THE T.V.A.: LESSONS FOR INTERNATIONAL APPLICATION

(A

^

,/é (r, 9 V.
INTERNATIONAL LABOUR OFFICE

THE T.V.A.
LESSONS
FOR

INTERNATIONAL APPLICATION
by
Herman FIN^R

MONTREAL
1944^

PREFACE
The ideâ óf a "Tennessee Valley Authority" on an international
scale has spread widely. The term is now so commonly used that
it has acquired à meaning of its own, independent of the experiment
from which it took its name. The T.V.A., after its first ten yeare,
came to be looked upon both as a model and as a preliminary to
wider developments elsewhere. In 1942, for instance, at a British
Association Coxlference on agricultural reconstruction, a speaker
advocated a "D.V.A; for the Danube Valley", to provide elecfirical
power, transport and irrigation. The Advancement of Science,
recently published by the British Association discusses the same
proposa;!:
The application of this idea in the Danube Valley seems to have much to
commend it. It presupposes a regional authority with clearly defined powers
derived from-the various central political authorities in whose territory it operates.
... It would, however, only be possible for thé countries of south-eastern
Europe to carry out the sort of programme indicated at a very slow rate unless
they could be assisted by some external agency.

Similar proposals have been made for the Amazon and Yangtse
Valleys. But some of the suggestions go much further and recommend regional ¿ievelopment through a wider form of oiganisation.
Mr. E. H. Carr in his book Conditions of Peace writes: ''Side by
side with a European Relief . . . we shall need hardly less urgently
a European Reconstruction and Public Works Corporation, whose
task will be to get on foot such major works of construction or reconstruction as are ttra extensive and cover too wide an area to be
handled,by local initiative."
Other writers and speakers have urged the creation of a United
Nations or a world development'organisátion. The Commission
to Study the Organization of Peace, for instance, suggests that:
. . . a United Nations development authority might be set up, working
through regional authorities, to deal with economic development and the investment connected therewith ... Vice-President H. A. Wallace, in a speech in
1942, said "there must be anintematíonalbank and an international T.V.A".

in the iVea» Republic in 1941, Dr. Julian Huxley wrote:
• What is required is clear. It is tibe establishment of international organisations for the development of various backward areas of the world. Concretely,
we need at the very-outset an eastern European and, an east Asian development
agency,

11

THS T.V^A.: INTBRNATI^NAL APPLICATION

These quotations will suffice to show that an "international
T.V,A." is a conception that, in various forms, is receiving very
wide support.
'
In the development of the standard of living in our own time
three things emerge clearly.
1. That the strikingly large increases have occurred in tàe course
of the last two^generations, roughly 60 years, especially in countries
which initially had a very Tow standard by comparison with Great
Britain and the tJ.S.A.
2. That the most remarkable gains have been made in those
countries which have created or borrowed capital and -acquired
general education and technical knowledge to enable them to
proceed beyond the primary to the secondary and tertiary industries.
3. That unless capital comes from outside, progress depends
upon home savings. Without international assistance it is therefdre difficult for a region with a very low margin of existence and
only a hand-to-mouth economy to make a productive start (the
effects of which are cumulative).
A flying productive start can be of immense benefit; and an
international resource development authority can help to give
that start and, for some time,' to guide the subsequent course, i
Ever since, ten years ago, the brushwood was cleared away to
make room for, the first gigantic dam at Horris, the T.V.A. has
attracted tihe interest and aroused the speculations of many minds
in the worlds of science* technology, economics and government.
Its work has been widely reported, and multitudes of experts have
examined its operations on the spot. As the thousands of tons of
cement were poured, and the tens of thousands of workers progressed with their tasks, the T.V.A.'s aims and methods increasingly
impressed observers. It was conceived on a great scale and its
procedure was novel and resourceful.
The Authority was established in the United States of America
at a time of economic distress, in the gravest world-wide economic
depression ever recorded. It came into being when governments
were taking tibie desperate course of restricting production and
destroying produce in the hope of restoring economic welfare. The
T.V.A. represented an altogether different conception of the
management of a modem nation's economic resources: that of
enterprise on a large scale, deliberately undertaken by the public
authorities, with certain social and economic purposes clearly in
mind from the beginning. It represented an eccwiomic policy of
hope and expansion in which the Government would play a dynamic
jjart.

PBEPACB

111

As an oi^anisation of the United States Government in an
American settingj the T.V.A. has attempted to raise the economic
level of a great depressed region and to develop integrally its various
resources. The most spectacular as well as the most important
single resource is water power. The T.V.A. therefore applied itself
to harnessing the existing water resources in the unruly Tennessee
River. The river has been tamed by a system of gigantic dams;
it has been made almost completely fit for navigation as part of
some S¿000 miles of inland waterways; and its tendency to destructive flooding-has been reduced. The waters that .the T.V.A. taught
and then spilled over a score of linked dams have been exploited
to make vast quantities of cheap electric po;wer, which has been
distributed through non-profit-making municipal or co-operative.
undertakings, and its uses have been encouraged by educational
methods. Especially valuable concentrated phosphatic fertiliser
has been experimentally produced, and applied in widespread
demonstrations, by means of which the farmers have been educated
in better agricultural methods so as to increase their produce,
diversify their crops and yet restore and conserve the soil. Rural
life has been fendered both agreeable and productive. The T.V.A.
has shown steady and active concern ior the region's forestry and
mineral resources, for the promotion of agricultural and other industries and for the health and general welfare of the people.
In short, tibe.T.V.A. was entrusted, not with a scheme based
on the making of a profit, but with the establishment and execution
of an integrated resources development pían, using specific undeveloped or underdeveloped natural and human resources. It
has fulfilled that trust, and füíñlled it well. Moreover, its operations
have brought benefit to private industries and have even stimulated
the sales and profits of the electric companies.
The general interest aroused by the T.V.A. has not been confined
to its aims. Its methods have also deserved special attention, since
they constituted an attempt to fashion an administrative instrument adapted to its particular purpose, and unencumbered by
traditional and possibly hampering procedures. The enterprise is
public in ownership and management. No single private venture
nor even a federation of private companies even if possessed of the
necessary authority could have covered such a diversity of operations, in sympathy with the ends in view. Nor could private enterprise, looking to profits, have found or risked the capital involved.
The T.V.A. is democratic, in that it derives its statute from, and is
financed by, a democratically chosen Congress and Executive,
while its local operations have always depended on the free cooperation of local institutions. It is regional in the sense that it

IV

rat» T.V.A.: ÏIÎTBÎRNATIONAL APPLICATION

was given authority in, and responsibility for, an area two thirds
the size of England, which comprised portions and transcended
the /boundaries of seven States within the watershed—the valley,
of the Tennessee Riyer. It is decentralised. Administration was,
with considerable autonomy, lodged in the Valley itself, and not
conducted from Washington, tiie distant capital of the country.
It is a public corporation, enjoying wide delegated powers and .many
of the attributes of an ordinary business corporation, so that it may
act both with responsibility and flexibility and in independence of '
customary controls by the cenfeil departments of the united States
Government. It has received the financial resources—no less than
600 million dollars—necessary to a unified plan of works (including over 20 dams), the execution of which required a decade or
more of continuous integrated building to yield the amplest economic return of which technology was capable.1
It has already been pointed out that consideration of the problems that peace may be expected to bring has spread the idea
that there should be many "T.V.A.'s" in lands of undeveloped
economy, aided where necessary by an international body. It is
important to know, then, what the T.V.A. is and what it has accomplished and what its problems and difficulties have been; and
, to consider under what conditions and by what adaptation its
experience may be applicable elsewhere, particularly in an international setting.

1
For other discussions of the T.V.A., the reaSer may be referred to the vivid
account by D. S. LILISNTHAI. (Chairman of the T.V.A.) in T.T.A.-I>moçracf
on the March (New York, 1944); and the administrative survey by Professor
C. H. PRITCBSBTT: The Tennessee Valley Attthority (University of North Carolina
Press, 1943).

CONTENTS
'--

fteB»AC8
CHAtTBR I.

'

:-

»«Se

.................... 1
,....^'i...
,
».
1
Rètardei Ûevelopment and Wasting Assets.
1
Forcea Leading to the EstabUshnient of the T.V.A.
S
Navígatiooú....,... >...........
............ t
6
¡Flood Control
..,....,.
6
Hydnoêlectricity.
.*....................
7
Çonsçprattion and MwM-PtirposÈ Development. ........
S
ths Fértílfeer and Munitions Fiants................ 10
Sodal and Economie Planning and the Depression... 13
The Character and Purposes of the T.V.A............... J*
CHAPTBR II.
TheTammg^theWatarmy:......................... IS
ütófiedaindlnl^rated'Büflding.............. .....^».. 19
• Navigation......
/......,....;.'.:...,.
21
FloodCSaitrol.
'..
,....".....'.. -, 22
Development of Electricity: Operations................. 24
Management of the Sevaral Purposes............'...... 2S
CHAPTBR HI. Making Ekctricity and Acquiring Markets.........
26
îîe^lablishmetttof a Policy........................ 21
The Elimination of Legal Obstacles.
;.....>...... ,28
Direct Transmission to Customers........
30
Municipal and Co-operative Undertakings.............. 30
,
TliePGwerSMesPôlîcy...;.............T....
,31
BreskÉog the ¥idons Circle of High Pricerand Low Consumption......,...,
32
índustóal Sale?,.........»
...t.......... 33
Controlled Èesalé Rates
...,.-.
.
,...
34
Encouraging Sales.
..;.........
3S
. T.VJu P3wer Oontracte..-;............................ 38
Equality of Rural and Urban Electricity Prices......... 40
Progress in T.y.A. Electricity Rates4nd tiie Problem of
Subsidies....;......
....;.
............ 42
Allocationdf Costs.
.J...........
44
OffiMPtsBBt 1% ThePrófar UseofifteLami...
.
........
40
The Land, its sNeedsand its Problems.
4$
Relation of the T.VJ^'s Powers to Other Government '
Agencies.......,...,.
47
The T.¥^s Agrieullairal Poweis,.,
.;..... 49
.. APoUcyftM-tiieM i.......J..'.....;.r.-...,...... SI
Land Improvemejnt by Phosphorus Fertiliser........... 52
Fertiliser Tests and Demonstrations : Research,' Education,
TecihmGgI Advice....... .......,.....*
~S4
Privaídiy Oímí^ Fátms aad Public Test-Demonstra- tions— ..................
............... SS

TH« T.V.A.: INTSRNATIOiNAI. APVtXCAtlO'S

VI

'
Page
Contraciual Relations with Existing Agencies........
57
Establishing Farmers' Associations or Clubs
6Ct
The Test-Demonstratipn in Practice.....,
...
\ 61
"An Accurate Measure of thé Economic Return"
62
Area Tests.. ;
64
Results of Demonstration Programme...............
6S
T.V.A. Phosphate» and the Nation...........:........
66
ÍÑitratc» and Phosphorus for National Defence.
69
Pireçt Erosion Oôntràl1...
76
Forestry. ;
10
Educational Guidance ôf Private Owners
—
?2
For^t Survey and Prospects.
^
....
73
Coopération with Other Agencies.
;.
74
Use of T.V.A.-i0wned Lands
...,. :
/7S
Fisheries and Wild Ufé
.'. v...........-..../
,.... to

Cmrmk v.

