Wednesday, 28 October 2009

Electrification: The FDR Model

David Woolner writes:

On March 4, 1933, when Franklin Roosevelt first took office, nine out of every ten farms in rural America were without electricity. That means 90% of all farm families, which made up a much larger segment of the overall US population than they do today, lacked not just the benefit of light, but also lacked running water and indoor bathrooms, electric refrigeration, indoor laundry facilities and a host of other basic comforts that electricity brings, such as the use of a radio.

FDR was determined to change this and from his first days in office began to look for ways in which the federal government might extend the benefits of electric power to rural America. His first major attempt to do so came with the establishment in May 1933 of the Tennessee Valley Authority (TVA) — a new type of Federal agency that served as both a supplier and regulator of power to one of the most economically depressed regions on the country — the Tennessee Valley. The TVA also provided jobs, as well as soil conservation and flood control and in many respects stands as a testament to the long term planning and multi-purpose vision of many of the New Deal programs.

As far as the national distribution of electricity was concerned, however, an even more significant act was the establishment of the Rural Electrification Administration (REA) two years later. The need for rural electrification had been around for some time, but due to the high costs of extending lines into rural America private, companies had thus far refused to do so. At the same time, private power also took a hostile view of publicly supported rural electrification.

Frustrated by the unwillingness of either the private or the public sector to extend power to rural areas, farmers began to take matters into their own hands in the 1920s by establishing non-profit power cooperatives. It soon became apparent, however, that the scale of the project was simply too large for this solution to work on its own and aside from a few areas in the midwest, this initial attempt to bring power to the farm was largely unsuccessful. By the end of the 1920s, it was clear that the only way rural American would become electrified was through a well run, national program, backed by the federal government.

The REA provided this, not by turning to the private power companies who remained hostile to the very idea of public support for rural electrification and even went so far as to refuse low interest government funds to do so. They did so by turning to the farmers themselves through their cooperatives.

Starting in 1936 — backed by a law passed by Congress that gave preference to non-profit entities — the REA became, in essence, a lending agency providing low interest funds to existing and newly established farmer cooperatives that built generating and distribution facilities as well as the transmission lines to carry the power to individual farms — using a good deal of unemployed labor in the process. By 1941, approximately 40% of all American farms had electric power, and by the end of the 1940s, nine out of every ten farms in America had electricity, a complete reversal of the state that existed at FDR’s inauguration!

To those critics today who remain skeptical of the ability of government to provide the vision, resources and plans to enhance our nation’s electrical and/or energy infrastructure by building what President Obama call a “smart grid,” the REA stands as living proof that government can-in cooperation with the people-solve a major national problem.

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