Historic Events for Students: The Great Depression. Editor: Richard C Hanes & Sharon M Hanes. Volume 1. Detroit: Gale, 2002.
The Tennessee River, one of the largest rivers in the United States, flows for 652 miles and drains an area of 40,900 square miles that includes parts of seven states: Tennessee, Virginia, North Carolina, Georgia, Alabama, Mississippi, and Kentucky. In the early twentieth century the Tennessee Valley was one of the most impoverished regions of the United States, and yet its rivers held a potential to produce huge amounts of hydroelectric energy. This potential was not yet discovered, of course, until Americans came to realize what electrical power could do to promote industrial development and improve the everyday lives of people. Electrical energy began to serve industry, cities, and homes in the 1880s, but it took several decades before Americans considered it a necessity of modern life rather than a luxury. Until the 1920s, the primary users of electricity, generated mostly by private power companies, were industries rather than homes.
During World War I (1914-1918) the American government sought to develop a domestic source of nitrates. Nitrates are used for explosives but only available from Chile. The industrial process favored for nitrate production at that time required huge amounts of electricity. The government decided to build its production facilities in northern Alabama at Muscle Shoals on the Tennessee River because at that location hydroelectric dams could generate the necessary power. One nitrate plant was completed just as the war ended, leaving the government with an expensive facility with which it did not know what to do.
Congress debated throughout the 1920s and into the 1930s about whether to demolish the facilities, lease them to private industry, or operate them as a government program.
The Tennessee Valley was home to millions of poor subsistence farmers who had little opportunity to improve their lives because the economy there had been depressed since at least the end of the Civil War (1861-1865). Economic development was held back in this area partly because the Tennessee River was not well suited to navigation nor agriculture. Industrial products were expensive to transport overland and a century of efforts to develop a practical navigation channel had not yet been successful. The land was damaged by many years of overly intensive and unwise farming and timber harvesting practices. The people could not afford good schools or adequate medical facilities and the region’s future looked bleak without massive outside help. Before the 1930s, however, there was no expectation that the government would step in to change the picture.
The Depression created a desire among the American people for new leadership. The overwhelming victory of Franklin Delano Roosevelt (served 1933-1945) and the Democrats in the 1932 presidential election brought sweeping changes. Among the most visible and effective New Deal programs was the Tennessee Valley Authority (TVA). The TVA included the Muscle Shoals facilities but had a much broader vision: the planned development of the entire Tennessee Valley and surrounding areas. Born of the struggle over Muscle Shoals, the TVA in the 1930s endured battles both internally among its directors and externally with the private power companies before finally realizing Roosevelt’s dream of a region revitalized through planning and the harnessing of electric power. A new series of hydroelectric dams generated massive amounts of new electricity, driving down electric rates and stimulating the modernization of industries and homes in the cities and countryside. Navigation locks alongside the dams finally established a practical shipping channel into eastern Tennessee, lowering shipping costs and improving the profitability of local businesses. The TVA promoted agricultural and forestry reforms that improved the fertility of the land and put money into the pockets of farmers. The TVA continued to serve the Tennessee Valley into the twenty-first century as a self-sustaining government corporation, producing more electricity than any other utility in the country.
Despite the successes of the TVA and its popularity in the South, it was an experiment that would not be repeated elsewhere in the United States. Its creation in the 1930s was the product of historical currents that converged at that time and place and would never unite again. It represented a triumph of progressive thinking, but only during a time when Americans were in trouble and willing to try something different. Once the crisis of the 1930s passed, the traditional American fondness for free enterprise and distrust of government reasserted themselves, although it was in a new world in which the TVA illustrated the potential benefits of massive government action.
As the decade of the 1930s began, several historical threads were converging that would lead to the first massive regional development program carried out by the United States government. The Tennessee Valley in the southeastern United States for decades had been economically depressed and its resources poorly managed. A century of efforts to engineer the Tennessee River and its tributaries as a water highway for commerce and transportation had largely failed because of a lack of long-range, centralized planning, and adequate financing. Government hydroelectric dams and fertilizer production facilities built for the World War I effort at Muscle Shoals, Alabama, on the Tennessee River were embarrassing the nation because twelve years of debate had brought about no final decision about how to manage them after the war. The economic downturn of the early 1930s brought these threads together in a dramatic way that would profoundly affect American life, especially in the Tennessee Valley, for the rest of the century.
The Early 1930s: The Tennessee Valley and Shifting Political Currents
Senator George Norris of Nebraska submitted a new Muscle Shoals bill to the U.S. Senate in 1930. It was in a form identical to a bill that had been approved by Congress in 1928 but stopped by President Calvin Coolidge’s (served 1923-1929) veto. Enactment of Norris’s new bill, which easily passed the Senate, would have established public operation of the project for power production and fertilizer research and the distribution of surplus power on a preferred basis to public utilities. A competing bill that would lease Muscle Shoals to private interests instead of maintaining government operation passed in the House of Representatives. The two bills differed so much that a House-Senate conference committee set up to reconcile them was deadlocked until 1931.
In the meantime in March 1930 the U.S. Army Corps of Engineers issued the final report of its comprehensive survey of the Tennessee River and its tributaries. This report made clear the huge benefits of cheap electrical power, navigation, flood control, and sanitary and health conditions that could be realized by an integrated and systematic development of the river system. Although the report anticipated that private power companies would carry out the proposed development, it amounted to support for Norris’s nearly decade-long arguments for multiple-purpose development of the Tennessee River.
In February 1931 the House-Senate conference on the Muscle Shoals bill finally compromised on a measure that gave Norris nearly all that he wanted, including government operation of the power facilities. The compromise bill easily passed the House and the Senate and was submitted to President Herbert Hoover (served 1929-1933) for his signature, required by the Constitution before the bill could become law. Most observers expected that Hoover would veto the bill. After an exchange of public comments by Hoover and Norris that were critical of each other, Norris made a dramatic public offer to resign from the Senate if Hoover would sign the bill. This was not to be, for Hoover vetoed the bill on March 3, 1931. His veto message, reprinted in Preston J. Hubbard’s Origins of the TVA: The Muscle Shoals Controversy, 1920-1932, p. 293, outlined the philosophical reasons underlying his decision:
This bill raises one of the most important issues confronting our people. That is squarely the issue of Federal Government ownership and operation of power and manufacturing business not as a minor by-product but as a major purpose. Involved in this question is the agitation against the conduct of the power industry. The power problem is not to be solved by the Federal Government going into the power business … The remedy for abuses in the conduct of that industry lies in regulation … I hesitate to contemplate the future of our institutions, of our government, and of our country if the preoccupation of its officials is to be no longer the promotion of justice and equal opportunity but is to be devoted to barter in the markets. That is not liberalism, it is degeneration.
Hoover’s statement touched on the basic disagreement between liberals and conservatives about the role of government. Muscle Shoals was a very visible battlefield between these two opposing forces.
Norris re-introduced his bill to the Senate in early 1932. Although his committee passed and referred the bill to the full Senate, a vote was not taken before adjournment of Congress. Norris felt that the best place to fight for his proposal was later in the presidential election campaign of 1932. In that campaign, President Hoover, the Republican candidate, differed greatly from the Democratic candidate, Governor Franklin D. Roosevelt of New York, on the public power issue. Roosevelt was promoting public development of waterpower on the St. Lawrence River in New York. While Hoover took no formal stand on the matter during the election, his views had been eloquently expressed by his veto of the Norris bill and public statement.
During the campaign, Roosevelt’s views on public power came out most clearly in a speech he gave on September 21, 1932, in Portland, Oregon, where public power was very popular with the region’s residents. In that speech he declared that he did not advocate complete government control of utilities. Rather he stated that he believed control of utilities should be mostly in the hands of private enterprise. He contended, however, that utilities should be firmly regulated by the government. Roosevelt contended that the people had a basic right to electrical power at a reasonable rate. In cases where private industry did not act in the public interest by charging reasonable rates the government had the right to generate and transmit power. Therefore the government could judge whether the private companies were providing fair and reasonable service to the public. His proposal, reprinted in Thomas K. McCraw’s TVA and the Power Fight, pp.33-34, called for the federal government to build four yardstick projects:
Here you have the clear picture of four great Government power developments in the United States—the St. Lawrence River in the Northeast, Muscle Shoals in the Southeast, the Boulder Dam project in the Southwest, and finally, but by no means the least of them, the Columbia River in the Northwest. Each one of these, in each of the four quarters of the United States, will be forever a national yardstick to prevent extortion against the public and to encourage the wider use of that servant of people—electric power.
When Norris heard of Roosevelt’s Portland speech, he was jubilant. He strongly supported Roosevelt in the 1932 election, seeing in Roosevelt the final solution to passage of his Muscle Shoals bill. The realization of Norris’s long-held dream finally came true when Roosevelt and the Democrats won an overwhelming victory in the presidential election. Norris would be even happier after the election when he learned that Roosevelt’s vision for the Tennessee River was even grander than his own.
