CHAPTER VIII THE SUBVERSIVE ASPECTS OF THE “NRA” IDEA

How many times have you heard an argument like this? “Our industry is in a mess. Most of the fellows are a decent sort. They keep prices up to such an extent that everyone can make a profit. But we have some ‘chiselers’ in our trade who are always cutting prices, sometimes selling below cost and they upset all our plans for stability. We ought to have a law—something to keep them in line—a law with teeth in it, so we could ‘crack down’ on them and make them behave. That is the only solution to our problem.”

That argument presupposes that a particular industry has a birthright to prosperity and all you have to do to guarantee that birthright is to pass a law sufficiently coercive. If that were the case and we could make these coercive laws work, then anyone could enter any business with an assured profit—everything to gain and nothing to lose. In other words, guarantee a profit to industry and guarantee a wage scale to labor so it can buy the products of industry and, presto!—you have the millennium. As naïve as the idea is, it is favorably entertained by tens of thousands of business men and millions of laborers.

This theory, crudely stated to be sure, robbed of its diverting verbiage and seductive embellishments is, nevertheless, the underlying philosophy of organized laborers, of “AAA” farmers and of “NRA” industrialists. Likewise, it is the driving motive that makes for the centralized government, the authoritarian State.

Walter Lippman, writing in the Atlantic Monthly[1] under the subject, “The Government of Posterity,” states the proposition excellently:

“. . . Thus it is that many have been persuaded that the importance of cheaper goods is a menace, that technological progress is a disaster, that to produce more is to earn less. They have the conviction that if only they could erect round their occupation a sufficiently high Chinese wall composed of holding companies, mergers, marketing contracts, production agreements, licenses, quotas, labor laws and labor contracts, a wall high enough to exclude new ideas, new methods, new men and unusual labor, they would enjoy the blessings of stability. They are quite right. A society which has organized itself elaborately must keep on until it has organized itself into rigidity. It must seek stability because it cannot advance. It must imitate the mollusk, which, though it can neither walk, swim or fly, and has only meagre ambitions, does seem to enjoy a reasonably well protected and stable existence.”

One of the really comic features of contemporary affairs is those business men who loudly hailed the death of the Blue Eagle on the one hand and are privately conspiring to erect another bird, differently bred but with the same intentions, on the other hand. General Hugh Johnson, in his first post-election syndicated article, recognizes the popularity of the idea:

“A third step in an immediate attack on unemployment is to determine the possibility of saving as much of NRA as can be done within the Constitution, with the cooperation of industry on a voluntary basis, quickly, simply and justly. Regardless of the adverse ballyhoo, there is a tremendous popular sentiment for this and a considerable sentiment in industry itself.”

Now, that statement, widely representative of business opinion, is a very pretty sentiment. Yes, we must do all this, “within the Constitution.” But does this merely mean we shall rewrite it in another fashion, retaining its former essential features? Does it mean we shall NRA, but henceforward we shall NRA legally? No, the idea must not be coercive any more—that didn’t work. We will do it “with the cooperation of business on a voluntary basis.” Does that suggest we shall from now on do voluntarily that which we formerly did, or tried to do, coercively?

There is a lot to be said for doing a thing constitutionally and not unconstitutionally—for doing a thing voluntarily and not coercively. Those maneuvers, laudable and necessary under our system, remove many opponents. But the fact that a practice is constitutional or that it is voluntary does not in any sense indicate that it is economically sound. Any action should be at once constitutional, voluntary and economic. If it cannot pass those three tests, it should never be graced with acceptance.

For instance, it is Constitutional to burn a fine crop of wheat! Conceivably, the action might be voluntary. But under no circumstances could it be considered economic, which disqualifies such action as a recommended national practice.

We are not here concerned with the constitutional or the voluntary aspects of the NRA idea, rather are we concerned with its economic aspects. We are concerned with its relation to the “X” factor. Does it subvert or promote it?

In the way of codes, there is little to be done, except in refinements, beyond that which the Federal Trade Commission has been supervising since 1919, codes formulated through the instrumentality of the Trade Practice Conference. That is, there is little more to be done if codes are to remain economically sound, voluntarily conceived and administered, and constitutional in their scope.

These codes have a dual purpose. First, the elimination of business practices, clearly illegal, such as secret rebates, false branding, trade-mark infringement, price discrimination in violation of the Clayton Act, use of false or deceptive selling methods, false advertising, commercial bribery, operation of lotteries and issuance of false invoices. Second, the elimination of business practices that are not necessarily illegal but which a given industry considers unethical, uneconomical or otherwise objectionable.