The Advancement of Economic Opporhmiiy
T.V.A. Pfenning Powers.
;
Progress by Resources Research, Technical Assistance and
Education
i.........
Agricultural Appliances and Processing. ....,..„
Minerais.^ .............. ;
./
......
Tourist Trade..
,.............'... ;...
Industry and Fiieight Rates.
Direct Promotion of Industry.
s

Cmtrm vi.

CHAPTBR

CHAPTBR

VII.

~

•

78
79
81
82
8S
87
89.
"91
i

The People's Social Well-Being.
Regional Studies and Planning. w......
The Relocation of Families;
.............r.V....
Relocating Highways....
..."
Schools...,..........
Publié Health..
:.
'Sanitation and Malaria Control
,..
Collaboration with Local H*aW> Agencies. • • •
•. •
Publie Health Education
.-.
General Regional Educa tton and Technical Assistance

94
94
98
99'
100
Í02
102
103
1*04
106

The Corporate Agency and its Methods of Operation
The Corporation..
Democratic Collaboration....;..-.
,
k..
ColJaboratioa with Other Goverpment Agencie?........
The Regional Area of Responsibility......... i
Integrated Resource ¡Development and a Multipurpose
Authority.-.
...'

110
110
114
119
121
Ï2S

VIII. Management and Personnel.
,.1... 12?
The Board of Directors.,
.......
127
The General Manager
»
131
Consultanfts
132
Éersonad
134
Freedom from Political Influence....
136
Merit and Efficiency........ t
.13?

.ma
-

\

- \
¡Page
R'feerttitiQBn.t
í*—
i...,;..........- Pf8
Classification and Salaries....
*. ...,¡...... 139
Proaotíon..,.,
,......,!...:........-..,..,.. 140
pouíily Woífeers
....,...,
................. 141

ÔBMiW»» IX.

,

FederM Coñ^okandSUtte MekMomhips... ;,.............
Presidential and Congréssional Controls
-, C^ngrewiôna:! AuAéritJ'and Coniwl......
.....
Federal Adimnísteatíve Pepswtmenital Conísrasls
^^t^^élímtedSt^l^CíQ^tTOBer^OeseraJ......
We FMerali Power Coramission).
-......,.'.
."•.-•.
., él»teiReIatióÉ»MSsmtfc1ihe'Í.V.A.
Fkjwref^tatéftaâéitotaîS...
...
..........
fa^tíónof TMA, Employées ifcy. fihé #tat^
ÍiamwSttty from C^ñeroi by Stáíe ÍTtá^

ICîM*3W8R

WS
14S
148
151
ISt
153
ÎS4
t|4
ISS
1#

X. ,. Wke'Bmiat^^Mkmh^Poí^ii^lLíétm............ 1>6'1
the Sight to Ùr^mîâémâ Jfeipiija.
%&
Working ©Miditions'...........
....... J
IÔ3
Eieetívito^s of Çotetive Baflgatoiûg. .......,....••• • ,16*
' WagèW&Ûcy.
:......
.'....
-166
- líe Cteaeral Âgrôment.......,./.,—
.10

Ête&appK- XI.

Som Smipioyee Wdfme Sermcfis,...........
ÍWMiani4%Í6ty.
7..............-.v.l.,:..;...
fob ft^tói^áud Adittlt Edttcation.
¡ !..., :..
!fonstTOetíbn¥illag^aad Í^w*C^tMoB8Í«g
%^iS^mei^í^Ts^k&^^M^!ó'!^Mm^í...........

1ft
Ill
If3>
fiS
Iff

•Çmtmm. Xli. ffaFimêmàgoffhe ffWjí'}ÂetMUès.................. . 1»
f.¥.â. Sinaneîng
....,....:...
.......
»
Ponda or Appropriations?.... ..'
Itl
lilUjto Suia upifroptfeitions. r.
18*
- Investment « f .¥.át. Power Distributors.....
I'M
M^0ÍUo%ai^&e^hts.'....¿....r.......^... ^i
' ' .
, %mm4mmtÊmTM.à,................7...,,..
... 191,
Ii©aMslr©miâe,îlH!t#ffl
192
<. .
• Loans ifrom the PUMíG Worfcsi MteMnistrâtiôn.,. .•....... 194
, fihe iSlèçtwe Home and Parm Auifshoriâ^.....,......... l9f
€m*mtm XIII. inMm 4Wf<o&m.
.. r......... i......... 198
tíimltationg on T.^^í-Enterprise....,..,.............. ÍW
desateátísMeveé
..;..
,..;............. 2^1
. , ,/'
Eliectric Power Development.
,.............<... 202
Mavigationi Benefits.
.'....... —... MS
^ ÜiMid fíoflitroí©eaêfifâ...
i.............
106
PaMPM&oñatratioñiBenisá^.
i.. 20f
,_•
- W^mWfmaWtâk^^mmpom.,...-..
.......... '20f\
. Benefits from Industria)!and#tÉer Pro^sses.
...'\ 208
Employment Opportunity and General Welfare.
- 209
.-. ' ' '. , ,
P^páMon•andiM^Mj.,.."..........
,•
,
;.• SIS'
: •
.'S^al^^aíffis,...,;.;......:,..;.,..—',.
^ti$'

VÜi

TB» T.V.A,: INTERNATIONAL APPLICATION

CHAPTSRXIV.

ApïBNDrcss:

The Problem qf an IntermtiotuaT.Vjl..
..:.....,.
"Che Value of Development Schemes
'.
.........
TheT.V;A.asa.Model
......'
Migration of Workers or Migration of Capital?.
,...
Public Supplements to Private Investment in the Tennessee Valley.
.,.
...;.
;
Which Resourœsî
Multi-Purpose Authority?.
.,
..............
The Area Of Development...................
.....
A Resources Survey.
.,
Provision of Unified Development Plans...............
The Financing of Developmçnt Autiborities.............
Clearly Defined Scope of Powers.
..,
Development Schemes and Social Progress...
Some Problems of International Assistance
Problems Of Development Schemes within a Single Country
Development Schemes Crossing National Boundaries.....
Inter-relationship between Regional and World Economic
Agencies.,'.........
,

Page
216
216
217
218
N

219
219
22Q
221
221'
223
224
226
228
230
232
234
235

-

I.

Tables
I. T.V.A. Land-Use and Fertiliser Programme..
II. T.V.A. Power Operations
. III. T.V.A. Dams...'....,....
IV. Expense Tables, Other T.V.A. Activities, 1933-1942.
II. Minerals Found in.the Tennessee Valley
III. the Allocation-of T.V.A.' Power Costs, the Profitability cjf
T. V.A .Power Operations, and the " Yardstick"
:.
IV. Interstate Compacts..................
V. The Tennessee Valley Authority Act

237
242
244
247
2S0
2S1
261
264

CHAPTER I
RETARDED DEVELOPMENT AND WASTING ASSETS
The vital question, to which the Tennessee Valley Authority
attempts an answer, is whether an industrious and capable people,
though settled in a Tegion which contains substantial natural
resources, must continue to endufè a low living standard. By what
means is it feasible, if at all, to assist a people fairly rich in primary
resources and available skills to,achieve higher productivity and
«il increase in their level of consumption and possessions ? The
significance and worth of the T.V.A, derive from this principal
object .of enquiry, and from the predominant physico-econotoic
and social characteristics of the Valley region which is their distinctive setting. A brief review of these factors is therefore an indispensable stage towards fuller consideration of the T-V-A/s various
.purposes^ its many problems of function and method, and its not
TirnimpWtant • achievements.
Thé Tennessee Valley is a great river basin draining a territory
of 40,600 square miles, of four fifths the size of England; the river
and its tributaries drain an area shaped like a butterfly, a thousand
miles long with a very narrow waist and a. maximum width of
about ISO miles. The Valley includes portions of seven StatesTennessee, Alabama, Kentucky, North Carolina, Virginia, Georgia,
and Mississippi.1 In 1933 thia Valley had a population of about
3,000,000, mainly of English, Scotch, Irish and German descent;
some 10 per cent, were Negroes. Nature had originally provided
very considerable resources of soil, forest, water and minerals.
These resources had been neglected and wasted, and to some extent
had suffered destruction. What still existed, however, was of very
considérable value. Though much was in danger of loss, much also
was capable of rehabilitation.
The signs of human welfare in thé Valley were not encouraging.
There was a percentage of rural population of 76.8 as compared
with 43,8 in the nation as a whole. The gross value of' farm products
1
The proportion of each of the seven so-called VaHey'States lying within
.the watershed of thé Tennessee River is as follows : Alabama, 13 per cent. ; Georgia,
2.-7 per cent. ; Kentucky^ 2.7 per cent. ; Mississippi, 0;9 per cent. ; North Carolina,
11.2 per cent.,; TennessiÉe, S3.8 per cent.; and Virginia, 8.4 per cent.

2

TiBB T.V.A. : INTERNATIONAL APPLICATION

per capita of farin population was $154 as compared with $362 for
the whole of the United States.1 The standard of nutrition, both
in quantity and kind, was extremely low2; educational provision
was among the worst ici the nation8; and certain key indices of
mortality were serious.4 Yet the population rates were considerably
higher than the average of the whole United States. The fertility
rate was one third higher5; the size of the family was greater*; the
number of dependants per family was considerably larger.7 There
was, as in most rural areas, an appreciable regular exodus of the
young and able-bodied to employment opportunities, .usually industrial, elsewhere in the United States.8
To restore this Valley to1 prosperity two things were needed-—
the conversion of its potential into actual resources, and the
preservation and reconstitution of existing resources which were
steadily depreciating and were still in danger of complete destruc- ^
tion. Both these things could be done through the application of
science, the vast resources of which were "amply available; but
the prime requirement was a spirit of enterprise and a form of
administration appropriate to ensure success.
The principal special resource of the Valley is its waterpower.
The river falls rapidly from a height of 3i000 feet at its source in
the Smoky Mountains (the highest range east of the Rockies), and
the Blue Ridge Mountains to the point at about 300 feet where at
Paducáh, Kentucky, it enters the Ohio River, which then flows
into the Mississippi. There is a heavy rainfall, ranging up to 80
inches at some places and averaging 51 inches for the Valley as a
whole, which normally ensures a swift flow; but it is a "flashy" river,
and at - the same
season
varies
much in character
from year to
_ _ _ _
_ _
/
_
_
1
In 1934 the average spendable, income per person (farm and otherwise)
was $211 as compared with $486 for the United States. (Computed by the
T.V.A.
from Saks Management, Apr. 193S.),
2
In 1934 consumption fell short of the national average by 2.7 per cent, in
white potatoes; 30 per cent, in hay; 45 per cent, in livestock; 77 per cent, in wheat;
92 percent, in oats, barley and rye. It exceeded the national average in com by
25 per
cent, and in sweet potatoes by 244 per cent.
8
Average expenditures per child between 7 and 17 were $23.35 compared
with $68á2 in the United itates as a whole.
*There were 7.6 deaths per 100,000 from typhoid and paratyphoid, as compared with 3.9 for the United States; 79.4 per 100,000 from tuberculosis as compared
with 63.2 for the United States.
8
In 1930, 531 children under five per 1,000 women of childbéaring age, as
compared with 391 for the United States.
» Average number of persons, 4.6 compared with a United States average
of 4.1.
7
For every 100 persons of productive age (20-64) there were 122 dependants
(people
under 20 and over 60), as compared with 90 jn the United States.
8
Nearly one half of the gainfully occupied people were in agriculture; 3.2
per cent ia mining, chiefly coal; 16 per cent in manufactures; 2.9 per cent, in
construction; 6.4 per cent in tramsportatiott and communication; 7.3 per cent,
in trade; 5.4 per cent in professional and public service; and 7.3 per cent in
personal service.

