The main purpose of the N.I.R.A. is to reactivate economic activity under certain rules of the game characteristic of a competitive regime. The government will not finance public works exceeding a maximum value of 3.3 billion dollars. The N.I.R.A. turns its back on the principles of antitrust laws and seeks, therefore, to postpone the Sherman Act. This is all the easier because implementing this new legislation consists in establishing “codes” for each industry. These codes are prepared by committees in which representatives of businesses, the government, and labor unions participate. The latter, however, participate only when dealing with concentrated sectors in which very large companies exist. More than 600 codes will be drafted, sometimes taking the form of collective agreements negotiated between employer associations and labor unions.
The main rules included in these codes provide for the fixing of minimum prices or even the simple elimination of price competition; the workweek is generally set at 40 hours and minimum wages are established. Consumers criticized the drafting of these codes, arguing that their interests were not sufficiently taken into account and that they merely led to higher prices. Labor unions voiced the same objections. In May 1935, the Supreme Court declared the N.I.R.A. unconstitutional. Faced with criticism, but also after discovering the disadvantages of these restrictive and Malthusian codes, the government took advantage of the Court’s decision to return to an antitrust policy.
Beginning in 1938, President Roosevelt definitively redirected his policy regarding monopoly prices, which were considered one of the causes of that year’s recession. A commission was tasked with opening an investigation on “the concentration of economic power.” This commission published a report demonstrating that the New Deal had favored the formation of monopolies.
During the war of 1914–1918, the federal government had built two explosives factories in Muscle Shoals, near the Tennessee River. To provide the necessary electric power, a dam had been constructed. In 1925, construction of the dam was completed, representing a public investment of 145 million dollars. Should this infrastructure be sold to private companies, or should it remain publicly owned? Roosevelt had made it known that he favored government control.
In May 1933, the Muscle Shoals Tennessee Valley Development Act created a three-member board called the Tennessee Valley Authority, whose function was to administer and operate the national factories in the Tennessee Valley. It was specified that this management should serve national defense, agriculture, and industry by improving navigation on the Tennessee and regulating its flow and that of the Mississippi. The T.V.A. was authorized to undertake a series of major public works: building factories, dams, irrigation projects, reforestation initiatives, and more. The T.V.A. was therefore, in essence, a major public works program.
This project, one of the most important of the New Deal, faced numerous attacks. The liberal spirit of the American business world could not tolerate such a high degree of intervention. However, the Supreme Court approved the T.V.A. In 1937, Roosevelt asked Congress to create additional public agencies of the same type to improve the economic situation of certain regions. He proposed six, but obtained none.
It is not easy to measure the consequences of this vast, innovative policy known as the New Deal. Critics from the camp of free-enterprise advocates always saw state action as a factor deepening the depression. Beyond purely doctrinal disputes, the influence of the New Deal must be considered in terms of economic recovery and the social reach of the measures adopted.
One may indeed feel disappointed by the limited magnitude of the results achieved between 1933 and 1939, since despite the recovery, unemployment would not be fully eliminated and investment remained extraordinarily weak—declining by nearly half between 1937 and 1938. The New Deal could not revive private investment, and some even believe it may have discouraged it. Opposition from the business world to Roosevelt’s policies may explain, according to some authors, distrust and possibly a desire to obstruct governmental action.
Public investment could hardly compensate for the extraordinary drop in private investment in a country like the United States and within a federal system. The depth of the depression was too great for a budget-deficit policy to “prime the pump.” But it is true that the set of measures adopted contributed to increasing aggregate demand or slowing its decline. If public spending had not substituted private spending, the depression would have been even more severe.
Finally, it should not be forgotten that the New Deal represents the first major experience in the history of capitalist development of state intervention acting simultaneously on economic cycles and structural factors. However, the method used was empirical, and the authorities proceeded by trial and error. There was no preconceived plan.