How Public Power Jump-Started the New Deal

Part way through selecting his Cabinet, President-elect Franklin D. Roosevelt departed Washington on Jan. 20, 1933, for a visit to a small, riverside Alabama town named Muscle Shoals. Though few knew it at the time, Roosevelt had big plans in mind: to harness the power of the Tennessee River through massive public construction projects that would provide tens of thousands of jobs and huge purchases of equipment and materials. Such projects would reinvigorate the upper South’s economy and provide hydroelectric power to the region and beyond.

During World War I, the Army Corps of Engineers began building an immense dam across the Tennessee River at Muscle Shoals, intended to generate power for adjacent plants making military explosives. The project employed more than 18,000 workers and involved about 1,700 temporary buildings.

But it remained unfinished at the armistice and didn't contribute to the war effort. By the time it was finally completed, in 1924, the dam had cost $150 million, and only a portion of its planned generators had been installed. It was a national embarrassment, criticized by private-sector power companies as a prime example of federal waste.

Henry Ford offered to buy the complex from the government for $5 million, but Congress declined this low-ball offer. Supported by his friend Thomas Edison, Ford next proposed a huge commercial hydropower development above the dam, including a 75-mile-long urban strip circling an immense reservoir.

Nothing came of this, largely because veteran Nebraska Senator George W. Norris, who believed the government should control the development of natural resources, blocked any attempts to privatize the project. During the 1920s, Norris repeatedly proposed plans for public development of the region’s water-power potential. Several of these bills, passed by Congress, died under vetoes from President Calvin Coolidge and President Herbert Hoover. In 1932, Norris, a liberal Republican, endorsed Roosevelt, the Democratic candidate.

In January 1933, the senator joined the incoming president at the Muscle Shoals Wilson Dam for a dramatic announcement. The new administration would fund comprehensive development of the Tennessee Valley, adding at least 11 dams above the Wilson one to create "the greatest interconnected power system in the world," with a generating capacity of an estimated 3 million horsepower, the New York Times reported.

Time magazine described the scene at the dam after Roosevelt's announcement:

As he turned from surveying the $150,000,000 Wartime white concrete elephant, he put his hand on the shoulder of Nebraska's insurgent Republican Senator Norris, who wants to see Muscle Shoals made a model for the federalization of electric power. "This should be a happy day for you, George," said Mr. Roosevelt. Tears filled the eyes of the wrinkle-faced Nebraskan. "It is, Mr. President," he replied, "I see my dreams come true."

In Washington, members of Congress were excited about the estimated $1.2 billion project, not least because it would employ about 60,000 men in its initial phase and perhaps 200,000 at the construction peak, the Times reported.

After meeting with the president-elect, the Wall Street Journal summarized his goals:

Cheap power would be the center of the plan. It would have the combined purposes of encouraging both urban and rural development, and of serving as a governor to regulate private power prices.

Such regulatory ambitions would trigger resistance from the private sector. Private power companies had long used profitability estimates in choosing where to provide electricity and how much to charge for it. Battle lines were now being drawn for conflicts that would span generations.

(Philip Scranton is a Board of Governors professor of the history of industry and technology at Rutgers University, Camden, and the editor-in-chief of Enterprise and Society. He writes "This Week in the Great Depression" for the Echoes blog. The opinions expressed are his own.)

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

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