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Wednesday, May 30, 2012

That’s Not Kosher: How Four Jewish Butchers Brought Down the First New Deal

Jewish-Americans have a long history of finding role models who broke barriers, accomplished great things, or engaged in more mundane acts of heroism. Jewish religious schools are full of discussions of athletes like Hank Greenberg and Sandy Koufax, or the legions of Jewish entertainers and scholars, as ways to demonstrate the accomplishments of American Jews.

But in all those stories many of us heard growing up, one set of brave heroes was never mentioned: the Schechter brothers of New York City. The Schechters were kosher butchers operating in the 1930s who stood fast to their commitment to the dietary laws of kashrut in the face of ferocious pressure and prosecution by a powerful government. They eventually took their case to the highest court in the land—and won—defeating one of the most popular and powerful administrations in American history.

One would think this story of Jewish heroism and commitment to Jewish values would be inspirational for generations of young American Jews. But the Schechter brothers were up against Franklin Delano Roosevelt.

It was the Roosevelt administration’s prosecution of the Schechters for violating the National Industrial Recovery Act, one of the pillars of the New Deal, that led the Supreme Court to declare the act unconstitutional in 1935. FDR was, and remains, so beloved by American Jews that the heroism of the Schechters has been lost as a story of Jewish moral commitment in the face of power. In her history of the Great Depression, The Forgotten Man, Amity Shlaes begins the process of rescuing the Schechter brothers from obscurity by spending an entire chapter on their challenge to the New Deal. In this article I build on Shlaes’s account to provide some broader context for their story and draw some implications for Jewish Americans.

To understand the Schechters’ story one needs to understand how the Roosevelt administration understood the causes of the Great Depression and thus developed its policy solutions. The dominant theory at the time was that the Great Depression was caused by “underconsumptionism.” Capitalism was supposedly incapable of creating enough purchasing power to buy all that was being produced, and this claim was often tied to concerns about income inequality. The rich were thought to save too much and spend too little. Some argued this was due to excessive monopoly, others to excessive competition. We now know that these arguments are confused and incorrect, but at the time many saw the Great Depression as a fundamental failure of the coordinative features of market-based production, requiring a significant role for government to fix. The problems were seen not as “macroeconomic” but as much more fundamental structural failures of the market economy.

The advisers around Roosevelt, many of whom were academics familiar with these arguments, accepted that explanation and favored a radical reform of the economic system. They had in mind a much more extensive role for government in planning and organizing production, as opposed to relying (largely) on independent decision-making coordinated by prices and profits. Both agriculture and industry were to be fundamentally restructured by government.

The two pillars of FDR’s first hundred days—the Agricultural Adjustment Act (AAA) and the National Industrial Recovery Act (NIRA)—came from this thinking. Each was designed to impose order on the market through government-mandated cooperation among producers and labor. It wasn’t socialism, but it wasn’t capitalism either. It was much closer to the economic institutions of fascism then in place in Italy. As Shlaes and others have documented, Roosevelt’s advisers had been explicitly influenced by Mussolini, and he and Roosevelt had something of a mutual admiration society.

Roosevelt created the National Recovery Administration (NRA) to enforce the NIRA’s provisions. It wrote or helped industries and labor write “codes” that governed production, prices, and labor relations. The AAA was a similar attempt to plan agricultural production. In the name of keeping prices up for farmers, millions of piglets were slaughtered and millions of acres of cotton were plowed under—while large numbers of Americans were hungry and cold.

Stores displayed the NRA “Blue Eagle” sign to show they were abiding by the codes, and consumers were encouraged to patronize only companies that did so. Thousands of inspectors checked for code compliance and initiated prosecutions against violators. Enter the Schechters.

Central Casting

The four brothers were born in Hungary before their parents made their way to the United States. With heavily accented, broken English, they were right out of central casting for the oft-stereotyped immigrant Jewish rube—and the Roosevelt administration treated them that way. The Yiddish version of their last name, Shochet, is also the word for their profession: butcher. More specifically, they were poultry middlemen, buying chickens from across the country, then butchering and selling them to the New York City market, mostly to retailers who then sold directly to consumers. Middlemen of course were exactly the sort of “problem” the NRA was designed to deal with, because in the eyes of the FDR crowd they profited off consumers while providing little in return. Additionally, prejudice against middlemen has been historically difficult to disentangle from anti-Semitism, since Jews have long performed this role and borne the brunt of ignorance about how trade creates value.

Most important to the story is that the Schechters ran a kosher butcher business. The Jewish laws of kashrut serve many purposes. Among them they specify how to safely kill and dispose of animals so as to avoid a variety of possible diseases. Also, they enforce a set of ethical obligations about how to treat animals that we kill and eat. The provisions about how to kill animals and what can and cannot be eaten helped the community avoid potentially unhealthy practices (and animals) and signaled that the animals sold had been inspected by recognized community authorities—namely rabbis trained to ensure that sellers followed the biblical rules. A certified kosher butcher has the equivalent of a Good Housekeeping Seal of Approval from the most respected members of the local community.

Tuberculosis was the major issue with chickens, making it crucial to inspect the lungs to make sure they were smooth and therefore healthy. The word glatt in the phrase glatt kosher means “smooth,” which assures buyers no signs of tuberculosis were found. Importantly, customers at kosher butcheries could choose the birds they bought, which gave them the ability to enforce kashrut through their buying choices. So even if the birds were certified kosher by a rabbinical authority, customers could still exercise their own judgment about the quality of the chickens. Kosher butchers allowed this as a way to attract customers.