Muscle Shoals Becomes TVA
Before his inauguration Roosevelt invited Norris on a tour of the Tennessee Valley that must have been one of the happiest events in Norris’s long life. Near the end of that tour, as the two stood gazing at Wilson Dam at Muscle Shoals, the President-elect said, “This ought to be a happy day for you, George.” Norris reportedly answered, “It is, Mr. President. I see my dreams come true” (Hubbard, p. 314). Later, after he returned to Washington, a reporter asked him if Roosevelt was truly with him. “He is more than with me,” he responded, “because he plans to go even farther than I did” (McCraw, p. 35). The two men apparently had discussed Roosevelt’s plans for an integrated, government-sponsored development of the Tennessee Valley. The grand dimensions of Roosevelt’s idea were suggested in a speech he gave in Montgomery, Alabama, during the tour:
Muscle Shoals gives us the opportunity to accomplish a great purpose for the people of many States and, indeed, for the whole Union. Because there we have an opportunity of setting an example of planning, not just for ourselves, but for the generations to come, tying in industry and agriculture and forestry and flood prevention, trying them all into a unified whole over a distance of a thousand miles so that we can afford better opportunities and better places for living for millions of yet unborn in the days to come (McCraw, p. 35).
In early February 1933 Roosevelt announced to the press his comprehensive plan for the development of the Tennessee Valley, which was not limited to Muscle Shoals. Having carried out statewide land-use planning in New York, Roosevelt saw a similar need and the opportunity afforded by the Muscle Shoals project and the Tennessee Valley. He called for a coordinated program for the entire watershed involving flood control, reclamation of land subject to flooding, power development, navigation improvements, and promotion of industry. He saw this project as “the widest experiment ever conducted by a government” (Hubbard, p. 314).
Roosevelt formally proposed the Tennessee Valley Authority Act to Congress on April 10, 1933. The Tennessee Valley Authority (TVA) was to be “a corporation clothed with the power of Government but possessed of the flexibility and initiative of a private enterprise” (Roosevelt, p. 122). Despite the vast scope of the TVA Act, the debate in Congress was remarkably brief, if at times intense. The power companies testified that government generation and distribution of power would put them out of business. The new Congress, however, was ready to enact the Roosevelt program as Roosevelt signed the TVA Act into law on May 18, 1933. For Senator Norris it was the victory of a lifetime. Neither he nor Roosevelt realized, however, that another round of battles was soon to begin.
The Battle Within: The TVA Board of Directors
Roosevelt brought the idea of a “public authority” from New York where he had created such organizations, including the Power Authority of that state. The TVA Act called for a governing board of three directors, one of whom would be called chairman. This was to be a government corporation not connected to other federal departments and answerable only to the President.
A month before he signed the TVA Act into law, Roosevelt selected Arthur E. Morgan as TVA Chairman. Roosevelt put him to work to select the other two directors. Morgan was Roosevelt’s choice because he shared Roosevelt’s enthusiasm for planning as a way to improve the lives of people. By training and experience, he was a water-control engineer and known for his innovative approach to problem solving. He was also an idealist and philosopher that could inspire great loyalty in some people but cause others to regard him as strange. Morgan founded an engineering company that developed a national reputation for excellent work all over the country. He had become the President of Antioch College in Ohio in 1921, where he instituted a unique program in which students worked on-campus in real industries to apply what they learned in the classroom. When Roosevelt offered him the TVA directorship he jumped at the chance to design a multi-purpose project. He and Roosevelt both saw TVA as way to develop the economy and society of the Tennessee Valley rather than simply a power production or navigation project. His broad vision eventually clashed with the very different ideas and purposes held by the other directors.
Roosevelt asked Morgan to select two different men for the director positions: one that was familiar with electric power and another with experience in agriculture. That way the Board would encompass the diversity of expertise needed for the broad purposes of TVA. The agriculturalist selection was Harcourt A. Morgan, then president of the University of Tennessee. Originally from Canada, Harcourt Morgan had moved to Louisiana and become an expert on crop pests before taking a job at the University of Tennessee. At the university he rose rapidly through the ranks. Like Arthur Morgan, he had a philosophical approach to his work and a commitment to making a real contribution. He saw TVA as an important agent for much needed agricultural reform through education. Although his job was to set up and guide the TVA farm program, he had definite views on the issue of private versus public power. He believed that private power companies had neglected their duty to farmers by not providing electricity to rural areas.
Selection of the third director was a very sensitive and important matter. Roosevelt and Arthur Morgan seemed to agree that this director, well versed in power issues, should be someone who could avoid explosive confrontations with the private power companies. Morgan felt that Roosevelt’s first two suggestions were too hostile to the companies. Behind the scenes, other interested parties including Senator Norris provided input to Roosevelt about who should or should not occupy this position. The final selection was David E. Lilienthal, an ambitious 33-year old lawyer with the Wisconsin Public Service Commission who was highly recommended to both Morgan and Roosevelt.
Despite being so young, Lilienthal had a rather long list of accomplishments. He was highly regarded because of his great energy and intelligence, his published articles on public utility law, and some important legal cases he had been involved with. He was very committed to social causes and had a very low regard for private utility companies. Senator Norris and others committed to public power were very pleased with Lilienthal’s appointment. They believed he would be a strong and aggressive force in what they expected would be a bitter fight with the private power companies.
The three TVA directors combined a remarkable variety of knowledge, experience, and skills well suited to the task before them. Their personalities and visions, however, differed in ways that led to serious internal strife. The greatest contrast was between Arthur Morgan and David Lilienthal. Morgan wished to avoid a battle with the power companies. He believed that company executives were reasonable people who could be convinced to work cooperatively with the TVA. Lilienthal did not trust the power companies at all and was eager to defeat them in a struggle for control of power systems in the Tennessee Valley. For five years these two directors of the TVA contested the direction and strategy of the project.
The trouble began early on when Wendell L. Willkie, the young and energetic president of Commonwealth and Southern Corporation, a holding company that owned private power companies in the Tennessee Valley, sent a letter to Chairman Morgan suggesting a meeting to discuss ways to cooperate. Willkie had earlier testified against the TVA Act before Congress, so obviously the TVA was a threat because it might take over territories held by his companies. Morgan was aware of Willkie’s thoughts but confident that the TVA’s powerful position as an arm of the government would make it safe to deal openly and fairly with Willkie and the other company representatives. To him, the power issue was about technology and economics. Lilienthal, on the other hand, deeply distrusted Willkie and other power company business leaders and sought to find ways to gain advantage for the government in any negotiations. For him, the power issue was basically political. In the beginning, Morgan’s moderate viewpoint prevailed and the directors agreed that he should meet with Willkie, but should not make any important agreements.
One of the first issues to be settled with the power companies was which territories the TVA would serve with electrical power. These would be the yardstick areas, where fair rates would be determined. This meant that some areas had to be given up by the power companies, which they naturally were reluctant to do. When Willkie’s companies failed to live up to an important agreement on this matter, Morgan still wanted to work cooperatively with him. Lilienthal strongly objected to further cooperation, and the two men grew increasingly antagonistic. Morgan saw Lilienthal as unethical and willing to stop at nothing to undermine the private companies and viewed this perspective as dangerous to the TVA’s reputation. Lilienthal, on the other hand, saw Morgan as naive in his dealings with the power companies and unguarded in his grandiose public statements about the social mission of the TVA. Most of the time, Harcourt Morgan agreed with Lilienthal, making Arthur Morgan the minority chairman.
In 1935 Morgan recommended to Roosevelt that Lilienthal, whose term would soon expire, be replaced or he would resign if Lilienthal were reappointed. Roosevelt wavered at first, but reappointed Lilienthal. Morgan backed off on this threat and remained in his position. From that point on, relations within the Board of Directors were very strained and full of intrigue. The ill will within the boardroom soon became public knowledge. By 1937 Morgan was disgusted with President Roosevelt’s New Deal social and economic programs designed to bring the United States out of the Great Depression. To him Roosevelt, Lilienthal, and others seemed more interested in punishing the companies than in a fair settlement. Lilienthal in turn was disgusted with Morgan, who he believed was conspiring with the companies. All of this was brought to a head when Morgan decided to take his case to the public. He wrote articles for major magazines and newspapers in which he openly criticized such TVA practices as misleading propaganda against the companies. Without referring to him by name, he also clearly criticized Lilienthal and his personal ambition.
The feud within the Board became an embarrassment and a political liability for President Roosevelt. He called the Board before him and demanded that they provide evidence for their charges or withdraw them. His primary concern was Morgan, who refused to provide details to substantiate his charges against Lilienthal and instead proposed an investigation by Congress. Roosevelt felt he had no choice but to fire Morgan, which he did on March 23, 1938. This action was very bad publicity for the TVA and led to a highly visible investigation of the TVA by a joint committee of Congress later in the year. Although the committee ultimately found little wrongdoing by the TVA, the TVA spent much of its time that year preparing for the investigation. This distraction delayed the resolution of the battle the TVA had been waging, outside the boardroom, with the power companies.
