National industrial recovery act ended relationship

National Industrial Recovery Act | United States [] |

national industrial recovery act ended relationship

On a practical level, this meant that industrial relations should be organized in such a A major attempt at national economic planning ended abruptly. June 16, Congress passes the National Industrial Recovery Act (NIRA) and. modified in under the National Industrial Recovery Act. The amended code contained a . Following the shutdown period, production was high through the end of the . relationship between Roosevelt and Henry Ford Despite the. National Industrial Recovery Act [1] () James G. Pope When Franklin D. Examples include the National Labor Relations Act of , which protected the . the successes it did achieve, like the end of child labor in the textile industry.

With the formation of the Third International Comin-ternthe Bolshevik government of Russia establishes its control over communist movements worldwide. Fall, along with oil company executives Harry Sinclair and Edward L. Doheny, is charged with conspiracy and bribery in making fraudulent leases of U. Navy oil reserves at Teapot DomeWyoming. On " Black Friday " in October, prices on the U. Thus begins the first phase of a world economic crisis and depression that will last until the beginning of World War II.

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. Austrian chancellor Engelbert Dollfusswho 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. Dionne sisters, the first quintuplets to survive beyond infancy, are born in Canada. Japan attacks China, and annexes most of that nation's coastal areas.

After years of loudly denouncing one another and quietly cooperatingthe 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. 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. 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 Braunpropaganda minister Josef Goebbels, and Goebbels's family commits suicide on 30 April.

Roosevelt was sworn in as president inthe 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 AFLSenator Hugo Black of Alabama introduced legislation in April 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.

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 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 Greenwho 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. 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.

After resigning his commission inJohnson worked for financier Bernard Baruch and as an executive with Moline Plow. Nearly everyone in the industry welcomed the National Recovery Administration NRAhoping that it would prevent fluctuating rubber prices and bring order to industry.

By the rubber tire market was dominated by the "Big Four" tire rubber firms: These companies produced tires that were sold to automobile manufacturers as "original equipment.

The smaller firms served local markets and generally sold at the lowest possible price while the "Big Four," aimed for the highest prices. Throughout the s, however, the industry structure began to change. Rubber costs were unstable, and toward the end of the decade automobile sales declined, which affected the Big Four. As a result the larger firms began moving into the replacement market and began producing cheaper lines of tires.

Some of the smaller firms shifted to producing specialty tires, but most could not compete. In there were tire manufacturing firms and by there were only Unlike other prominent industries, such as automobile or cotton textile manufacturers that negotiated primarily over labor issues when drafting NRA codes, the rubber tire industry fought almost exclusively over distribution practices. At first the code looked promising; tire manufacturers unanimously agreed not to sell tires below cost.

There was little agreement, however, on the matter of production controls. Three of the Big Four favored a production and sales quota plan. Firestone was the maverick and instead proposed a flexible plan where prices would be set according to the size of the company.

New Deal - HISTORY

The smallest firms would be able to charge the lowest price. Goodrich, Goodyear, and U. Rubber remained supporters of production quotas. Five of the smaller companies represented on the industry's eight-member Code Committee favored the Firestone plan. It was this plan that was approved in the final draft of October This decision was met with an uproar as many considered the plan to be blatant price-fixing.

When the NRA finally approved a code at the end of October, the Firestone plan was conspicuously absent as was the production quota plan. The NRA administrators hoped that several months might bring a consensus on controlling the stability of prices.

The stalemates never dissolved and the adopted code was completely ineffective. It took five months of bitter negotiations before a code was approved in May Immediately afterwards accusations of noncompliance began flying. The tire industry condition was recognized as dire and if ever a situation required the declaration of an emergency, the tire industry was it. The emergency provisions classified tires into four price levels based on their quality of manufacture.

A flexible price system was used but not between companies like the earlier Firestone plan but between products. This code was, critics objected, price-fixing and soon proved a failure. Next manufacturers pushed for a long-term cost control plan. The industry presented a cost report to the NRA in June based on the current cost of raw materials. The NRA, however, refused to consider the plan because it would raise prices for the consumer. It would only accept the plan if it changed the value of raw materials.

