The NATIONAL INDUSTRIAL RECOVERY ACT (NIRA) was a law passed by the
United States Congress
The legislation was enacted in June 1933 during the Great Depression
in the United States as part of President
Franklin D. Roosevelt 's New
Deal legislative program. Section 7(a) of the bill, which protected
collective bargaining rights for unions , proved contentious
(especially in the Senate), but both chambers eventually passed the
legislation. President Roosevelt signed the bill into law on June 16,
1933. The Act had two main sections (or "titles"). Title I was
devoted to industrial recovery, authorizing the promulgation of
industrial codes of fair competition, guaranteed trade union rights,
permitted the regulation of working standards, and regulated the price
of certain refined petroleum products and their transportation. Title
II established the
Public Works Administration
The Act was implemented by the NRA and the Public Works Administration (PWA). Very large numbers of regulations were generated under the authority granted to the NRA by the Act, which led to a significant loss of political support for Roosevelt and the New Deal. The NIRA was set to expire in June 1935, but in a major constitutional ruling the U.S. Supreme Court held Title I of the Act unconstitutional on May 27, 1935, in Schechter Poultry Corp. v. United States , 295 U.S. 495 (1935). The National Industrial Recovery Act is widely considered a policy failure, both in the 1930s and by historians today. Disputes over the reasons for this failure continue. Among the suggested causes are that the Act promoted economically harmful monopolies , that the Act lacked critical support from the business community, and that it was poorly administered. The Act encouraged union organizing, which led to significant labor unrest. The NIRA had no mechanisms for handling these problems, which led Congress to pass the National Labor Relations Act in 1935. The Act was also a major force behind a major modification of the law criminalizing making false statements .
* 1 Background and enactment
* 1.1 Enactment
* 2 Structure of the Act * 3 Implementation * 4 Legal challenge and nullification * 5 Criticism * 6 Legacy * 7 Notes * 8 References * 9 External links
BACKGROUND AND ENACTMENT
The Depression began in the United States in October 1929 and grew steadily worse to its nadir in early 1933. President Herbert Hoover feared that too much intervention or coercion by the government would destroy individuality and self-reliance, which he considered to be important American values. His laissez-faire views appeared to be shared by the Secretary of the Treasury Andrew W. Mellon . To combat with the growing economic decline, Hoover organized a number of voluntary measures with businesses, encouraged state and local government responses, and accelerated federal building projects. However his policies had little or no effect on economic recovery. Toward the end of his term, however, Hoover supported several legislative solutions which he felt might lift the country out of the depression. The final attempt of the Hoover administration to rescue the economy was the passage of the Emergency Relief and Construction Act (which provided funds for public works programs) and the Reconstruction Finance Corporation (RFC) (which provided low-interest loans to businesses).
Hoover was defeated for re-election by Roosevelt in the 1932
presidential election . Roosevelt was convinced that federal activism
was needed to reverse the country's economic decline. In his first
hundred days in office, the Congress enacted at Roosevelt's request a
series of bills designed to strengthen the banking system, including
Emergency Banking Act , the
Hugh S. Johnson, one of the primary authors of NIRA, was Time magazine's Man of the Year for 1933.
National Industrial Recovery Act was enacted at the very end of
the Hundred Days .
Hugh S. Johnson ,
Raymond Moley ,
Donald Richberg ,
Rexford Tugwell ,
Jerome Frank , and
Bernard Baruch —key Roosevelt
advisors—believed that unrestrained competition had helped cause the
By May 1933, two draft bills had emerged, a cautious and legalistic
one by John Dickinson (Under Secretary of Commerce ) and an ambitious
one focusing on trade associations by Hugh Johnson. Many leading
Gerard Swope (head of
The House of Representatives easily passed the bill in just seven days. The most contentious issue was the inclusion of Section 7(a), which protected collective bargaining rights for unions . Section 7(a) was nearly passed into the bill, but Senator Wagner, Jerome Frank, and Leon Keyserling (another Roosevelt aide) worked to retain the section in order to win the support of the American labor movement.
