Economy, History

The FDR Model: Electrifying the United States

One of the most crucial steps in creating the basis for economic progress, and a human standard of living, is the creation of an electrical power infrastructure. The availability of electricity dramatically increases the potential productivity of the human individual, and the more that individual uses, the better. Contrary to the green-Malthusian mantra you hear today, an increase in per capita electricity consumption correlates with an increase in the productivity of an economy, even as measured by the general category known as GDP.
If Americans hadn’t been brainwashed by the environmental movement over the past 45 years, this truth would be obvious. The spread of electricity makes available machinery that frees people of backbreaking physical labor; provides the ability to increase food availability by preventing spoilage; facilitates the fight against disease by powering life-saving machines, purifying water, and keeping medicines from decaying. Even a cursory picture of sub-Saharan Africa, where hundreds of millions of people live at the mercy of the weather and disease due to lack of electricity, should make this point clear. In fact, 20% of the world’s population was still without electricity in July 2014, and some of those people living in those Third World conditions actually live in the United States.
Equally elementary is the fact that the power source for generating electricity should be of the highest possible energy-flux density—that is, that the smallest amount of fuel should create the greatest amount of output of energy. The principle can be expressed by simply noting that the energy generated from one lump of coal, given the proper technological processing, vastly exceeds the energy that can be generated by a small herd of horses. Similarly, the atom can generate many orders of magnitude more energy through fission and fusion processes.
But, putting the fuel source aside for the moment, let’s look at the process of creating the electrical power environment of the United States. The effort began small, in the cities, in the late 19th century, and gradually expanded, as inventions of means of transmission were developed. The big leap in accessibility came between the 1920s and the 1940s, with 70% of U.S. households reportedly electrified by 1930.
There were several major problems that went along with that process of electrification. One was that the companies which controlled the distribution of electricity were often owned by outright shysters, determined to milk the maximum profit out of their investment. The idea of electricity being a “public utility” was anathema to them, and many people found it impossible to take advantage of the availability due to the high cost. The second related reason was that electricity availability was basically confined to the cities, with the power companies claiming it was too expensive to expand their lines into rural areas–thus leaving about 40% of the population consigned to primitive production methods, and literally in the dark.

FDR Steps In

The catalyst for changing this situation was the election of Franklin Delano Roosevelt. FDR had spent years as governor of New York battling the electric power companies there, and he had concluded that they had to be controlled by government agencies representing the interests of the people. They were, as he argued in his Oregon campaign speech in Fall 1932, “public utilities,” which had to act in the interest of the general welfare, providing electricity at a reasonable cost and to the population at large. And he would fight to enforce such practice.[1]
His premier project was the Tennessee Valley Authority, pushed through Congress in May of 1933. FDR’s concept, shared wholeheartedly with Republican Sen. George Norris, was to lift a seven-state region of the country out of dismal poverty “for the benefit of generations to come and millions of yet unborn.” Before TVA, 97% of the farms in the TVA region had no electricity, and they were ravaged yearly by rivers flooding out of control, mosquito-borne diseases like malaria, and a landscape deforested and stripped of mineral wealth. A population living under these conditions could not be healthy and productive.
The TVA plan was to build 20 dams which would serve to provide flood control, electricity, and navigation to the region. As a result of the electrical infrastructure, farmers could be brought up to a living standard and mode of production to bring agriculture back to life. Electric rates were priced to permit this, at half the national average, and people were encouraged to use power, eventually reaching twice the national rate per capita. The result was a giant leap in productivity, including the creation of a phosphate-based fertilizer industry, a world-class aluminum industry (highly dependent of massive electrical supplies), and ultimately the national laboratory (Oak Ridge) which developed U.S. atomic power. As noted by President John F. Kennedy, when he celebrated the 30th anniversary of the Muscle Shoals Dam in 1963, Oak Ridge was a pioneer in the idea of nuclear power for civilian purposes, including water desalination.
But FDR was not content to address just one region of the country. In 1935, he took two other measures on electric power which served to spread inexpensive electricity nationally. By executive order he created the Rural Electrification Administration, which provided loans to local cooperatives to buy power wholesale, to provide it to their members. In 1936, 10% of rural household had electricity; by 1950, the figure was 90%. The loans were provided at a 3% rate of interest. The second measure was the Public Utility Holding Company Act of 1935, which established oversight over utility companies, preventing them from engaging in speculation and profiteering.
The PUHCA was repealed under the George W. Bush Administration in 2005, by a Congress riddled with corruption and ignorance. This, despite the national scandal on electricity deregulation in the case of Enron, back in 2001.
FDR was no scientist, but he understood that electricity was a component of basic infrastructure needed for the general welfare, and that its broad and affordable provision to families and industry was a sine qua non for lifting up the population to share in and produce economic prosperity. Electricity consumption per capita had to rise—while technological development reduced the cost of production of that electricity per capita. FDR’s premier projects proved his point. Just as Americans are finally coming around to the realization that FDR was right on Glass-Steagall, it’s time they learned the lesson of his policy on electricity.



[1] It was in this speech that FDR enunciated his policy to bring huge hydroelectric projects to all “four quarters” of the United States – the Hoover Dam, the Grand Coulee and Bonneville Dams, the St. Lawrence, Seaway, and the Tennessee Valley.

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