Neither side would budge. The last resort of the industry was to petition the NRA to modify its emergency price provisions by raising the minimum prices. The NRA agreed but the eventual changes, effective on August 27,were still too low and too late to help the industry. The NRA tire manufacturing and retail codes were not only a major failure but also likely contributed to even greater industry strife and price wars.

Most of the codes, approximately four hundred, prohibited sales of goods below cost of production. In practice, many businesses did not always follow the plain meaning of this term and tended to substitute "price" for "cost.

A few codes, such as in lumber, cleaning and dyeing, and coal, actually contained language that allowed for direct price-fixing. These industries had traditionally engaged in price wars that threatened the existence of smaller firms within the industry. Deputy administrators pursued several strategies for controlling prices set by the codes. One path was through what were known as price-filing plans.

These were placed into codes and called for the filing of current and future prices, required the identification of sellers, and prohibited deviation from filed prices without notifying the code authority. Penalties could be meted out to those who failed to comply. Other methods to control minimum prices were placed in codes. Some attempted to place into their codes existing geographical relationships so as to preserve existing avenues for distributing goods.

Others tried to regulate bidding practices for winning new orders. Generally, the approach to standardize costs and sales practices in the codes presented an incredibly diverse collection of restrictions on economic competition. Over 60 industries approached the control of prices by controlling production. Limitations were set on machine use or plant hours, production quotas, and even, in four codes, provisions for limitations on inventory control.

These all restricted the productive capacity of industries. General Johnson tried to discourage production controls but admitted there were cases where they might be useful such as in natural resource industries like oil or timber. Provisions were also set up for enforcing the codes. This provided the punishment approach for not falling into line. The amount of requirements differed from code to code and business was often reluctant to punish its own members. Many code authorities preferred instead to use their power to make exemptions for industries not willing to comply with the codes and interpret the code language in a favorable light for those industries.

While every code authority did include government members appointed by the NRA, usually they were part-time, unpaid, and given little or no power to vote.

When NRA administrators did not have duties elsewhere and were able to attend code authority meetings, their presence was usually negligible. The drift of the code authorities toward favoring the larger more economically powerful companies or groups of companies gradually became apparent.

In practical terms, the larger and securely established trade associations businesses having a common interest in a particular industry controlled the process. Though some allowance was made for legally required labor clauses, what began to emerge was a system of business cartels. To substantiate this claim, they pointed to the gradual rise in prices for many goods and services. But Johnson was not concerned about rising prices.

Since prices had collapsed as a result of the Great Depression and the new costs imposed on industry by the codes for wage increases and work hour reductions made price raises inevitable in many cases. In fact prices needed to rise according to Johnson and the NRA staff. Otherwise numerous shaky businesses trying to recover from the Depression would be driven into bankruptcy.

What did alarm Johnson and the NRA staff was that prices of goods were rising faster than wages paid to workers. According to the overall NRA recovery plan, wages would rise with prices. The increased income would give more purchasing power to consumers. What was essential to the program was balance between price changes and wage changes. If business cartels increased prices beyond those justified by the new costs of production, then the usefulness of any increase in wages would be negated.

By January growing evidence was suggesting that this is exactly what was happening. Business self-restraint was failing and many businesses were cooperating to produce cartels. Suspiciously large price increases in certain commodities goods were eating away at any benefit of increased wages. Thus the drive to create increase purchasing power of the public was working in reverse.

The public was quickly becoming disenchanted with an economic recovery program that brought higher prices instead of better jobs. In October Johnson decided it was time to counterattack. He started a "Buy Now" program in an attempt to encourage a consumer buying spree. This, it was thought, would stimulate enough spending to offset a drop in business confidence.

With business confidence restored, there would be proof that the NRA was working and that businesses should follow the codes and cooperate with the code authorities.

General Johnson envisioned the campaign to be a reenactment of the Liberty Bond drive he had undertaken during World War I. He soon discovered, however, that the same level of moral enthusiasm was not present. The campaign proved a dismal failure because consumers had very little to spend as the public grew exasperated with the Blue Eagle. If there were fears about the failure of the recovery program before, there was little doubt by the end of October.

