National Recovery Administration

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NRA Blue Eagle stamps
The initials NRA can also refer to the National Rifle Association, a gun-rights advocacy group.

The National Recovery Administration (NRA) was a key part of the First New Deal in 1933, until it was abolished in 1935 by the Supreme Court. The goal was to regulate competition by bringing industry, labor and government together to control prices and wages. It was created by the National Industrial Recovery Act) under the general guidance of President Franklin D. Roosevelt and his top advisors, who believed that the Great Depression had been due to "piratical" competition. President Roosevelt announced the new legislation in the following terms:

"History probably will record the National Industrial Recov­ery Act as the most important and far-reaching legislation ever enacted by the American Congress. It represents a supreme effort to stabilize for all time the many factors which make for the prosperity of the nation and the preservation of American standards. Its goal is the assurance of a reasonable profit to industry and living wages for labor, with the elimination of the piratical methods and practices which have not only harassed honest busi­ness but also contributed to the ills of labor."

The NRA administration encouraged industries to create "codes of fair competition," which were intended to limit competition and to help workers by setting minimum wages and maximum working hours. Businesses that supported the NRA put its "blue eagle" symbol in their shop windows and on their packages. Though membership to the NRA was voluntary, businesses that did not display the eagle were often boycotted. Its director was was Hugh S. Johnson, a retired general and successful businessman. Johnson saw it as a national crusade designed to restore employment and regenerate industry. Johnson was removed in 1934, In early 1935 the new chairman announced that the NRA would stop setting prices, but businessmen complained. Chairman Samuel Williams told them plainly that, unless they could prove it would damage business, NRA was going to put an end to price control. Williams said, "Greater productivity and employment would result if greater price flexibility were attained." Of the 2,000 businessmen on hand probably 90% opposed Mr. Williams' aim, reported Time magazine. "To them a guaranteed price for their products looks like a royal road to profits. A fixed price above cost has proved a lifesaver to more than one inefficient producer." The business position was summarized by George A. Sloan, head of the Cotton Textile Code Authority:

"Maximum hours and minimum wage provisions, useful and necessary as they are in themselves, do not prevent price demoralization. While putting the units of an industry on a fair competitive level in so far as labor costs are concerned, they do not prevent destructive price cutting in the sale of commodities produced, any more than a fixed price of material or other element of cost would prevent it. Destructive Competition that is at the expense of employees is lessened, but it is left in full swing against the employer himself and the economic soundness of his enterprise....But if the partnership of industry with Government which was invoked by the President were terminated (as we believe it will not be), then the spirit of cooperation, which is one of the best fruits of the NRA equipment, could not survive.[1]

About 23,000,000 people worked under the NRA fair code. However, violations of codes became common and attempts were made to use the courts to enforce the NRA. The NRA included a multitude of regulations imposing the pricing and production standards for all sorts of goods and services.

Pennock (1997) shows that the rubber tire industry faced debilitating challenges, mostly brought about by changes in the industry's retail structure and exacerbated by the Depression. Segments of the industry attempted to use the NRA codes to solve these new problems and stabilize the tire market, but the tire manufacturing and tire retailing codes were patent failures. Instead of leading to cartelization and higher prices, which is what most scholars assume the NRA codes did, the tire industry codes led to even more fragmentation and price cutting.

Alexander (1997) examines the macaroni industry and concludes that cost heterogeneity was a major source of the "compliance crisis" affecting a number of NRA "codes of fair competition" that were negotiated by industries and submitted for government approval under the National Industry Recovery Act of 1933. The argument boils down to assumptions that progressives at the NRA allowed majority coalitions of small, high-cost firms to impose codes in heterogeneous industries, and that these codes were designed by the high-cost firms under an ultimately erroneous belief that they would be enforced by the NRA.

Storrs (2000) says the National Consumers' League (NCL) had been instrumental in the passage and legal defense of labor legislation in many states since 1899. Women activists used the New Deal opportunity to gain a national forum. General Secretary Lucy Randolph Mason and her league relentlessly lobbied the NRA to make its regulatory codes just and fair for all workers and to eliminate explicit and de facto discrimination in pay, working conditions, and opportunities for reasons of sex, race, or union status. Even after the demise of the NRA, the league continued campaigning for collective bargaining rights and fair labor standards at both federal and state levels.

The NRA came under attack from some businessmen, while others supported it. (Best 1991). Sniegoski (1990) shows that a major attack came from the left. The "National Recovery Review Board," headed by famed lawyer Clarence Darrow, was created by President Roosevelt in March 1934 and abolished by him that same June. During its brief existence, the board issued three reports highly critical of the NRA. The reports, which charged the NRA with fostering monopolies, were philosophically consistent in their advocacy of competitive capitalism and their denunciation of special privilege for big business. Although the NRA was attacked from other quarters at the same time, the small-business viewpoint of the Darrow board, supported by followers of Louis Brandeis in the New Deal, was a major factor in the NRA's demise.

In 1935, in the case of Schecter Poultry Corp. v. US, the Supreme Court declared the NRA as unconstitutional because it gave the President too much power.[2] The NRA quickly stopped operations. Some of the labor provisions reappeared in the Wagner Act of 1935 and the minimum wage act of 1937.[3].

The economic consequences of the scheme are discussed in the articles on the New Deal and the Great Depression in the United States.

Notes

  1. "Dollar Men & Prices" Time (Jan 21, 1935) online
  2. The Supreme Court Historical Society.
  3. George E. Paulsen, "Ghost of the Nra: Drafting National Wage and Hour Legislation in 1937." Social Science Quarterly 1986 67(2): 241-254. Issn: 0038-4941