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This Week in History

April 8-14, 1933:
FDR's Tennessee Valley Authority for Today

April 2012

Franklin Delano Roosevelt.

April 10, 1933 was a historic day for the United States: the day when President Franklin D. Roosevelt sent a message to Congress calling for the Creation of the Tennessee Valley Authority. This call for the implementation of a water-management, power-generation, and overall development plan for the seven-state region around the Tennessee River, was destined to lead to a project so successful, that it was the model for major infrastructure-development programs worldwide (including today's Three Gorges Dam in China), and is still such a model today.

Last year, at this time, this column reprinted FDR's original message, and a summary of the accomplishments of the project. This year, we emphasize the way in which the TVA model can be used today.

On Dec. 7, 2002, in an address to an event in California, Lyndon LaRouche called for the creation of a new Federal agency, along the lines of Roosevelt's Tennessee Valley Authority, as the means of financing the trillions of dollars worth of infrastructure projects which are required to put the American economy back on track. This mechanism, LaRouche said, could be called a "Super-TVA," a credit-generating mechanism which would disburse low-interest, long-term credits into the states, to launch the program of energy production and distribution, water management, and mass transit-rail network programs, which are needed to rebuild the tax-revenue base, and the physical economy.

To make this happen, LaRouche added, will require emergency legislation to repeal all the deregulation laws of the past 30 years.

The TVA project called for a set of multi-purpose dams, rural electrification, improvement of agricultural productivity, and overall upgrading of conditions of life for the population. Its center was the Muscle Shoals hydroelectric dam project, which had been on the boards for decades, but the new plan was far broader. In announcing the plan, FDR specified the following powers for the agency:

"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."

And help the general welfare the project did. The TVA project, in the course of its first 10 years, dramatically changed the way of life from that of Third World-like impoverishment, subject to periodic flooding and misery: By 1958, the Tennessee Valley was a modern agro-industrial region, with higher electricity use per capita than many places around the country, an end to flooding, abundant manufacturing jobs, and the conquering of illiteracy and disease (malaria had been rampant).

The Federal Role

From the very beginning, the advocates of "free enterprise" loudly protested the development of the TVA. The local power utilities wanted to prevent the Federal agency from actually selling power over its own transmission lines. Others wanted to restrict the overall planning powers of the agency, which gave it the right to declare eminent domain, and permitted it to provide services, including libraries, for the workers in the area.

But, without the Federal powers, and Federal money, these improvements would never have occurred.

The TVA was set up as a Federal corporation which received monies from Congress, and also had the power to issue its own bonds, in order (initially) to raise up to $50 million. These bonds were to have an interest rate of no higher than 3.5%, and could be purchased by the U.S. Treasury. The Authority's monies were strictly tied to certain projects, such as the Muscle Shoals dam, or the nitrate plant (for fertilizer).

The linkage of the credit issuance to a specific project, is an absolutely crucial aspect of a Super-TVA program. In the particular case of the TVA, Roosevelt knew that the investment would more than pay for itself, not only in improved living standards, jobs, and tax-revenue increases, but also in terms of money. That was directly the case because the power plants which were built, were going to charge for electricity—although at a considerably lower rate than the private utilities were doing. In addition, the entire project was going to provide thousands of jobs, and decrease the financial losses of those who regularly had suffered from the interference with navigation, and from the flooding, which the uncontrolled Tennessee River caused.

Writing in 1943, TVA board member David Lilienthal projected that, over 30 years from its inception, the payments from users of TVA power would have totally repaid the investment of more than $700 million in the Valley. At the same time, he said, the electrical plants would be in good, usable shape, and a large surplus income would continue to flow into the Federal Treasury.

What is obvious as well, is that the federally funded project created the basis for private ventures, including feeder industries, to join in the prosperity. Yet, if FDR had been forced to operate under the deregulated, "private" industry restrictions which most projects today are mandated to have, the depression conditions of 1933 would never have been overcome.

Today, these principles of Federal, project-linked funding, based on the general welfare, need to be applied on a much larger scale. Investing trillions, will create trillions in profits, and in improved lives. A "Super-TVA" can reverse the decline of a nation.