By the fall of it had become clear that noncompliance with the codes was widespread. The temptation to violate the provisions of the codes was just too great. The competitive advantages over rivals who followed the codes were enormous. Wage slashing and "chiseling," the dumping of goods on the market at below the code cost, became common.

Once it became evident that certain businesses in a given industry were violating the codes, economic self-interest reasserted itself. Even those businesses committed to the NRA were ultimately compelled to violate the codes in order to compete with those businesses that had no qualms about ignoring the NRA. A few non-complying businesses in an industry could force the rest to abandon the codes in a vicious circle.

Gradually the traditional competitiveness found its way back into the economic system. During this period code-abiding businesses demanded that the NRA take steps to curb violations.

By late the NRA put greater emphasis on compliance and created an independent Compliance Division, a National Compliance Board, and regional compliance offices in every state.

The credibility of the NRA was at stake and a new emphasis on punishing violators ran through the agency. But if voluntary cooperation proved difficult, the problems posed by enforcing compliance would prove insurmountable. The codes were often very detailed and overly ambitious in many cases.

Sometimes they included the smallest details of sales transactions in less organized industries like the service industry. Therefore violations were often difficult to detect. Businesses monitoring compliance in the industry was one thing, but the extent of highly detailed management that would have been required for government to oversee business compliance with the codes was never contemplated.

A few well-publicized prosecutions might have delayed the breakdown in compliance, but the most frequent violators were small businesses on the verge of bankruptcy. Attempts to penalize these businesses, which usually had nothing to lose, would only bring worse publicity for the program.

Many within the agency now began to fear that the NRA was embarking down a dangerous path toward regulating industries. Compliance with the codes could only be assured by a much larger bureaucracy, and business would never be sympathetic to a development such as this.

The NRA was stuck in a quandary. Without more enforcement, it would lose the support of those willing to comply, with more enforcement, opposition to the NRA would only increase.

Although both consumers and labor were increasingly vocal in their objections to the NRA, the majority of the complaints actually came from the increasing disharmony within industry.

The inevitable conflicts between manufacturers and distributors, large firms versus smaller firms and chain stores versus independents could no longer be resolved in the marketplace. Resolving conflicts would have to come through political negotiations and the decisions of code authorities.

Frequently businesses were put in the position of judging their competitors. The losers of NRA decisions were quick to conclude that their rivals were simply making a business maneuver by using the code and that the code authorities were discriminating to put them out of business.

Inevitably the Roosevelt administration would be caught in the middle of such confrontation. The old antitrusters in Congress, such as Senator Borah, were now convinced that the NRA was creating monopolies everywhere. Other departments within the administration became critical as well. The Department of Labor voiced concern about the accuracy of statistical reporting turned over to the code authorities. The Department of Agriculture was anxious about rising industrial prices.

The Federal Trade Commission thought the objectives of the NRA were a complete corruption of the purpose of government regulated competition.

national industrial recovery act ended relationship

Ickes accused the NRA of promoting monopoly as evidenced by the fact that he was receiving identical secret bids on public works contracts in terms of the dollar amounts proposed. Such marked similarities strongly suggested the companies were overly cooperating and essentially forming a cartel to corner the new government projects among themselves. Johnson and Ickes would spar at meetings of the Special Industrial Recovery Board, an interdepartmental agency designed to coordinate the activities of the NRA with the rest of the economic recovery program.

The board had other critics sitting on it as well. Johnson would usually get an earful from Secretary of Agriculture Henry Wallace and assistant Secretary of Agriculture Rexford Tugwell about the futility of price controls unless they were accompanied by government regulation. Johnson vehemently disagreed, arguing that the price controls in the codes did much to limit destructive price wars. He was also aware that opposition by key players in the Department of Agriculture was actually part of a broader political break between the Department of Agriculture and the administrator of the Agricultural Adjustment Administration George Peek who generally supported the NRA.

Partly due to his awareness of competing views within the Department of Agriculture, Johnson increasingly ignored the board, refused to provide it much information, and finally asked Roosevelt to abolish it.

