The First New Deal
NRA, AAA, TVA, and Economic Planning in the Great Depression
Jan 30, 2009 William L. Wunder
Arthur Schlesinger Jr. and like-minded historians believed that the New Deal had two distinct periods. The First New Deal, during Franklin Roosevelt's first term, emphasized coordination between government and the private sector. According to Schlesinger, the basis of the First New Deal was that the technological revolution had rendered big business inevitable and competition in the marketplace could not be relied on to protect social interests. New institutions had to be created to replace cutthroat competition to balance the economy.
National Recovery Administration
To prevent unfair competition, disastrious overproduction, and the cycle of low prices and wages, the NRA was established under the National Industrial Recovery Act of 1933. The NRA was charged with supervising the process where business and government would hammer out industry specific codes that set production quotas, prices, wages, and general business practices. The textile industry was the first to draft a code, which included a 40 hour work week, a child labor ban, a minimum wage, and collective bargaining.
Unfortunately, the NRA had little power to enforce its vast responsibilities. NRA head Hugh Johnson had to use a moral propaganda campaign, the Blue Eagle drive, to get stubborn industries to draft codes. It was the larger producers that ended up making the codes, at the expense of small business, labor, and consumers. The submitted codes that Johnson approved amounted to nothing less than the cartelization of huge sectors of American industry, according to David Kennedy. Meanwhile, the NRA became a bloated bureaucracy trying to oversee more than 700 overlapping codes. By the time the Supreme Court ruled the NRA unconstitutional in Schechter vs. the United States, the NRA was a failure.
Agricultural Adjustment Administration
Like the NRA, the AAA confronted overproduction to raise prices. Department of Agriculture secretary Henry Wallace had the difficult task of convincing farmers to cut production, even to plow up 10 million acres of cotton sprouts and slaughter 6 million piglets. The Domestic Allotment Plan was passed to pay farmers to grow less, the money coming from a food processor tax. Also, the Commodity Credit Corporation paid farmers to stop their already harvested surplus crops from reaching the market.
To oversee these programs, the AAA depended on Extension Service agents putting together production control committees in each rural county. However, the agents had a history of associating with large commercial farmers and chose them for the committees, skewing the production decisions in their favor. In the South, landowners received payments to lay fallow acres of land, forcing out their tenants and sharecroppers. Despite the favoritism for the wealthy, and with help from the drought, prices rose modestly and farm income rose 50% from 1932 to 1936. But in Butler vs. the United States, the Supreme Court ruled unconstitutional the food processor tax.
Tennessee Valley Authority
More successful was the TVA, a public corporation created to revitalize the stagnate Tennessee River valley through these methods:
- Distribute cheap hydroelectrical power from Muscle Shoals, Alabama.
- Construct more dams for flood control and to generate additional electricity.
- Produce fertilizers.
- Combat soil erosion and deforestation.
- Dig a 650 mile navigable waterway from Knoxville, TN to Paducah, KY.
- Improve educational and health services.
- Attract new industries.
To acheive these goals, the TVA relied on local business and farm leaders, such as chambers of commerce, leagues of bankers, and commercial farm associations. Also, TVA director David Lilienthal created an electrical appliance retail program, negotiating with General Electric and the National Electrical Manufacturers Association for low prices on electrical appliances for TVA residents, thus boosting demand for electrical power. Despite no cooperation with private power companies, the TVA was the beginning of the South's transition from Cotton Belt to Sun Belt, according to Bruce Schulman.
The First New Deal had mixed success. The NRA was a complete failure,with little cooperation within the industries and codes favoring large producers. The large producers also benefited from the AAA. In the end, both entities were struck down by the Supreme Court. The TVA survived its court battles and boosted the infrastructure and economy of the South.
Sources
Bailyn, Bernard et al eds, The Great Republic, DC Heath: Lexington, MA, 1985.
Kennedy, David M., Freedom From Fear, Oxford: New York, 1999.
Schlesinger, Arthur M., The Coming of the New Deal, Mariner: New York, 2003.
Shlaes, Amity, The Forgotten Man, HarperCollins: New York, 2007.
NRA Blue Eagle storefront poster
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