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November 2010

Recs

13

Government’s Prohibition of Price Cuts in the Great Depression

November 16, 2010 – Comments (5)

When President Franklin Roosevelt signed the National Industrial Relations Act on June 16, 1933, the National Recovery Administration (NRA) was created. The NRA, one of the major components of Roosevelt’s “New Deal” legislation, was created in response to accusations of “cutthroat competition” and the need for “fair competition.” Economic historian Thomas DiLorenzo explains the “NRA organized each industry into a federally supervised trade association called a Code Authority, which had the authority to regulate production, prices, and distribution methods.” The NRA empowered government bureaucrats and industry executives (as well as the U.S. President), officially called the “Code Authority”, to determine fair prices, wages, and business practices and punish businesses that did not comply with the code. I will examine the punishment businesspeople faced if they broke the regulations established by the Code Authority.

Journalist and economist Henry Hazlitt wrote in 1933, “It is obvious that under the present N.R.A. programme the American consumer is to become the victim of a series of trades and industries which, in the name of ‘fair competition’, will be in effect monopolies, consisting of units that agree not to make too serious an effort to undersell each other; restricting production, fixing prices,—doing everything, in fact, that monopolies are formed to do.” Hazlitt was one of the few public skeptics of the NRA at the time, and it wasn’t long before his predictions proved to be correct.  [more]

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