As part of their faith in the underconsumption theory, [the New Dealers] believed that artificially higher wages [resulting from less competition, fixed prices and fewer working hours] meant greater purchasing power, which they believed would help Americans out of the Great Depression. If people earned more, they could buy more, and that would stimulate industrial and economic recovery.In this "high wage" theory, the efficient businessman, the innovator and the price cutter, was evil because he was believed to contribute to lower wages, and therefore diminishing purchasing power. He was a violator of "fair competition." His gain was not just the loss of his competitors, but of the whole country. The NRA, by encouraging codes of "fair competition," was giving all existing businesses a chance to make profits, to pay high wages, and to survive the price cutter and innovator.As Roosevelt said, the NRA "was passed to put people back to work (emphasis in original), to let them buy more of the products of farms and factories and start our business at a living rate again."
[NRA Director Hugh Samuel] Johnson called on every business establishment in the nation to accept a stopgap "blanket code": a minimum wage of between 20 and 45 cents per hour, a maximum workweek of 35 to 45 hours, and the abolition of child labor. Johnson and Roosevelt contended that the "blanket code" would raise consumer purchasing power and increase employment.
In early 1935 the new chairman, Samuel Williams announced that the NRA would stop setting prices, but businessmen complained. Chairman Williams told them plainly that, unless they could prove it would damage business, NRA was going to put an end to price control. Williams said, "Greater productivity and employment would result if greater price flexibility were attained." Of the 2,000 businessmen on hand probably 90% opposed Mr. Williams' aim, reported Time magazine: "To them a guaranteed price for their products looks like a royal road to profits. A fixed price above cost has proved a lifesaver to more than one inefficient producer."
...The National Recovery Review Board, headed by noted criminal lawyer Clarence Darrow, a prominent liberal, was set up by President Roosevelt in March 1934 and abolished by him that same June. The board issued three reports highly critical of the NRA from the perspective of small business, charging the NRA with fostering monopolies.
...The NRA was famous for its bureaucracy. Journalist Raymond Clapper reported that between 4,000 and 5,000 business practices were prohibited by NRA orders that carried the force of law, which were contained in some 3,000 administrative orders running to over 10 million pages, and supplemented by what Clapper said were "innumerable opinions and directions from national, regional and code boards interpreting and enforcing provisions of the act."
The AAA was very complicated, but in a nutshell here is how it worked. First, some farmers would be paid not to produce on part of their land; second, farm prices would be pegged to the purchasing power of farm prices in 1910; third, millers and processors would pay for much of the cost of the program. What's more, power would be centralized through the secretary of agriculture, who would set the processing taxes, target the price of many commodities, and tell farmers how much land to remove.
The Agricultural Adjustment Act...was a United States federal law of the New Deal era which restricted agricultural production by paying farmers subsidies not to plant part of their land (that is, to let a portion of their fields lie fallow) and to kill off excess livestock. Its purpose was to reduce crop surplus and therefore effectively raise the value of crops, The money for these subsidies was generated through an exclusive tax on companies which processed farm products.