National Recovery Administration
The National Recovery Administration (NRA) was established in 1933 as part of the National Industrial Recovery Act, aimed at regulating industrial practices to stimulate economic recovery during the Great Depression. Spearheaded by President Franklin D. Roosevelt, the NRA sought to establish fair labor standards, including minimum wages and maximum work hours, while also promoting cooperative practices among businesses. Under General Hugh S. Johnson’s leadership, the NRA implemented numerous codes of fair competition across various industries, which were symbolized by the Blue Eagle emblem.
Despite its initial popularity, the NRA faced significant criticism from multiple fronts. Critics argued that it fostered monopolies and was reminiscent of fascist principles, while many small businesses struggled to comply with the extensive regulations dominated by larger corporations. Labor unions were also discontent, as the codes did not mandate union membership or adequately protect workers’ rights. The NRA's effectiveness was further undermined by constitutional challenges, culminating in a Supreme Court ruling in 1935 that declared it unconstitutional.
Although the NRA aimed to promote economic stability and recovery, it ultimately faced challenges that hindered its success, and many of its principles were later addressed through new legislation. Its legacy remains one of both ambitious reform and significant controversy in American labor and economic history.
National Recovery Administration
Identification Regulatory administration overseeing business practices
Date Established on June 16, 1933
The National Recovery Administration (NRA) was set up under the National Industrial Recovery Act of 1933 to regulate business practices. In particular, it was designed to keep wages and prices up and working hours low in order to encourage recovery.
The National Industrial Recovery Act started out as a Senate bill, proposed by Hugo L. Black, to bar from interstate commerce factories whose employees worked more than thirty hours per week. President Franklin D. Roosevelt doubted this would be constitutional or wise, but labor unions favored it, so his administration designed a modified version, which he sent to Congress on May 17, 1933. Part one formed the NRA to regulate business practices, especially work hours and wages. Part two formed the Public Works Administration, intended to reduce unemployment. The law passed a month later and was authorized for two years.
Starting the NRA
Roosevelt appointed General Hugh S. Johnson, an associate of wealthy social reformer Bernard Mannes Baruch, to run the NRA, with antibusiness progressive Donald Randall Richberg as general counsel. The Special Industrial Recovery Board provided nominal oversight; the board was replaced December 6, 1933, by the National Emergency Council. Johnson started organizing even before the bill passed, helped by longtime friend Alexander Sachs of Lehman Brothers. Inspired by his service with the War Industries Board in 1918, Johnson wanted to replace unrestrained competition with cooperation and class struggle with a balanced economy, providing economic opportunity for laborers to restore consumption, and thereby bringing about economic recovery.
Johnson and Sachs organized a series of boards to oversee the regulatory codes. The Industrial Advisory Board was appointed by Secretary of Commerce Daniel C. Roper and chaired by Walter Clark Teagle of Standard Oil of New Jersey. The Labor Advisory Board was chaired and appointed by Secretary of Labor Frances Perkins. The Consumers’ Advisory Board was chaired and appointed by Mary Rumsey, older sister of diplomat Averell Harriman—this board had little influence.
Johnson set about energetically organizing the codes to be practiced by the various industries; eventually there were at least 550. These were created in cooperation with major businesses, such as automakers General Motors and Chrysler. As soon as the codes were developed by the industries, they were reviewed by the Code Analysis Division—to verify that the codes included the labor provisions mandated by section 7 of the NIRA, such as mimimum wages, maximum hours, and a ban on child labor—and the advisory boards. After a formal public hearing advertised in advance, Johnson took them to Roosevelt for approval. He issued the first, for cotton textiles, on July 9, 1933. With other industries initally slow to act, he set up a basic blanket code for businesses to sign and follow; these companies displayed a blue eagle as a symbol of their support.
Within three months, businesses in the ten largest industries joined. There were also codes for minor industries, such as shoulder-pad makers, burlesque theaters, and dog-food makers. Johnson launched a massive publicity campaign to encourage businesses to participate and consumers to pledge to patronize only businesses displaying the blue eagle; the campaign was highlighted by a massive parade down Fifth Avenue in New York. Johnson had also hoped to use public works contracts to encourage participation, but the administrative separation of the Public Works Administration from the NRA, coupled with the slow progress of the former, prevented this for all sectors but shipbuilding.
Inevitably, some businesses refused to cooperate, and Johnson had fourteen hundred enforcers in fifty-four branch offices scattered throughout the country to deal with them. The enforcers were empowered to punish recalcitrant businesspeople with fines up to five hundred dollars and imprisonment for up to six months for trivial violations. Johnson preferred voluntary cooperation, but while membership was voluntary, obedience to the individual codes was mandatory.
