OPPOSITION TO THE NEW DEAL
The New Deal agenda was based on the presumption that free market forces and common business practices had greatly contributed to the failure of the economy. However, neither Roosevelt nor his New Deal experts and advisers attempted to overthrow or even radically reform capitalism. Instead, they believed that capitalism could be fixed or its outcomes could be improved through the intervention of the government. The New Deal was thus rooted in the idea (proposed already in the 19th century) that the government not only could but simply should regulate and reform the economy. Poverty, unemployment, dangerous labor conditions, or struggling agricultural sector were now to be addressed through government reforms and relief programs. Not surprisingly, the idea did not gain much popularity among those who promoted limited government intervention, laissez-faire, and individualism. Among them, business leaders,Republicans, and conservative Democrats constituted the most powerful group of New Deal's opponents.
The so-called Roosevelt Recession that began in 1937 provided fresh fuel for business and political opponents of the New Deal. Extreme stock market decline coupled with growing unemployment and decreasing GDP served as apparent evidence that the New Deal regulations and reforms, in fact, hurt the economy.
NATIONAL INDUSTRIAL RECOVERY ACT
The National Industrial Recovery Act (NIRA), signed into law in June 1933, proposed comprehensive reforms to boost industrial recovery. It outlined guidelines for the creation of the so-called "codes of fair competition" (rules according to which industries were supposed to operate), guaranteed trade union rights, and permitted the regulation of working standards. It also established the Public Works Administration, an agency responsible for creating jobs through public works projects. The National Recovery Administration (NRA) was founded to implement NIRA.
Both NIRA and NRA attracted widespread criticism. Critics argued that NIRA endorsed monopolies and cartels, which in turn contributed to higher prices. While higher prices were one of NIRA's explicit goals (in response to severe deflation), evidence for whether they contributed to economic recovery remained ambiguous. Even the National Recovery Review Board, established by Roosevelt in March 1934 in response to the growing criticism to review the performance of the NRA, concluded that the codes of fair competition gave disproportional power to each industry's already biggest and most powerful actors. As the codes regulated such matters as wages, working hours, production quotas, and prices, many businesses, particularly those smaller and newer ones, refused to endorse NIRA. The Blue Eagle logo became the symbol of businesses that signed up for NRA and, in the aftermath of an effective public campaign, businesses that did not display the logo were often boycotted. Consequently, some business owners argued that the NRA membership was not really voluntary but necessary for survival. Business leaders and conservative politicians were also critical of the power that NIRA invested in the organized labor and workers generally. NIRA's labor protection provisions soon turned out to be incredibly difficult to implement, which provoked labor unrest and increased tensions between employers and workers. As NIRA included no provisions on how to dissolve labor disputes, the National Labor Board was established under the auspices of the NRA to handle conflicts between labor and employers.
On 27 May 1935, in Schechter Poultry Corp. v. United States, the Supreme Court declared Title I (devoted to industrial recovery) of NIRA unconstitutional. The Court ruled that the Act delegated legislative powers to the executive and regulated commerce that was not interstate in character. It also criticized the fact that instead of providing "rules of conduct," NIRA authorized the creation of codes (containing "rules of conduct") without outlining any specific standards. As NRA was a product of the same section of NIRA that the Court deemed unconstitutional, the agency's role was redefined by an executive order. It now promoted industrial cooperation and produced economic studies.
NATIONAL LABOR RELATIONS ACT
In the aftermath of NIRA's failure, the 1935 National Labor Relations Act (NLRA; known also as the Wagner Act) was passed. It offered many of the labor protection provisions that were earlier included in NIRA. NLRA provided basic rights of private sector employees to organize into trade unions, engage in collective bargaining for better terms and conditions at work, and take collective action, including strike. Unlike NIRA, which tied the same rights to industrial codes, NLRA guaranteed labor rights through the federal government. The act also created the National Labor Relations Board (not to confuse with the National Labor Board created under NRA!), which was to guarantee the rights included in NLRA (as opposed to merely negotiating labor disputes) and organized labor unions representation elections.
Business leaders overwhelmingly criticized NLRA. The increasing power of labor unions and the rights of all workers, both unionized and non-unionized, to negotiate their terms of employment caused rather expected anxiety among employers. Some voiced the opinion that NLRA would significantly contribute to the higher costs of production (most notably through increasing wages) and thus trigger higher prices and limited profits. Politicians affiliated with the business also opposed NLRA, most notably members of the American Liberty League, a non-partisan organization that gathered Republicans, Democrats, and business leaders opposing the New Deal. The League's lawyers challenged NLRA but the Supreme Court upheld its constitutionality in National Labor Relations Board v. Jones & Laughlin Steel Corporation (1937). While organized labor largely lauded NLRA, the American Federation of Labor accused NLRB of favoring practices employed by the Congress of Industrial Organizations (CIO). CIO, created in 1935 as the Committee of Industrial Organizations by unions belonging to AFL, gathered industrial workers and it eventually broke away from AFL in 1938.
NRA (National Recovery Administration) member: We Do Our Part