In December Roosevelt agreed with Johnson and the board's functions were transferred to a coordinating agency, the National Recovery Council. The council was unlikely to give Johnson much difficulty. Through attempts to reorient the focus of the NRA had been thwarted by conflict within the agency that was now growing. These sections were primarily staffed with economists and sociologists who had little faith in industrial self-government. Johnson generally ignored their policy proposals but they were assertively challenging existing policy.

After much pressure in December he agreed to schedule public hearings on the so-called "price question" in January.

The complaints centered around areas where there was suspiciously too much similarity in price bids for government contracts and unjustified price increases, mostly in lumber, textiles, printing, steel, cement, coal and scientific instruments. In all only 34 codes were questioned. Days later Johnson would state publicly that the people complaining were mostly "chiselers," and knew very little about industry.

Nevertheless Johnson did concede to use labor and consumer advisors for the government representatives on each code authority. This policy, however, strongly opposed by industrial leaders, was never really implemented. The biggest problem, critics charged, was that small firms were at a disadvantage because they could not challenge larger firms by lowering prices. In many industries, large firms had advantages that smaller firms did not. These included access to credit, advertising, research funds, control of patents, and managerial talent.

national industrial recovery act ended relationship

The only advantage many small firms had was that they could offer lower prices, either by cutting wages or relocating, to undercut the larger firm's brands. It was therefore to the advantage of larger firms to make sure that prices and wages could not be used to undercut them.

The majority of codes seemed like efforts to eliminate any special advantages that made it possible for smaller firms to cut prices. There were exceptions, which Johnson pointed out, in retail, cotton textiles, and coal where reduction of competition did possibly maintain higher labor standards. Overall, however, it seemed to many that the codes were an effort to force small companies out of business.

Small business protested that it was unable to pay the same wages and charge the same prices as the larger firms. Also many small businesses could not continually afford legal and accounting fees to work through the code authority directives and reports. To an administration dedicated to helping the "little man," such complaints were politically devastating. They charged the agency with breeding monopoly. The President issued an executive order creating a formal way that small businessmen could appeal directly to the Federal Trade Commission if they were dissatisfied with the NRA's decision in a case.

On March 7,Roosevelt issued another executive order creating a National Recovery Review Board that would investigate the effect of codes on small business and recommend any changes. Johnson had considered the idea for such a board much earlier.

Johnson had actually recommended that the great criminal defense attorney Clarence Darrow chair it. Darrow agreed, but instead of reporting to Johnson as Johnson had instructed him, Darrow decided he would report directly to the president.

It was perhaps an indication that Darrow intended for the commission to make his findings public. However much the general's tough-minded persistence had induced him to dismiss critics in the past, it was becoming clear the NRA was reaching a crossroads. Johnson would have to face the two significant policy choices with which he was confronted.

The first was how to eliminate or reduce price and production controls. The second was how to develop more responsible code authorities through closer supervision. Johnson wavered on what to do. He recognized that there were price increases that gave some firms, mostly smaller ones, an advantage.

But price increases allowed average producers some profits and this was needed, in theory, if employment was to increase. Johnson also defended the NRA for its successes—wages had risen, child labor had been abolished, bankruptcies were down, and the right to join a union was being protected.

There were enough successes, Johnson pointed out, to merit reform of the NRA rather than dismantling it. As for eliminating price controls, one useful innovation came out of the January hearings. It was called the "emergency minimum price" concept. The approach was designed to simplify administration and get around complex accounting systems. Under this procedure, a code authority could determine when destructive price-cutting was so severe that it threatened an "emergency" for the industry.

The code authority could then determine the industry's "lowest reasonable cost" and submit this figure to the NRA administrator. If approval was given, the administrator would then declare an emergency and it would become an unfair practice to sell below what was found to be the "lowest reasonable cost.

This was not always easy given the complexity of a company's operations and the nuances of their bookkeeping in determining their overhead costs of doing business and outstanding debts as well as closely guarded details of various sales contracts. In developing greater supervision over abuse by code authorities, the NRA began to shift in the direction of greater government control.