^$0

MINNEAPOLIS •

H.^-

: ^f

col

Puu
N.J.

' "Pf«"'TTSBOftOH

J v^ Sri

MD

JÊ^a*>,i.m >*•gw. VA-.?""'

,' ' ^È

VA.

53?

y««|^jjW»«vtó^í<íjjeacyaij N. c.
s.c.

FLA.

BRÛKEN LINES MEAN *
PROJECTS UNDER CONSTRUCTION
• ANO AUTHOaiZÉ» 8Y CONG«£SS
«¿J^- ¿ -^r^^^ja^i^fa^y^^

L»GEN® :
^:- -n 4 ft. to 6 ft. ;
6 ftfîo 9 ft.; ••••9 ft. Or moce.
projets "umder Mñatmctíon and authorised fey Congress.

Broken lines mean

m

i-t^

RETARDBB DBVBLOPSmNT AND WAS5ÏIÎG ASSBTS

3

year. The principal stretch of the Tennessee River runs some 6S0
miles from Knoxville, Tennessee, to Paducah on. thé Ohio River.
In that distance the fall is 500 feet; it is irregular, dud at certain
points predpitous. Properly harnessed, this gfèat volume of water
falling so heavily from one level to another can he the source of
enormous electric power, and science has made it possible to utilise
that power for the attainment of a generous variety of human
purposes, for production and consumption.
Water, however, is not the only resource of the Valley. The
area was originally heavily wooded but a great deal of the forest
had been cleared to make way for cultivatíont and the timber was
rarely replaced with anything like the speed with which it was
consumed. The agricultural methods used and the crops produced
were such as to destroy the soil, whfch was treated as an expeftdabie
mine rather than aà a medium of production whíeh ought to be
maintained at least constant in'its productive capacity, and if
possible improved. Certalç consequences had followed with all
the rigour of nature's punishment when her laws are not observed.
The rainfall, coming precipitously in à region of hills and declivitiea
and not being held by the leafage and roots of the trees, had swept
away the soil, so that about one and a half million acres ^fere cropped
only intermittently owing to depletion, while four and a half million
acres were on the decline and some 300,000 acres were practically
destroyed. The top soil had gone into the river, silted it Up, and
made it less fit for navigation; the process known as leaching had
taken the essential nitrogen out of the land.. It was once, said by
Mr. Henry A. Wallace, then United States Secretary of Agriculture, that "no civilisation has ever builded in so short a time
•^hat our forefathers have builded in America" ; but it may equally
well be suggested that no civilisation has in so short a tape consumed and destroyed so much of the resources of the earth. But
it is possible to apply remedies to this wasting asset, and not only
to stop the decline of land resources but actually to develop and
enrich them by proper treatment.
Furthermore, the Valley had important mineral resources.
These had already given a livelihood to more than three out of
every hundred gainfully occupied people in the Valley, and bSered
prospects of considerably wider employment opportunities.
- That the conversion of the water resources into actual social
benefits and tibe restoration and even increase of the «col resources
can be achieved has been made manifest by scientists in the Course
of the past century. The scientific means are avaiiaMe to convert
a silted, precipitous river, shallow in many places, deep in others,
into a great stream navigable from its headwaters down to the

4

THE T.V.A.: ÎNTBSNATIONAL APPLICATION

Ohio, and thencé, because of the connection with the Mississippi,
down to the Gulf of Mexico with access to all the ports of the world;
to take the crest from the floodwaters, which are a perennial threat
and often a deadly danger to the cities on the river's banks, by
regulating dams; and to convert the falling water into electric
power, and send it out in the service of mankind to a distance of
250 miles, and much further still by interconnections with other
systems. Anticipating the exhaustion of the soil, science and its
experts can apply the appropriate remedies. They can restore the
depleted soil by the application of phosphatic food; they can correct
the damaging agricultural practices of a sangle crop economy of
cotton or corn; and by diversifying the crops both restore the soil
and produce a higher standard of living. -Special equipment can be
devised to conserve the soil and farm difficult hillsides. And, with
navigation aad electric power and new agricultural practices, an
industry supplemental to the Valley economy can be encouraged,
each different factor fitting into a balanced efficient pattern.
In this Valley, the conditions of which have been thus roughly
sketched, all these things were potential. Why, then, had they
not become actual ? The missing factor was enterprise—that is,
the energetic, benevolent, and unified intervention of an .agency
which, grasping the possibilities and being interested in the social
objectives and consequences, would apply knowledge to the problem. 01 course, in this Valley, as elsewhere, any perses, or persons
with sufficient capital might have entered and undertaken the necessary arrangements. The Valley was wide open to enterprise.
There were, indeed, a number of private enterprises operating in
the area; there were several electric compariies; and one great
aluminium manufacturing undertaking. There were a few private
dams built to provide electricity. But private enterprise was a
very incomplete, piecemeal and unco-ordinated method of development. The fertiliser manufacturers could not engage in farm demonstration on an adequate scale; nor would this have promised
to yield profits. The people in the Valley thenjselves were too poor
to lift themselves out of their poverty unassisted. In general, they
had hardly enough for comfortable living, let alone a substantial
margin' of savings which, accumulated, might have provided the
investment capital for the extensive works necessary to develop
the Valley's abundant resources.
Moreover, the Valley is divided in political jurisdiction among
seven States and hundreds of local government units, cities and
counties. None of these is charged with responsibility or authority
for more than the fraction of the Valley that lies within its area.
Nor were the boundaries of the States ever coincident with the

R®TARDBD DBVBiLOPMBNT AND WASTING AS^BTS

5

most appropriate area of economic organisation. Under the laws,
it would have been extremely difficult, and probably quite impossible, to create a single private enterprise which could, as a^
united organisation, have acquired and administered the water
resources of the area as a unit. Yet the potential value of those
resources could be developed to the majdmum only if the inherent
natural need for unity of plan and operation were respected. Any
one State, or even several States, any one city, or even all the cities
together in joint association, any one private enterprise, or even
many acting as a consortium, could have seen the opportunities
and introduced the measures only in splintered fashion. The enterprise necessary for developing the Valley had to be such as could,
see the Valley Readily, and see it whole.
But the unification of vision and agency is by no means all.
Of far superior import is purpose, the will to attain the social objectives for the sake of all the people of the Valley, an interest that is
keen, consistent and direct—that is basic, and not, as it might be
in private enterprise, the caàual offspring of a profit-making purpose.
The region needed, at least for a time, some one to show solicitude
and to assist it. That was tibie vital missmg factor in its welfare.
In 1^35 the Government of the United States undertook this
task of caring for the Valley. Congress passed a law setting up an
agency-^-the Tennessee Valley Authority—to implement its interest
in the people's welfare within that Valley, by furnishing adequate
capital for development, together with technical assistance, and
by assuming a continuous responsibility for developing the resources
both by direct activities and by instructing the local population
ultimately to help itself.
FORCaS LEADING TO TES ESTABLISHMENT OF THB T.V.A.

However, this solution was not easy to reach, nor was it seen
or adopted by the genius of a single person at a single moment.
For the problem grew piecemeal; or rather several problems were
superimposed on each ©t|ier and suggestion followed suggestion
until a comprehensive answer was needed and found. It is essential,
then, to glance at the movement of forces which led to the establishment of the T.V.A., since this.deepens the appreciation of its
significane».
Five streams of tendency produced the T.V.A. The first was a
local interest in the navigability of a short stretch of the-river and a
wider, but still local, interest in protection from floods in an area
eoatinually liable to them. The second was the national interest in
electric power developmeilt. Thirdly, the policy, of conserving

6-

THE T.V.A.: INTERNATIONAL APPLICATION

national resource^ led to the idea of an appropriate area of government with multiple and integrated purposes. Fourthly, the national
defence plants, built in 1916 at Muscle Shoals, raised the problem
-of theic further use. Fifthly, the economic depression, beginning
in 1929, sharpiened the already developing realisation that governmental economic planning was essential.

Just above the city of Florence, Alabama, on a 37-mile stretch
of the Tennessee River, lie Muscle Shoals. In that distance the
river falls 134 feet and is bestfewn with natural obstacles which
prevented traffic in an age when roads and railways were not available as alternatives. As a consequeince of Congressionally authorised
surveys of naiionally important roads and canals, the Federal
authority in 1827 made a grant of land to the State of Alabama
for the improvement of Colbert and Muscle Shoals for navigation
by means of a canal. Many subsequent local demands for such
assistance by Federal grants and new works we?re made to Congress.,
The, deterioration of the railroads during the Civil War added
urgency to the provision of river transport, while the United States
Army Corp&jrf Engineers observed that important manufactures
coulcj have developed out of the local deposits of minerals if navigation had been improved.
Flood Control

Owing to the location of the river basin in relation to the line
of travel of the torrential downpours and storms, and the peculiar
topography, there is a continuous likelihood of high, damaging
floods. The time-honoured and very widely applied remedies for
this were the abandoameat of large areas of valuable land and
other property and the building of levees. Here again, piecemeal
activity in the lower reaches^ without co-©peratio& or co-ordinated
works on the upper, could not adequately achieve "the object sought.
It began to be seen that the Mississippi, the Ohio and the lower
Tennessee would have to be safeguarded by means of planned controls, more comprehensive and placed further backhand by a radically dMerent method of water controh
Thus, for more than a hundred years before 1933, the improvement of the Tennessee River was an object of local and then national concem. But the many schemes of river improvement, being
mostly small and largely unrelated, were correspondingly inadequate. In 1904 Congress authorised certain private interests to
establish á dafln at Hales Bar, finished in 1913, to carialise the 33-

RETARDS© DSVBLOPSCtNT AND WASTING ASSSTS

7

mile stretch of the river below Chattanooga. The river was further
improved by the Widow's Bar lock and dam, authorised in 1916
and completed in 1926. The, Wilson dam, authorised in 1916 and
completed in 1925, Jprovided a first-class canalised waterway for
IS^ miles over the Muscle Shoals. In 1914,1922, 1925,192-7, and
again in 1928, Congress authorised comprehensive surveys of the
river.' Thé survey begun in 19281 and made, like the others, by the
United States Army Corps of Engineers, is a magistral document
to which, as will be seen, the T^A. later became much indebted
for the basis of its own plans. This report, completed in 1930, led
Congress to introduce in the Rivers and Harbors Act of 3 July 1930
an authorisation for a 9'foot navigation channel project for the 650mile stretch of river from Knoxville to Paducah, under which the
Wheeler Lock was built by the Army Engineers.
Thus, the broadening of concern from mem loœil interests to a
national interest, the inadequacy of individual local and partial
projectSî the lack of private enterprise, drive and funds on a sufficient scale, were among the tendencies which ultimately produced
the T.V.A. The need for a wider authority was shown by the increasmg rakge of tíie mterests involved.

