Markets, Planning and the Moral Economy

Markets, Planning and the Moral Economy

Business Cycles in the Progressive Era and New Deal

Donald R. Stabile and Andrew F. Kozak

Markets, Planning and the Moral Economy examines the rise of the Progressive movement in the United States during the early decades of the 20th century, particularly the trend toward increased government intervention in the market system that culminated in the establishment of President Roosevelt’s New Deal programmes. The authors consult writings from politicians, business leaders, and economists of the time, using a variety of historical perspectives to illuminate the conflicting viewpoints that arose as the country struggled to recover from the worst economic downturn in its history.

Chapter 10: The National Industrial Recovery Act: market economy perspectives

Donald R. Stabile and Andrew F. Kozak

Subjects: economics and finance, history of economic thought


Supporters of the market economy are typically characterized as true believers in laissez-faire, the theory of economics that argues that all government intervention in the economy will cause harm. Market economists, however, admit that some government activities are necessary for the market economy to function. Adam Smith, for example, recognized that the government needed to provide a system of laws and police and courts to see that those laws were enforced. More surprising, Smith wanted the government to offer free education to the poor. In both cases he recognized that humans would often yield to the temptation to behave improperly. A criminal justice system and better education would reduce improper behaviour. The question market economy advocates asked of the NIRA was whether it was a law that enforced proper behaviour or an illegitimate government intervention in the economy. In this chapter we look at what proponents of the market economy had to say about the NIRA and the NRA. Like Smith, they had no doubt that businesses would be tempted to eschew the benefits to society of competition and get together to fix prices and wages and use the government to help them. We saw in the last chapter that advocates of a moral economy felt that business had too much influence in the NRA codes. Market economists would not have been surprised. But they worried even more over how the New Deal programs were transforming government and politics in the US.

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