Developing Problems
Although initially popular, the NRA had its critics from the start. Many—including the Special Industrial Recovery Board, which was overseen by Roosevelt—disliked Johnson’s publicity campaign and its symbol, which reminded them of fascism. In fact, the idea of state-business-labor cooperation came from Italian fascism, but few noticed or cared. Radical progressives believed the codes encouraged corporatism and monopoly, a claim supported by a 1934 study of the NRA chaired by Clarence Darrow.
Consumers opposed higher prices and production restrictions, which also worked against recovery. Some industrialists, notably Henry Ford, never accepted the NRA. Labor unions also were unhappy with the codes, which permitted but did not mandate unions and did not ban company unions. Although Johnson hoped the NRA would generate labor peace, many major strikes occurred during this period. Initially supportive, small businesses disliked the domination of the code-making by large businesses, and many found obeying the codes and staying in business virtually impossible. In one spectacular case, dry cleaner Jacob Maged of Jersey City, New Jersey, was jailed and fined for charging thirty-five cents instead of forty to press a suit, as mandated by the NRA.
Johnson saw himself as an impartial arbiter forcing business, labor, and consumers to compromise. Under fire for these problems and unhappy for personal reasons, Johnson resigned in September, 1934; that led to a reorganization by a September, 27, executive order. The National Emergency Council, chaired by Richberg, who was considered ambitious and untrustworthy by many of his old progressive allies, set policy, while a National Industrial Recovery Board executed it. This failed to stem the tide of hostility as Roosevelt sought the NRA’s renewal. Many considered it a relief when the Supreme Court finally struck down the NRA. Some parts were soon restored by new laws, such as the Wagner Act, codifying labor law, and the Guffey Act, codifying the NRA’s bituminous coal code; the latter was later overturned by the Supreme Court.
From the start, the NRA was unlikely to bring recovery even aside from its production limits. Whatever their value as reforms, the many business regulations discouraged hiring. In particular, the bipartisan notion that high wages and prices could end a depression resulting from deflation was dubious. Johnson argued that modern man could transcend supply and demand just as he did other natural laws.
Constitutional Difficulties
Many employers were tried for code violations, and three cases reached the Supreme Court. United States v. Belcher was a test of the lumber codes, and the administration hoped to use it as a test case for the NRA’s general authority. However, the Court dismissed the case before it was actually argued.
The first case argued was Panama Refining Co. v. Ryan, concerning oil-industry codes. One problem, discovered right before the case was argued, was that the penalty codes had never been written—though people had been tried and punished. The Court was also concerned with the unlimited executive authority to regulate, with only vague standards in place to use as guidelines. In January, 1935, the Court overturned the codes, with only Benjamin N. Cardozo dissenting.
The most important case was Schechter Poultry Corp. v. United States. This involved a small poultry dealer in Brooklyn convicted of selling an unfit chicken, allowing buyers to select individual chickens, and selling to unlicensed dealers. None of these was deemed a matter of interstate commerce, which was sufficient in itself to reverse the company’s conviction. However, Chief JusticeCharles Evans Hughes was also concerned about the excessive delegation of legislative authority. The administration argued that the NRA was a cooperative effort, but the Court disagreed because the regulations were binding on all employers. On May 27, 1935, the Court unanimously voted to overturn section 3 of the NIRA, effectively eliminating the NRA.
Impact
The NRA had a major effect on the economy during its brief existence. However, for a variety of reasons, it ultimately did far more to retard recovery than to promote it; only World War II finally ended the Great Depression.
Bibliography
Davis, Kenneth S. FDR: The New Deal Years 1933-1937. New York: Random House, 1986. Detailed history of Roosevelt’s first term from a progressive viewpoint, including extensive coverage of the NRA.
Flynn, John T. The Roosevelt Myth. Reprint. San Francisco: Fox & Wilkes, 1998. Moderately progressive critique of Roosevelt as unethical and of the New Deal, including the NRA, as corporatist and inspired by fascism.
Johnson, Hugh S. The Blue Eagle from Egg to Earth. New York: Garden City, 1935. Personal memoir focusing on service with the NRA, explaining its purpose and denying all accusations against it, while admitting to personal errors.
Leuchtenberg, William E. Franklin D. Roosevelt and the New Deal, 1932-1940. New York: Harper & Row, 1963. Sympathetic study of the subject from a liberal viewpoint, including the NRA and Roosevelt’s attitude toward it.
Powell, Jim. FDR’s Folly. New York: Three Rivers Press, 2003. Topical libertarian critique of the New Deal, including a full chapter on the NRA and another on the key court cases.
Shlaes, Amity. The Forgotten Man. New York: HarperCollins, 2007. Generally critical, but fair, conservative history of the New Deal, including the NRA.