In 1891 the first hydroelectric plant was built in the United
States, introducing a new factor in the situjition. In 1890 general
licence powers were vested in the United States Chief of Ehgineers,
the Secretary of War and the Secretary of the Interior for the purpose of regulating the establishment of structures on rivers and
rights of way in the public domain for bridges, canals, ma irrigation
reservoirs; the developihent of electricity was recogaised as a
subsidiary purpose. In 1898 an Alabama representative submitted
a proposal to Congress for consent to the construction of an electric
plant at Muscle Shoals by a private corporation. This franchise
was granted by Congress to the Musde Shoals Hydroelectrie Power
Company in 1899, but lapsed, parfly owing to disputes between
the Federal and State Governments regarding their respective shares
of the charges to be paid by the Company for its privileges. A
similar franchise was vetoed by President Theodore Roosevelt in
1903, and again in 1908, on pubBe groynds. For public opinion was
developing emphatically against the unconditional alienation to
private bodies of natural resources, especially waterpower, wtoieh
held such promise for the daily welfare of the ¡people. The grounds
of this opinion were that resources either were not exploited at all
1

71st Congress, 2nd Session, House Document No. 328.

8

THB T.V.A.: INTERNATIONAL APPLICATION'

by private qoncessionaires or were not so planned as to give the
maximum development of nayigatioh or power, and so were lost
to the public as a property, which would help to defray the cost
of navigation, flood cotítrol and other improvements.
Nevertheless, local interests, like the Alabama Power Company
(the parent company of the Muscle Shoals Hydroelectric Power
Company) and political representatives of Alabama, one of the
Valley States, still sought to secure waterpower concessions.
Conservation and Multi-Purpose Development
~ Thus a local interest arid resource emerged into the, arena of
national principle and policy regarding the whole community's
interest in its latent resources. At the turn of the century, the factor
of conservation, or the planned preservation of natural resources
which were being usefully exploited, and of integrated multiple
purpose development entered the stream of tendencies. The "con"
servatidnist" movement;, beginning with a memorial to Congress
from the American Association for the Advancement of Science
in 1874, resulted in the creation o| Federal administrative departments to take care of the forests, to cope with drainage^ irrigation
. and power1, 'and in many other subsequent measures down to the
present time, including, indeed, the T.V.A. Linked with this movemeiit was the recognition of the reciprocal value of the several uses
of naturally integrated resources. For example, the United States
Waterways Commission, charged with fostering co-ordinated development and administration of waterway systems, demonstrated
the inseparability of problems of navigation, hydrôeleçtricity,
forestry, soil erosion and flood prevention, and related these problems to the conservation of coal and iron.
Again, a United States Army Engineers' report of 1914a took
a considerable step towards the idea of a public and integrated
development authority by showing that, in the specific case of the
area of retarded development around Muscle Shoals, the general
prosperity would be greatly increased if its mineral, forest and
agricultural resources were fully exploited by the use of the power
now wasting in the Tennessee River. Raw materials would be
used in manufactures,; dre deposits could be profitably processed ;
fertilisers could be made at low cost in the vicinity of the field of
use—^provided the power supply were ample, continuous, permanent
1
Among the many works of which the United States Redamation Service
was ia charge was the buMing of the great Boulder Dam on the Colorado River
(1928) and the Boñnevile and Grand Coulee Danton the Cokmbia River. Cf.
tj. S. DaPARtMCBN* or ïHB INTBRIOR, BUSSAü O» RBOtAMATioN.: Rechmation
mandhotík ¿Conservation Bulletin No. 32, 1942).
* 63ra Congress, 2ffld Session, Koitse Doomneat No. 20,4)p; 6-7.

RJfTABJDBD DBVSLOPM»NT AND WASTING ASSBTS

9

and cheap. It was rare, after this report, to hear any opinion voiced
except in terms of "the region" or '*tlie basin". Such an outlook
raised other problems. What area should be envisaged within which
to cope with the problem of the river ? Some thought in terms of a
boundary line 2SÔ miles each way from Muscle Shoals, since transmission lines were feasible over that distance. It was observed
that the Reclamation Service acted on the theory that for its work
of developing power and irrigation existing State boundaries must
be disregarded.
Again, it was insisted in Congressional debate that every phase
of the water problem and of all interests and communities within
an area widely conceived must be dovetailed; for example, floods
on the Mississippi could be most effectively dealt with by holding
back water in the tributary rivers. As for the agency which should
undertake such work, it was observed thai an, economic commission
was needed, permanent and not ephemeral, not political or partisan
or academic, but compact, uniting representatives of the Federal
. departments most concerned and binding together in close articulatipm the attainable benefits of the specific plans of each department.
This leads again to the Army Engineers' report of 1930—"the
-comprehensive plan . . . for the complete development of the
water resources of the Trnmessee River for navigation, power
development, and flood control". This report presented two plans
for development of the Tennessee Riyer. The first was a combination power, navigation and flood control plan requiring the construction of seven high dams at an estimated cost of approximately
$250,000,000. It was contemplated that private interests would
participate in the cost of these dams at feast to the extent of the
cost of power facilities. The second plan called for a series of 32
low dams with locks at an estimated cost of $75,000,000, which
would give only inferior navigation facilities, and would develop
no power. The Chief of Engineers recommended this latter plan
with authorisation to private interests. States or municipalitíes to
substitute a high dam for any two or more of the low dams. As
already mentioned, the project authorised in the Rivers and Harbors
Act of 3 July 1930 for a 9-foot channel in the Tennessee River was
based on the recommendations of the Army Engineers.
All these developments were important; but for the transformation of ideas, however sound and socially beneficial, into governmental action, a precipitating agent is needed. In the case of the
T.V.A., this was the creation in 1917 of a Government nitrate and
electricity producing plant at Musde Shoals for war purposes and
its consequential problems, and later the interest in economic
planning developed by the great depression that started in 1929.

10

THE T.V.A.: INTERNATIONAL APPLICATION
i

TAe Fertiliser and Munitions Plants
The! National Defense Act of 1916 included a section "to provide
for the fixation of atmospheric nitrogen by the development of
waterpower or any other means necessary to establish an adequate
.supply of nitrogen", and appropriated the funds fpr the necessary
construction. The purpose was to make the nation independent
of foreign sources of nitrogen in time of war. The proposal attracted
the interest of various private economic groups. One group asked
that after the war the plant should be used for the manufacture of
fertiliser, and also that, as the power necessary tomake the nitrogen
would come from Muscle Shoals, the latter plant should be privately
owned. Representatives of the farmers^ interests warmly favoured
the development of nitrates, hoping that the farmers might get
cheap fertiliser; they were gather moré in favour of the private
utilities' operating the scheme than the Government, alleging that
they feared a domestic monopoly as strong as that of their former
Chilean suppliers. There was a contest between a group of people
who (not necessarily in deliberate relation to the Muscle Shoals
problem) had introduced a Bill providing for complete public
ownership and operation of a hydroelectric nitrate-making plant or
plants, while another grouj). strenuously fought this proposal, which
would have excluded Muscle Shoals from private business prospects. All the industrial groups concerned" with waterpower,
fertiliser and munitions, were strongly opposed to such Government enterprise.
However, the powers which it was proposed the Governrnent
should receive were, in substance, granted. The United States
Government was given the power to designate sites on navigable or
non-navigable rivers for the exclusive use of the United States,
and to construct and operate hydroelectric or other plants for the
production of nitrate for munitions and fertilisers, and even, by an
(amendment, of "other useful products". A proposal that the
Government might sell surplus electric power as well as other
useful products was decisively rejected by the Senate. Two nitrate plants were built in application of these powers.
Nitrate Plant No. 1 at Sheffield, Alabama, was an expeViijaental
plant using the Haber process. Itrcost nearly $13,000,000 to build,
and nearly three quarters of a million was spent on its operation
before it was abandoned as useless; Nitrate Plant No. 2 at Muscle
Shoals which, with it« accessories, cost nearly $70,000,000, was to
produce ammoniutn-nitrate by the cyanimid process. It began
to produce in November 1918, a little late for the war, and after
January 1919 was maintained in a stand-by condition. This plant
was located at Muscle Shoals, where it was expected that the proper

RBTARDBD DSVBLOPMBNT ANB WASTING ASSETS

" 11

hydroelectric installation would provide the tremendous amounts
óf power needed for full development. But speed was necessary,
and so the Government contracted with the Alabama Power Company to build a 30,000 kilowatt plant1 at its Gorgas Stesam Plant W
miles away, while the Government itself constructed a steam plant
at Nitrate Plant No. 2 to' produce 60,000 and eventually 90,000
kilowatts. To exploit the waterpower, the Corps of Engineers
began in 1916 to prepare a scheme of combined navigation and
waterpower construction activity. Dam No. 2, later known as
Wilson Dam, was to be chief of a trio of dams, and the engineers
concentrated on this. But the war ended before substantial construction had-begun;, appropriations from Congress were intermittent, and the dam was not completed until September 1925,
when power began to be generated.
, ,
At the end of the war, then, the United States Government
had someassetó and liabilities at and arouncl Musclé í&oals. Wnat
was to be done with this property and the potentialities it represented? This problem was one factor which helped to precipitafe
the ideas already described, and. others yet to be brought into
account, and in the end to produce the T.V.A.
Congress began to debate the problem of the disposition of the
Muscle Shoals property, in 1919, when the then Secretary of War,
Mr. Newton D. Baker, proposed the establishment of a Government
corporation to operate it. The purpose of the Baker Bill was to
produce nitrogen products for sale to the tJnited States Government
for military purposes, any surplus to be made available to producers or users of îertiliser.' The corporation was also authorised
under direction of the President to opemte the hydroelectric power
plant which was then under construction at Wilson Dam, and to
use and sell the power there developed.
This Bill, which was not passed, was followed during the years
from 1920 to 1933 by a series of twelve other Bills relating to Muscle
Shoals. In view of their proposals regarding fertiliser, all these Bills
were referred to the Senate Committee on Agriculture. The Chairman of this Committee, Senator George Norris of Nebraska, thus
became responsible for dealing with them and some were initiated
by him. His interest, quickened by his experience of rural life, was
so strong and Unflagging that he is sometimes known as "the father
of the T.V.A.".
A much debated Bill, in 1924, came partly as a rejoinder to a
remarkable offer which Mr. Henry Ford had made two years before
—one of a number ©f offers made by power companies and industrial
promoters for the acquisition of the power potentialities. Mr. Ford
1

This Government plant was later bought by the Company.