The Battle Without: TVA and the Power Companies
The TVA Act, as written, emphasized government responsibility for navigation improvements and flood control. It also provided for government generation and distribution of electric power. The power issue captured the greatest amount of attention because it had a huge and direct impact on the lives of millions and on the profits of some of the biggest corporations in America. The act authorized the government to distribute publicly generated power throughout the Tennessee Valley and adjacent areas, primarily to public agencies such as municipal utilities and nonprofit cooperatives. It also explicitly stated its intent not to duplicate existing power facilities, which would prevent direct competition with private companies within any given area. Roosevelt’s idea was that yardstick areas would be set aside for the TVA as the power supplier. Analysis of the TVA’s experience in these areas would establish reasonable rates. Since private companies already were in place, the only practical way such yardstick areas could be set aside was to negotiate agreements with the companies to establish the boundaries between public and private service territories. Otherwise it would be a free-for-all in which the TVA and the companies would compete for customers, a situation frowned upon by the TVA Act and not in the interest of either side.
The champion of the power companies was Wendell L. Willkie, the young President of the Commonwealth and Southern (C & S) Corporation, the holding company that owned a number of power companies in the Tennessee Valley. Trained and experienced as a lawyer, Willkie was a strong proponent of free enterprise and a likeable man with a talent for public speaking. His battle with TVA for control of the region’s customers made him a national figure important enough to become the Republican candidate for President in the 1940 election. In 1933 the C & S corporation was huge, with assets of over $1 billion and ownership of 11 major electric utilities that served five million people.
One of the first decisions of the TVA Board was to establish the initial area in which the TVA would provide power. A long corridor was identified along which the TVA planned to build a transmission line between Wilson Dam at Muscle Shoals and the proposed Norris Dam in eastern Tennessee. It also included certain areas adjacent to the corridor and at least one major city. This corridor passed directly through areas already served by Willkie’s companies. Another complication was that one of Willkie’s companies, the Alabama Power Company, held the contract awarded in 1925 to buy power from Wilson Dam, which would expire on January 1, 1934. The TVA needed to renew that contract or else lose the largest part of its income, making C & S both its customer and adversary.
Willkie and Lilienthal met on October 4, 1933, to discuss ways to resolve the situation. Willkie proposed to buy all of TVA’s electricity, but Lilienthal made no commitment. A short time later the TVA signed an agreement with the town of Tupelo, Mississippi, to provide power by February 1934. This agreement served notice that the TVA was moving ahead with its program whether Willkie agreed or not. As a result negotiations with C & S became very tense and high-pressured. Willkie did not want a TVA transmission line through the heart of his electricity market and he even offered to sell the Tennessee Electric Power Company (TEPCO) to the TVA, but for a price the TVA did not want to pay. As time was running out for the Alabama Power Company contract, Lilienthal gave Willkie an ultimatum. If C & S would not sell its transmission lines, in the areas the TVA wanted, at a price the TVA Board thought was reasonable, then the TVA would build its own duplicate transmission facilities in the areas. Willkie decided to sign an agreement on January 4, 1934, to continue to buy Wilson Dam power and to sell electrical systems in certain areas that the TVA wanted. The TVA agreed not to move farther into C & S territories for five years or until Norris Dam began producing power, whichever came first. This contract seemed to mark a truce between the two sides, but peace was short-lived.
The January 4 agreement failed to resolve key issues because the two sides still had fundamentally opposing interests. Therefore they could not agree on details of implementing the agreement. For example, C & S insisted on cash payments from cities that were to buy municipal power distribution systems. Cities, however, did not have enough cash at this stage of the Great Depression and wanted to pay with bonds instead. The TVA and C & S worked out a deal in which the TVA would purchase the municipal systems and then resell them to the cities. That agreement would later fail when C & S refused to turn over the property because of a legal technicality. Similar legal problems cropped up throughout the contract territory. For a long time the TVA had a very small area in which it could sell electricity while at the same time it was busy building dams that would produce more power.
Negotiations between the two sides soon broke down and it became clear that the battle would have to be resolved in the courts. Private power companies and their stockholders filed many lawsuits against the TVA and other federal agencies. They wanted to stop the takeover of their electrical facilities by the government and the cities. Two cases were most influential in deciding the issue in favor of TVA. In the first of these, filed on September 13, 1934, George Ashwander and thirteen other stockholders of the Alabama Power Company tried to stop their company from following through on the January 4 contract. They argued the contract was illegal because the TVA itself was unconstitutional. The District Court judge in northern Alabama ruled in favor of Ashwander, but an appeals court reversed the lower court’s decision and ruled in favor of the TVA. The case was referred to the Supreme Court, which at the time was in the habit of deciding cases against Roosevelt’s New Deal programs. In February 1936 to the surprise of many, the Supreme Court ruled 8 to 1 in favor of the TVA, but deliberately avoided the issue of the TVA’s constitutionality.
In the second case, known as the “TEPCO case,” five of Willkie’s companies filed suit against the TVA on May 29, 1936, to force the courts to decide the question of the TVA’s constitutionality. As the legal process moved forward, Judge John J. Gore issued a legal order to stop an action, known as an injunction, temporarily freezing the TVA’s power program for six months. An appeals court put the TVA back in business again, but sent the case back to the same court presided over by Judge Gore, who would certainly rule against TVA again. TVA lawyers, however, deliberately inserted a clause into the Judiciary Act of 1937 that required a three-judge panel, not a single judge, to hear constitutional cases like TEPCO. This clever tactic worked and in early 1938 the judicial panel voted two to one, with Judge Gore casting the dissenting vote, in favor of the TVA. The companies appealed this decision to the Supreme Court that ruled five to two in TVA’s favor.
In five years of litigation to stop the TVA program, the power companies lost every case. They had, however, prevented the TVA from capturing the biggest electricity markets in the region. In the meantime the TVA sold power, which it was generating in greater amounts as it finished dams, to some small cities and to some private power companies and industrial firms. At the same time it carried out a massive and well-planned publicity campaign to garner public support for its programs. Once the legal issues were resolved, the TVA was able to force the power companies to give up key market territories in its yardstick areas.
A typical example of the TVA’s successful tactics was carried out in the city of Knoxville, Tennessee, where the TVA set up its main office in 1933. The people of Knoxville in November 1933 voted overwhelmingly to set up their own public utility system to deliver power in place of the private company already there. The cheaper TVA power was a powerful inducement. The city offered to buy the existing private facilities, but the company refused because that system was central to their whole operation. The city then applied for a loan and a grant from another New Deal agency, the Public Works Administration, to build their own parallel system. Faced with that prospect, the company offered to sell or lease its facilities to the city, but the two sides for some time could not agree on a purchase price. Just when a deal was reached, a lawsuit by company stockholders prevented the agreement from going through. The legal maneuvering continued for years until finally the company accepted an offer made by the TVA and Knoxville together. The city finally took control of the system in September 1938.
A very similar series of events took place in Memphis where the public voted 17 to one in 1934 to establish municipal ownership of the power system. The local private power company fought in court until finally surrendering in 1939. Probably the most important battle of this kind began in Chattanooga. There the public voted in 1935 to adopt a public system, but political and legal wrangling delayed any purchase. This case was an embarrassment to C & S because its own company, TEPCO, was headquartered there. As legal decisions continued to move in favor of TVA, Willkie realized that the best solution for C & S was to sell TEPCO to the TVA. He came under particularly strong pressure because Chattanooga actually began building its own system in 1938. The long and difficult negotiations continued until an agreement was reached. TEPCO was turned over to the TVA in a formal ceremony on August 15, 1939. After this sale the TVA held exclusive electricity markets in most of Tennessee and large parts of northern Alabama and northeastern Mississippi. The TVA continued to confine itself to this territory throughout the remainder of the twentieth century.
By the end of the 1930s the TVA was finally at peace both internally and externally and could focus on carrying out its programs. Although the power companies obstructed the TVA in its efforts to serve electrical markets, the other parts of the program had been moving full speed ahead.
TVA Programs in the 1930s
TVA was set up from the beginning as a multi-purpose organization to develop the physical and human resources of the Tennessee Valley and pull it out of its decades-long regional depression. The TVA involved itself in a wide range of activities, from building dams for flood control, improved navigation, and generation of electricity, to creating a publicity campaign to inform the public of its activities and gain support. These are the two activities for which the TVA is most widely recognized. The TVA also produced fertilizer and conducted agricultural experiments, including demonstrations and experiments with electrical farm equipment; provided loan assistance to rural citizens for the purchase of electrical appliances and home wiring; promoted improvement in health care and education, including a program to eliminate malaria; and built roads, bridges, model cities, and recreation areas near new reservoirs.
The most visible TVA program was the construction of dams. Wilson Dam at Muscle Shoals had already been completed in 1925, and it was a key point of contention in the Muscle Shoals controversy prior to the establishment of TVA. Once established the TVA very quickly planned dams on the Tennessee River and its tributaries guided by the Corps of Engineers recommendations. The TVA built them in rapid succession. The first of these was Norris Dam, named after Senator Norris and begun in October 1933, while construction on Wheeler Dam began the following month. In June 1934 the TVA employed 9,173 people, mostly in dam construction and by 1935 that number had risen to 16,000. By 1936 five dams were under construction and Norris Dam, the first to be completed, was finished in 1936. These dams were popular tourist destinations during the Depression and one thousand people visited Wilson, Wheeler, and Norris dams each day. By the time the system was completed in 1944 the TVA had built 16 dams, rendering the Tennessee River navigable for ships for 650 miles from the Ohio River to Knoxville, controlling floods, and generating huge amounts of hydroelectric power.
