Industry and Labor

Industry and Labor

The New Deal, like all major legislative reforms, was not simply concocted by members of the Roosevelt administration. Its provisions were the result of hundreds of grassroots initiatives by union workers and the unemployed who created the New Deal through participation in local, state, and national politics. For example, rank-and-file workers in Chicago created and participated in many organizations that communicated their ideas to local government leaders. For the first time in the city’s history, the majority of these organizations were not based around ethnicity or a particular craft. Instead, they represented ideas and perspectives that crossed these fault lines that had divided workers in the past.

Support for the federal government directly providing jobs for the unemployed or arbitrating conflicts between labor and management had been building for several generations. The Great Depression led to an increased level of activism among workers who believed that the federal government must intervene on behalf of the common citizen. Local political machines had failed to insulate cities and states from the Depression, while the paternalism and generosity of welfare Capitalism displayed its limits. For example, in 1931, Henry Ford blamed the Depression on the character faults of workers. “The average man won’t really do a day’s work unless he is caught and cannot get out of it,” Ford declared. Later that same year, Ford laid off 60,000 workers at one of his most productive plants.

Private industry and banks were unable to stimulate recovery, and many leading businessmen beyond Henry Ford seemed indifferent to the plight of workers. In response, the Roosevelt administration became more willing to consider the perspectives of the unemployed and the poor. At the same time, Roosevelt was a member of the upper class and shared many of the same conservative beliefs regarding the role of government, as did business leaders and previous presidents. Like Hoover, Roosevelt was an outspoken opponent of expanding the dole—the epithet applied to state and local welfare programs that distributed food and money directly to the needy. He was also sensitive to the ideas of industry and believed that the only way out of the Depression was to create a more favorable business environment through government intervention.

The Roosevelt administration looked toward the War Industries Board of the previous decade as a model for how to achieve both greater prosperity and increased production. Government planning had worked during World War I, Roosevelt’s advisers believed, arguing that government intervention could also help revive several industries where prices had declined below the point of profitability. Representatives of workers and the unemployed also convinced Roosevelt that public works projects were necessary to provide immediate employment until the economy and the private sector recovered.

As a result, the New Deal sought to promote two objectives. First, it would provide “workfare” rather than welfare by offering short-term employment in public works projects. Second, it would seek to create a more well-ordered economic system that encouraged the recovery of the private sector in the long run. Key to the operation of this system would be the incremental termination of federal public works programs once private industry began to recover. If government employment continued too long, they believed, these federal programs would compete for workers and prevent America’s factories from fully recovering and resuming full production.

Representing these twin goals of relief through public employment and recovery through economic planning, the National Industrial Recovery Act (NIRA) created two massive agencies. The Public Works Administration (PWA)Created by the National Industrial Recovery Act, the PWA was a federal works program that generally worked with private contractors to create major public works projects. would oversee Roosevelt’s “workfare” relief program with a budget of $3 billion in its first year. The PWA contracted with private construction firms to build a variety of public works projects. Among the projects of the PWA were the Grand Coulee Dam in Washington State, the Lincoln Tunnel connecting New Jersey with New York City, the Overseas Highway connecting the Florida Keys, and the San Francisco-Oakland Bay Bridge. Although many doubted the usefulness of air power at the time, the PWA’s decisions to build the aircraft carriers Enterprise and Yorktown would later prove to be two of the most important decisions made during the New Deal.

The second provision of NIRA soon became both the most ambitious and most controversial program of the entire New Deal. The National Recovery Administration (NRA)Also created by the National Industrial Recovery Act, the NRA sought to create trade unions representing various industries that would create codes regulating wages, prices, and production. The goal was to provide a more ordered economy and eliminate overproduction that led to unnaturally low prices and low wages. Critics suggested that the NRA created cartels controlled by the largest firms to reduce production while increasing prices. The NRA was declared unconstitutional by the US Supreme Court in 1935. created planning councils that established codes governing each industry. For example, the automotive trade council was led by representatives of major car manufacturers, labor unions, and government officials. Together, this council would determine how many and what types of automobiles would be built, the prices of these vehicles, minimum wages, and other provisions that would guarantee both profitability and the well-being of workers.