12

TÉ® T.V.A.:.INTERNATIONAL APPLICATION

proposed to buy the Muscle Shoals nitrate property and steam
power plants for $5,000,600, and to manufacture nitrogen and other
fertilisers at a profit notfexceeding 8 per cent. Moreover, he would
complete Wilson Dam and construct the projected Dam No. 3 for
the Government at cost priée, and lease these dams and power
plants for 100 years. The House, of Representatives accepted this
proposal, which was, in fact, backed by the strong influence of the
American Farm Bureau Federation, anxious to have cheap fertiliser and indifferent tô the method by which it was produced,
even if this involved the surrender of great public resources. Senator
Norris,, however, was convinced by this time that his original belief
in cheap fertiliser—he had proposed a Federal Chemical Corporation—on a commercial basis was unfounded; and his 1924 Bill
therefore included only; authority for the production of power,
while experimentation in fertiliser prOductíon was turned over to
the Department of Agriculture as the best way of aiding thefarmer.
Elaborate provisions were also included to regulate the sale of
surplus power, all in the direction of giving greater freedom of business initiative to the corporation. There were several counterproposals and clauses were added designed to make a Government
power corporation less dependent upon a single customer (the,
Alabama Power Company) by authorising the construction or
leasing of transmission lines from the dam. By 1928, the two Houses
of Congress came to an agreement on a Government corporation
to engage in fertiliser experimentation and the sale of surplus power.
The corporation was permitted to manufacture fixed nitrogen on a
commercial basis, but the production of fertiliser was limited to
experiment in order to avoid Government competition with the
industry. The Bill was adopted on 25 May 1928, but was vetoed
by President-Coolidge. •
Throughout this period, there were frequent counter-proposals
based upon the principle that the United States Government
should lease the nitrate plants and the power plant to private agendes; usualty a term was included within which such leasing could
be effected. In 1931, the 1928 Bill, with some slight financial amendments and with a leasing section added to it, was accepted by Congress, only to be vetoed by President Hoover. The reasons given
in the veto message are interesting. The President thought that
competent management was not possible, seeing that Congress
must intervene to secure democratic responsibility and that such
intervention was bound to be damaging to the technical administration of the enterprise. Secondly, he thought that the directors
would be bound to have a political complexion, and would therefore
be technically inept and certain to choose a staff on a political basis.

ÎRSTARDSD DBVKLOPMRNT AND WASTING ASSBTS

13

Thirdly,, he was opposed to the Government's entering into business
competition in power manufacturing with its citizens, though he
did adaaowledge that there were many localities where the Federal
Government was justified in coping with navigation, flood control,
reclamation, or regulation of streams by constructing dams and
reservoirs which were beyond the capacity or purpose of the capital
available to private persons or local government.
Social and Economic Planning and Ike Depression
The fifth and final factor in the social situation leading up to the
establishment of the T.V.A. was the idea of planning coupled with
experience of distress in the great xlepression. Towards the end of
President Hoover's term he had already setup the Reconstruction
Finance Corporation, and instituted the research committee which
in 1933 published its report under the title of "Recent Sodal
Trends". The development of the idea of governmental planning
of l^rge regions or of the economic life of a whole nation was influenced by the world ^ar, by European developments in the aftermath, and by the idea of public works in the great depression.1
The Colorado River compact, under which seven'States were
to co-operate in a scheme for planned irrigation, water control âttd
agricultural and industrial progress, was established in November
1922 and accepted by Congress in December 1928, and led to the
construction of Boulder Dam.2 In May 1923 the State of Pennsylvania began a survey of the problem of "giant power" (published
in February 1925) to relate a power policy with industrial, farm
and railroad development. In May 1923 the Legislature of New
York State established the Commission of Housing and ^Regional
Planning, with wide powers of research, to study housing needs
and to prepare plans to meet them. In its final report8 this Commission said: "These new forces that have come in to dominate
the future may be left free to alter the present mould without
direction and without control. They may be directed towards a
more effective utilisation of all the resources of the State and thereby
profoundly affect thé future movement of population,"
The outlook and words of the New York Commission as well
as thé report of the Niagara Frontier Planning Board, established
on 9 April 1925, bear a close resemblance to the Message with which
1
Cî. IsrïSKNAiitONAi, LABOUR 0»w:cs: UnemMoymem and PubUc Works
(Studies and Reports, Series C, No. IS, Geneva, 1931), and PMic Works Policy
(No.a 19, Geneva, 1935).
The method of solving the difficulties of the Colorado River States by
interstate compact offers an interesting contrast to the establishment of the
T.V.A.
by Act of Congress. This subject is briefly discussed in Appendix IV.
9
Report of the Commission on Mousing and Regional PUmmng, State of New
York, 7 May 1926, p. 11.

14

THE T.V.A.: INTBRNATIONAÎL APPLICATION

President Roosevelt submitted the T.V.A. Bill to Congress on 10
April Í933.1 Mr. Roosevelt himself became responsible for problems
of power development and land planning on election to the govern*
orship of New York State in 1928; In January 1931, prior to the
establishment of a land policy for the State, he inaugurated a
State-wide survey, the principal purpose of which was to secure that
"every acre of rural land . . . should be used only for that purpose
for which it is best fitted and out of which the greatest economic
return can be derived".
The depression had plunged the United States into widespread
and bitter distress, all the more painful because the public institutions for dealing with unemployment and business failure were
hardly developed in any of the States and were practically nonexistent in the Federal Government. Immediate and heroic measures were necessary. Both Senator Noms and Mr. Roosevelt,
who became political associates during the Presidential campaign
of 1932, believed in the planned use and development of national
resources for the benefit of "the forgotten man". Mr. Roosevelt
had spoken in favour of regulating electrjc power utilities by means
of public ownership, of conservation and reafforestation.
After touring the Muscle Shoals area with Senator Noms and
power and electricity experts in January 1933, he outlined the
scope and particulars of his plans for tibe area to the press, describing
the project as a great experiment, which might provide 200,000
jobs. He hoped that schemes similar to this, "the most interesting
experiment a Government has ever undertaken", might be established in other areas. He believed that this multiple purpose project would be self-sustaining. "Hitherto", he said, "the Government has attacked the various factors in a piecemeal way. Now
is the time, I feel, to tie up all the various developments into one
great comprehensive plan within a given area. "
At the time of the passage of the T.V.A. Act, the conflict of
interests and political opinion was tempered by the universal perception that the Government must step in with public works in a
situation where there was so much distress. The depth of that
distress'itself produced á notable degree ôf confidence itt Govern^
ndent enterprise. Yet certain basic differences of opinion and tradi*
tional habits of mind still constituted an opposition, even if it were
unexpressed, or temporarily held in reserve. :
'
T.V.A.
The T.V.A. Act was passed on 18 May 1933. No single document expresses the spirit and nature of this enterprise better than
THE CHARACTER AND PURPOSES OF THE

» Cfi p. L5.

!

:

'

RSTAK.DBD DBV»LOPM«NT áJÍD WASTING ASSETS

1?

Preâdent Roosevelt's Message of 10 April 1933, asking Congress
to pass the legislation:
^
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 that the Muscle Shoals development1 is but a small part of the
potential public usefulness of the entire Tennessee River." Such use, if envisioned
in its lentirety, 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, conèervatiott 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 those plans into
effect. Its duty should be the rehabilitation of the Muscle Shoals development
and the co-ordination 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 countries 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 hose we can mardi on, step by step, in a like development of other
great natural territorial unit? within our borders.

In this Message to Congress, the concern for the social welfare
of the people of the Valley is evident,,solid and genuine. There is
already included a prevision of achievement and of the Idnd of
governmental mstrument necessary to its purposes. The Authority
came into practical being as soon as the Statute was passed; its
first corporate meeting was held on 16 June 1933.
It is an agency Of the. Federal Government of the United States
of America, established in the form of a corporatíont governed by
a board of three directors2, appointed by the President of the United
States with the advice and consent of the United States Senate.
Its organisation is peculiar, and espedally interestiftg in that the
—
—
iCf. p. 10.
' 'The first three directors were Mr. Arthur E. Morgan, a hydraulic engineer
and formerly President of Antioch College; Mr. Harcourt Morgan, an agriculturalist and President of the University ofTennessee, and Mr. David E. Lilienthal,
a lawyer and member of the Wisconsin Public Service Commission. The firstnamed was chairman from the beginning of the Authority until his removal by
the President in 1938. Mr. Harcourt Morgan was chairman froin 23 March 1938
to IS Sept. 1941, when Mr. Lilienthal was appointed. The place of Mr. A. E.
- Morgan on the Board was filled by the appointment of -Mr. Jam» P. Pope, a
former Senator, as a director on 12 January 1939. ,

16

THB T.V.A.: INTERNATIONAL APPLICATION

corporation has a clear local responsibility and a given area of
government, and is locally resident in the territory of its administration. Itis not, like ordinary agencies of the United States Government, housed in Washington and responsible for a single sector
of national life, but is responsible for multiple purposes and a com-i
plex of related resources as they concern the one particular region.
It has considerable freedom of operation, naturally within limits
fixed by the law, which specifies responsibility of various degrees
to the Federal authority—that is, the President, some of the departments, and Congress. In order that it may the better attain its
objectives, the Authority is, as will be seen, freer than the regular
administrative departments from certain controls exercised by
agencies within the administration branch itself and by Congress;
but it is by no means entirely free. It reports to Congress; its accounts are "audited" by the Controller-General; its capital and
operating expenses have, with small exceptions, been voted annually by Congress, and its financial procedure and operations have
been settled by that body in considerable detail. It has of set democratic purpose co-operated with the States and the local units in
the yalley,-and also with the local branches of the Federal'Government departments which have functions cognate to its own in
order to avoid -overlapping and to concentrate, for the Valley's
benefit, die best technical assistance available. Further, although
it was open to the Authority to carry out the development by
giving contracts, it deliberately chose to work through its own
direct labour force,, thus making it an employer, át -its highest
peak, of something like 40,000 employees.1 ,
The purposes and scope of the Authority's power are defined in
the preamble to the Statute :
To improve the navigability and to provide for the flood control of the Tennessee River; to provide for reforestation and the proper use of marginal lands in
the Tennessee Valley; to provide for the agricultural and industrial-development
of said Valley; to provide for the national defence by the creation of a corporation
for the operation of Government properties- at and near Muscle Shoals in' the
State of Alabama, and for other purposes.

The body of the Statute amplifies and specifies these powers.
The Authority was given, first, direct executive power to construct
dams and reservoirs in the river to provide a channel 9-foot deep;
to promote navigability and flood control, bearing in mind the
impact of the Tennessee on the Mississippi drainage basin; to
operate the dams or reservoirs primarily for these purposes, and,
consistently with them, to develop electric energy which might be
• 1 Boulder Dam was built by the Six Companies, Inc., for the Bureau of Reclamation.

