption scandals of the Harding Administration (1921–1923), the PWA managed to spend more than $6 billion over a period of six years without any serious charges of corruption. Using a combination of direct spending, loans, and grants, the PWA contributed to thousands of construction projects including schools, government buildings, hospitals, subways, and bridges, most of which were built to high standards and many of which are still in service today.
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Alfred L. Brophy
When Franklin Roosevelt ran for president in 1932, the United States was in the midst of the Great Depression. He told delegates at the Democratic Party's nominating convention in Chicago in July 1932 that "I pledge you, I pledge myself, to a new deal for the American people." Roosevelt was elected in a landslide in November and the legislation that followed known as the "New Deal." The legislation was designed to provide jobs and a social safety net, stimulate the economy, and regulate business.
The heyday of the New Deal was 1933–1938. During his first hundred days in office, Congress passed and Roosevelt signed legislation for the National Industrial Recovery Act (NIRA), the Civilian Conservation Corps (CCC), the Tennessee Valley Authority (TVA), the Emergency Farm Mortgage Act, the Federal Emergency Relief Act, the Glass-Stegall Banking Act, and the Agricultural Adjustment Act (AAA). The amount of legislation was staggering and subsequent presidential administrations are always measured against what they do in the "first 100 days." Later New Deal legislation included the National Labor Relations Act, Indian Reorganization Act, Rural Electrification Act, the Gold Standard Act of 1934, Walsh-Healy Act, and the Fair Labor Standards Act. Other legislation established such government agencies as the Security and Exchange Commission, Social Security Administration, the Farm Security Administration, and the Works Progress Administration.
National Industrial Recovery Act
NATIONAL INDUSTRIAL RECOVERY ACT
National Industrial Recovery Act (NIRA) was the centerpiece of President Franklin D. Roosevelt's (1933–1945) initial New Deal programs that were aimed at reversing the economic collapse of the Great Depression. Enacted by Congress in 1933 during the president's First Hundred Days in office, the NIRA was designed to improve standards of labor, promote competition, reduce unemployment, and increase consumer's purchasing power. As the legislation went through Congress, it met with much debate and passed by a slim margin of seven votes.
Title I of the act attempted to accomplish the goals of the NIRA by creating the National Recovery Administration (NRA) to establish codes of fair competition, which were rules governing the wages, prices, and business practices of each industry. Representatives of firms in various industries joined NRA officials in drafting the codes. Although the codes were not intended to foster monopolies or discriminate against small business, applicable antitrust laws were temporarily suspended to prevent the NIRA from being challenged on grounds that it engendered unfair competition. Initially, the codes received wide public support, but over time that support diminished. Enforcement of the codes was limited, and the successes it did achieve, like the end of child labor in the textile industry, were eventually overshadowed by higher prices and limited production.
Title II of the act created the Public Works Administration (PWA) to award $3.3 billion in construction contracts for public projects. The PWA oversaw an enormous number of such projects, including the construction of schools, hospitals, post offices, courthouses, water systems, roads, bridges, and dams. The NIRA also included provisions for increasing minimum wages, limiting the hours in a workweek, and recognizing the right of labor to unionize and collectively bargain with management. Among the PWA's biggest successes are the construction of the Tirborough Bridge in New York City and the Hoover Dam in Arizona. Overall, the Public Works Administration completed 34,000 projects nationwide.
Three weeks before the NIRA's two-year expiration date in 1935, the U.S. Supreme Court unanimously declared the act unconstitutional. In the case of Schechter Poultry Corporation vs. the United States, the Supreme Court ruled that Congress had impermissibly delegated its legislative power to the National Recovery Administration. The NIRA ceased operations.
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