TVA After 40 Years

The New Republic, November 10,1973

Knoxville

WHEN THE TENNESSEE Valley Authority was created by Congress in 1933, it was conceived of not only as an effort to revitalize an eroded and impoverished region, but also as an experiment in public enterprise from which the whole nation could learn.  “If we are successful here,” President Roosevelt said, “we can march on, step by step, in a like development of other great natural territorial limits within our borders.” Forty years later the returns on TVA are pretty much in.  There’s been good and there’s been bad, with the former far outweighing the latter, but there has not been any marching on to other regions.

Dams had been built before, and electricity generated by public authorities, but never had a single federal agency been given such broad responsibility to develop the natural and human resources of a region.  And this was no ordinary federal agency.  It was head-quartered in the Tennessee Valley, not in Washington; it was not part of an established department, or subject to civil service regulations (though it was required to hire on merit alone); and many of its powers, including the power to spend self-generated revenues without Congressional or Budget Bureau approval, were akin to those of private corporations.

The river basin TVA was charged with developing was vast, beginning in the moun­tains of Virginia and North Carolina, winding through Tennessee, curving across northern Alabama and Mississippi, then back up through Tennessee and Kentucky to the banks of the Ohio — in all, an area larger than England and Scotland combined.  There was little in the way of industry, most of the forests had been cut, and one-crop farming had depleted most of the topsoil.  Intense rainfall had flooded villages and washed away much of the soil that was left.  Income was less than half the national average, and many families were lucky if they earned $100 a year.  By the 1930s few could hope that things would ever get much better.

The Tennessee Valley had one unusual asset, however—a government-owned nitrate factory sitting idle by the river at Muscle Shoals, Alabama.  Woodrow Wilson’s admin­is­tration had built the plant, along with a steam electric generating station and a dam to provide hydroelectric power, as a wartime precaution against loss of Chilean nitrates.  After the War scores of bills were introduced in Congress to sell the Muscle Shoals facilities to private enterprise.  One measure that passed the House would have given it to Henry Ford for five million dollars (it had cost the government nearly $100 million to build).  The controversy raged for more than a decade, with Senator George Norris of Nebraska, chairman of the Senate Agriculture Committee, repeatedly block­ing any giveaway to private interests.

Norris’ idea was to use the dam to generate low-cost public power, which then could be applied as a yardstick against private utilities.  He found support among farm-belt representatives who were less interested in public power than in the fertilizer that could be produced by the nitrate plant.  In 1928 and again in 1931 Congress passed Norris-sponsored bills to authorize government operation of Muscle Shoals, only to see the bills vetoed by Presidents Coolidge and Hoover.  Finally Roosevelt and Norris joined forces to create TVA.

The TVA Act established a three-man board that Roosevelt quickly filled with dedicated progressives: Arthur E. Morgan, an engineer; Harcourt A. Morgan, an agriculturalist; and David Lilienthal, an attorney with experience in public utility regulation.  After turning aside a challenge to its constitutionality, TVA began to move.  Dams were built and electricity marketed; fertilizer was produced at Muscle Shoals and distributed to thousands of “demonstration farms”; millions of tree seedlings were planted.  In World War II the military needed aluminum and atomic fuel; TVA pro- vided power for both.  By 1945 TVA had transformed the face of the valley.  The bold experiment was hailed as a dramatic success, but with success came a certain encrust­tation.  TVA became chiefly a power producer.  The times were changing but TVA didn’t change with them — or so some of its old friends said.  What is the record?

Power production.  A mark of the Tennessee Valley’s underdevelopment in 1933 was that only one farm in thirty had electricity.  The private utilities franchised in the region preferred to serve only the high-density, high-profit urban markets.  Their out­put was low and their rates were high.  TVA quickly changed that.  It encouraged farmers to set up cooperatives to distribute cheap power from TVA dams; the success of this program prompted Roosevelt to launch the Rural Electrification Administra­tion.  Cities were urged to establish municipal power agencies and they did so in rapid succession.  Knoxville voted 5,124 to 2,602 to switch from private to public power.  In Memphis the vote was 32,735 to 1,868.  Similar referenda followed in one town after another.  The private utilities were in retreat, and TVA completed the rout by acquir­ing the properties of Commonwealth & Southern, a holding company whose president, Wendell Willkie, fought TVA at every tum and lost.  Today only a single small private power company is left in Tennessee, and TVA’s 160 cooperative and municipal distri­bu­tors extend into six surrounding states.