Another very visible and successful TVA program was its publicity campaign. Headed by William L. Sturdevant, the TVA Information Office was well funded and employed a dozen staff members. The staff included a motion picture director and writers that specialized in power, agriculture, and engineering. TVA employees published a flood of articles in professional journals. The TVA directors gave scores of speeches, and staff members responded personally to every one of 100,000 letters between 1933 and 1940. The Information Office published 15 major pamphlets with plenty of illustrations, some of which won awards and were adopted as models of writing for school classes. TVA photographers busily documented every aspect of work and their pictures became highly regarded works of art. The TVA installed exhibits at hundreds of conventions, meetings, schools, and colleges around the country. Their exhibit at 1939 World’s Fair in New York drew 3.3 million visitors. Trained guides led visitors to the dams where 4.3 million people visited between 1933 and 1940. TVA films, including such titles as TVA at Work, Norris Dam, and Electricity on the Farm, were used in hundreds of schools and seen by nearly one million people by 1940. More than two thousand magazine articles were written about the TVA by 1940. To keep itself informed, the TVA subscribed to about five hundred periodicals and more than one hundred newspapers. Visiting writers and students were given special treatment and assistance and encouraged to study and write about what the TVA was doing. This massive effort and attention to detail in informing the public paid off: the TVA won immense popular support in the Tennessee Valley and around the country.
TVA in 1939
By the end of the 1930s the TVA had overcome great difficulties and was well established as a successful public organization. No more lawsuits threatened its existence and it was generating and distributing large and growing amounts of electrical power within a secure and integrated territory. Ship traffic was growing as new dams and navigation locks were completed, rural homes were modernizing through the use of electrical power, and new industries were springing up. The huge investment in the region was having an effect on the both economy and on the lives of the people.
The TVA was a model of efficiency and organization and was extremely popular, having employed many thousands of people and bringing electricity to the countryside. By working cooperatively with local people and agencies to accomplish its goals, the TVA became part of the social and economic fabric of life in the Tennessee Valley. As demonstrated even more convincingly in later years, when it was in full operation and its effects clearly measurable, the TVA was one of the crowning achievements of the New Deal.
Technological advances in the nineteenth century, particularly those relating to electrical power, communication, and transportation, created expectations in the United States and elsewhere that the way of life of the average citizen would soon change for the better. Many Americans in the early twentieth century electrified their homes and businesses and acquired telephones, automobiles, and radios. For many who could not afford these improvements, especially in rural areas, this promise of a new life led to frustration and disappointment. One of the most visible of the New Deal federal programs designed to address this fundamental problem, the Tennessee Valley Authority (TVA), arose from a series of unique conditions and historical events that might have led to a quite different result without the focused dedication of a few key individuals.
Electrical Power in Early Twentieth Century America
Although the theory of electricity was well established in the early nineteenth century, commercial power production first appeared in the early 1880s. It was then that Thomas Edison installed the world’s first central electric power plant in New York City. Ironically these first power systems were built largely to create a market for electrical equipment, beginning with electric lights, made by Edison’s company and others like it. They were not to serve an existing demand for power. They also served only those close to the power plants who could afford the high cost of the power. Electric systems soon appeared in cities all across North America. For example electrical generation arrived in Eugene, Oregon, three thousand miles from New York City, in 1887. Even so, it took several decades before everyday use in homes became commonplace.
By the early 1920s half of all urban homes in America were electrified and had at least some electric lights. In some communities, such as in Seattle and Los Angeles, municipal utilities owned by city residents provided electrical service. In most places private companies owned the power plants and the transmission lines. Many American families in the 1920s, largely limited to the wealthiest 20 percent, modernized their homes by installing full electric lighting and purchasing power tools and appliances for heating and cooling. By the end of that decade electric irons, radios, vacuum cleaners, and clothes washers were seen in many, but far from all, electrified homes, while less than 10 percent of U.S. farms had electricity. It was expensive to install power lines in rural areas where fewer prospective customers existed to help pay for them. As a result power companies did not believe it could be profitable to serve those areas. Cost was an obstacle for rural people as well as many city dwellers who were not well-to-do and could not afford to buy much electricity at the high rates of that time.
Enough Americans began benefiting from the use of electricity in the 1920s that it came to be seen as a necessity rather than a luxury. Many citizens and political leaders began to feel that American progress was being held back by greedy power companies who sought maximum profits rather than to serve the interests of their customers. Examples from other countries and from some American communities demonstrated to many that public programs could deliver universal electric service at much lower rates than the private companies were willing to consider.
Efforts to promote public power projects in the 1920s met largely with failure. At that time the American economy appeared to be very healthy and private enterprise was held in high regard. Most people felt that government should not interfere with private business, which was seen as responsible for the economic success that the United States had achieved. In the biggest public power proposal of that time, Gifford Pinchot, Governor of Pennsylvania and a progressive who believed that government should promote social welfare, set up the Giant Power Board in 1923 to design a statewide public power system. He felt that the power companies had been irresponsible in charging unreasonably high electric rates and in failing to serve rural areas. He and his appointed Director, Morris L. Cooke, had visions of an even grander public power system that would serve the entire country. After an exhaustive study, the Giant Power plan, proposing strong state control over power companies, universal service even in rural areas, and a way to set standard electric rates, was submitted to the Pennsylvania legislature in 1925.
The private power industry opposed this plan and proposed one of their own, called “SuperPower.” This plan proposed to interconnect distribution systems but would maintain private company control. It did not provide for universal service or a standard basis for rates. Supporting the power companies against Giant Power were Secretary of Commerce (and later President) Herbert Hoover as well as the U.S. Chamber of Commerce, a variety of private industries, and the press. After an intense public debate, the legislature voted against the Giant Power proposals. The debate, however, succeeded in introducing to many people the possibilities of public control over regional power systems. In the 1930s, when power companies were no longer so highly regarded because of the struggling national economic system, these ideas became much more acceptable.
The Boats Can’t Get Through: A Short History of Navigation in the Tennessee Valley
The Tennessee Valley region receives much annual precipitation, but the river flow is about twenty times greater in the winter than in the summer. This variation combined with natural obstructions in the river channel made the Tennessee River system a big challenge for those who wanted to use it as a means of transporting goods and people.
Native peoples of the region used the rivers for thousands of years as transportation routes, but only in canoes that could be carried around the many rapids. European and Euro-American explorers and traders in the seventeenth and eighteenth centuries traveled on the rivers in the same way. Despite the many obstacles, the rivers still were the most efficient way to move from place to place. For example a group of settlers led by John Donelson in 1779 migrated from the Watauga colony in eastern Tennessee down the Tennessee River, through what is now Tennessee, Alabama, Mississippi, and Kentucky, to the Ohio River, up the Ohio to the Cumberland River, and up the Cumberland to settle at what is now Nashville, Tennessee. This journey covered about three or four times the distance that an overland trip might have taken, but it was much less difficult than an overland migration.
Settlement of the Tennessee River drainage in the late eighteenth and early nineteenth centuries created a need for ways to move people and products along the rivers. Local two-way river transport using boats propelled by poles called keelboats was possible, although expensive, along stretches between obstacles. Boat traffic upstream from New Orleans, the major source of goods in the region on the Mississippi River by way of the Mississippi, Ohio, and Tennessee rivers, was not at all practical until the arrival of the steamboat in the 1820s, and even they were limited to use in the high-water season. Neither could overcome the obstacles of Muscle Shoals in northern Alabama, where in 37 miles of rapids the river dropped 134 feet.
Muscle Shoals effectively split Tennessee into two regions: western and central Tennessee with its two major cities of Memphis and Nashville, and eastern Tennessee with its principal urban centers of Chattanooga and Knoxville. As a result people in eastern Tennessee were effectively cut off from markets and supplies in the Mississippi River valley and were economically disadvantaged in comparison with people in the central and western part of the state. Eastern Tennessee would remain economically depressed until a way could be found around or over the Muscle Shoals impediment. Similarly, northern Alabama, fertile ground for cotton production that enriched other areas in the South, could not participate in the bounty because shipping products downstream on the Tennessee River was not feasible.
Numerous attempts to improve the rivers for navigation met with little success. As early as 1817 the Tennessee state legislature created a board to look into navigation improvements on the Holston and Tennessee rivers. The people of Knoxville and others put up prize money in the 1820s to induce steamboat owners to find a way to navigate the entire length of the Tennessee River. The prize was won in 1828 by the enterprising captain of the side-wheeler Atlas. This feat, however, did not lead to regular steamboat service, and only eight boats succeeded in passing the shoals in the next decade. In the 1830s the federal government conducted a survey of the Tennessee and Holston rivers and recommended channel deepening among other improvements. Once finished it enabled steamboats to operate for a greater part of the year upstream from the Alabama state line. Similar small improvements made on river tributaries in the 1840s and on the main river in 1852 accomplished very little.
Alabama focused on ways to overcome Muscle Shoals, beginning with federal aid in carrying out a survey of the shoals area in 1827. A 14-mile canal to bypass the obstruction was completed in 1836 but failed to solve the problem because navigation was still obstructed both upstream and downstream from the canal. The canal was abandoned and eventually filled with silt. In 1890 the U.S. Army Corps of Engineers completed two canals, including navigation locks, around major obstacles in the shoals region, but did not completely overcome the Muscle Shoals problem until 1927. At that time the huge Wilson Dam and a smaller companion were completed.
