RELIGION or POLITICS ??? Rules for Economic Recovery ......cont'd.

Ah yes, and a great TGIF to you, too. And may your weekend be as happy as you can make, and if you are not a happy person, get back to me and I'll show you how to be unbreakably happy.  But for now I must continue with the Rules of Economic Recovery.  And I hope you are paying attention.


ARROGANCE AND DISCRETION.............


       Consider the centerpiece of the New Deal's first 100 days, The National Recovery Administration(NRA), which was in effect an enormous multisector mechanism calibrated to manage the business cyle through industrial codes that, among other things, regulated prices.    The principles on which its codes were based appear risible from the perspective of microeconomics and common sense.   They included the idea that prices needed to be pushed up to make recovery possible, whereas competition constrained recovery by driving prices down.   They held that big firms in industry -- those "too big to fail" -- were to write codes for all members of their sector, large and small -- which naturally worked to the advantage of those larger firms.    As for the consumers choice, it was deemed inefficient and an inhibitor of recovery. 

       The absurdity of these principles was overlooked, however, because they were put forth by great minds.   One member of the Brain Trust, Ray Moley, described the myopic credentialism of this fellow Brain Trusters, Felix Frankfurter, in this way:

         The problems of economic life were to Frankfurter matters were to be settled in a law office, a court room, or around a big labor-management bargaining table ...... The government was the protagonist.   Its agents were its lawyers and commissioners.  The antagonists were big corporate lawyers. In the background were misty principals whom Frankfurter never really knew at first hand.... These background figures were owners of the corporations, managers, workers and consumers.

        One family that was targeted by the NRA bureaucrats was the Schechters, who were wholesale chicken butchers in Brooklyn.  The NRA code that aimed to regulate what they did was called  THE CODE OF FAIR COMPETITION FOR THE LIVE POULTRY INDUSTRY OF THE METROPPOLITAN AREA IN AND ABOUT THE CITY OF NEW YORK.  And according to this code, the Schecters did all the wrong things.   The paid their butchers too little.   They charged prices that were too low.   They allowed their customers to pick their own chickens.   Worst of all, they sold a sick chicken.   As a result of these supposed crimes, they were prosecuted.   

       The prosecution would have been comic if it were not business tragedy.   Imagine the court room scene:   On one side stands Walter Lyman Rice, a graduate of Harvard Law School, representing the government.   On the other stands a small man in the poultry trade, Louis Spatz, who is afraid of going to jail.   Spatz tries to defend his actions.  But he barely speaks English, and the prosecutor bullies him.   Nevertheless, Spatz is now and then able to articulate, in his simple and common-sense way, how business really works. 

Got to stop here friends, but will continue on monday, starting with the prosecution qustioning Mr. Spatz. Very interesting, so please do come back and visit then.  You are much appreciated.    CHeers      CJ