NRAftermath

Nearly every lawyer, broker, banker and businessman in the land last week was almost wholly preoccupied with the overthrow of NRA. Full implications of the Supreme Court's decision were by no means clear, and while U. S. Business was more relieved than downright joyful, it was also jittery. Overnight, the stock-market greeted the return of business freedom with an opening rally, then dropped sharply, declined for the rest of the week. Uncertainty over the future of NRA and other New Deal legislation precipitated a general break in commodities. Wheat sank 5-c- per bu. to the lowest price this season, 81 1/4-c-. Cotton dropped under 11-c- per lb. Sugar lost most of its recent gains in the wildest trading in a decade, and Cuban sugar securities nose-dived on the fear that the island's reciprocal trade pact might be annulled as an unconstitutional delegation of the Senate's treaty-making powers. And with all codes and coercion swept from the U. S. Business structure, endless readjustments were obviously in order. What those readjustments would be and where they would occur was businessmen's prime concern.

P: Some readjustments came swiftly--notably in cigarets, books and branded drugs, the retail price of which had been maintained by codes. Schulte Retail Stores promptly resumed the issuance of premium coupons and joined other big chains in cutting leading cigarets from 12 1/2-c- per pack to 11 1/2-c-. Macy's, Gimbel's and Bloomingdale's, the three big Manhattan department stores whose legendary price vendettas are a merchandising tradition, were at it again as soon as their doors opened the morning after the Supreme Court's decision. In one day's skirmish cigarets at Macy's dropped from $1.14 per carton to 64-c- -- of which 60-c- represented the Federal tax. Edna Ferber's Come and Get It sank from $2.50 per copy to $2.04. Franz Werfel's The Forty Days of Musa Dagh, a $3 volume, opened at $2.82 the first day, closed at $2.64, plummeted to $1.83 before the weekend. Modern Library editions, usually retailed at 95-c- each, were quoted as low as 29-c-.

Other lines by the hundreds were reduced slightly but most of the price wars that flared from Los Angeles to Boston last week were over "loss leaders"--popular items sold at a loss to pull in customers, a practice outlawed by the codes. Loss leader price wars are merely cheap advertising for big chain and department stores but they are often disastrous for small independent grocers, druggists or tobacconists, who count on fast-selling brands for a large part of their profits. And the little fellows, who objected so strenuously to NRA wages & hours, were last week howling to the White House about "predatory price-cutting" and "cutthroat competition."

Lower Prices for the consumer will probably be the most immediate result of NRA's death. Even if an industry had no price-fixing schemes in its own code, its suppliers usually did, and the result was the same--a frozen price structure. Moreover, the codes largely abolished discounts to big buyers, eliminating the advantages of mass purchasing. It remains to be seen whether big buyers in their notorious efforts to wring the very last concession from manufacturers will force manufacturers in turn to sweat their labor. That was what happened before NRA. Since then, however, purchasing power has increased and lower prices may--as all NRA foes have predicted--stimulate a virtuous circle: greater volume of business creating more employment creating more business.

Rails & Utilities will be two of the biggest beneficiaries of the NRA decision. Both have been boxed between rising cost of the things they buy and fixed rates for the things they sell. At present prices the railroads as a whole will pay $136,000,000 more for fuel & supplies this year than they would have had to pay in May 1933. More than one-half the added burden is accounted for by the rise in coal prices. Every 10-c- chipped off a ton of coal will mean $7,000,000 annually to the harassed carriers. And unless special coal legislation is passed, lower prices are almost a certainty in that demoralized industry.

Utilities stand to gain even more. Considered in terms of the Supreme Court's views, the Wheeler-Rayburn Bill to abolish holding companies appeared to be off the Constitutional reservation. And power securities were the one bright spot in last week's stockmarket, rising to new high levels for the year.

Motors & Steel. The automobile code was little more than a wage & hour agreement but the motor-makers bitterly resented the array of price-fixing provisions devised by the scores of industries that supply them with materials. Unable to pass on to the public the higher cost they had to pay, the automen have been setting new records for profitless prosperity. Nor did the motor industry have any love for the dealers' codes, which put a ceiling on allowances for trade-in cars. That ceiling may have saved dealers from their own generosity but it tended to slow down new car sales. The automobile industry was one of the few U. S. industries that not only had nothing to lose but everything to gain by the death of NRA.

One of the first automotive provisioners to feel the enormous bargaining power of companies like General Motors or Chrysler will be the steel industry, whose code banned discounts for big orders and required advance notice to the American Iron & Steel Institute of any price change. For a few months at least the steel industry will be on pins & needles, hoping against hope that steel prices will not be cut & cut to get business.

Businessmen talked fast and long last week about salvaging the good features of their respective codes. Trouble with that idea, as with the codes themselves, was the conspicuous lack of agreement on what were good features. What was good to one group was bad to another--if not within that industry, at least to another industry. The Oil Code, largely honored in the breach even before the Supreme Court cracked it open last winter, irritated the big oil companies and pleased some--but not all--little fellows. Actually the passing of the Oil Code will have little effect on the industry. Code or no code, there have always been gasoline price wars. And control of overproduction has been strengthened by special Federal legislation drafted in accordance with Supreme Court dictates. Nicely timed to demonstrate the industry's good faith were 5% "cost-of-living" wage boosts made last week by Sun, Tidewater and Standard of New Jersey.

P: Industries with chronic overproduction or a vast number of small-units will miss code discipline the most. The ugly problem of wage & hour differentials between the North and South was again to the fore in textiles and coal--complicated as always by excess capacity. Cement and fertilizer makers were nervous about prices. Copper men hoped to continue their curtailment program on a voluntary basis. In the liquor industry with its six codes scrapped price-cutting came early and easily.

Even where the end of NRA would raise no old ghosts, its effects on the complex structure of U. S. Business were incalculable. The unstable ice industry may fall into confusion but manufacturers of ice-making machinery will probably profit. Almost no modern ice-making machinery has been purchased for nearly two years because installation required an NRA permit. If Southern coal fields regain their wage advantage over Northern fields, railroads like Chesapeake & Ohio, Virginian, and Louisville & Nashville will gain traffic, and lines like New York Central, Baltimore & Ohio, Chicago & Eastern Illinois will lose it. Machine tool makers expect a slackening in the recent heavy demand for labor-saving equipment now that wages & hours are purely a matter of private negotiation between employer and employe. Yet employes in machine tool plants would gain by longer hours because a shortage of skilled labor makes a cut in hourly rates a practical impossibility.

Taking the long view of trade prospects, most businessmen were frankly sanguine. NRAftermath jitters might deepen the current downward dip in the business curve but when recovery was resumed it would be broader and brighter. The stock-market relapse in any event was overdue after a two-month climb and was accelerated by the plight of the French franc (see p. 19). The fall in commodities was aggravated by President Roosevelt's gloomy forecast that wheat might drop to 36-c- per bu., cotton to 5-c- per lb. unless the Constitution were amended (see p. 11). And general uncertainty was increased by the fact that the mourner's bench far outshouted the cheering section.

Nevertheless, it was with only a faint smile that businessmen read a melodramatic pronouncement by Business Pundit B. C. Forbes in his Hearst column last week:

"If Business Fumbles, God Help Us All! . . . The conduct of business & industry in the next twelve months may determine the fate of America for the next century."

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