The Federal Trade Commission has the authority and the obligation to demand the removal of illegal practices and it encourages and assists the industry in self-policing the legal but objectionable practices. If more attention were given to the promotion of this type of code and less to the let-government-do-it-all type, our whole scheme of business relationships would be materially elevated.

The Supreme Court gave its blessing to this form of code-making in its Sugar Institute decision:

“Voluntary action to end abuses and to foster fair competitive opportunities in the public interest may be more effective than legal processes. And cooperative endeavor may appropriately have wider objectives than merely the removal of evils which are infractions of positive law.”

What, may we properly ask, does a revived NRA envision beyond the potentialities of the Trade Practice Conference code? Does not the motive behind the NRA revival spirit seek monopolistic permissiveness? Is there not embraced within this spirit the desire for production control and therefore price control? If these are not the objectives, then what is there to be obtained through a revived NRA that does not already exist in the TPC code? Because all industries will not submit to codes under the Federal Trade Commission? Then why would they voluntarily submit to NRA codes? The answer is, all of industry and business cannot be codified without coercion being applied.

Let us look at just one phase of the industrial structure and see where the application of coercion leads. Take the brick business. Brick, as we have indicated, is subject to two kinds of competition: intra-competition and inter-competition. Intra-competition is that within the industry, other brick manufactories, Inter-competition is that without the industry, other competing products such as lumber, concrete and the twenty or thirty other building materials.

The price of brick is as much regulated by the competition of other building materials as it is by the competition of other brick makers. Therefore, a code embracing production and price control for brick is perfectly useless unless codes are applied and sensitively adjusted to all the competing products. Experience under the defunct NRA taught us the interrelationship of codes of this sort. Once the process is started it must go the complete way, to all industry, thence to agriculture; in fact, to every product of production and consumption. If the thing is carried out to its logical conclusion, and it must be carried out if it is to work at all, consumption will have to be rationed. The citizens of free America will no longer be free—they will take their strawberries and cream according to the whims of a dictatorial bureaucracy—and like it!

Writing on this subject, Dr. Lionel Robbins, University of London, recently stated:

“There is a sort of snowball tendency about this kind of interventionism which has no limit but complete control of all trade and industry. Once a government starts to control important branches of industry, if they are not willing at some point definitely to reverse their whole line of policy, there is no stop to this process short of complete socialism.”

We may well consider the course of the AAA to prove the soundness of Dr. Robbins’ statement. Originally it was to apply to two crops—cotton and wheat. The restriction placed by the Federal Government on cotton growers caused the farmers to raise peanuts, which immediately affected the market on peanuts and further restrictions on that crop were made. Then they put their idle acreage into growing potatoes, which caused further restrictions, and so on until the original two crops were extended to cover twenty crops, and carried severe penalties in the form of excessive tax and criminal penalties.

Had the United States Supreme Court failed to check the AAA of Government control, we would have drifted into a complete dictatorial form of government supervision over all crops and raw materials with supervision and limitations on manufacturer, distributor and retailer.

Here we have an excellent example of the evil results of Federal Government tinkering with lawful operations and producing a system under which the first step makes inevitable the second step, the second forces the third and so on until the old order has disappeared and the new one has been completed.

The point is, the thing cannot work because there are no humans with the physical and mental capacities successfully to bureaucrat such a scheme. And to think it can be done piecemeal, just to certain industries, is as absurd as to think you can jump only part way from a stratosphere balloon! The real reason there is such a present popularity for the idea is that we already have so many rigidities that business men, laborers, agriculturists and others can see nothing else to do but impose compensating rigidities. One foot is tied down so let’s tie down the other one. Little thought is given as to how the first foot can be untied. It is easier to shackle than to unshackle, even though shackling makes for impoverishment.

Even if we had some gods on earth, endowed with superhuman powers of administration (we haven’t) and if they were tempted to try this scheme (no god would), the thing would be a colossal flop. It would be a flop for the simple reason that the NRA idea gives the medicine to the wrong patient. It conceives that classes and groups are the objects of our welfare affections. It loses sight of the real patient—the consumer. The NRA idea, even if voluntarily practiced and constitutionally okayed, would be an economic evil because it stifles competition, it fosters monopoly, it regulates production to an undeveloped demand—in short, it forces prices farther and farther out of reach of purchasing power. It produces less and less by fewer and fewer and therefore there is less wealth for few people. The NRA idea and the many varieties of its philosophy are without a doubt one of the most subversive elements to the “X” factor extant in America today.

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[1] November, 1936.