The bill had a more difficult time in the Senate. The National Association of Manufacturers , Chamber of Commerce, and industrialist Henry Ford all opposed its passage. Senator Bennett Champ Clark introduced an amendment to emasculate Section 7(a), but Wagner and Senator George W. Norris led the successful opposition to the change. The bulk of the Senate debate, however, turned on the bill's suspension of antitrust law . Senators William E. Borah , Burton K. Wheeler , and Hugo Black opposed any relaxation of the Sherman Antitrust Act , arguing that this would exacerbate existing severe economic inequality and concentrate wealth in the hands of the rich (a severe problem which many economists at the time believed was one of the causes of the Great Depression). Wagner defended the bill, arguing that the bill's promotion of codes of fair trade practices would help create progressive standards for wages, hours, and working conditions, and eliminate sweatshops and child labor. The Senate passed the amended legislation 57-to-24 on June 9.
A House-Senate conference committee met throughout the evening of June 9 and all day June 10 to reconcile the two versions of the bill, approving a final version on the afternoon of June 10. The House approved the conference committee's bill on the evening of June 10. After extensive debate, the Senate approved the final bill, 46-to-39, on June 13. President Roosevelt signed the bill into law on June 16, 1933.
STRUCTURE OF THE ACT
The National Industrial Recovery Act had two major titles.
Title I was devoted to industrial recovery. Title I, Section 2 empowered the President to establish executive branch agencies to carry out the purposes of the Act, and provided for a sunset provision nullifying the Act in two years. The heart of the Act was Title I, Section 3, which permitted trade or industrial associations to seek presidential approval of codes of fair competition (so long as such codes did not promote monopolies or provide unfair competition against small businesses) and provided for enforcement of these codes. Title I, Section 5 exempted the codes from the federal antitrust laws.
Title I, Section 7(a) guaranteed the right of workers to form unions and banned yellow-dog contracts :
...employees shall have the right to organize and bargain collectively through representatives of their own choosing, and shall be free from the interference restraint, or coercion of employers of labor, or their agents, in the designation of such representatives or in self-organization or in other concerted activities for the purpose of collective bargaining or other mutual aid or protection; (2) that no employee and no one seeking employment shall be required as a condition of employment to join any company union or to refrain from joining, organizing, or assisting a labor organization of his own choosing... .
Title I, Section 7(b) permitted the establishment of standards regarding maximum hours of labor, minimum rates of pay, and working conditions in the industries covered by the codes, while Section 7(c) authorized the President to impose such standards on codes when voluntary agreement could not be reached. Title I, Section 9 authorized the regulation of oil pipelines and prices for the transportation of all petroleum products by pipeline. Section 9(b) permitted the executive to take over any oil pipeline company, subsidiary, or business if the parent company was found in violation of the Act.
Title II established the Public Works Administration. Title II,
Section 201 established the agency and provided for a two-year sunset
provision. Section 202 outlines the types of public works which the
new agency may seek to fund or build. Title II, Section 203
Public Works Administration
Title II, Section 208 authorized the president to expend up to $25 million to purchase farms for the purpose of relocating individuals living in overcrowded urban areas (such as cities) to these farms and allowing them to raise crops and earn a living there.
Title II, Sections 210–219 provided for revenues to fund the Act, and Section 220 appropriated money for the Act's implementation.
Title III of the Act contained miscellaneous provisions, and transferred the authority to engage in public works from the Reconstruction Finance Corporation to the Public Works Administration.
Blue Eagle poster, the image most commonly associated with
the NIRA. Main article:
National Recovery Administration Main
Public Works Administration
Implementation of the Act began immediately. Hugh Johnson spent most
of May and June planning for implementation, and the National Recovery
Administration (NRA) was established on June 20, 1933—a scant four
days after the law's enactment. Roosevelt angered Johnson by having
him administer only the NRA, while the Public Works Administration
(PWA) went to
Harold L. Ickes
The premiere symbol of the NIRA was the Blue Eagle .
NIRA, as implemented by the NRA, became notorious for generating large numbers of regulations. The agency approved 557 basic and 189 supplemental industry codes in two years. Between 4,000 and 5,000 business practices were prohibited, some 3,000 administrative orders running to over 10,000 pages promulgated, and thousands of opinions and guides from national, regional, and local code boards interpreted and enforced the Act.
The backlash against the Act was so significant that it generated a large loss of political support for the New Deal and turned a number of Roosevelt's closest aides against him. Roosevelt himself shifted his views on the best way to achieve economic recovery, and began a new legislative program (known as the "Second New Deal ") in 1935.
