Fear Itself (37 page)

Looking back, we can see how the NRA’s implementation of its goals was checkered. Its complex organization often reached beyond its actual managerial abilities to superintend, manage, and enforce hundreds of codes or integrate the economy into large and inclusive pyramids. Franklin Roosevelt himself remarked in his State of the Union address in January 1937 how “we know now that its difficulties arose from the fact that it tried to do too much.” The supposition that the NRA, as distinct from other forces, fell short in its goal to be the primary factor driving an economic recovery has been backed by reasonable analyses, even though the country did witness growth rates of 9, 10, and 14 percent in the three years following the passage of the Recovery Act, and a decline of the national unemployment rate from 25 percent in 1933 to 17 percent in 1936.
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Clearer still is that the attempt to find a balance of power between business and labor failed to level the playing field. Even as the law did represent a “dramatic legal victory for organized labor” that facilitated the growth of independent and often militant unions,
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uneven class power made planning for a cooperative capitalism difficult. As the first extended history of the New Deal observed in 1944, trade associations dominated by the largest corporations “not only formulated the codes but had also dominated the procedure of hearings, amendment, and adoption, while the influence of small businessmen, laborers, and consumers had been very slight.”
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In all, Louis Galambos and Joseph Pratt concluded, the National Industrial Recovery Act was “one of the most publicized and least significant of the programs” of the New Deal.
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However, this was not how the NRA was understood at the time. With support coming from most sectors of the country’s economy, including many parts of business, the great majority of observers, some in favor and some against, were confident that the NRA would dramatically renovate American capitalism. A week after the passage of the new statute, the ordinarily market-oriented
Wall Street Journal
celebrated as “a matter for national rejoicing” how the NRA promised to end “murderous competition and the starvation wages which it compels or speciously condones. . . . If ‘government interference’ or ‘regimentation of industry’ is the only way to check these depression evils we must perforce accept even those distasteful emergency measures.”
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In September 1933, Henry Luce’s business magazine,
Fortune
, applauded the NRA’s “purpose to transplant the practice of democracy from the political field . . . to the industrial field,” and it proclaimed how “the result may be not only the salvation of American industry but the rejuvenation of the now decayed and outmoded ideal of democracy itself.”
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Four months later, Gerard Swope, the president of General Electric, who helped design the NRA and who chaired the Executive Committee of the Business Advisory Council of the Department of Commerce while also serving on the NRA’s Business Advisory Board, graded the law a success in how it was developing a form of planning and economic organization that was “enabling cooperative work on the part of competing units in commerce and industry,” a gain he described as the “first but very important step” in what he hoped would be “the creation of a National Economic Council for long-range planning.”
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Considered conclusions about achievements, we might acknowledge, are not the same as verdicts about the program’s robustness. A focus on shortcomings and disappointments can overlook the fundamental objectives and the changes in assumptions and possibilities that the law initiated. The negative verdicts that dominate historical memory and scholarly appraisal usually miss two quite fundamental aspects of the short-lived NRA. First is the law’s sheer audacity. Invented under conditions of fear, the program’s grand purposes, inventive arrangements, and elaborate means should not be underestimated. Second is the way this pioneering experiment was connected to other ambitious New Deal initiatives.

We know that the recovery legislation the administration sent to Capitol Hill was drafted quickly and somewhat haphazardly by at least three sets of policy groups. But what united them was quite remarkable. In undertaking the most assertive and thoroughgoing American attempt to restructure the economy under democratic auspices, they made use of instruments that had largely been invented and sponsored by antidemocratic regimes. In daring acts of transformation and inversion, these means were thoroughly modified. The NRA was designed to respect nongovernmental preferences and powers, and it inclined optimistically in the direction of showing how a constitutional government with a legislature at its heart could act effectively on behalf of the public interests even in the most difficult of conditions. There was, its supporters insisted, important space to be found and colonized between a failed market capitalism and the illiberal policies of the dictatorships, a democratic pathway to restore the shattered economy, by placing American capitalism under public supervision, a point made by John Dickinson in October 1933 from his position at the Department of Commerce.
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By combining purposive planning with voluntary code making, the NRA possessed capacities that were cut short by the agency’s own limitations and, more decisively, by the Supreme Court. As a 1936 report recording how the NRA’s program operated in the oil industry observed, “had it not been for the presence of legal obstacles, the Code might have become the instrument by which the government would eventually have controlled the whole of the oil industry.”
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When the NRA began, this largely anarchic industry faced massive problems of overproduction, falling prices, and dangerous conditions. It was weakly regulated, if at all, at the state level. Major producers, including Gulf, Shell, and Standard Oil, vied with independent companies in a clamor for control, pricing, and organization. Drilling scrambles led to cutthroat competition, which, in turn, led to a near-total neglect of environmental considerations. Clearly, the stakes were high—for the industry, survival and profit; for the country, economic success and national security—when the “NRA Code of Fair Competition for the Petroleum Industry” combined public authority with a collaborative and cooperative program that did effectively place oil production on a new and more secure basis.
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In all, Kenneth Finegold and Theda Skocpol are right to recall how, despite its flaws and uneven record, the NRA did add up to “an extraordinary new departure for the U.S. national government which abandoned its previous stance of minimal interference in the domestic market economy in favor of comprehensive attempts at administrative intervention.”
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Donald Brand’s meticulous study also correctly judges this program to have been “radical” for the way the national state subordinated private power and transformed both business and labor into servants of the public interest.
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If a key defect, as Alan Brinkley has noted, was how the act “did not so much resolve the tension” between economic planning and the model of creating industrial self-government through sponsored trade associations “as incorporate it into the new institution it was creating,”
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this combination, paradoxically, also was the program’s greatest strength, for it showed that it was within the scope of democratic public policy to use private consumer, worker, and business groups for public purposes.

