Touted by President Franklin D. Roosevelt as "the most important and far-reaching ever enacted by the American Congress," the National (Industrial) Recovery Act (NRA) was passed by Congress on June 16, 1933. That New Deal law was designed to promote recovery and reform, encourage collective bargaining for unions, set up maximum work hours (and sometimes prices) and minimum wages, and forbid child labor in industry.
For a short time, Title I of the famous NRA prescribed the drafting and establishment of a code system of fair competition for every sort of industry. Those codes had the force of law and were exempt from antitrust provisions.
The codes were to be designed by a group or association that would not impose inequitable restrictions on one company over another, not limit membership in the group drafting the code, nor would the code be designed to promote monopolies or to eliminate or oppress small enterprises. It also would not descriminate against small enterprises, and lastly it "will tend to effectuate the policy of this title."
The president was given the executive power to not only approve the code Â essentially giving the President the authority to make laws, which is the job of the Congress Â but also he could impose his own conditions on those codes, make additions or deletions to them prior to approving them, and was free to write codes himself where none existed.
A New Deal product of meetings among such Brain Trust advisors as Raymond Moley, big business leaders, and labor unionists, the NRA illustrated Roosevelt`s willingness to work with, rather than against, business interests.
The Brain Trust was a group of academics put together to carve out the policies of the New Deal prior to Roosevelt`s inauguration. Members of the group were Raymond Moley, an American journalist and public figure; Rexford Tugwell, Adolf Berle of Columbia University, attorney Basil O`Connor, and later, Felix Frankfurter of Harvard Law School. Most of those men served in official posts during Roosevelt`s presidency; they never met as a group after his inauguration.
The NRA was part of President Roosevelt`s first 99 days, which produced 16 pieces of relief legislation in 1933, including the following:
Emergency Banking Act
Civilian Conservation Corps
Federal Emergency Relief Act
Emergency Farm Mortgage Act
Abandonment of the gold standard
Home Owner`s Loan Act
Agricultural Adjustment Act
Tennessee Valley Authority
In general, American industrialists did not particularly like NRA because it didn`t allow them to raise prices or cut wages once they were in recovery. Although Roosevelt could not force industrialists to sign codes, he would withhold NRA`s popular blue eagle seal of approval as a bargaining tool to persuade businesses to adopt them. These seals were to be found in shop windows all over the country and represented businesses` cooperation with the government to rebuild the nation`s economy.
Criticism began to mount when it was shown that larger industrial manufacturers were shaping codes to suit their own priorities Â excluding labor, consumers, or the overextended NRA staff. Critics also noted that some NRA codes actually limited production and therefore penalized consumers by sustaining prices.
The NRA went through several reorganizations during 1934, when program director General Hugh Johnson was replaced by a five-person board and was reluctantly extended for another year by Congress in May 1935.
Title I of the NRA was overturned by the U.S. Supreme Court on May 27, 1935 in a sweeping and unanimous ruling after hearing the A.L.A. Schechter Poultry Corp. v. United States case, in which the Schechter Corp. allegedly disobeyed the requirements of a "Code of Fair Competition for the Live Poultry Industry of the Metropolitan Area in and about the City of New York."
In that Roosevelt-approved code, the company had failed to observe provisions fixing minimum wages and maximum hours for employees, permitted customers to select individual chickens, sold unfit chicken, were not in compliance with inspection regulations, had dealings with slaughterers and dealers not licensed under the code, and made false reports.
The Supreme Court found that the provisions in the code were not a valid exercise of federal power. The court argued that Congress had given too much control to the presidency to issue whatever edicts it chose. The act also gave Congress excessive power to regulate interstate commerce and "invades the power reserved exclusively to the States." The court ruled that Congress did not have the right to dictate to the states wages and hours worked, because those factors affect costs and prices and therefore indirectly affect interstate commerce, "nor in the fact that failure of some States to regulate wages and hours diverts commerce from the States that do regulate them."
The court also argued that there were no standards set for any trade, industry, or activity and therefore could not prescribe "rules of conduct" to be used when drafting these codes.
By the time Title I was overturned, more than 700 industries had been codified, four million unemployed people had been absorbed into industrial jobs, and nearly 23 million workers were under codes. It was largely felt that by the time it was overturned, Title I had run its course and was no longer needed.
The Works Project Administration (WPA), which was the second part of the NRA, was allowed by the court to stand. The WPA went on to spend billions on reforestation, flood control, rural electification, water works, sewage plants, school buildings, slum clearance, student scholarships, and other projects.
Later the National Labor Relations Board and the Rural Electrification Administration were passed by the Congress in order to replace the labor portions of the NRA, but Congress did not bring back the industrial code system.