A Practical Appraisal of the N. R' A.

By Kenneth Smith, Manaser Lumber a Allied Products Institute, Los Angeles

A Paper Delivered ot o Meeting of the Construction Industries Committee of the Los Angeles ChEmber of Commerce on June 26,1935

.' A paper delivered at a meeting of the Construction Industries Committee of the Los Angeles Cham'ber of Commerce on June 26,1935.

I have ssld in a number of talks recently that the Supreme Court decision was an excellent thing for the'country 'from the long-range standpoint, and have been misunderstood by a number of my friends who have jumped to the conclusion that I was unfairly critical of NRA and unwilling to concede the great good which it did. For that reason' and because of the fact that this talk is labelled "A Critical Appraisal of the NRA", I should like to make it clear at the outset that I do not think, by any manner of means, that the effect of NRA was all bad.

On the contrary, I feel that a tremendous amount of good was accomplished by the NRA, and that its accomplishments were very much on the right side of the ledger up to that point where the public and businessmen generally became aware of the fact that the Administration knew it could not enforce its code edicts and was merely running a bluff.

From that point on it became a menace to recovery. It was holding back confidence. It was hamstringing highclass, clean businessmen, and it was doing all over again the job done by the Eighteenth Amendment, of teaching disrespect for law.

It is a great pity that through an apparent 'constitutional inability of the President to keep his pledges, NRA should have been allowed to run on after it was a demonstrated failure. If the President had kept his pledge, to forget about NRA if it should develop that it did not work' if he had then stepped out and admitted that experien'ce had demonstrated that it was a failure and pointed out the fact that it had been a good thing while it lasted, and that that portion of it which was good should be made into a perma' nent law, the country would have been saved the two or three months of turmoil, nervousness and business uncertainty which was produced by the abrupt cessation forced by the Supreme Court decision.

I I think there is no question but that this jittery feeling has already begun to subside and that businessmen are beginning to realize, upon second thought, that from the longrange view, the Supreme Court decision on the NRA and the other unconstitutional measures and acts has definitely dampened the spirit of New Deal experimentation, and that 'we can look for mounting optimism and continuing recov-. er)'. 1936 will be better and, 1937 will be a normal year. I do not think there is any reason to be anything but optimistic over the efiect of the NRA decision; but I also think that businessmen will make a serious mistake to think that this will in any way interrupt the steady progress of public opinion and legislative enactments which have been gradu- ally for 150 years imposing increasing limitations upon the right of initiative.

I think, in fact, that in spite of its failure it will have the effect of very definitely accelerating that natural trend. As long ago as May 8, 1934, speaking in these same rooms, to a meeting of Trade Association Secretaries, with respect to the form the Association of the future will take, I said to them:

"It does not matter what you think of NRA-whether you belong to those who damn it and all its workswhether you are one of those who drape the flag about it and denounce its critics as traitors-or whether you see both good and bad in it-it is an inescapable and undeniable fact that its existence to date has forever sealed the doom of the hverage and usual type of Association of the past.

"It has been a forced educative agency that has, in a little over a year jimmed down the necks of business more understanding of the necessity for, and the benefit of, united action than had been accomplished by all the efforts of the ablest leaders industry had produced. It has broug'ht an understanding of the value of facts as distinguished from opinion that 3 years ago looked like it woul,d take a millenium to bring about. It has forced an intensive study of distribution channels and costs and brought about an understanding of the necessity for restricting the cost of distributing the product of industry to the consumer to the worth of the service actually rendered that is working now and will continue to work an outright revolution in the'distribution practices of industry. E,conomists have preached for years that distribution cost must be lowered; that overlapping and une,conomical services must be eliminated if business was to be kept in balan'ce, but it took NRA to force industry to recognize the fa,ct.

"These are fundamental accomplishments that will never be lost. These are seven-league steps taken that will never be retraced. Whether NRA be continued on the present pattern, or so altered as to leave only governmental control of working ,conditions and volume of production, as many think it may, it afiects the future of associations only in 'degree. The less business is ,controlled by bureaucracy the greater the control whi'ch must be exercised by the association. The only question is the extent to which the association will influence business. The fact is that it must and will do the job. It must and will become the most potent instrumentality for solving the perplexing problems of industry. I do not believe that the recalcitrant minority will ever again be permitted to determine the practices of industry."