Since this experiment was ended by judicial decision in 1935, we cannot know how it might have developed had it been renewed. Late in its life, Tugwell recalled, “the National Recovery Administration had fallen into awful chaos,” beset by erratic leadership. “After a spectacular flight,” he concluded, “the blue eagle’s plumage was torn and ragged.”
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But spectacular the flight had been. Though manifestly beset by problems when it closed down, the NRA never had the chance to learn and adjust, build institutional capacity, or mobilize public powers to fully create a more balanced economic system by transforming its inherent tensions into a creative, rather than debilitating, site of friction and pressure. Though the NRA was quickly gone, its ideas, which the Supreme Court could not eradicate, did remain robust. Strikingly, when America’s economy confronted a deep dip in 1937 and 1938, there was, as Brinkley notes, a “notable interest still in reviving something like the NRA” that could renew “efforts to limit competition and ‘harmonize’ the economy” by “making the federal government itself a powerful planning mechanism, capable of orchestrating corporate policies on prices, wages, and investments.”
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Later, the New Deal’s short-lived configuration of democratic planning and corporatism was adopted as a model in much of postwar Western Europe, where administrative tools were developed with much success to achieve collaborative and egalitarian economic goals.
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Despite its manifest and well-chronicled shortcomings, the NRA, in short, did lead the country’s most far-reaching attempt in economic and social policymaking, before or since.

The second sizable cost exacted by a focus on the malfunctions and letdowns of the NRA concerns the organization of political time. In an important study of congressional behavior during the New Deal, James Patterson observed that “historians have not agreed whether the ‘first’ or ‘second’ New Deal was more radical,” adding that “they have, however, usually agreed that about the time of the ‘second’ there was at least a shift in emphasis.”
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Indeed, one of the most familiar features of New Deal historiography is the construction of a boundary separating the First New Deal, whose main achievements were the creation, in 1933, of the National Recovery Administration and the Agricultural Adjustment Administration, from the Second New Deal, whose central legislative accomplishments in 1935 included the formation of a National Labor Relations Board and the establishment of Social Security. The influential 1937 essay by Arthur Schlesinger Sr. was the first to distinguish an initial moment that promoted economic reorganization to prevent starvation and ameliorate suffering from the next period, which created a modern American welfare state, and, by assisting organized labor, redrew the country’s lines of power and influence.
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Nearly a quarter of a century later, Arthur Schlesinger Jr. similarly identified how “1935 marked a watershed.”
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Historians have come down on both sides of the timing of radicalism question. Setting the tone for one side of the debate, Basil Rauch’s pioneering full-blown 1944 history of the New Deal characterized the start as cautious and friendly to business, and the second as expansive and oriented to the working class. Many others have also projected the position that the New Deal took flight as a progressive force only after it was liberated by the
Schechter
decision, which ended the NRA. Pressured by growing working-class militancy, it turned leftward to protect labor rights and build a program of social insurance.
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However, there is an opposite view, first proposed by Arthur Schlesinger Jr. Rejecting the trajectory of a growing radicalism, he discerned just the reverse in how the Second New Deal drew back from the radical impulse of the First. A willingness to break through traditional limits to curb an unfettered marketplace and limit uncontrolled business power, he argued, had given way to “a certain lowering of ideals, waning of hopes, narrowing of possibilities.” This second moment he believed to be “essentially more conservative,” and only “ostensibly more radical.”
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This debate forces a factitious choice. Though not entirely consistent, Schlesinger was rather more on the mark when he underscored how the New Deal’s “objectives remained the same” during both times. Any change, he wrote, had been one of emphasis and style regarding “the manner in which these objectives were pursued.”
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Stressing continuities rather than differences, he took note of a letter he received in 1958 from Leon Keyserling, Senator Wagner’s legislative assistant during FDR’s first term, which underlined the unity of the 1933–1936 interval.
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This third orientation, the one I embrace, demonstrates that the division between the First and the Second New Deal signifies not a major break but a lesser inflection. This is the powerful message Alan Brinkley conveys in his study of how New Deal reformers defined their goals and articulated their ambitions. Moving from what Carl Degler called “the third American revolution,” which had produced “a revolutionary response to a revolutionary situation,”
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American liberalism’s domestic policies became less expansive and more contained, Brinkley shows convincingly, during the period spanning 1937–1938 to World War II.
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As both he and Schlesinger have revealed, it makes sense to focus a good deal less on differences within Roosevelt’s first term and consider instead how those four years composed a tightly connected moment whose unprecedented actions were based on the persistent understanding that an unfettered and unbalanced capitalism could no longer be made to work.

Governor Roosevelt’s presidential candidacy, we might recall, had been premised on this line of analysis. In a hallmark address to San Francisco’s Commonwealth Club on September 23, 1932, he lamented how “equality of opportunity as we have known it no longer exists,” and he sought to explain why “we are now providing a drab living for our own people.” That speech offered a structural analysis. It identified a closed frontier, a built-up industrial structure, and “a steady course toward economic oligarchy” as the Depression’s culprits. Needed in such circumstances were “new terms of the old social contract” . . . a new “economic constitutional order” in which “our government” would “restrict the operations of the speculator, the manipulator, even the financier.” To check competitive markets and the reach of business power, FDR announced, would require plans in the public interest.