RBTARDSD mvmJOFMtim AND WASTIKfQ ASSBTS

17

sold with preference to public bodies and qo-operatiye organisations
of citizens or farmers organised on a non-profit basis; to promote
rural electrification; to make fertilisers and demonstrate improvements in farm economy; to furnish nitrogen for national defence.
Secondly, in addition to this, the Authority was to have a planning
power "to aid further the proper use, conservation and development of the natural resources of the Tennessee River drainage
basin" and adjoining territory; and "to provide for the general
welfare of the citizens of the said areas". But these were not direct
planning powers; they depended on recommendations to the President of the United States who could then recommend the necessary
measures to Congress. For the rest, the T.V.A. was to dépend for
its effectiveness on education and persuasion based ott the value
of its research and the assembling and furnishing of technical experts who could lead, guide and advise. In the exercise and interpretation of these and of other powers instrumental and inddehtal
thereto, the activities of the Authority have been extended in
breadth and detail.
As will be spen later, the spirit of enterprise in which this venture
has been undertaken challenges the belief so persistently voiced
that public authorities cannot be expected to show initiative, inventivenese, persistence and the technical capacity to master the
problems involved in industrial and commercial undertakings.
The Authority's own recognition of the responsibility for enterprise placed upon it, and its own perception of the kind of enterprise required are well stated in its Annual Report of 30 June 1936,
under the heading "A New Kind of Pioneering":
To compress into a few words what the Authority is doing and is attempting
to do, it may be said that the facilities ofthe controlled river are being used to
release the energies, of the people. The pioneer of a century and a half ag® could
get his living from the new land with axe, rifle and plough. The pioneer of the
present day has available a heretofore underdeveloped resource—the potentialities of running water—with which to secure in modern times the equivalent
of what his ancestor found ready to hand in the late eighteenth or early nineteenth
century. He must tame water so that if will not wash away his land or inundate
his home ; he must have it available when it is needed to carry his goods ; he must
iake power from it to lighten his burdens and to tuna an otherwise valueless rock
into a valuable plant food. He must put back into his land, as his pioneer ancestor
did not have to do, the'equivalent otwhat he takes out of it.
He cannot achieve all these things by individual effort but he can achieve
them if he acts through his governmental agencies, national, State, and local,
and in voluntary co-operation with his neighbours. The principle involved is
not new: it is as old as the postal service, the army and the navy, or the pioneer
custom of co-operative barn raising. The degree of common action now found,
necessary is not the result of a governmental mandate; it is determined by the
nature and extent of the problem.

20

THB T.V.A.: INTBRNATIONAL APPLICATION

hensive process of planning has to precede the decision where,
when, and how to build. The multiple uses—^navigation, flood
control, electricity and malaria control by fluctuation of the water
level—are in contest for the water of each and all the dams. The
land which has to be bought may be very valuable for agricultural
purposes; roads and railways may cross it, and cities and villages
may be built on it. Hence, a balance of the economy to be produced
by the dam must be struck against the economic waste caused by
the inundation, and the site may perhaps have to be reconsidered.
This means careful adjustment of site and level of the taking line,
with the aid of air mapping and stream-flow prediction. In due
order of time, the land must be surveyed and bought, and families,
and even churches and cemeteries, must be relocated.
The T.V.A.'s policy has been to take its own labour force and
equipment from dam to dam, and work of a similar kind must be
so scheduled that equipment and men may go on in due progression
from one dam to another. This requires a continuity of operation,
and therefore a continuity of-financing.
To take one example only, and that a medium work: Chickamauga Dam, completed on 15 July 1940, required the following
operations:
Operation

Unit

Total

Dam construction
Excavation (north embankment)
Cu. yd.
27S,003
Earth fill (north embankment)
"
709,828
Excavation (south embankment)
'...
"
507,475
Earth fill (south embankment and switch-yard)...
"
1,628,586
Slope protection (crushed rock blanket and riprap).
"
270,853
Excavation (N. Chickamauga-Creek Divers)
"
483,664
Excavation (lock, spillway and powerhouse)
"
467,530
Concrete (lock)
"
207,684
Concrete (spillway)
"
108,678
Concrete (intake, powerhouse, and misc.)
"
179,006
Foundation grouting (cement)
Cu. ft.
1,695,000
Land acquisition for reservoir
Acre
63,151
Preparing reservoir for impoundage
"
6,033
Highway adjustments1
'.
Mile
82
Railroad adjustments
"
—
Utility adjustments
"
27
Cemetery removal
Grave
425
Family removal
Family
903
Height of-dam: 129 feet.
Length of dam,: 5,794 feet, including two earth embankments, totalling 4,384
feet, and 1,410 feet of concrete works.
1

Small amount of slope-protection work only.

Making its plans in times of peace, the Authority had looked
to the building of some ten dams by the end of 1943. But after
1939, and more especially after the entry into the war of the United
States, the need for power for defence and war production (in
particular, aluminium) caused the Federal Government, through

THE TAMING OF THE WATERWAY

21

the War Production Board, the War Department and the Federal
Power Commission, to propose additional responsibilities for the
Authority in regard to rapidity of action and the building of steam
plants, and led both to the speeding up of the execution of the
Authority's unified plan and to the construction of additional
dams outside the plan.
Purchases from the Tennessee Electric Power Company brought
within the T.V.A.'s system Hales Bar Dam, Great Falls Dam on
the tributary of the Cumberland, and three dams on the Ocoee
River. Furthermore, five dams belonging to the Aluminum Company of America on the Little Tennessee River have been included
in the operation of the T.V.A. system,, though the ownership remains with the Company.
Thus, by 1943, the T.V.A. was master of the integrated operation of some 29 dams— 24 of its own, completed or nearing completion, and the five Alcoa dams under its control. A table showing
the characteristics of the system of dams is given later.1
NAVIGATION

The part that a fully navigable Tennessee River would play in
the inland waterway system of the United States was evidently a
great one. The Authority foresaw that its work would be a contribution to the largest inland waterway system in the world, with
the possible exception of the fully developed Amazon. The Valley
area would be connected by 9-foot channels with Pittsburgh and
cities on the Great Lakes, including Chicago, as well as with the
Gulf ports. The possibility was constantly borne in mind of coordinating navigation on the Lower Tennessee with that on the
Ohio, Cumberland and Wabash Rivers by a dam on the Ohio
River at the mouth of the Cumberland, a dam across the Tennessee
near its mouth, and a connecting channel between the Tennessee
and Cumberland Rivers, so as to provide something over 550 miles
of continuous navigable water on a single level. It was known that
a patchwork development might never result in a completely
navigable channel.
While the full 9-foot draught over the whole 652 miles of the
river awaits the completion of all the main river dams about 1944,
already in March 1943 there was a continuous and commercially
useful channel from the mouth of the Tennessee River to Chattanooga, Tennessee, a distance of 464 miles. Below Chattanooga, a
minimum depth of 6 feet was available throughout the year, and
1

Cf. Appendix II, table II.

22

TES T.V.A.: INTERNATIONAL APPLICATION

depths of 8 and 9 feet for a considerable portion of the time.1 Commercial traffic On the river grew from approximately 22 million tonmites in 1933 to 100 million ton-miles for the year 1941. Products
such as wheat, pig iron, automobiles, petroleum, clay, iron, steel,
timber, coal and coke, and more recently raw materials for armaments, were moving along the river deep into the Middle West.2
As soon as the Authority realised that its dam building progress
was bringing it within measurable distance of traffic problems,
it began to survey its responsibilities for the provision of terminal
and other facilities for the exploitation of the new resources. Private
companies became interested in industrial and terminal sites. The
Authority took into consideration the problem of tolls at terminals
arid the conditions of leases for terminals, surveyed the area for
• possible users of the river, and carefully considered the joint questions of highways supplemental to the river and the arrangement
of railway and other freight rates, which affected the exploitability
of river transport. In 1938, there was established a Tennessee
Valley Waterways Conference, representing the municipalities
located on the river, and the Authority has supplied this Conference
with research results which, it is expected, will ultimately lead to
the arrangement of a unified system of terminals for public use.
Traffic estimates have been made, and also attempts to ascertain
the commerce that might be transported economically on various
types of barge lines; and the T.V.A. collects and disseminates
information for the use of public agencies and others interested in
utilising the river. In 1940 the Authority undertook a traffic survey
of 3,700 business concerns and other shippers and receivers of
freight. It was estimated that in 1945 there might be some 2,600,000
tons of traffic on. the river, with an annual saving on freight charges
of about $3,450,000 and in 1960 some 6,173,000 tons, with a saving
of $8,000,000.
FLOOD CONTROL

In planning the height ^nd location of the dams, and therefore
the water storage made possible by them, the Authority has looked
back many decades for data on floods, in order to find some basis
of prediction. The height of the floods at various points on the
Tennessee and on. the Mississippi are its index of the total amount
of water to be held back, and of the points at which that water is to
be impounded in order to benefit the threatened places immediately
1
See table in Hearings, House of Représentatives, Indej)endent Offices Appropriation
Bill for 1942, p. 448.
2
The management of the river for navigation requires the Authority to make
special silt studies, prepare navigation charts, and dredge the river.

5PEEIB PROTEmVE
[OVER GROWTH

50 inches 6f Rain in the Tennessee Valley.
Controlled

Makes Deep River Channels

Speeds Protective Cover Growth

Generates Cheap Electricity

50 inches of Rain in the Tennessee Valley
uncontrolled

Floods Town and Countxy

Erodes Naked Lands

Makes People Poor

TH^ TAMING OF THE WATERWAY

23

below. Without entering into technicalities, it may be said that
the Authority has successfully used the most efficient technical
means, and has made a full appraisal of its responsibilities by means
of thorough surveys of the Mississippi1 in order to calculate how
many million acre-feet of water taken from the river in flood will
reduce the peak in terms of feet of water at various threatened
points. The value of the Authority's flood control was first appreciated in 1936. In a flood in March 1936 it was estimated that Chattanooga had been saved some $750,000 by control operations at
Norris Dam, and on four occasions in 1937 the Dam reduced flood
heights around the same city by an amount varying between 3 and
5 feet. The desperately threatened city of Cairo, Illinois, which
protected itself from the flood by mud-boxes on top of the flood
wall, was probably saved a loss of some $15,000,000 by the operations of the T.V.A., which reduced the crest of the flood by almost
half a foot and thus prevented the dyke from breaking. There were
similar benefits all along the river.
In the middle of 1936, when calculating the-probable value
against costs of the Gilbertsville (now the Kentucky) Dam, the
largest of all the Authority's projects, the T.V.A. made a study ôf
the value to the alluvial valley of the Mississippi, from Cairo to the
Gulf, of the reduction of flood heights by 2 feet.2 If a 2-foot measure
of reduction were secured, there would then be a 3-foot margin on
the levees.3 A very wide survey was made of all the properties
liable to flood damage—cities, railways, highways, unprotected
marginal areas, backwater areas, floodways, protected agricultural
areas—and allowances were made for levee maintenance and the
reduction of damage from seepage. Widespread discussions were
undertaken with all the groups concerned, public and private,
Federal and local. Calculations based on various reasonable criteria
showed that the reduction of flood height by 2 feet could be reasonably appraised at a capital cost of something over $380,000,000, to
which the T.V.A.'s contribution by the Kentucky Dam was conservatively estimated at the value of $200,000,000. In the light of
subsequent floods in 1937 the calculations were amply confirmed.
There is no doubt whatever about the remarkable contributioni
present and future, of the Authority to the control of floods in this
river system. How much the effect of each dam depends on the
cumulative effect of all the dams may be seen from the T.V.A.'s
1
For technical details, cf. 76th Congress, 1st Session, House Document No. 455:
Presidential Message on Value of Flood Height Reduction from T.V.A. Reservoirs.
'Ibid.
8
The levee is the time-honoured method of banking back the waters. There
are 1,600 miles of levees along the Mississippi. They actually force upwards the
flood heights.