Straight Killing or Prison

The problem for the Schechters was that Section 2, Article 7 of the NRA’s Code of Fair Competition for the Live Poultry Industry of the Metropolitan Area in and about the City of New York, which sounds like something out of Atlas Shrugged, mandated “straight killing,” which meant that customers could not select specific birds out of a coop. Instead they had to select a coop or half coop entirely. The code thus directly contradicted kashrut. This put the Schechters in an untenable position: Abide by the New Deal or abide by kashrut. Do the former and lose your customers. Do the latter and get arrested.

In June 1934 the Roosevelt administration expanded NRA inspections, and prosecutions began in earnest. The poultry industry was targeted because of alleged corruption. It is worth noting that corruption was not alleged to have caused the Great Depression, and the law said little about it. As is often the case, power assumed by the government for one purpose is very easy to use for other, more nefarious purposes. That summer federal agents swarmed the Schechters’ business. In July a grand jury delivered a 60-count indictment against them, including “threatening violence against agents and inspectors” and violating code rules about hours and pay. Most important: They were charged with violating code rules about the selection of chickens and knowingly selling a chicken unfit for consumption to a customer. They were also charged with conducting a “conspiracy to violate the NRA code.” As Shlaes notes, once they were charged with selling a sick chicken, they were tagged as not just law breakers but also bad Jews.

During the original criminal trial, at which the brothers were each found guilty and sentenced to several months in jail, the prosecutors tried to play them as rubes. When they appealed, the media used the usual anti-Semitic tropes to make them look silly for bucking the all-powerful federal government, including invoking standard anti-Semitic stereotypes against their lawyer, Joseph Heller. Shlaes offers additional details in her chapter; most of the attempts to make the Schechters look stupid backfired on the prosecutors since the attempts only served to demonstrate how much the brothers knew about their own market and how ignorant the NRA code enforcers were. The Schechters were hardly the only business targeted, but they were among the larger ones and had the most charges leveled against them.

At the same time, criticisms of the NRA grew, not the least from the African-American community, which correctly saw attempts to raise wages as a means of shutting black labor out of the market. Writers at the Chicago Defender, the local black paper, referred to the NRA as the “Negro Run Around” and the “Negro Removal Act.” The NRA’s harm of black workers fits into a longer story how of labor market regulation was used for racist purposes. (See Art Carden and my October 2011 Freeman article, “Eugenics: Progressivism’s Ultimate Social Engineering.”)

On May 2, 1935, the Supreme Court heard the oral arguments. The federal government’s case rested largely on emergency powers: There was a national crisis, and the government should have whatever powers it needed to fight it. At stake were competing interpretations of the Commerce Clause, which supposedly limited Congress’s power to regulate commerce to interstate transactions. The government argued that the Schechters’ business should be seen as interstate commerce in light of the Depression, while the Schechters’ lawyer countered both that the business was not interstate commerce and, more powerfully, that the Schechters had never agreed to the NRA code, which interfered with their ability to best serve their customers. As Shlaes points out, attorney Heller was careful to explain the kosher practices in a way that avoided making them sound Jewish, again for fear of anti-Semitic backlash.

Part of the exchange between the Justices and Heller was over what “straight killing” meant for customers, leading to a discussion of reaching into chicken coops. The reaction in court was mostly amusement at the absurdity of the code, in both its level of detail and what it required of producers and consumers.

Unanimous Decision

On May 27 a unanimous Court ruled that the NIRA did indeed violate the Commerce Clause and that even in “extraordinary conditions” Congress may not exceed its constitutional limits. Specifically, Congress had no legitimate power to delegate what amounted to law-making power to the NRA.

This case and a related one that struck down the AAA ended the more radical provisions of what is often called the “First New Deal.” FDR’s reaction to the decision was his famous line about the Court taking the country “back to the horse and buggy age.” That sentiment was one reason Roosevelt later proposed his “court packing” plan to expand the Court. This case was one of the last Supreme Court decisions to uphold this narrow reading of the Commerce Clause. The same set of issues is at stake in the case against the Obama administration’s health care act.

There are many lessons one could draw from the story of the Schechter brothers, not the least of which is how much the Supreme Court’s jurisprudence has evolved over the years. Back then Congress had to prove it constitutionally possessed the powers it exercised; the Court did not place the burden of proof on those who claimed the exercise of some power is unconstitutional.

The Schechters’ story, however, raises other interesting questions. Why is it not better known, particularly among American Jews, that underdog immigrant small-business owners triumphed over a government that denied them the right to run their business according to their long-standing ethical-religious code? After all, this is the classic story of Jewish heroism: a group of Jews under siege by the State demonstrating grace under pressure by standing up for their beliefs.

It would seem that the overwhelming love that American Jews have had for FDR is likely one explanation. It might be difficult to hold up as heroes the men who helped bring down the First New Deal. The American Jews’ love for FDR is also something of a mystery when one considers his administration’s refusal to help Jews escape Nazi Germany as the Holocaust began to unfold.

The story of the Schechter brothers raises important questions about the power of the State. It’s a story still waiting to be told in its entirety.

  • Steven Horwitz was the Distinguished Professor of Free Enterprise in the Department of Economics at Ball State University, where he was also Director of the Institute for the Study of Political Economy. He is the author of Austrian Economics: An Introduction.