Implementation of Section 7(a) of the NIRA proved immensely
problematic as well. The protections of the Act led to a massive wave
of union organizing punctuated by employer and union violence, general
strikes , and recognition strikes . At the outset, NRA Administrator
Hugh Johnson naïvely believed that Section 7(a) would be
self-enforcing, but he quickly learned otherwise. In addition, the
National Labor Board was established under the auspices of the NRA to
implement the collective bargaining provisions of the Act. The
National Labor Board, too, proved to be ineffective, and on July 5,
1935, a new law—the
National Labor Relations Act
The leadership of the Public Works Authority was torn over the new
agency's mission. PWA could initiate its own construction projects,
distribute money to other federal agencies to fund their construction
projects, or make loans to states and localities to fund their
construction projects. But many in the Roosevelt administration felt
PWA should not spend money, for fear of worsening the federal deficit,
and so funds flowed slowly. Furthermore, the very nature of
construction (planning, specifications, and blueprints) also held up
the disbursement of money. Harold Ickes, too, was determined to ensure
that graft and corruption did not tarnish the agency's reputation and
lead to loss of political support in Congress, and so moved cautiously
in spending the agency's money. Although the U.S. Supreme Court
would rule Title I of NIRA unconstitutional, the severability clause
in the Act enabled the PWA to survive. Among the projects it funded
between 1935 and 1939 are: the USS Yorktown ; USS Enterprise ; the
30th Street railroad station in
President Roosevelt sought re-authorization of NIRA on February 20, 1935. But the backlash against the New Deal, coupled with continuing congressional concern over the Act's suspension of antitrust law, left the President's request politically dead. By May 1935, the issue was moot as the U.S. Supreme Court had ruled Title I of NIRA unconstitutional.
LEGAL CHALLENGE AND NULLIFICATION
Chief Justice of the U.S. Supreme Court Charles Evans Hughes.
On April 13, 1934, the President had approved the "Code of Fair Competition for the Live Poultry Industry of the Metropolitan Area in and about the City of New York." The goal of the code was to ensure that live poultry (provided to kosher slaughterhouses for butchering and sale to observant Jews) were fit for human consumption and to prevent the submission of false sales and price reports. The industry was almost entirely centered on New York City. Under the new poultry code, the Schechter brothers were indicted on 60 counts (of which 27 were dismissed by the trial court), acquitted on 14, and convicted in 19. One of the counts on which they were convicted was for selling a diseased bird, leading Hugh Johnson to jokingly call the suit the "sick chicken case".
Even before these legal aspects became widely known, a number of court challenges to the NIRA were winding their way through the courts. The constitutionality of the NIRA was tested in Schechter Poultry Corp. v. United States , 295 U.S. 495 (1935). Courts identified three problems with the NIRA: "(i) was the subject matter sought to be regulated by the power of congress; (ii) if the regulations violated the Fifth Amendment to the United States Constitution ; and (iii) had Congress properly delegated its power to the executive."
Although Roosevelt, most of his aides, Johnson, and the NRA staff felt the Act would survive a court test, the U.S. Department of Justice had on March 25, 1935, declined to appeal an appellate court ruling overturning the lumber industry code on the grounds that the case was not a good test of the NIRA's constitutionality. The Justice Department's action worried many in the administration. But on April 1, 1935 the Second Circuit Court of Appeals upheld the constitutionality of the NIRA in the Schechter case. Although Donald Richberg and others felt the government's case in Schechter was not a strong one, the Schechters were determined to appeal their conviction. So the government appealed first, and the Supreme Court heard oral argument on May 2 and 3.
On May 27, 1935, Chief Justice
Charles Evans Hughes
To summarize and conclude upon this point: Section 3 of the Recovery Act (15 USCA 703) is without precedent. It supplies no standards for any trade, industry, or activity. It does not undertake to prescribe rules of conduct to be applied to particular states of fact determined by appropriate administrative procedure. Instead of prescribing rules of conduct, it authorizes the making of codes to prescribe them. For that legislative undertaking, section 3 sets up no standards, aside from the statement of the general aims of rehabilitation, correction, and expansion described in section 1. In view of the scope of that broad declaration and of the nature of the few restrictions that are imposed, the discretion of the President in approving or prescribing codes, and thus enacting laws for the government of trade and industry throughout the country, is virtually unfettered. We think that the code-making authority thus conferred is an unconstitutional delegation of legislative power.