Beginning in 1868 the federal government made more serious attempts to deepen the main river channel. The main strategy was to dredge the channel in some places and narrow the river in others to achieve sufficient depth. This effort and similar ones over the next 50 years served to open the lower 225 miles of the river. They did not succeed in the greater stretch of river above Muscle Shoals. Eventually, open-channel methods were abandoned in favor of much more expensive dams and navigation locks. The first of these, built privately and mostly to produce electrical power, was completed in 1913 at Hales Bar about 33 miles downstream from Chattanooga, overcoming a major obstacle to navigation. The U.S. Army Corps of Engineers completed another dam at Widow’s Bar about 23 miles below Hales Bar in 1925.
Despite a century of efforts to improve the Tennessee River as a navigable waterway, in 1930 it still was poorly suited to water transportation. It was especially difficult upstream from Muscle Schoals where the water depth in most of the stream was sufficient only during the high water season. It would take a huge federal commitment and a grand plan to make the river a truly effective artery of commerce.
Living Conditions in the Tennessee Valley
Euro-American immigrants to the Tennessee Valley in the eighteenth and nineteenth centuries were largely subsistence farmers. They grew food primarily for their own use and did not have much cash to buy products from other areas. Slow economic development of much of the region into the early twentieth century brought little fundamental change in the lives of the people, particularly in eastern Tennessee beyond the reach of river navigation. In the late 1920s most people in the Tennessee Valley were still farmers. Much of the farmland had been misused through intensive cultivation causing soil erosion. Also timber in many areas had been clear-cut for short-term profit without replanting or consideration for the long-term productivity of the land. Hill slopes had been cleared of forest, crops were planted on these slopes, and then badly eroded by the rainfall that washed the soil down into the streams. Because of unwise farming practices, much of the land was no longer very fertile; corn would grow only a third as tall as it would in Iowa. The valley bottoms were favored places for people to live and farm, but floods frequently caused widespread damage to homes and fields.
Because the region was poor, large numbers of its two million people lived in deplorable conditions. Their houses were substandard with no indoor plumbing or electricity. Many people could not read and were undernourished and medical care was inadequate. This lack of education meant that good farming practices were not widely known.. Without some form of outside assistance and investment to boost the economy, there seemed little hope for improvement in living conditions.
The Muscle Shoals Controversy
Although the United States did not enter World War I until 1917, by 1916 national defense had become a major concern. One worry was that the country was too dependent on Chile as a source of nitrates. Nitrogen compounds, such as nitrates, are an important component of explosives. Other great powers in the world were developing synthetic nitrogen facilities so they would not have to depend on sources that could be cut off in wartime. Accordingly, Congress passed the National Defense Act of 1916, which included a provision authorizing the President to design, build, and operate synthetic nitrogen plants. In peacetime the nitrogen was to be used for making fertilizer instead of munitions, which would reduce the cost of fertilizer to American farmers.
President Woodrow Wilson (served 1917-1921) appointed committees to recommend how and where to build the nitrogen plants. Of the two plants that were built, one of them was designed to use a method requiring large amounts of electrical power. For this reason it was located at Muscle Shoals, Alabama, where a hydroelectric dam could be built to provide the needed power. This plant was ready to begin production by October 1918, but was not put into service because the World War had just come to an end. Construction of the dam, named Wilson Dam after the President, was authorized in February 1918. Because the dam would not be completed before the nitrogen plant was ready, a steam power facility was installed to generate the needed power until the dam was finished.
Almost immediately after the end of the war, the Muscle Shoals project came under attack by Republicans who saw it as an issue for the 1920 presidential election. They charged that the project was a costly failure and might lead to government competition with private industry. At the same time, the government attempted to find private buyers for the facility. When no buyers could be found, the Wilson administration in 1919 presented a bill to Congress. The bill proposed to continue government operation of the nitrate plant by an agency run very much like a private corporation. Nitrogen products not needed for national defense would be sold for fertilizer. When Wilson Dam was finished, its surplus power beyond that needed for the nitrate plant would be sold on the open market. Proponents of the bill argued that the dependence of national defense and American agriculture on Chilean nitrates was a bigger concern than the possible competition between the government and private enterprise.
An investigation of the Muscle Shoals project by a Republican-led committee found evidence of some waste and petty graft. The Republican majority of the committee also charged that the project had been built with the hidden motive of turning it over to a particular company, the American Cyanamid Company, after the war. American farmers, however, responding to a shortage of fertilizer supported government control of the Muscle Shoals nitrate plant and immediate completion of Wilson Dam to power it. In the end, in 1921 after a lengthy and heated debate that captured the attention of the nation, the Senate approved the bill but the House rejected it. Funding for completion of Wilson Dam also was turned down, and it appeared that government operation of the Muscle Shoals project was doomed.
The new Republican administration under President Warren Harding (served 1921-1925), however, was reluctant to scrap the project. They felt that the government should receive a fair return on its investment. They proposed that if private industry could make use of the project and pay the government for it, the project—including Wilson Dam—should be completed and then leased to a private operator. Initially no private companies expressed interest in the proposal and it appeared the project would be abandoned. One of those contacted about the project, the prominent industrialist Henry Ford, famous for making automobiles that many Americans could afford to buy, then stepped forward and made an offer for Muscle Shoals.
The Ford offer started another phase of controversy over Muscle Shoals. Differences of opinion arose within the government about whether the offer should be accepted. It also incited heated debate among the public. Many felt that Ford’s offer was an opportunity for the government to rid itself of a white elephant, while critics charged that accepting the offer would amount to a government giveaway. During the negotiations between Ford and the government, an important point of dispute over the Wilson Dam was how much it would cost to complete. Ford arranged a high-profile tour of the Muscle Shoals facilities with another famous and highly regarded American, Thomas Edison, to promote public support of his bid. In speeches delivered to the people of the Muscle Shoals area, Ford declared that he intended to develop the Muscle Shoals project to rid the world of war by creating the “energy dollar” to replace the dollar based on gold. He made many enemies when he further declared that the international financial system was under the control of Jews who created wars, including the American Civil War and World War I, for financial profit. The New York Times and others took great issue with Ford’s interpretation of history and his anti-Semitism, however, at the same time he gained strong popular support in the South for his bid. This support grew still more when he proposed to build a great city, 75 miles long, in the Muscle Shoals area and bring great prosperity to the South through development of waterpower and other natural resources. This created great excitement among people in northern Alabama who had only dreamed that their region could have the economic success of other parts of the country.
The Harding administration submitted the Ford bid to Congress in 1922, but recommended that it be rejected. Among the major problems with the proposal was that it violated terms of the Federal Water Power Act, since it did not provide that the waterpower would be subject to government regulation. The administration also felt that the Ford bid would not pay a fair amount to the government for the project. Once before the Congress, the Ford offer spurred a vigorous public debate. While this debate raged, the Alabama Power Company submitted a competing bid that Congress also began to consider.
In what proved to be a fateful decision, the U.S. Senate referred the Ford bid for consideration by the Senate Agriculture Committee. Senator George W. Norris of Nebraska, a progressive who believed strongly in public power chaired the committee. Norris had his own bill providing for public rather than private operation of Muscle Shoals. He mobilized opposition to the Ford offer while dragging the hearings out as long as possible. Norris introduced his first Muscle Shoals bill to the Senate in May 1922. In July the Senate Agriculture Committee rejected both the Ford bid and the offer by the Alabama Power Company. Norris’s bill called for completion of Wilson Dam and a companion dam on the Tennessee River. It also provided for a government corporation to make fertilizer and sell surplus power, giving preference to public utilities. The bill called for a survey of the waterpower resources of the Tennessee River and its tributaries and authorized the Secretary of War to build dams where economically feasible. These dams would be designed also to facilitate navigation as well as to provide power.
The Norris bill prompted great interest and started a debate that lasted more than a decade. In the meantime the Ford offer was still under consideration in the House of Representatives. In late 1922 Congress authorized the completion of Wilson Dam, which included both hydroelectric power generation and navigation locks. This work made the Muscle Shoals project even more valuable and a bigger prize to fight over. Congress did not approve Norris’s plan for a government corporation to operate the project, leaving that matter for later consideration.
In January 1924 a group of nine southern power companies, including the Alabama Power Company, submitted a bid for Muscle Shoals. In the same month Senator Norris gave a speech in which he proposed a nationwide plan for development of all possible water-power resources by the federal government and a single public power system connecting the entire country. When the Ford offer, however, was finally brought before the House of Representatives in March 1924, it passed by a vote of 227 to 143. Immediately Norris went to work to defeat the proposal when it was transmitted to the Senate and referred to his Agriculture Committee. Again Norris’s strategy was to prolong the hearings to allow time for the opposition to gain strength. At the same time he more strongly pushed his own bill for public operation of Muscle Shoals. In May 1924 the Agriculture Committee voted 11 to four to recommend the Norris bill instead of the Ford offer. Many viewed this as just a temporary setback for the Ford plan, and they expected that it would fare better in the next session of Congress. All were surprised in October 1924, however, when Henry Ford withdrew his offer without warning.