My conclusion at that time was that, a{ter NRA, associations would have to be reorganized "so that they will function hand in hand with the law in regulating the competitive process; in maintaining equality of opportunity; in minimizing the 'cost of distribution; in protecting the public against unreasonable prices and predatory practices of all kinds if we are to retain freedom of enterprise and fr,eedom of the individual in this land."

Talking at Avalon last October l?th, on the subject of "\Mhat follows NRA", I pointed out that as mu,ch as NRA was getting to be disliked it nevertheless was a fact that it was not something which the heinous politicians had saddled upon industry, but that it was an effort sincerely proposed at the time of its inception as an answer to the vociferous demands of business for the past twenty to twentyfive years for the right and privilege of making its own rules of cooperation and competition and that, in fact, only the vicious American habit of expecting immediate perfection, had ,caused the members of practically every industry to start looking immediately at the defects in administration, at the imperfections of the laws in the shape of rules and regulations under codes which they had made for themselves, and to ,complain bitterly at the very restraint upon individual freedom of action which they had imposed upon themselves.

My plea then was that every businessman give personal thought to, and take active interest in the, consi'deration of this problem of "'What Follows NRA", and see to it that the organization through which he voiced his opinions took a cooperative attitude with respect to trade practice regulations rather than just sit back and buck everything proposed by both politicians and professors. I stated then, and I think it is the point with which we should be most concerned today that, if we either do nothing, or just oppose what is proposed by others, we shall get legislation mu'ch more difiicult to work with, much more restrictive and likely to result in mu,ch less real freedom of 'competition and real opportunity for profit than would be the case by assuming a cooperative attitude and r,vorking along with the law-makers.

I think we made a great mistake to just condemn the NRA, that we should instead look back at the conditions which prevailed in the years before we had this legislation, at the ,chaos which existed at that time, at the fervency with which we almost prayed for an opportunity for industry to be permitted to govern itself, to make its own rules and regulations and laws of competition.

I think if we will do that we will then recognize that

NRA failed not only because it was unconstitutional but that in its failure it had conclusively demonstrated that it would never be possible, at least in our present state of civilization, to delegate to ,businessmen themselves the right to make laws for themselves. NRA also demonstrated equally ,conclusively that it is impracticable to tie the relation between employer an'd employee into the same compact fair trade practices in industry. It was political horsetrading which tied these two entirely separate and distinct fields both of law and of business conduct in one compact as NRA. It was a political expedient and experiment, and it was so frankly labelled at its inception. Its faiture has demonstrated, not that no further progress can be made in the handling of these trvo separate and distinct subjects in the future by statutes dealing with them as separate and distinct problems, not that we must now revert to the horse and buggy age and to 36c wheat and 5c cotton, not that the steady progress of the past 150 years in the limiting of the right of the avaricious to prey upon their fellowmen must be halted, but merely that the job cannot be done in that particular way.

At one time in this ,country anybody 'could practice law; anybody could practice medicine; anybody could practice dentistry; anybody could start a water company; any'body cou-ld put in a telephone system; anybody ,could start an electric light or gas company; anybody could build and operate a railroad without limitation and without hindrance. Step by step, because it served the best interests of all the public, these unlimited rights to engage in these profegsions and businesses were limited by statute and these statutes were improved or tightened as time went on until today no one has any idea that there is anything unfair about the fact that he cannot engage in these lines of business without a permit from some branch of the government to do so.

In the course of time, we will have seen passed, and regard no less favorably, laws extending this theory of limiting the right of initiative in the interest of the public, to the point where it will require a certificate of necessity and convenience and a certificate of competency in order to engage in any staple line of business.

The Construction Indus'ry in California very nearly found itself working under such a law at this last session of the Legislature and will quite likely be the next major industry to which this type of legislation will be applied.

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