24

THB T.V.A.: INTERNATIONAL APPLICATION
\

chief engineer's statement in 1939 that with half the total money
spent only IS to 20 per cent, of the flood control expected had so
far been obtained.1
DBVBLOPMBNT Oï ELBCTRICITY OPERATIONS

The development of the electricity operations of the T.V.A. is
reserved for full treatment in subsequent chapters, but it is relevant
at this point to draw attention to two direct consequences of the
construction programme: (a) the magnitude of the installed electric capacity, and (6) the great economies which come about through
the complementary operation of the T.V.A.'s system of dams,
mainly hydroelectric power, and the steam-generating plants of the
private producers who are neighbours of the T.V.A.
With regard to the first point, by the middle of 1943 the T.V.A.
had in service some 1,640,000 kilowatt capacity, including steam
plants; and on completion of the work authorised it would have
some 2,846,000 kilowatt capacity2 of which about a quarter would
be steam-generated. With regard to the second, several arrangements have been made to achieve maximum utilisation of power
resources. The steam plants are not as heavily burdened by demand
_ at night and on Sundays as during the day and can produce surplus
energy. The T.V.A. takes some of the surplus steam energy and so
can reduce generation at its plants, and meanwhile impound substantial amounts of water in its reservoirs for subsequent use. This
is particularly important as the opportunity of impounding water
is variable, for the river is "flashy". In times of heavy demand this
impounded water can be released to meet the requirements of both
steam and hydro systems. The result is that steam units with interruptable supply can be assisted; economies are possible in breakdown, in emergency reserves; less plant has to be used because the
call on each plant is diversified, and there is provision of emergency
service in case of flood. Of course, this complementary operation
adds to the difficulty of managing the three main purposes of the
system of dams. An electric "grid" of considerable importance is
therefore being constructed. A 154 kw. double circuit transmission
line, 175 miles long, constitutes the most important tie between
the major systems of the north and of the south. It is capable of
transferring from one area to another as much as 200,000 kilowatts.
1
The most recent development in flood control is a report made by the Authority concerning the protection of Asheville and the Upper French Broad River
Valley, proposing storage reservoirs supplemented by a levee. No power production is feasible. The scheme would cost something over $8,000,000 and Oie tangible benefits (¿.e., increased values of laad and other property owing to security)
were
estimated at a total of $9,000,000.
a
But some installations were held in abeyance by the War Production Board
in order to divert materials to other war uses.

THB TAMING OF THB WATSRWAY

25

MANAGEMENT OP THB SBVBRAI, PURPOSES

According to the Statute (Section 9a), the storage of the unified
system of lakes formed by the dams must serve three principal
purposes, of which navigation and flood control are primary, and
the production of electricity incidental. The latter is only legally
possible in so far as it is incidentally compatible with the first two.
This threefold responsibility in water control operations requires
the most careful and considered planning.1 For one thing, the
stored water must be released down the length of the river at the
dry season of the year when the natural pools are low in order to
maintain the navigable draught, and this involves previous storage.
To allow for flood control, the waters must be held back at some
times, and released in the intervals between the crests of the flood.
Furthermore, in order to secure a substantial basic generation of
firm electric power with the maximum use of equipment and continuity of supply, the impoundments of water must be spilled off
through the turbines accordingly.2 Finally, the management of the
river is further complicated by the need to vary the level of the river
periodically in order to destroy mosquito larvae and thus prevent
malaria; this involves notifying and consulting in advance various
interests affected by the raising and lowering of the river.
In the process of thus managing the several purposes, a fundamental stage is the prediction of rainfall. This is one example of the
co-operative arrangements which the T.V.A. makes with other
governmental agencies. In this case the United States Weather
Bureau furnishes the T.V.A. with predictions of rainfall, and the
United States Geological Survey co-operates with the T.V.A. in
the maintenance of an extensive network of rain and streamgauging stations, furnishing daily reports.

1
The Authority set up the appropriate internal committee arrangements to
fulfir its obligations. Since 1937, responsibility for controlling the operation of
the reservoirs has been delegated to its Water Control Planning Department,
subject to the approval of the chief engineer. Cf. "Multiple Purpose Reservoir
Operation", by N. W. BOWDSN, Principal Hydraulic Engineer, T.V.A., in Civil
Engineering,
May-June 1941.
1
A spilling of water may mean a loss of power, and consequently some of the
T.V.A.'s power sales are "secondary", i.e., liable to interruption; some is actually
"dump" power, to be sold at any price, since water mast be released.

CHAPTER III
MAKING ELECTRICITY AND ACQUIRING MARKETS
When, in 1933, the Tennessee Valley Authority began operations, it was in possession of the power fadtlities at Wilson Dam
and the steam plant at Muscle Shoals. In the course of the first
year of its operation, the Authority disposed of 395,842,000 kilowatt
hours, mainly by sales. In the year 1942, it sold 5,983,369,534
kilowatt hours, the product of 18 dams and 12 steam plants. In
1933, its revenue from power sales was $833,669; in 1942 it was
$25,214,207. It is important to observe that the sales of 1933 had
less than doubled by 1938—up to that year the T.V.A. had a financial deficit1—and that only from the year 1939 was there the beginning of a very sharp expansion to the considerable total and profits of
1942. Naturally, the chief explanation of this gradual development
to 1939 lies in the rate of coijipletion of the dams supplying electric
power2, but contributory factors were the retarding effect of litigation, and the time required to develop organisational momentum.
The expansion in the course of some eight years must be regarded
as truly remarkable, seeing that the Authority leapt from a very
small start to being one of the five largest electricity concerns in
the whole United States,
The principal problems confronting the T.V.A. were: (1) the
establishment of a policy, especially in relation to the power companies already in the field; (2) the elimination of legal obstacles;
(3) the securing of direct access to customers by its own transmission system; (4) encouragement of the acquisition of the local
markets by municipalities and co-operatives; (5) the pursuit of a
power sales policy, taking. into account considerations of price,
control on resale by its own distributors, and consumer education.
The practical solution of these problems was a most exacting task
successfully carried out against heavy opposition. Development
is reviewed below in relation to each of these problems, one by one,
though it must be remembered that they can only be severed in
theory, since all of them together, in varying measure, confronted
the Authority from the moment it began operations.
1
2

Cf. the Annual Reports of the T.V.A.; and Appendix III, ta,ble III, 1.
Cf. Appendix III, table III, 2.

MAKING BLECTRICITY AND ACQUIRING MARKSTS

27

OP A POWCY
The T.V.A. had very ample scope in its programme of power
utilisation development, since the average consumption of electricity in its area was about 600 kilowatt-hours per residential customer, and only in a few places had a keen promotional policy been
followed. The Tennessee Valley had 4.1 electric lights in farms
compared with the United States average of 13.4 in farms. Considerable powers to generate electricity and sell the surplus, after
the fulfilment of certain obligations, were given to the Authority.
Once it has provided for navigation and controlling floods, it may
go on to generating electricity; and when its own needfor electricity
has been satisfied, the surplus may be sold. The Authority was
faced by at least two great difficulties: first, it operated in an area
served by many utility companies and faced severe competition;
and, secondly, there was the possibility that the powers vested in
it by the Statute in respect of electricity were unconstitutional,
and .therefore liable to challenge and perhaps to invalidation, at
the instance of the utility companies. Both of these factors retarded
the Authority's progress.
However, the Authority attacked its first problem, that of
general policy, immediately, and by August 1933 it had produced a
policy, which included the following points1:
THB ESTABUSHMSNT

(1) The business of generating and distributing electric power is a public
business.
(2) Private and public interests in the business of power are of a different
kind and quality and should not be confused.
(3) The interest of the public iñ the widest possible use of power is superior
to any private interest. Where the private interest and this public interest conflict, the public interest must prevail.
(4) Where there is a conflict between public interest and private interest
in power which can be reconciled without injury to the public interest such reconciliation should be made.
(5) The right of a community to own and operate its own electric plant is
undeniable. This is one of the measures which the people may properly take to
protect themselves against unreasonable rates. Such a course of action may
take the form of acquiring.the existing plant or setting up a competing plant as
circumstances may dictate.
(6) The fact that action by the Authority may have an adverse economic
effect upon a privately owned utility should be a matter for the serious consideration of the Board in framing and executing its power programme. But it is not
the determining factor. The most important considerations are the furthering
of the public interest in making power available at the lowest rate consistent
with sound financial policy, and the accomplishment of the social objectives
which low-cost power makes possible. The Authority cannot decline to take
action solely upon the ground that to do so would injure a privately owned
utility.
1

Annual Report, 1934, p. 24.

28

TH8 T.V.A.: INTERNATIONAL APPLICATION

Points 7 and 8 express the Authority's intention initially to
confine itself to certain regions, including large and small cities,
and later to go outside this area if the privately owned utilities in
the area did not co-operate in the working out of the programme,
or wherever special considerations, like unreasonably high rates for
service and failure to protect the public interest, so required. The
statement of policy then proceeds as follows:
(9) Every effort will be made by the Authority to avoid the construction of
duplicate physical facilities or wasteful competitive practices. Accordingly,
where existing lines of privately owned utilities are required to accomplish the
Authority's objectives, as outlined above, a genuine effort will be made to purchase such facilities from the private utilities on an equitable basis.
(10) Accounting should show detail of costs and permit a comparison of
operations with privately owned plants to supply a "yardstick" and an incentive
to both private and public managers.
(11) The accounts and records of the Authority, as they pertain to power,
would always be open to inspection by the public.

