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This Week in History:
May 15 - 21, 1933
National Industrial Recovery Act Introduced

May 2011

The third major emergency powers measure enacted by the Roosevelt Administration was the National Industrial Recovery Act (NIRA), a measure which has come down in history as evidence of the "corporatist" nature of FDR's New Deal. In fact, the NRA was a mixed bag, which adopted measures of varying endurance to accomplish the objectives of increasing employment and protecting the wages and working conditions of the U.S. labor force. The fact that some of Roosevelt's brain trust wanted to do this by restricting production, and creating mini-cartels—measures that were later ruled unconstitutional by the U.S. Supreme Court—does not take away from the value of the goals.

Indeed, prior to the drafting of the NIRA, a powerful grouping in the Senate had already passed a bill proposed Alabama Senator Huge Black, which would mandate a 30-hour week, in order to "spread" the work around. This measure was something which FDR's core group of advisors wanted to head off at the pass.

The NIRA was introduced on May 17, under the theme of creating a "partnership" between private industry and government in bringing about an economic recovery. It had three Titles, which broke down as follows:

Title I declared a national emergency, under which there would be a partial suspension of anti-trust laws, in order to permit industries, in collaboration with the government, to draw up industry-wide codes setting certain standards on wages, prices, working conditions, and the like. The codes, according to FDR advisor Raymond Moley, were intended to be enforceable by the courts.

Library of Congress Prints and Photographs Division, Harris & Ewing Collection, LC-DIG-hec-24661

John L. Lewis, head of United Mineworkers.

One of the most lasting, and popular, provisions of Title I was what came to be known as 7 (a), the section which guaranteed labor's rights to collective bargaining, maximum hours, and minimum wages. It was under this provision that the leaders of U.S. labor, headed by United Mineworkers head John L. Lewis, ran a massive organizing campaign, under the title "The President Wants You To Join the Union!" The impact of this effort was such that it could not be reversed, even with the Supreme Court's 1935 decision to declare the NIRA unconstitutional.

Title II of the NIRA invoked the existence of the national emergency in order to create the Public Works Administration, whose administrator was authorized to spend a massive sum—$3.3 billion—on major public works projects throughout the United States.

Title III was a funding provision for the NIRA. Tax issues being as sensitive then as they are today, and the public being inflamed by ongoing hearings about the tax scofflawing of J.P. Morgan and his friends, the funding mechanism passed was an increase in the income tax.

In addition, the PWA developed a novel, but useful, way to aid cities and towns to finance the building of infrastructure. The Depression had left citizens unable to pay local property and other taxes, without which cities and towns could not maintain capital investment for infrastructure. In June 1933, even good municipal bonds were quoted at a 30-40% discount, meaning that investors were not buying them. Further, the yield on a bond for 20 "standard" cities, as reported by Bond Buyer magazine, stood at 5.7%, an interest rate far too high for a city or town to pay in a depression.

The PWA set up a financing mechanism: First, it would purchase the bonds of a city or town at full par value, disregarding the "market" discount. Second, any qualifying municipality could issue a new bond at a 4% interest rate—rather than the prevailing yield of 5.7%—and the PWA would buy it. This rejuvenated the municipal bond market, enabling municipalities to engage in infrastructure building; and, as cities recovered and paid off their bonds with interest, the PWA made money.

In addition, once a local infrastructure project was designed and approved, the PWA would pay, through grants and loans, more than 50% of its construction cost.

From the beginning, President Roosevelt conceived of the NIRA as a whole, but wanted

U.S. Army Corps of Engineers

Fort Peck Dam in Montana, spillway construction, a project of the Public Works Administration. One of the largest dams in the world, it continues to generate electricity; in July 1936 its construction employed 10,500 workers.

its administration to be divided into two parts. For the industrial codes, he appointed General Hugh Johnson, a veteran of the War Industries Board in World War I, to take charge of organizing industry standards. For the public works, FDR appointed Interior Secretary Harold Ickes, a Chicago lawyer who was to have a long and colorful history in the Roosevelt Administrations.

Unlike the earliest emergency measures, the NIRA was subject to huge controversy which delayed its passage, primarily in the Senate. The House of Representatives voted for the bill, by the margin of 325 to 76, on May 26—only a week after introduction. The Senate, which saw opposition from conservatives to the price-fixing, as well as to the labor rights segments, did not pass the bill until June 13, and then only by a margin of 46 to 39. The NIRA went into effect on June 16, 1933. While, due to its problematic features, it should not be taken as a model for today, it was an initiative that should be understood by those seeking to resolve today's depression crisis.


The original article was published in the EIR Online’s Electronic Intelligence Weekly, as part of an ongoing series on history, with a special emphasis on American history. We are reprinting and updating these articles now to assist our readers in understanding of the American System of Economy.

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