Codified Capitalism, I
A brief upturn in production and employment during July and August 1933 led some contemporaries to the premature conclusion that a more optimistic business outlook engendered by the adoption of the National Industrial Recovery Act and allied New Deal programs had actually reversed the course of recent economic history. To be sure, this sudden increase in economic activity was no illusion. But it was based on little more than a temporary stimulus occasioned by a sudden rush in the manufacturing sector to build up inventories as a hedge against the anticipated impact of NRA-supported price increases in the weeks and months to come. By the end of September, the economic indexes had again turned sharply downward, setting the stage for the first serious wave of apprehension about the alleged merits of the federal government's unprecedented recovery scheme.
The charges and countercharges in this respect were varied and multidimensional, encompassing many different facets of the New Deal's particular brand of "political capitalism." 1 But clearly the most pervasive source of difficulty for the NRA arose in connection with the apparent inability of the codes adequately to fulfill their intended regulatory function in many of the nation's most highly competitive industries. This was the sector in which the rationalization of standard capitalist behavior promised the greatest potential return in terms of the desire to restore balance and order throughout the economy. These usually were labor-intensive industries, and the hope of achieving industrial control in them was linked directly to the effective enforcement of the labor provisions of the code and the prospective stabilization of the cost structure of competitively overdeveloped product markets. It was soon recognized, moreover, not least by the NRA administrators, that the difference between moderate success and complete failure in the quest for stabilization more often than not turned on the ability of labor unions to limit the ease with which the individual entrepreneur might avoid full and uninterrupted compliance with the prescribed standards of employment in a given branch of industry. In fact, however, organized labor during the early 1930s— in spite of Section 7a—was so seldom in possession of the countervailing