At the end of Januarycode authorities were stripped of much power and were prohibited from modifying code provisions, exempting members, and engaging in enforcement. These functions were taken over by state compliance officers, while code authorities were to stick to investigation, education, and arbitration. In March the Bureau of Labor Statistics took over the duty of collecting data directly from the code authorities. Johnson reasserted his power to review, suspend, or veto code provisions.

Policy in the NRA was definitely changing, although gradually. As for the idea of "industrial self-government," it was the beginning of the end. Donald Richberg was named as its director. The committee was established as part of the National Emergency Council, which Roosevelt had established a year earlier. The National Planning Board enjoyed a longer lifespan. The Planning Board became the first experiment in peacetime national planning. The National Planning Board changed names several times: But its personnel remained remarkably continuous.

Over the course of the board's existence, planning committees were set up to study a broad range of social and economic projects. Committees studied land use planning, mineral policy, transportation, energy, and the impact of science and technology.

Regional planning agencies were also established in the Pacific Northwest and New England. Many of the studies remained unique for the remainder of the twentieth century. Another key policy decision that gave hope to small businesses and others was the creation of an advisory council on May 21,to coordinate the various advisory boards within the NRA. It was anticipated that internal disputes within individual industries could be settled more peacefully.

A new Policy Group was also created, which was made up of a single administrator and three deputy administrators, one each for trade practices, labor provisions, and code authority administration. Lyon's recommendations furnished the NRA's most controversial declaration of policy.

In a famous office memorandum of June 7,which came to be known as "Memorandum ," a new approach to price policy was outlined, essentially recognizing that the goal of the NRA was to create a free market. Code provisions, therefore, should strengthen, rather than limit, competition.

Strict safeguards were to be provided against price fixing, and price cutting would be considered unfair practice where it imperiled small business, labor standards, or tended to promote a monopoly. Lastly the fixing of minimum prices was to take place only in emergencies after full study by NRA economists.

Memorandum was hailed as an abandonment of all price-fixing. This perception brought an immediate wave of resistance from the business community who liked the ability to fix prices whenever they wanted. Johnson was forced to make a public statement to stifle the clamor. When he spoke he announced the new policy would not affect already approved codes. It would neither create changes nor be applied to codes near completion at the time the memo was issued.

As a result of the confusion, the NRA found it difficult to take any action at all. The great policy shift, like so many other attempts at reform within the agency, amounted to little more than organizational change. Critics now attacked the agency for the inconsistency between its policy and practice.

Matters were made worse by the release of the Darrow Board reports that found exactly what it had been looking for: In reaction an Industrial Appeals Board was established to handle small business complaints. It, however, dealt only with individual complaints of misconduct, not general reform of the program. Organized labor felt especially out of the picture by the summer of Johnson was not highly receptive to union representation and generally refused to get involved in labor disputes created by section 7 a.

As time went on small businesses and antitrusters continued to claim the NRA assisted big business to the detriment of the "little man. Frustration and disappointment was now so great that Johnson could not keep a lid on bickering within the organization. As pressured mounted, he had become increasingly emotional and would occasionally explode in an angry tirade and also took refuge in alcohol.

It became clear to Roosevelt that Johnson would have to go, and on August 21,the President summoned Johnson to the White House to discuss having him chair a commission to study recovery programs of several European nations. Johnson refused and immediately submitted his resignation. Clay Williams, former chief executive of R. Sidney Hillman of the Amalgamated Clothing Workers would represent labor.

Two economics professors, Leon C. Whiteside, would also serve on the Board. Policy, however, would be at the direction of Donald Richberg who would manage and formulate the broad policy of all recovery agencies from the Industrial Emergency Committee.

The press praised the new reorganization as a victory for the liberal economic men who advocated maintaining the price controls and protection from the antitrust laws while introducing policies that strengthened competition. Free markets were not feasible under such dire economic conditions, although it was believed that stronger institutions and controls could be created to accomplish the same ends that a free market would achieve. Planners, as well as business, continued to be hopeful of a fair, recovering economy.