Finally, in a very restrictive reading of what constituted interstate
commerce, Hughes held that the "'current' or 'flow'" of commerce
involved was simply too minute to constitute interstate commerce, and
subsequently Congress had no power under the
Although the decision emasculated NIRA, it had little practical impact, as Congress was unlikely to have reauthorized the Act in any case.
A key criticism of the Act at the time as well as more recently is that the NIRA endorsed monopolies, with the attendant economic problems associated with that type of market failure . Even the National Recovery Review Board, established by President Roosevelt in March 1934 to review the performance of the NRA, concluded that the Act hindered economic growth by promoting cartels and monopolies. One of the economic effects of monopoly and cartels is higher prices—this was seen as necessary because the severe deflation of 1929–33 had depressed prices 20% and more. There is anecdotal evidence that these higher prices led to some stability in industry, but a number of scholars maintain that these prices were so high that economic recovery was inhibited. But other economists disagree, pointing to far more important monetary, budgetary, and tax policies as contributors to the continuation of the Great Depression. Others point out that the cartels created by the Act were inherently unstable (as all cartels are), and that the effect on prices was minimal because the codes collapsed so quickly.
A second key criticism of the Act is that it lacked support from the business community, and thus was doomed to failure. Business support for national planning and government intervention was very strong in 1933, but had collapsed by mid-1934. Many studies conclude, however, that business support for NIRA was never uniform. Larger, older businesses embraced the legislation while smaller, newer ones (more nimble in a highly competitive market and with less capital investment to lose if they failed) did not. This is a classic problem of cartels, and thus NIRA codes failed as small business abandoned the cartels. Studies of the steel, automobile manufacturing, lumber, textile, and rubber industries and the level and source of support for the NIRA tend to support this conclusion. Without the support of industry, the Act could never have performed as it was intended.
A third major criticism of the Act is that it was poorly administered. The Act purposefully brought together competing interests (labor and business, big business and small business, etc.) in a coalition to support passage of the legislation, but these competing interests soon fought one another over the Act's implementation. As a consequence, NRA collapsed due to failure of leadership and confusion about its goals. By the end of 1934, NRA leaders had practically abandoned the progressive interventionist policy which motivated the Act's passage, and were supporting free-market philosophies—contributing to the collapse of almost all industry codes.
There are a wide range of additional critiques as well. One is that NIRA's industry codes interfered with capital markets, inhibiting economic recovery. But more recent analyses conclude that NIRA had little effect on capital markets one way or the other. Another is that political uncertainty created by the NRA caused a drop in business confidence, inhibiting recovery. But at least one study has shown no effect whatsoever.
As noted above, Section 7(a) led to significant increases in union
organizing, as intended by the Act. But the enforcement of Section
7(a) and its legal limitations led to clear failures. Although Section
7(a) was not affected by the Supreme Court's decision in Schechter v.
Poultry, the failure of the section led directly to passage of the
National Labor Relations Act
Historian Alan Brinkley stated that by 1935 the NRA was a "woeful failure, even a political embarrassment." Many liberals, probably including Roosevelt, were quietly relieved by its demise. However, New Dealers were worried by the Supreme Court's strict interpretation of the interstate commerce clause and worried that other legislation was jeopardized.
In 1934, at the request of the Secretary Ickes, who wished to use the statute criminalizing making false statements to enforce Section 9(c) of the NIRA against producers of "hot oil", oil produced in violation of production restrictions established pursuant to the NIRA, Congress passed Pub.L. 73–394, 48 Stat. 996, enacted June 18, 1934, which amended the False Claims Act of 1863 to read:
… or whoever, for the purpose of obtaining or aiding to obtain the payment or approval of such claim, or for the purpose and with the intent of cheating and swindling or defrauding the Government of the United States, or any department thereof, or any corporation in which the United States of America is a stockholder, shall knowingly and willfully falsify or conceal or cover up by any trick, scheme, or device a material fact, or make or cause to be made any false or fraudulent statements or representations, or make or use or cause to be made or used any false bill, receipt, voucher, roll, account, claim, certificate, affidavit, or deposition, knowing the same to contain any fraudulent or fictitious statement or entry, IN ANY MATTER WITHIN THE JURISDICTION OF ANY DEPARTMENT OR AGENCY OF THE UNITED STATES OR OF ANY CORPORATION IN WHICH THE UNITED STATES OF AMERICA IS A STOCKHOLDER …
This form of the statute, in slightly modified form, still exists today at 18 U.S.C. § 1001.
