Today’s “This Day in History” comes from Andrew W. Cohen, also known here as AWC, among whose many fine qualities we cannot discern the desire to agree with me. He is the author of the excellent Racketeer’s Progress and here he explains the Schechter case doesn’t mean what the New Deal’s modern Republican critics think it means. Many thanks for the contribution, Andrew.

On this day in 1935, the US Supreme Court handed down A.L.A. Schechter Poultry Corp. v. United States, the so-called “Sick Chicken case,” invalidating the National Industrial Recovery Act of 1933 (NIRA). The unanimous court held that the US Congress had unlawfully delegated its powers to the executive and exceeded its authority by regulating commerce that did not cross state lines. This setback for the Roosevelt administration marked the end of the “First New Deal.”

Few scholars lament this verdict, partly because the court later reversed its worst implications, and partly because the NIRA itself was an ugly law. In a year of legal experiments, it was the Frankenstein’s monster. The law created the National Recovery Administration (NRA), which encouraged businesses and workers to write industrial codes and gave them the legitimacy of laws. As a recovery policy, it was a bust. When un-enforced, the codes seemed a pointless exercise in rah-rah economics, the 1930s equivalent of Gerald Ford’s “Whip Inflation Now” buttons. When compulsory, the codes appeared a counterproductive and intrusive form of corporatism. In retrospect, the law’s best legacy was its support for collective bargaining, which was re-created more effectively by the Wagner Act of 1935.

Historical contempt for NIRA has faded our memory of the Schechter decision, allowing journalists like Amity Shlaes to misrepresent the story as a libertarian fable. In Shlaes’ portrayal, the Schechter brothers were small immigrant businessmen crushed by a tyrannical federal government exceeding its traditional jurisdiction.

The real story is much more interesting. A.L.A. Schechter & Co. was actually the largest firm in Brooklyn’s $60 million kosher poultry market, grossing over $1 million per year. The corporation had grown by undercutting their five hundred or so rival slaughterhouses, represented by three groups: the Greater New York Live Poultry Chamber of Commerce, the Official Orthodox Slaughterers of America, and Teamsters’ Union Local #167.

The tough guys who ran these organizations tried to bully the Schechters into submission, on one occasion putting emery powder in the crankcase of their trucks. In response, the US government pursued the leading figures in the industry, especially Arthur “Tootsie” Herbert, the business agent of the poultry drivers. Between 1928 and 1932, Herbert and his colleagues endured federal indictments, injunctions, and contempt citations, interventions all upheld in the Supreme Court case Local #167 v. United States (1934).

With the passage of the NIRA in 1933, however, the worm turned. Even as the leaders of the poultry associations were fighting to stay out of prison, they were given the authority to construct a legally enforceable code for their industry. Soon the Schechters found themselves prosecuted for sixty violations of the code. The criminals had become lawmen, and the victims, delinquents.

That the Roosevelt administration handed the White House keys to a guy named “Tootsie” seems rather shocking today. Yet, it was actually consistent with the radical assumptions of the law. NIRA’s author, Roosevelt advisor Raymond Moley, was a criminal law professor with no expertise in economics. Like many functionalist criminologists of the Prohibition Era, Moley believed that social disorder flowed from laws barring purportedly natural human behavior. In this case, he believed that anti-trust laws did not stop tradesmen from setting prices and wages, but rather forced them to turn to hooligans like Herbert. With this in mind, Moley wrote a recovery law that not only reversed the Sherman Act of 1890, but also made the federal government the enforcer, supposedly reducing the need for racketeers. And of course, he believed that this new cooperation would halt declining prices and wages.

This suggests one reason why the court tossed out the recovery act. Though the Schechters were a big corporation, and federal authority in the trade was well established, the NIRA overturned too many of the justices’ assumptions. It’s not just the power the state possessed, but who wielded it. The law reversed not only anti-trust law, but also the society’s notions of criminal and innocent. At least in one industry, it put the gonifs in charge.