Despite the rejection of the Ford bid and other private offers to operate the Muscle Shoals project, the vision of economic benefit connected with it was not diminished. No longer considered a white elephant, Muscle Shoals, as an issue, became even larger when people saw it as a highly valued resource that might be used to benefit the public. The disappointed people of the Tennessee Valley continued to hold out hope that the water power of their region would be developed to help lift them from economic stagnation. Increasingly, as the 1920s progressed, people in the United States felt that electrical power could help improve the lives of ordinary people.
With Henry Ford removed from the Muscle Shoals controversy, the issue boiled down to public versus private control of the hydroelectric power. In the Senate the Norris bill faced opposition from those who still favored leasing the project to private interests. In 1925 the Senate, in a defeat for Norris, voted in favor of leasing the project. When that bill was under consideration by a joint House-Senate conference to resolve differences between the House and Senate versions, Norris successfully filibustered, or stalled by delivering long speeches, against it. This killed the bill by preventing any vote before Congress adjourned.
Throughout the remainder of the 1920s, the struggle between Norris and those who favored private operation of Muscle Shoals continued. Norris reintroduced his bill during each congressional session and his opponents offered theirs in opposition. Much of the time, Congress was effectively stalemated because neither side could win a clear majority. The lengthy debate raised awareness of the potential value of hydroelectric development, not only of the Muscle Shoals project area, but also of the entire Tennessee Valley. The U.S. Army Corps of Engineers released a study in 1925 that documented the huge hydroelectric power potential of the Tennessee River and its tributaries. Norris advocated this wider development, but never succeeded in gaining strong support for government operation of a project so much bigger than Muscle Shoals where the controversy was focused.
By 1928 it was clear that Muscle Shoals was much more valuable for power production than for fertilizer, which was no longer in short supply. In the same year Norris won his biggest victory during his long fight for public control of the project, when the Senate passed his resolution by an overwhelming vote of 48 to 25. The House of Representatives passed a similar bill and both houses then worked out a compromise measure in conference. It appeared that the Muscle Shoals development finally would be established as an exclusively public project. To the great dismay of Norris and his supporters, President Coolidge (served 1923-1929) decided not to sign it into law within the constitutional time limit, following a tactic called a “pocket veto.” Norris accused Coolidge of bending to the interests of the private power companies, which he called the “power trust.”
Coolidge’s pocket veto of the Norris bill created a national issue for the 1928 presidential election. In that campaign Norris, a Republican, supported Alfred E. Smith, the Democratic candidate, instead of the Republican candidate Herbert Hoover. Smith leaned more toward public control of electrical power systems, while Hoover clearly expressed his distaste for what he thought was government competition against private enterprise. Hoover and the Republicans won an easy victory in that election, but public opinion was beginning to move against the private power companies. An investigation by the Federal Trade Commission (FTC) in 1928 showed that the power companies had used their money improperly to win public support. Additional revelations of that kind by the FTC investigation in 1929 further damaged the image of the power companies. This was much to the delight of the Norris camp that emphasized the wrongdoings of the “power trust” in their public statements. By this time many people felt that the power companies were overcharging their customers. Governor Franklin D. Roosevelt of New York proposed that Muscle Shoals, in addition to a power project on the St. Lawrence River and Boulder Dam on the Colorado River, be publicly operated to serve as “yardsticks” in order to establish reasonable power rates. His idea was that the government, by operating these projects, could find out how much it really cost to produce and distribute electrical power. The government would then require the power companies to lower their rates to a fair level.
When President Herbert Hoover delivered his annual message to Congress on December 3, 1929, he advocated the lease of the Muscle Shoals facilities to private companies. However as shown by the congressional passage of the Norris bill in 1928 and by the FTC investigations of the power companies, the tide was already turning against reliance on private enterprise to manage natural power sources in the public interest. Thus the stage was set for events and circumstances in the 1930s toward a massive federal development of the Tennessee Valley.
Private Tradition vs. Public Tradition
The political and ideological battle associated with the creation of the TVA was a clash between two American traditions with different and opposing visions about the proper control of electrical power resources: the private tradition and the public tradition. Beginning at the turn of the twentieth century this struggle reached its peak during the New Deal. The private tradition, represented by private power companies and their stockholders and supporters, built the first electrical power systems in the 1880s and 1890s and rapidly expanded to become a major force in the American economy by the 1920s. In their view, what was good for private enterprise was good for America. It stimulated innovation and economic activity for the benefit of all. They chafed at government regulation or, even worse, government ownership and operation of competing utilities, which they felt was un-American. The public tradition comprised a group of reformers who defended what they saw as the public interest against the excesses and abuses of the private companies. These people often referred to themselves as “progressives;” to them, private power companies were essentially monopolies because only one company realistically could supply power to a given area. A lack of competition meant that the government had an obligation to regulate the industry to assure that its rates and services were reasonable and fair. Expecting self-regulation in the absence of competition would be unreasonable. Furthermore in their view, power generated from public resources such as rivers should be considered itself also a public resource to be used first and foremost for the public benefit and not to profit private interests.
Building electric power production and distribution systems required large capital investments. This meant that private power companies were started and run by people who had large amounts of money to begin with and borrowed still more money that had to be repaid. Profits could be substantial because the companies could charge rates that could yield impressive cash flows, but the risks were high as well. Hundreds of small private utilities were bought out by larger companies, called “holding companies,” that had sufficient capital (money) to afford the ups and downs of the business. By the 1920s most private companies were owned by holding companies who in turn were often owned by still larger holding companies. Because each layer of ownership had to make a profit, this ownership structure did little to reduce the rates to the electricity consumers or to encourage widespread use of electricity by ordinary people who could not afford the high rates. The situation was ripe for abuse and many abuses did take place. Profits were held in higher regard than the customers who were served, and government regulation was very weak. Especially in the 1920s many holding companies made incredible profits either by enriching themselves at the expense of the companies they owned or by manipulating stock prices in the poorly regulated stock market. The company owners and stockholders felt that they were within their rights to run their companies as they pleased.
The public tradition reacted to power company activities by promoting government regulation and public ownership of utilities. Some cities, such as Seattle and Los Angeles, established their own public utilities very early. By the end of the 1920s most states had commissions to regulate private utilities based on the systems set up in New York and Wisconsin in 1907. Unfortunately these commissions were ineffective against companies that had much larger budgets and armies of lawyers. Political leaders such as Senator George Norris of Nebraska and Governor Gifford Pinchot of Pennsylvania led a charge against private power companies and especially against the holding companies. These two and many others like them saw the private tradition as an enemy of social progress.
By the 1920s electricity was regarded as essential to modern life, but it was largely under the control of a powerful few that had little incentive to spread the benefits to the middle and lower rungs of the economic ladder. The power companies had gained enormous public prestige through the successful development of their industry and their generous investment in public relations. The leaders of the public tradition, believing that they held the banner of the common people, used the political arena to attack the abuses and advantaged position of the power companies. Through proposals, hearings, and publicity at the local, state, and national levels, these leaders undermined public support for the power companies. They eventually succeeded in largely dismantling the holding companies and establishing the largest public utility the country has ever seen, the Tennessee Valley Authority.
TVA Beyond the 1930s
The Tennessee Valley and the nation experienced the greatest effects of the TVA in the decades following the 1930s. Dam construction was still actively under way in 1940 and did not conclude until 1944. As dams were completed, power generation grew and the navigation and flood control systems began to work as designed. These engineering achievements and the broad-scale developments carried out by the TVA yielded the benefits for the region that President Roosevelt had envisioned. However despite the success of this massive experiment and contrary to Roosevelt’s prediction, it was never repeated elsewhere in the country.
TVA developments came just in time to make a significant contribution to the war effort in World War II (1939-1945). Construction was at its peak in 1942 when 28,000 workers were busy on 12 hydroelectric projects and a steam plant. TVA power was critical to wartime industries, particularly aluminum plants essential to the production of airplanes and bombs. By war’s end the TVA had completed the 650-mile navigation channel and was the largest electricity supplier in the United States. Demand for electricity grew faster than the TVA’s hydroelectric power production. By the 1960s the TVA was generating power from coal-fired plants and began construction on nuclear power plants. As for other utilities around the country, the TVA encountered rising construction costs and political resistance to nuclear power plants. Several plants were canceled before the TVA finally abandoned nuclear plant construction entirely in the 1990s. Beginning in the 1970s and continuing into the 1990s electricity costs rose dramatically. These higher costs severely challenged the TVA to improve efficiency and productivity so it could remain competitive in the industry. As it moved into the twenty-first century, the TVA continued to justify its role in the electric power industry as a yardstick by which private companies could be measured. What many considered an unfair advantage for the TVA was removed in 1959 when Congress made the TVA’s power system depend entirely on its own revenues. It became completely independent of government funding or financing. Of course the initial massive investment that funded the construction of hydroelectric facilities in the first place was public money, direct comparisons between the TVA and private systems may not be entirely fair.