The central idea behind the NRA was that without these quotas and minimum standards, car manufacturers (and other businesses) would continue to engage in cutthroat competition with one another. This was important because the Depression decreased the number of consumers to the point that manufacturers were forced to sell their products at or below cost. NRA supporters believed that industry-wide coordination and planning would ensure that manufacturers only produced the number of products that would sell at a predetermined price. Included in this price was a reasonable profit that would permit employers to pay their workers a better wage. In return, employees of these companies could enjoy a measure of financial security and once again become consumers whose discretionary spending had fueled the growth of the 1920s.

Although this kind of central planning might be well-intentioned, many Americans feared that unintended consequences would occur. They feared that planning councils would be controlled by a few corporations within each industry, thereby creating cartels that could operate without any fear of competition. Such a system would permit manufacturers to keep production so low that prices could be increased dramatically. If this occurred, the result would be large profits for industries that intentionally limited production in ways that prevented job growth. Others feared the government would control these planning councils, promoting the growth of Socialism. Defenders of the NRA argued that neither cartelization nor Socialism would develop so long as each council shared power between heads of industry, labor unions, and government regulators. Government planning had worked in World War I, they argued, while the ruinous competition of the unregulated free market had led to the excesses of the 1920s and would likely prolong the current Depression. Equally important, NRA defenders argued, was the fact that participation in the NRA was voluntary. The decisions of planning councils were merely codes rather than law, and businesses were still free to practice free market principles if they did not like the codes in their industry. However, refusal to participate in the NRA was not without its own consequences. Only those businesses that participated could display the NRA’s Blue Eagle in their storefronts and on their products. Failure to participate in the NRA was considered unpatriotic, and the government suggested consumers boycott any business that rejected the NRA’s codes.

Figure 7.6

Participation in the NRA was voluntary, but only businesses that followed the codes in their industry could display the Blue Eagle Emblem on their products or in their stores.

Volunteerism could only be effective if the majority of businesses in any given industry participated in or at least abided by the decisions of the NRA’s planning councils. In the first years of the NRA, most industries did participate. However, this level of participation was only achieved by allowing the largest companies in any industry to draft codes allowing them to reduce production and increase prices. While this might encourage stability, critics argued that the NRA was actually preventing economic recovery while violating free market principles. In 1935, the Supreme Court agreed with the critics of the NRA, who argued that the agency violated principles of limited government and free enterprise and placed too much power in the hands of the federal government.

Although the NRA was ruled unconstitutional, it inspired a number of important changes. To provide more jobs for heads of households, the NRA prohibited child labor and set the workweek at forty hours. The NRA also included minimum wages and required companies to pay 150 percent of a worker’s normal hourly wage for every hour he or she worked beyond forty hours. Each of these measures had long been goals of the labor movement. Although the forty-hour week and overtime pay were merely codes and not laws, they were now supported by the federal government. The main reason the government supported these measures was to encourage businesses to hire more workers as a means of reducing unemployment.

Subsequent legislation in Roosevelt’s first year included the creation of the Civil Works Administration (CWA). The CWA provided federal jobs for 4 million Americans between its creation in November 1933 and its termination only four months later. The majority of CWA workers were employed in small-scale construction and repair jobs, but the CWA also hired teachers in economically depressed areas. Critics charged the CWA with providing needless jobs, such as raking leaves in parks. Given the speed with which the CWA payroll grew and the lack of a bureaucratic structure to secure the needed planning and resources for meaningful projects, such criticism was often well placed. The program’s expenses grew faster and larger than the Roosevelt administration had anticipated until the CWA was eliminated in March 1934. However, the CWA would serve as a model for future projects by directly employing workers rather than operating through private contractors. At the same time, it provided a cautionary tale about the need for planning and direction before launching a nationwide public works program.