* ^ Pub.L. 73–67, 48 Stat. 195, enacted June 16, 1933, codified
at 15 U.S.C. § 703)
* ^ Ellis W. Hawley,
New Deal and the Problem of Monopoly: A Study
in Economic Ambivalence (1971)
* ^ A B C D E F G H I J K L M N O P Q R S T U V W X Y Z AA AB AC AD
Schlesinger, The Age of Roosevelt: The Coming of the New Deal, (2003)
* ^ "Our Documents". National Industrial Recovery Act. National
Archives. Retrieved 15 April 2014.
* ^ Roger Biles, A
New Deal for the American People (1991) pp.
* ^ A B C D E F G H I J K L M N O P Q Kennedy, Freedom from Fear,
(2001) pp. 151–54.
* ^ A B C D Morris, The
Blue Eagle At Work: Reclaiming Democratic
Rights In The American Workplace, 2004.
* ^ Peters, Gerhard; Woolley, John T. "Franklin D. Roosevelt:
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1933". The American Presidency Project. University of California –
* ^ A B C D E F G McKenna, Franklin Roosevelt and the Great
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* ^ A B Himmelberg, The Origins of the National Recovery
* ^ A B C D E F G H Eisner, Regulatory Politics in Transition,
* ^ A B C D Best, Pride, Prejudice, and Politics: Roosevelt Versus
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* ^ A B Bellush, The Failure of the NRA, 1975.
* ^ A B C National Recovery Review Board, Report to the President
of the United States, First report, May 21, 1934.
* ^ A B C D Paulsen, "The Federal Trade Commission v. the National
Recovery Administration, 1935," Social Science Quarterly, March 1989.
* ^ A B C Horwitz, The Irony of Regulatory Reform: The Deregulation
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* ^ A B Dubofsky and Dulles, Labor in America: A History, 1999;
Bernstein, The Turbulent Years: A History of the American Worker,
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* ^ A B C Bernstein, The
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* ^ A B United States v. Gilliland, 312 US 86, 93–94 (1941)
(“Legislation had been sought by the Secretary of the Interior to
aid the enforcement of laws relating to the functions of the
Department of the Interior and, in particular, to the enforcement of
regulations under Sec. 9(c) of the .”).
* ^ A B Galbraith, The Great Crash of 1929, 1997.
* ^ A B C Smith, The Shattered Dream:
* ^ Brinkley, The End Of Reform: New Deal Liberalism in Recession and War, 1996, Kindle Location 385.
* Anderson, William L. "Risk and the National Industrial Recovery
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* Barber, William J. From New Era to New Deal: Herbert Hoover, the
Economists, and American Economic Policy, 1921–1933. Paperback ed.
New York: Cambridge University Press, 1989. ISBN 0-521-36737-9
* Bellush, Bernard . The Failure of the NRA. New York: Norton, 1975.
* Bernanke, Ben; Parkinson, Martin (1989). "Unemployment, Inflation
and Wages in the American Depression: Are There Lessons for Europe?".
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* Bernstein, Michael. The Great Depression: Delayed Recovery and
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* Brinkley, Alan. The End Of Reform:
New Deal Liberalism in
Recession and War. Paperback ed. New York: Vintage Books, 1996. ISBN
* Clarke, Jeanne Nienaber. Roosevelt's Warrior:
Harold L. Ickes
* t * e
CAUSES AND LEGACY
Emergency Banking Act
Agricultural Adjustment Act
SECOND NEW DEAL
* Works Progress Administration (WPA) * Federal Project Number One * Federal Energy Regulatory Commission * Farm Security Administration * Judicial Procedures Reform Act * National Bituminous Coal Conservation Act * National Labor Relations Board (Act ) * Rural Electrification Act * Rural Electrification Administration * Social Security * United States Housing Authority