From the beginning TVA’s rates were designed to promote maximum use of electricity.  In 1933 the going price for electricity to home consumers in Tennessee was over five cents per kilowatt hour; by 1972 TVA had brought it down to one-fourth of that, though rates are rising now.  Power lines sprung up everywhere.  Farmers bought refrigerators, freezers and electric farm equipment; builders and owners put electric heating in one-third of the region’s homes; industry flocked to the area, along with the Atomic Energy Commission (Oak Ridge, Tennessee and Paducah, Kentucky) and NASA (Huntsville, Alabama).  Private utilities in neighboring states lowered their rates and watched as volume and profits went up.  The utilities’ last attempt to under­cut TVA—the Dixon-Yates proposal of 1954—fell on its face when it was discovered that the Budget Bureau official who was pushing it was also associated with the First Boston Corporation, Dixon-Yates’ bankers.

In recent years TVA’s commitment to low-cost energy has put it in conflict with many of its old conservationist friends.  Nearly 80 percent of TVA’s power is now steam-generated, the hydro capacity of the river having been fully captured by the early 1950s, and TVA has become the world’s largest purchaser of strip-mined coal.  TVA critics find it ironic that the agency that so radically restored the valley is now causing, through its patronization of strip-mined coal, vast destruction of hills and farms.

Economic development.  That the Tennessee Valley has advanced economically since the 1930s, and that much — though not all — of this development is attributable to TVA, is indisputable.  Income throughout the region has risen to three-quarters of the national average; outmigration, especially of the young, has not been stopped but it has been slowed.  The work-force, which was over 60 percent agricultural in 1930, is now 90 per-cent non-farm.  Aluminum, chemical, paper and pulp, and other industries have located in the region in large part because of TVA power and water transportation.  Over 80 percent of the new industrial jobs have been outside metropolitan areas, typically at riverfront sites.  Once-sleepy towns such as Decatur, Alabama, Calvert City, Kentucky and New Johnsonville, Tennessee have become thriving manufactur­ing centers, offsetting the influx into already congested cities.

Growth is no longer so uncritically accepted.  A case in point is the proposed Tellico dam, which would flood the last wild stretch of the Little Tennessee River, as well as the historic heartland of the Cherokee nation.  Tellico won’t add much hydro power or flood control capacity, but TVA says it’s needed to create new industrial sites.  Oppos­ing the dam are environmentalists, trout fishermen and Indians who contend that there are ways to create jobs without building more dams, and plenty of industrial sites else­where in the region.

Another criticism heard of late is that TVA’s approach to economic development sub­sidizes industry more than people; TVA presumes the benefits will trickle down, and some do, but that is not the whole story.  The industry TVA brings in, say these critics, tends to be energy-intensive rather than labor-intensive.  Often it is also low-wage.  Moreover TVA’s rates are weighted in favor of industry and the AEC at the expense of consumers and farmers (average wholesale rates are 5.86 mills per kilowatt hour to the AEC, 6.31 to industry and 7.18 to cooperatives and municipals), and TVA’s earnings, much like a private utility’s, are sent back to Wall Street and Washington ($111 million to private bondholders and $74 million to the US Treasury last year).  “TVA is a Robin Hood in reverse, robbing the poor to pay the rich,” says James Branscome of the Highlander Research Center.

Resources.  TVA was given the dual task of developing and conserving the Tennessee Valley’s resources.  In the 1930s there was no contradiction between these goals; deve­lopment and conservation meant the same thing.  The most obvious task was to turn the abundant rainfall of the Tennessee Valley into a constructive rather than destruct­tive force; this was accomplished through the building of dams, locks and hydroelectric turbines.  An equally important challenge was to restore the eroded soil.  This required a shift from such soil-depleting crops as cotton, corn and tobacco to soil-building crops like legumes and alfalfa.

In the first of many breakthroughs at Muscle Shoals TVA developed a concentrated form of phosphate fertilizer that it made available—free, at first—to farmers through­out the area.  It then teamed up with county agricultural agents to show farmers how to use the phosphate and switch to new crops and livestock.  Some 20,000 farmers—about one in ten—volunteered to become “demonstration farmers”: they were given fertilizer and advice on the condition that they let their neighbors learn from their experience.  The rutted, washed-out farms of the 1930s turned into verdant pastures dotted with cattle; farm sales rose twentyfold to an average of $6,000 per farm.

Nowadays development and conservation of resources are not always compatible.  TVA has acquired and set aside thousands of acres for recreation and environmental education.  It continues to manufacture fertilizers and produce tree seedlings for reforestation.

At the same time it has become a die-hard builder of marginal dams (its engineering staff must be kept busy, cynics say) and as noted earlier, a voracious consumer of strip-mined coal.  TVA Chairman Aubrey Wagner, an engineer who rose through the ranks, has stated on many occasions that the technology of land reclamation is so good that strip mining is perfectly conscionable.  Since 1965 the agency has required its coal suppliers to make some effort to reclaim the land they strip, and it has accepted, if not embraced, the idea of federal strip mine legislation.  But it has strenuously opposed strip mine abolition (though, as EPA Chairman Russell Train pointed out last month, only three percent of the nation’s coal reserves are classified as strippable), and has launched nothing comparable to the early farm and forest programs to repair the damages wrought by its own quest for fuel.