In the end, however, the board only proved effective in balancing opposing interests, and it was never able to take effective action. Advocates of change scored minor gains, but the complexity of the problems and potential political fall-out from moving too far in one direction prevented any significant revision in the program.

Many industrial leaders still supported the idea of industrial self-government in a corporatist state, but only to the point at which concessions had to be made to labor. In the end, the Board's only real accomplishment was that it more skillfully presided over stalemates between parties. Congress was beginning to discuss whether to extend the agency. But it was increasingly apparent that divisions within the NRA were well established along rigid battle lines.

Official policy had strayed from the original provisions of the business codes, agency officials were exhausted, and the future of the program was uncertain.

There was little inclination to take action since Congress would decide the very existence of the program in a short period of time, with new hearings scheduled for January Once again economists within the NRA argued that price and production controls were economically harmful. The majority of business, however, made it clear that they opposed Memorandum and that industry still needed price protection.

Some way had to be found to stop destructive price wars and establish a minimum "price floor" below which prices could not fall. The hearing was followed by two other major hearings in earlybut little was gained in changes of policy. Lines of conflict within the agency went unchanged. Officials were left feeling that they were doing little more than biding their time until the program would be ended. With few friends for the agency as it shuffled toward the end of its two-year authorization by Congress, critics began to look toward a potential replacement.

Nobody supported an extension of the agency in its original form but the diversity of proposals were broad reflecting the different perceptions of the NRA's success or failure. Business was generally unhappy about its perceived lack of control, while labor believed business had too much control. There was little agreement regarding an alternative. Some industry leaders proposed adopting purely voluntary codes, while a few in Labor were advocating continuing wage and hours standards but eliminating the price controls.

Roosevelt's task was to arrive at a compromise between conflicting groups if the NRA was to be renewed. Donald Richberg advised the President that this could be done if sharper distinctions were drawn between restraining destructive competition and promoting monopoly. Roosevelt realized antitrust laws had to be revived, and in a message to Congress on February 20,the President recommended a two-year extension of the NRA in a revised form.

The new program would keep the labor provisions but limit price and production controls only to those industries who needed to protect small business, conserve natural resources, or prevent monopolies. The address was not as well-received as hoped, and considerable resistance to renewal was gathering in the Senate as the Senate Finance Committee was preparing to begin an investigation.

national industrial recovery act ended relationship

The Senate hearings were devastating. Much publicity was given to the NRA's enemies who insisted the agency was dominated by big business. There was conflicting evidence on the different effects of the code system in different industries. In the end the Senate approved a much watered-down measure. The NRA would only be extended a year, applying only to businesses engaged in interstate commerce and barring all price-fixing. Existing codes had to comply with the new provisions within 30 days.

The President's hopes lay in the House of Representatives where he had much greater support. The House Ways and Means Committee recommended a two-year extension. By the end of May, however, it became clear the Senate would not agree to such an extension.

In fact it looked as if a deadlock between the two chambers would block any resolution at all. The Ways and Means Committee pressed forward and scheduled a vote in the House for May 28,but the vote was never to be cast. A day before the House vote was scheduled, the Supreme Court handed down a decision that held the NRA and the entire system of codes unconstitutional. They would purchase live poultry in New York and Philadelphia, slaughtered the poultry according to Jewish law, and sold the poultry within the state of New York.

Enough evidence was gathered to obtain indictments against the corporation and its affiliate, as well as the four Schecter brothers who operated them. The Schecters were indicted for conspiracy to violate the codes and 18 specific violations of the code.

They were accused of filing false reports, violating the hours-and-wage provision, ignoring the health inspection requirements in the code, and selling "unfit chickens. The brothers appealed and in April the Circuit Court upheld the conviction on 17 counts. Two counts charging violation of the maximum hours and minimum wage provisions were ruled to be beyond the regulatory powers of Congress and therefore unconstitutional.

Having faced criticism in the past that the NRA was afraid to face a judicial test, the administration decided to make Schecter a test case. The case was argued before the United States Supreme Court on May 2 and 3 and decided on May 27,a relatively short time later.

