Recovery

One of the most dramatic advances in government intervention came with the National Industrial Recovery Act (NIRA). Its goals were to raise prices and wages, spread work by reducing hours, and prevent price cutting by competitors trying to maintain volume. The National Recovery Administration, under the direction of General Hugh Johnson, supervised the preparation of a “code of fair practice” for each industry. These were really agreements among sellers to set minimum prices, limit output, and establish minimum wages and maximum hours of work. Pending the approval of basic codes, the president issued a “blanket code” in July 1933. Sellers signing the blanket code agreed to raise wages, shorten the maximum workweek, and abstain from price cutting. In return, they could display a “blue eagle” and avoid being boycotted for not doing their part.

By 1935, 557 basic codes had been approved. Although in theory the codes were the product of labor, consumer, and employer representatives, in practice, labor representatives participated in the construction of fewer than 10 percent of the codes, and consumer representation was negligible. Employer representatives dominated and prices were set to maximize profits. The possibility of such an outcome was recognized in the NIRA by suspending the antitrust laws.

Was the NIRA effective? The consensus among economic historians is that for the most part, the codes redistributed rather than expanded incomes. Gauti Eggertsson (2008, 2012), however, has pushed a contrary view: the NIRA promoted recovery by creating expectations of inflation. In any case, enthusiasm for the NIRA waned. It was with little regret, then, that New Dealers saw the passing of the NIRA, which the Supreme Roosevelt’s broad grin, in evidence above, center, at the 1936 Democratic convention, made his theme song, “Happy Days Are Here Again,” believable to a shaken nation. His charm and buoyancy did much in itself to soften the Great Depression’s psychological impact.

Court declared unconstitutional in 1935 on the grounds that Congress had illegally delegated legislative powers to the president.106