The perception of unfair dealings by the government with private industry in the creation of the TVA led to a kind of backlash against further developments of this kind. In the 1940 presidential election campaign, Republican candidate Willkie, a veteran of the battle against the TVA, severely criticized the Roosevelt administration for sinking so much public money into a single project and in the process allegedly damaging the free enterprise system. The fact that business investment declined in the latter half of the 1930s provided support for Willkie’s arguments. These arguments had their effect on public opinion even though Roosevelt won the 1940 election. Even earlier in 1937 when Senator Norris introduced legislation to create TVA-like authorities across the country, he faced opposition not only from private interests but even from within the Roosevelt administration. The Agriculture and War departments felt such authorities would duplicate what the departments already were doing. Political wrangling within the government and opposition from private companies and their supporters effectively prevented the creation of any more public organizations like the TVA.
In fact, analysis of the historical forces that led to the TVA suggests that it was only the convergence of certain unique circumstances that made it possible in the first place. World War I led to Wilson Dam. Abuses by the private power companies lowered their popularity dramatically by the early 1930s, even though later reforms within the industry rectified many of the errors that they had committed. The Depression was a national crisis that made new approaches popular. The persistently depressed economy of the Tennessee Valley made it a popular cause for government assistance. Once the TVA was established, the power needs of World War II made the TVA a highly valued national asset. These circumstances were not repeated elsewhere in the country or at any other time in American history. They also did not change the traditional American ambivalence regarding government competition or interference with private enterprise.
Although the country did not repeat the TVA experiment elsewhere, the TVA did have profound impacts in the Tennessee Valley and elsewhere. As the fulfillment of a unified plan for development of an entire river basin, it probably has no equal in the world. The combination of a massive financial investment, generation of huge amounts of affordable electrical power, and establishment of an uninterrupted navigation channel all the way to Knoxville stimulated the economy and dramatically raised standards of living in the Tennessee Valley and to a large extent the entire American South. Ironically this huge government program, criticized by many as “socialistic,” was a fantastic success in promoting private economic activity. Despite the vision of Roosevelt and Arthur Morgan, however, the TVA never achieved similar success as a regional planning agency in the promotion of social, educational, and health programs.
David E. Lilienthal (1899-1981)
David Lilienthal was one of the original three TVA directors appointed in 1933. He served as the principal TVA strategist and spokesman in the political and legal battle with the private power companies to establish the TVA as principal electrical power utility in the Tennessee Valley.
The son of Jewish immigrants from Czechoslovakia, Lilienthal was born in Illinois and raised in Indiana where he graduated from DePauw University. As a student he spent his summers working in mills and factories where he developed his concern for social justice. He attended Harvard Law School, studying under Felix Frankfurter who later became a Justice of the U.S. Supreme Court. Idealistic, energetic and ambitious, Lilienthal as a law student corresponded with labor leaders and public figures. He began his legal career with a Chicago law firm and then set up his own practice. As a young lawyer he wrote articles for magazines and journals and became associated with some highly visible legal cases. One was before the U.S. Supreme Court in which he won a $20 million refund for the people of Chicago against the telephone company. After that he became an acknowledged expert on public utility law, in 1931 Lilienthal was appointed head of the Wisconsin State Utility Commission.
Lilienthal’s brilliance early in his career led to his appointment as a Director of TVA, where he employed his legal and political skills against the private power companies in the Tennessee Valley region. Extremely distrusting of the companies, he employed every possible tactic to undermine their bargaining position. Lilienthal strongly disagreed with TVA head Arthur Morgan who felt that the TVA should strive to work cooperatively with the private companies. Lilienthal worked instead to compete directly with the companies in the power business and fought with them successfully for several years in the courts. Following a major dispute between Lilienthal and Morgan, President Roosevelt fired Morgan in 1938. In 1939 Lilienthal achieved final victory over the companies when TVA bought out the Tennessee Electric Power Company and gained control of its territory in the Tennessee Valley.
Appointed as head of TVA in 1941 and given another nine-year term in that position in 1945, Lilienthal left the TVA in 1946 to become the first head of the Atomic Energy Commission. He moved into private business in 1950 and in his later years spent time writing and publishing his recollections.
Arthur E. Morgan (1878-1974)
Arthur Morgan, President Roosevelt’s choice to be the first head of TVA, ran the TVA’s program to design and build dams as well as a variety of other projects until 1938, when Roosevelt fired Morgan after an internal power struggle between him and David Lilienthal.
Visionary engineer Arthur Morgan was born in 1878 in Cincinnati, Ohio, and grew up in St. Cloud, Minnesota, where he learned engineering through his father, a surveyor. With a formal education limited to three years of high school and six weeks at the University of Colorado, Morgan decided to enter a field, water-control engineering, that was young and did not require a degree. He devoted himself to this pursuit, becoming a nationally regarded field engineer by the time he was 30 years old. By 1910 he had established his own engineering firm in Memphis, Tennessee. Over the next 20 years Morgan supervised scores of projects all over the country. After the Miami River flood of 1913, which killed three hundred people in Ohio, that state hired him to establish a flood-control program. For that project Morgan set up the innovative Miami Conservancy District and adopted an expanded scope of work. The program included organizing dam workers into small communities and providing instruction for them in sound values, which began his reputation as an educator. While directing the Ohio project in 1919, he became a trustee of the struggling Antioch College in Yellow Springs, Ohio, and was hired in 1921 as its president.
Under Morgan’s leadership, Antioch College prospered and became known for Morgan’s creation of a cooperative plan in which students worked at campus industries associated with their classroom studies. His concept was to create a generation of philosopher-engineers with a cultivated moral philosophy. Many admired him for his utopian vision and non-religious moral philosophy. An influential Antioch College supporter was Eleanor Roosevelt, wife of Franklin Roosevelt, who was to become Governor of New York and then President of the United States. Franklin Roosevelt no doubt learned about Morgan through Eleanor and admired Morgan’s vision and his fondness for planning. To Morgan’s surprise, Roosevelt invited him to the White House in 1933 and asked him to accept the chairmanship of TVA. Morgan accepted without hesitation, seeing TVA as the opportunity of a lifetime to see his social vision become reality.
Morgan was very successful in designing and building TVA’s dams, keeping them on schedule and within budget. He ran into opposition from the other TVA directors, however, in instituting unusual programs such as recreation, a credit exchange for cash-poor areas, development of specialized forest industries, a forest genetics program, a local porcelain industry, bean-growing ventures in mountain valleys, and a commission on race relations. He also wanted to work cooperatively with the private power companies, but TVA Director Lilienthal saw that approach as naive and dangerous. Friction arose between Morgan and the other directors, particularly Lilienthal. Morgan spoke out publicly against the TVA of what he thought were unethical practices and in 1938 was fired by President Roosevelt. Arthur Morgan spent the remaining 37 years of his long life publishing a series of diverse and thoughtful books, and he produced his own account of events at TVA in a book called The Making of the TVA.
Harcourt A. Morgan (1867-1950)
Harcourt Morgan, one of the three original TVA directors, organized the TVA’s agricultural programs and ultimately sided with David Lilienthal in his internal dispute with Arthur Morgan.
Born in Stratroy, Ontario, Canada, Morgan graduated from the University of Ontario in 1889 and attended graduate school at Cornell University where he studied horticulture and agriculture. He moved to Louisiana to teach entomology at Louisiana State University and work with the newly organized agricultural experiment station. Morgan became an expert on plant pests, gaining this reputation by battling boll weevils, armyworms, cattle ticks, and grasshoppers. He became head of the University of Tennessee agricultural experiment station at Knoxville in 1905. His easy-going personality helped him gain the trust of southern farmers and ability to convey his progressive agricultural methods. He became Dean of the College of Agriculture in 1913, then Food Administrator for Tennessee during World War I, President of the University of Tennessee in 1919, and finally President of the Association of Land Grant Colleges and Universities in 1927.
Morgan believed strongly in a balanced approach to land use. He witnessed the damage to Southern agriculture that had been caused by short-term thinking and improper farming methods. Morgan had very firm ideas about what was needed to reform the region’s agriculture and restore the land. He was committed to helping the farmers of the region and held a poor opinion of the private power companies who he believed had neglected rural people by not extending electrical service into the countryside. Arthur Morgan selected him in 1933 as the second TVA Director because of his agricultural expertise in the region, his personal connections with the people there, and his commitment to agricultural reform.
Within the TVA Board, Harcourt Morgan gave support to large commercial farmers and in turn was supported by farm interest groups. This disturbed Arthur Morgan who was partial to the small subsistence farmers of the region. This difference of opinion and Harcourt Morgan’s inclination to side with David Lilienthal on strategies for dealing with power companies made Arthur Morgan a minority of one on the Board. After Arthur Morgan was fired in 1938, Harcourt Morgan was made head of TVA, a position he held until 1941. He remained on the TVA Board until 1947, when he retired.
George W. Norris (1861-1944)
George Norris, as Senator from Nebraska, vigorously promoted government control of electrical utilities and was instrumental in the establishment of both the New Deal’s Rural Electrification Administration (REA) and the Tennessee Valley Authority (TVA). The REA was created to ensure that cheap electricity was available in rural areas across the nation.
Born in Sandusky County, Ohio, Norris grew up in a very poor farm family. He learned first-hand how difficult rural life could be. He taught school and studied law, completing his education at Valparaiso University, in Indiana, and earning admission to the bar in 1883. He moved to Nebraska in 1885 and later became a county prosecuting attorney. Norris was elected to a district judgeship in 1895 and re-elected in 1899. In 1902 he was elected to the U.S. House of Representatives and served five successive terms, and he became U.S. Senator from Nebraska in 1912.
