Business Cycles in the Progressive Era and New Deal
Chapter 10: The National Industrial Recovery Act: market economy perspectives
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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