The Schecter Brothers claimed that the provisions in the code under section 3 of the NRA were an unconstitutional delegation of legislative power by Congress. The government responded by arguing that the national crisis justified extraordinary measures. Writing for a unanimous majority, Chief Justice Charles Evans Hughes rejected the government's argument. Extraordinary conditions, he stated, do not create or enlarge constitutional power.

The adoption of codes by industries and their administration by the president were acts of legislative not executive authority. Only Congress had the authority to legislate matters effecting commerce. This authority could not be delegated to another branch of government. But Congress, Hughes held, only has the authority to regulate interstate commerce. It cannot regulate commerce exclusively within a state.

  • National Industrial Recovery Act of 1933
  • National Industrial Recovery Act

Because the Schechter Brothers were not involved in interstate commerce—they sold poultry only within the state of New York—their business was outside the range of congressional commerce power.

In fact all the NRA codes exercised this power beyond the scope and authority of Congress. On the basis of these conclusions, the Court reversed the conviction of the Schechter Corporation. The decision produced both dread and relief.

While some businesses praised the decision as a necessary check on presidential power, others feared tremendous uncertainty as to the potential for industrial chaos now that the codes were suddenly dead. At the White House the President conferred with his advisors for over two hours and, in the end, all accepted the conclusion that the codes were now unenforceable. Ironically the Supreme Court's decision gave the appearance of bringing America's great experiment with corporatism to an abrupt and untimely end.

In actuality, the NRA had long been disinherited of its popularity and support. Congress had become increasingly hesitant about renewing the program and the agency's chances of survival had grown slim. Frozen in deadlock, the numerous and contradictory policies of the NRA had effectively brought the agency to a standstill. Even though several advisors suggested ways around the Schecter decision, Roosevelt decided against an effort to restore the NRA.

Privately the president breathed a sigh of relief as the agency had created the most perplexing administrative problems imaginable.

Contributing Forces The Antitrust Acts Antitrust laws are designed to curb the growth of monopolies and monopoly practices. A monopoly is where a company or group of companies, called a cartel, that have total control over the production and price of a certain good, or commodity. Antitrust laws were based on belief that the public could be protected from the power of business monopolies by breaking up complex monopolistic companies into smaller companies. The federal government through its constitutional power to regulate interstate commerce trade that crosses state boundaries could best accomplish this.

The Sherman Anti-Trust Act of was the first of three laws passed during the so-called "Progressive" era that sought grater government regulation of economic activity. The Sherman Act provided that every business contract, business combination in the form of a trust or otherwise, or conspiracy to restrain trade was illegal. The ruling severely limited the definition of what was considered an act of trade. Thereafter government attorneys made few attempts to enforce the law and only 18 lawsuits were brought between and Some of these were designed to restrain labor unions rather than industries.

The Democratic administration of Woodrow Wilson served — brought a renewed vigor to expand government regulation of business and a revival of interest in strengthening the Sherman Act.

The Clayton Act, a supplement to the Sherman Act, specifically excluded organized labor from the provisions of the Sherman Act.

national industrial recovery act ended relationship

Among other things the Clayton Act prohibited corporations from purchasing the stocks and bonds of other corporations for the purpose of eliminating competition. It also provided that individual corporate officers could be held personally liable for violating the antitrust laws. The FTC was authorized to prevent persons, partnerships, or corporations from using unfair methods of competition. The FTC was also given power to gather information, require corporations to file annual or special reports concerning their business practices, investigate trade conditions, and reorganize businesses convicted of violating the antitrust laws.

A Working Relationship Is Formed After World War I, there developed in the United States a growing acceptance of cooperation between business and government to achieve social and economic stability. The experience of the War Industries Board WIB had shown, however briefly, that this cooperation could be successful under certain conditions.

national industrial recovery act ended relationship

Governments in Western Europe were also embracing the social philosophy of "corporatism. In America corporatists sketched a picture of society in which industry was organized by trade associations that could formulate plans for achieving stability and progress.

The chief proponent of this cooperative scheme in America was, ironically, Herbert Hoover served — Hoover had been head of the wartime Food Administration and Secretary of Commerce during the Harding and Coolidge administrations.