During his decades in Congress, Norris championed the causes of ordinary Americans, especially farmers. He particularly espoused public power and pushed for controls on private utility companies. In the 1920s he fought for federal development of the Muscle Shoals hydroelectric project on the Tennessee River. The federal government had built this system of hydroelectric dams and factories during World War I for the purpose of manufacturing munitions for the war effort. While some felt that the project should be turned over to private industry for development, Norris saw an opportunity to provide cheap power to poor Southern farmers as well as city people. He opposed Henry Ford’s offer to purchase the project for $5 million and deliver the power to private manufacturers. In 1922 Norris recommended that the federal government distribute power to states, counties, and municipalities within a three hundred-mile radius. He repeatedly introduced legislation to establish permanent federal control of the Muscle Shoals project. His resolution passed both houses of Congress in 1928, but was stymied by President Calvin Coolidge’s veto. His bill again passed in 1931, but was vetoed this time by President Herbert Hoover. After the sweeping Democratic election victory of 1932, President Franklin Roosevelt in 1933 expanded Norris’s Muscle Shoals concept into the even more ambitious TVA, which became one of the most visible and successful of New Deal programs. After leaving the Senate in 1942, Norris died on September 3, 1944, in his adopted state of Nebraska.
Wendell L. Willkie (1892-1944)
Wendell Willkie was President and Chief Executive Officer of Commonwealth and Southern Corporation, a holding company that owned many private utilities in the Southeast. He fought to protect his company’s holdings from virtual takeover by TVA. Willkie eventually lost a series of decisive lawsuits and sold the Tennessee Electric Power Company to the TVA.
Raised in Elwood, Indiana, and the grandson of four German immigrants, Willkie was the son of an unusual couple who both practiced law and taught school. Although not especially bright in school, he displayed a remarkable gift for debate and public speaking. He attended Indiana University where he admired Woodrow Wilson (then Governor of New Jersey) and became active in the student Democratic Club. He taught high school in an effort to earn money to attend law school. He also worked briefly in a Puerto Rican sugar plant where he witnessed brutality that kept him mindful of the plight of powerless people. Upon entering law school at Indiana University, he focused on his studies and rose to the top of his class. Willkie enlisted for World War I but arrived in France just before Armistice Day, which ended the war.
In 1921 Willkie joined a private law firm in Akron, Ohio, one of whose clients was Northern Ohio Traction and Light. This company would become part of Commonwealth and Southern Corporation (C & S). Willkie developed a reputation as a trial lawyer, often defending Northern Ohio Traction and Light against lawsuits. He attended the 1924 Democratic National Convention as a delegate. In October 1929 he moved to New York as a legal adviser to the new C & S and three years later rose to the top as the C & S President. The creation of TVA by President Roosevelt immediately put him into conflict with the federal government even though he had voted for Roosevelt for president. He did not believe the government had the right to use its power and authority to take territory away from his corporation. Therefore he fought TVA in the courts charging that the TVA was unconstitutional. After losing the legal fight, he sold one of the companies, the Tennessee Electric Power Company, to TVA for $78 million, yielding to TVA the Tennessee Valley and some adjacent areas.
Partly as a reaction to this experience, Willkie sought and won the Republican nomination for president in 1940, but lost the election to Roosevelt. Roosevelt nevertheless admired Willkie for his international perspective and in 1942 recruited Willkie to tour Asia to promote the creation of an international body of law. In 1944 Willkie again entered the race for the Republican presidential nomination, but dropped out. He died later that year.
Just prior to the 1931 presidential veto of the Norris Muscle Shoals bill, President Herbert Hoover and Senator George Norris of Nebraska engaged in a war of words. Their debate demonstrated the attitudes of the two sides on the issue of public power and toward each other. Preston Hubbard quotes Hoover and Norris in his book, Origins of the TVA: The Muscle Shoals Controversy, 1920-1932, 1961, p. 291. Speaking to the press on February 28, 1931, Hoover said:
To be against Senator Norris’s bill appears to be cause for denunciation as being in league with the power companies. It appears also to be emerging as the test of views upon government operation and distribution of power and government manufacture of commodities. In other words, its adaptation to the use of the people of the Tennessee Valley and to the farmers generally is now enmeshed in an endeavor to create a national political issue …
This happens to be an engineering project and so far as its business merits and demerits are concerned is subject to the cold examination of engineering facts. I am having these facts exhaustively determined by the different departments of the government and will then be able to state my views upon the problem.
On March 1 the next day, Norris, obviously expecting the veto, heaped ridicule on Hoover for his reference to the issue as primarily an issue about engineering:
The President, being an engineer, it would seem he would have no difficulty in solving the problem and, therefore, it is rather surprising to learn from his statements that he is referring the matter to the heads of his departments, none of whom is an engineer.
The great engineer is asking advice on an “engineering project” from those who are not engineers, and when those who are not engineers tell the engineer what to do with “an engineering project” the engineer will know whether to sign or veto the bill.
It reminds me of the New England country justice who, at the close of a law suit, said he would take it under advisement for three days, at which time he would render judgment for the plaintiff.
The vision of President Roosevelt as he proposed the Tennessee Valley Authority extended far beyond the provision of electrical power. It included sweeping improvements in the lives of the people of the Tennessee Valley. This vision is well described in Roosevelt’s formal proposal to Congress on April 10, 1933 (The Public Papers and Addresses of Franklin D. Roosevelt; Volume 2: The Year of Crisis, 1933, 1938, pp. 122-123):
The continued idleness of a great national investment in the Tennessee Valley leads me to ask the Congress for legislation necessary to enlist this project in the service of the people.
It is clear to me that the Muscle Shoals development is but a small part of the potential public usefulness of the entire Tennessee River. Such use, if envisioned in its entirety, transcends mere power development; it enters the wide fields of flood control, soil erosion, afforestation, elimination from agricultural use of marginal lands, and distribution and diversification of industry. In short, this power development of war days leads logically to national planning for a complete river watershed involving many States and the future lives and welfare of millions. It touches and gives life to all forms of human concerns.
I, therefore, suggest to the Congress legislation to create a Tennessee Valley Authority, a corporation clothed with the power of Government but possessed of the flexibility and initiative of a private enterprise. It should be charged with the broadest duty of planning for the proper use, conservation and development of the natural resources of the Tennessee River drainage basin and its adjoining territory for the general social and economic welfare of the Nation. This Authority should also be clothed with the necessary power to carry these plans into effect. Its duty should be the rehabilitation of the Muscle Shoals development and the coordination of it with the wider plan.
Many hard lessons have taught us the human waste that results from lack of planning. Here and there a few wise cities and counties have looked ahead and planned. But our Nation has “just grown.” It is time to extend planning to a wider field, in this instance comprehending in one great project many States directly concerned with the basin of one of our greatest rivers.
This in a true sense is a return to the spirit and vision of the pioneer. If we are successful here we can march on, step by step, in a like development of other great natural territorial units within our borders.
David Lilienthal, one of the three original TVA directors, championed the TVA cause whenever possible. He contrasted the public goals of the TVA with the private motives of the power companies. The following is from a speech (cited in his TVA Years, pp. 79-81; referenced by McCraw, TVA and the Power Fight pp. 123-124) given in Memphis and broadcast by radio on October 20, 1934:
We are proud to count among our leading enemies the whole Tory crowd concentrated in New York and Chicago that always fights every move toward giving the average man and woman a better chance. The interests of this crew of reactionaries and your interests are diametrically opposed. There is a conflict here that can not be reconciled. Either TVA has to be for you or it has to be for this other crowd. When that crowd begins to sing the praises of TVA, it is time for you to throw us out.
The power companies, after a long struggle, eventually found that they could not win a competition with the government for the power market and in the end sold out. Wendell Willkie, the head of Commonwealth and Southern Corporation and later the opponent of President Roosevelt in the presidential election of 1940, put it this way:
When it got at the point where the cities were actually going up the city streets, building duplicate distribution lines, and the Supreme Court had said that they would not pass on the constitutionality of the question, then I became a realist.”
The creation and survival of the TVA was the product of a long struggle between opposing forces and resulted from a combination of unique circumstances. A chief participant in this struggle from the beginning was Senator George Norris of Nebraska. In 1941 when he was more than 80 years of age, Norris reflected with wonder on the achievement:
When I think of the work which has been done and the difficulties which have beset those in charge of this project, and the malicious attempts made to destroy it by the power trust, I can hardly believe the development which has taken place … It seems, when I think it over, that it is too good to be true. It seems almost like a dream.”
Suggested Research Topics
- The national debate about TVA pitted the proponents of the free enterprise system against those who believed that the public would benefit most from government control of electrical power. What current issues today resemble this dispute? Do the opposing sides in the TVA issue have ideological descendants today?
- Make a census of the dams in your state or a nearby state. Describe them. Why and when were they built and by whom? What benefits and problems have resulted from their construction? Should more dams be built or should some dams be dismantled?
- Pick a public or a private utility near you. When and why was it established? How is it run? How does it relate to its community? What services does it provide? How is the public assured that its electric rates are fair and reasonable?