Jim Huntzinger | On April 7, 2020

Despite the Roosevelt Administration’s effort, coercion, and propaganda, by 1934 the National Recovery Administration (NRA) was losing ground. Many smaller businesses around the country, finding the NRA intolerable, began defying its regulations, ignoring fines levied against them, and filing complaints. Ultimately, in May 1935, the Supreme Court unanimously found the NRA unconstitutional.[1] The Lucifer’s tongue and pitchfork of the NRA, and that part of the Roosevelt Administration, was excommunicated. “Facts and circumstances have a logic that planners never seem to anticipate.”[2]

Even today we remain terribly belabored by some devastating legacies of the NRA and NIRA (National Industrial Recovery Act of 1933). Researchers and authors C. J. McNair and Richard Vangermeersch explain:

The NIRA, with its legacy embodied in the Blue Eagle, appears to be the most significant singular event shaping cost practices in the United States. It was the only time in documented history when government intervention in business practices went beyond regulating market transactions to interfering with the internal operations of the firm.[3] The impact of the NIRA on accounting remains today, embodied in the full cost model and the reporting practices it comprises. A legacy of Roosevelt’s New Deal, the full cost model and the cost-plus mentality it fostered continue to serve as an insidious but effective roadblock to change in management accounting.[4]

While many attempts of the Roosevelt Administration to grab power and destroy the rights of Americans were declared unconstitutional by the Supreme Court of the United States, much legislation, as well as many regulations and federal agencies, emerged driven by the New Deal. “In practice, many of [the New Deal’s] policies were redistributive, intended to help workers, farmers, and other sizeable groups. These policies raised real wages above productivity. The result was unemployment.”[5]

When wages are kept artificially high, unemployment lingers on until labor wages are adjusted appropriately.  The great Austrian economist Murray Rothbard explains that unemployment:

[N]eed only be temporary. The speedier the adjustment, the more fleeting will the unemployment be. Unemployment will progress beyond the “frictional” stage and become really severe and lasting only if wage rates are kept artificially high and are prevented from falling. If wage rates are kept above the free-market level that clears the demand for and supply of labor, laborers will remain permanently unemployed. The greater the degree of discrepancy, the more severe will the unemployment be.[6]

Unfortunately, the statism of the 1930s still lingers with us today.

Originally published on Townhall Finance.

Jim Huntzinger

Jim Huntzinger began his career as a manufacturing engineer with Aisin Seiki (a Toyota Group company and manufacturer of automotive components) when they transplanted to North America to support Toyota. Over his career he has also researched at length the evolution of manufacturing in the United States with an emphasis on lean’s influence and development. In addition to his research on TWI, he has extensively researched the history of Ford’s Highland Park plant and its direct tie to Toyota’s business model and methods of operation.

Huntzinger is the President and Founder of Lean Frontiers and a graduate from Purdue University with a B.S. in Mechanical Engineering Technology and received a M.S. in Engineering Management from the Milwaukee School of Engineering. He authored the book, Lean Cost Management: Accounting for Lean by Establishing Flow, was a contributing author to Lean Accounting: Best Practices for Sustainable Integration.