Regionalism and democracy.  TVA has long been a model of decentralized admini­stration and a self-proclaimed practitioner of “grassroots democracy.”  It has worked wherever possible with state and local institutions and stimulated the creation of such institutions where none existed.  Thus instead of marketing its own electricity, TVA urged co-ops and cities to do the job.  It has started library, mobile health and garbage disposal projects and persuaded local governments to keep them going.  It has worked with land grant colleges in agricultural matters and made its planning skills available to communities that requested them.  All the while it has fought off back-door attempts by Washington-based departments to undercut its autonomy and multipurpose activities.

There is something very appealing about this close-to-the-people regionalism, yet it isn’t always as democratic as TVA claims.  There’s a growing feeling in the valley that TVA is less attuned to the grassroots than to the industrial constituency it created; that it responds to its own bureaucratic imperatives more than to the concerns of local citizens.  It’s also pointed out that the presidentially appointed directors in recent years have not had the broad social vision or guts of the first three, and that there’s no mechan­ism for holding them regionally accountable.  “TVA ought to be turned over to some sort of locally elected board,” says Tom Gish, publisher of the Whitesburg, Ken­tucky Mountain Eagle.  “It acts like the king’s emissary sent out to run the colonies.”

WHAT LESSONS can be gleaned from the TVA experience?  First, that public agencies clothed with certain powers of private corporations can perform valuable public functions.  No single federal or state agency, or even a bunch of them coordi­nated through a committee, could have uplifted the Tennessee Valley the way TVA did.  It’s also clear that at least some military facilities can be profitably converted under public ownership to peaceful endeavors, and that public corporations are not the wasteful, noncompetitive slugs they are often said to be.

TVA’s record of on-time, on-budget performance is unsurpassed; its frills are minimal and its rates have been extraordinarily competitive.  It has helped make private cor­por­ations more competitive too, by exposing both overinflated prices and outright price-fixing conspiracies.  (It was TVA’s publication of identical bids that led to the indict­ment and conviction of electrical machinery executives in the 1960s.)  And TVA has shown that public corporations can be extremely innovative.  In the fertilizer field it has pioneered not only new products but new manufacturing techniques, and always made its patents available nonexclusively.  It is currently studying ways to use the heated water discharged by electric power plants for agricultural purposes (in green­houses or piped underground to extend the outdoor growing season).

At the same time, the TVA experience shows how difficult it is to keep public agencies imaginative and responsive to changing times and perceptions.  This is a problem that is hardly unique to TVA.  Perhaps some solutions lie in popular election of directors or periodic creation of new agencies to bypass those that have become inert, distant, or indentured to special interests.

Another lesson is that there are limitations as well as benefits in the kind of develop­ment strategy employed by TVA.  Transportation and power networks are, of course, essential to any region that seeks to industrialize, but they have little to do with the way income and wealth are distributed within that region or between that region and the rest of the country.  Poverty has persisted in the Tennessee Valley, as throughout Appalachia and the South, because wages have remained low and most of the profits have gone to absentee owners.  The need now is not so much for dams and waterways but for community-owned enterprises and higher taxes on absentee-owned firms, especially those that export nonrenewable resources.

Kentucky attorney Harry Caudill, among others, has argued for severance taxes on coal and a public utility district approach to economic development.  The districts would own land, coal and industries; their boards would be locally elected; their profits would be retained for schools, health centers and other public needs.  In its early days TVA fought hard for locally-owned electric distribution systems, but otherwise it has steered away from such issues as ownership, taxes and wages.

Franklin Roosevelt envisioned a series of regional authorities tied to other river basins —the Missouri, the Columbia, the Arkansas—as well as the tides of Passamaquoddy Bay.  Bills were introduced to establish as many as ten regional agencies, but they never found enough support in Congress.  Opposition from private utilities, the coal industry (which has a strong distaste for hydro power) and the Corps of Engineers was always effective.

In some instances, the lessons of TVA seem to have been applied in reverse.  After World War II, government-built aluminum plants were sold to private interests (Lilienthal had pro­posed that TVA keep one alumi­num plant, accounting for five per­cent of total pro­duction, as a yardstick against the aluminum oligopoly); grassroots agencies such as the Farm Sec­urity Administration were dismembered; and the Appa­lachian Regional Commission was expressly prohibited from spending funds on public power.

Foreign countries, by contrast, have learned from TVA.  India, Iran, Colombia and others have set up agencies patterned after the U.S. model, and American presidents have tried to tempt foreigners with promises of aid for TVA-like efforts on the Mekong and Jordan rivers.

Only in its homeland, it seems, is TVA an overlooked relic of another era.  It was, it now appears, a product of unique circumstances (the Muscle Shoals controversy), unique times (the Depression) and unique personalities (Norris and FDR).