How Successful Was the National Recovery Administration?

Although the National Recovery Administration, created in 1933, was at first successful in combating many of the debilitating effects of the Great Depression, such as high unemployment and deflationary pricing, the agency stopped operating in 1935. The primary cause of the agency's demise was a U.S. Supreme Court decision ruling that the codes enforced by the agency violated the U.S. Constitution's provisions regarding a separation of powers and went beyond the constraints of congressional power outlined in the Constitution's Commerce Clause. By the time the agency was dissolved in 1935, however, American production had increased by 22 percent, large numbers of unskilled workers joined labor unions and child labor was abolished.

The purpose of the National Recovery Administration was to establish codes for businesses to follow that would provide minimum wages, limit the maximum number of hours worked and set prices and production levels. The intent was to stabilize the American economy by limiting destructive competition, increasing consumer purchasing power and putting unemployed workers back to work. By midsummer of the year it was formed, the new agency was able to accomplish the voluntary acceptance by more than 500 industries of new codes of fair practice. The new codes covered more than 20 million workers.

The agency's first director, retired U.S. Army General Hugh S. Johnson, proved to be overzealous in his approach and, despite his initial successes, managed to alienate important business leaders. Before long, the agency came under criticism for meddling in the affairs of business. It was also criticized for its policy of setting industry prices, an approach that could promote the creation of monopolies. When the agency announced in 1935 that it would no longer set prices, the majority of the business leaders involved reacted unfavorably.