The Authority immediately set to work in accordance with its
policy to market the power produced at Wilson Dam. It made contracts with the Commonwealth and Southern Corporation and
its subsidiaries in Alabama, Tennessee, Georgia and Mississippi,
At this stage, the power distribution programme of the Authority
was carried out by agreement, mainly over the transmission lines
of private power systems. The Authority quickly proceeded to the
construction of its own transmission systeni. Forms of contract
were worked out with the distribution system, relating to the rates
for wholesale supply by the Authority, and the detailed conditions
under which the contractor was required to sell the electricity to
consumers and to conduct his concern financially and otherwise.
The Authority proceeded also to the encouragement of local cooperative power associations in various areas, large and small, as
self-governing.non-profit corporations.
THB ELIMINATION OV LEGAL OBSTACLES

By the middle of 1934, the power companies realised that the
T.V.A. intended to go beyond the generation of electricity and its
sale to themselves, and that it regarded with favour the desire of
local communities either to purchase a private utility's distribution
facilities, or to set up one in competition. They therefore took the
stand, first, that it was impossible to sell any part of their own systems without making the remainder uneconomic; and, secondly,
that if the Authority could not purchase ïhe whole of their systems
on terms satisfactory to them, they would enjoin fulfilment of cer-

MAKING BLBCTRICITY AND ACQUIRING MARKETS

29

tain contracts made by the Authority with cities and companies,
on the grounds that the T.V.A. Statute was unconstitutional.
In 1934, five suits were pending against the Authority. Among
them were an appeal to the Alabama Public Service Commission by
coal and ic§, companies to invalidate the T.V.A. contracts with the
Alabama Power Company; another to enjoin the Tennessee Public
Service Company from selling properties around Knoxville to the
T.V.A. Soon other companies followed suit. They sought, and some
obtained, injunctions restraining financial aid by grants and loans
from the Federal Emergency Administration of Public Works,
popularly known as the Public Works Administration1, to cities
seeking to purchase or construct power plants. Some alleged false
representations, attempted boycotts, and unfair competition by
the T.V.A. One suit sought restraint of a city from contracting to
purchase electricity from the T.V.A. The city of Knoxville itself
had voted in March 1936 to construct its own system and purchase
from the T.V.A. : it was enjoined. It was in the midst of such opposition2 which gravely slowed up its operations and involved considerable financial expenses and loss that the Authority proceeded.
But the Authoritywas upheld by the courts in a secies of judgments culminating in complete vindication of its powers and the
constitutionality of the Statute in 1939 in the case known as "The
18 Companies Case" {Tennessee Electric Power Co. vs. T.V.A.)?
1
2

The work of this agency terminated on 30 June 1938.
The Authority's operations were much retarded and its expenses increased
by litigation. To 30 June 1938, the T.V.A. had been attacked on constitutional
grounds in 41 cases, of which 22 were primarily against municipalities or cooperatives. Direct defence expenses amounted to $518,159; wholesale power
revenues lost by delay amounted to nearly $5,500,000, and consumers' losses,
from not buying at the T.V.A.'s low rates, are estimated at $7,702,100. Cf. 76th
Congress, 1st Session, Senate Document, No. 56, Report of the Joint Committee
Investigating
the Tennessee Valley Authority, 1939, çp. 65-66.
8
The details of the litigation are of interest only in relation to the Constitution
of the United States, and would have little bearing on conditions that might arise
elsewhere. Readers interested in this aâpect of the T.V.A.'s development may be
referred to the relevant literature. Here, however, two points need mentioning.
First, the courts upheld (o) the T.V.A.''s encouragement of municipalities and
co-operatives in seeking to set up their own distribution systems; (6) the T.V.A.'s
co-operation with the municipalities and the Public Works Administration to
secure the offer of grants by the latter to the municipalities and co-operatives
to enable them to set upthèir own distribution systems (by the time the court was
seized with the case in the autumn of 1938, the P.W.A. had made contract3i and
allotments for loans and grants to 23 municipalities in Alabama, Mississippi and
Tennessee, amounting to about $14 .million for the construction of municijjal
systems) ; («) the legality of the acts of the T.V.A. regarding their statutory basis;
(a) the constitutionality of statutes establishing and empowering the T.V.A.;
(e) the legality of the generation of electricity at T.V.A. dams and the consistency
thereof with navigation, flcwd control and national defence; and (/) the propriety
and constitutionality of the T.VJV.'s methods of disposing of its electricity. The.
principal cases were Askwmder vs. T.V.A., 297, U.S. 288 (1936); Tennessee Electric Power Co. vs. T.V.A., 21F, Supp, 947 (1938); and 306 U.S. 118 (1939). Cf.
H. N. MARTBW.: "Legal Aspects of the T.V.A.", in George WasMngfon Law Review,
1939, pp. 983-1012.

30

THS T.V.A.: INTERNATIONAL APPLICATION

,;

DIRBCT TRANSMISSION TO CUSTOMERS

At the beginning, the Authority necessarily sold a large volume
of its power to the great private power companies in the vidnity
who owned transmission lines and practically all the local distribution fadlities: the Alabama Power Company, the Georgia Power
Company, the Tennessee Electric Power Company and the Mississippi Power Company. In the fiscal year ending 30 June 1936,
for instance, the power sold by the Authority at Wilson Dam went
in the following proportions to the various customers:
Per cent, of total
power sales

—

Municipalities
Co-operative associations
Electric utilities
Industries
Direct sales
Total

6.4
3.8
88.S
—
1.3
100.00

Now, the fulfilment of the Authority's policy of making abundant electridty available at low prices depended upon its ability
directly to serve the final distributing agendes. its necessary procedure therefore came to be, first, to build and acquire its own
transmission lines, to avoid becoming dependent on one or two
large private companies (mainly the Alabama Power Company)
which would then have been in a monopolistic position.1 The policy
of ownership of its own transmission system was also benefidal
because any economies effected in costs could be transmitted to
the public in prices; and in fact, the T.V.A., by its own independent
research work, was able to produce and itself install rural lines
much more cheaply than business had hitherto done, yet providing
perfectly adequate and reliable service.
MUNICIPAL AND CO-OPERATIVE UNDERTAKINGS

The fullest benefidal development of T.V.A. power operations
could be achieved only if the T.V.A. were assured of the local
markets, that is to say, if distribution in the cities were raider
munidpal management, and in the rural areas under the co-operatives. Pursuant to this view, the T.V.A. was friendly to these
bodies, even to the point of assisting them to acquire distribution
systems of their own, though these might compete with the existing
1
The effect of this factor may be observed in sales in 1935. Cf. Appendix III,
table III, 2, A.

MAKING ELECTRICITY AND ACQUIRING MARKETS

' 31

private distribution systems—not that the T.V.A. pursued a policy
of duplicating, but there definitely was a conflict of interest. This
was ultimately resolved by the T.V.A. system acquiring, in various
ways and by agreement, the distribution systems of the whole area.
It should be remembered that the Statute required the authority
to sell its power to States, counties, municipalities and non-profit
organisations in that order of priority, and individual citizens and
other consumers were the residuary purchasers only after these
had been satisfied. To implement this stipulation, the Authority
lent its good offices to the movement for public acquisition and for
the establishment of rural non-profit organisations.
Certain consequential problems then arose, especially that of
the financing of the undertakings required by the cities and the cooperatives. As for the former, there were loans and grants from the
Public Works Administration; as for the latter, the Rural Electrification Administration {established in Washington by the Federal
Government) provided a large proportion of the capital required.
This question is discussed at greater length in a later chapter.1
Here it may merely be said that up to 30 June 1942, of the approîdmately $90 million required, public bonds had provided about
two thirds, loans from the R.E.A. about one fifth, loans made by
the T.V.A. about one twentieth, and theP.W.A. and theW.P.A.
one tmth.
The Power Sales Policy
By 1938, the removal of all legal obstacles opened out wide
possibilities to the Authority. Thereafter it proceeded, in cooperation with the Public Works Administration, and by negotiation with one utility after another, to acquire both transmission
properties and outlets for sale.2 By 1941, the Authority had become
almost wholly responsible for the generation and transmission of
electric power in Tennessee, and in considerable parts of Mississippi, Alabama and Georgia. The successive stages of this purchase
policy and the acquisition of ever more customers is set out in a
table, showing the growth of the T.V.A.'s capacity, the growth of the
transmission system, the number of public agencies acting as distributors, customers, etc. The net result was the increase in the
i Cf. Chapter XII.
~~—_
• The largest single purchase was from the Tennessee Electric Power Company, a subsidiary of the Commonwealth and Southern system. The Company
sold to the Authority, municipalities and cooperatives, for $78,600,000, a system
covering 140^000 customers in the two great cities of Nashville and Chattanooga
and in 23 smaller cities and 11 co-operatives. Included in the properties acquired
were five dams (cf. Chapter II, p. 21) and a number of steam plants, though
the Courts have never pronounced on the constitutionality of the T.V.A.'s
producing power by steam generation.

32

TH« T.V.A.: INTERNATIONAL APPLICATION

sale of kilowatt hours from less than half a million in 1934 to nearly
6,000,000 in 1942; the increase of retail customers from about 6,000
to nearly 500,000; while 5,000 miles of transmission lines and 5,000
miles of rural lines had been installed by the T.V.A. A more complete
and exact display of the T.V.A.'s growth in terms of its capacity, customers, distribution systems, etc., is to be found in Appendix III,
table III, 2.
The Authority proceeded in its quest for a market with energy
because it wished, as it said in its Annual Report of 1936, to apply
the principles of mass production and consumption to this problem
in the Valley, in a way which had proved successful in a number
of private industries in the United States. It saw that the essential
element in mass production was a progressive decrease in unit
cost—the more items produced, the less the cost of each item;
and in the matter of electricity there was still abundant possibility
of decreasing costs and increasing consumption, although private
enterprise in the field of electricity supply appeared to be unwilling
to make drastic cuts in advance of wider use. Nor was this all.
The spirit inspiring the T.V.A. Statute was concern for the rural
population. Here was a possibility of doing the maximum amount
of good in terms of improving the ease and comfort of farm families, both in their living and in their productive activities, amj it
was precisely here that the private utilities, owing to the trouble
involved and small rate of return, had been disinclined to attempt
to develop their business, and thereby the countryside. Indeed,
by 1936, analysis of operations by nine municipal and co-operative
systems procuring power from the T.V.A. had verified the T.V.A.'s
conviction that a drop in priœ, the use of what in England is called
"promotional rate", did in fact promote higher consumption and
better revenues.
BRBAKINO TH8 VICIOUS CIRCLE OP HIGH PKICBS AND
Low CONSUMPTIOIî

Since the war of 1914-1918, many electricity systems have
experimented with a variety of rates and methods of charge, with
the idea of developing the maximum use of electricity, which in
itself leads to a consequential reduction of electricity rates. The
T.V.A., uninhibited by certain financial considerations which affect
private enterprise in electricity and which had certainly retarded
progress in the Tennessee Valley, undertook from the beginning a
policy of daring reduction of rates, confident on the basis of its own
estimates that the results aimed at would be achieved. Resale
prices, therefore, were proposed to the municipalities and other
public agencies taking electricity from the Authority, which many

MAKING BLBCTRICITY AND ACQUIRING MARKETS

33

critics believed to be either ruinous or subsidised. In fact they were
neither, and when the pericxl of litigation had been successfully
passed and the Authority had a free run, so that there was no artificial limitation on the demand for its product, the wisdom of its
resale policy became evident. An enormously increased consumption followed; the consumers benefited from the very large reduction of rates; and the municipalities and other public agencies,
especially the urban agencies, were able to make handsome surpluses. Furthermore, the influence of the Authority's policy was
clearly visible on the companies in the vicinity and elsewhere,
for they adopted a cognate policy with the same results, namely,
reductions in price and considerable increases in consumption with
an accompanying increase in profits.
This result was achieved by the combination of two forces:
careful attention to cost of production, and diligent promotion of
sales. In regard to the cost of production, the Authority could
organise the building of dams and the installation of generating
machinery to secure the maximum economies oñ a long-term basis,
thanks to its scheme of unified development permitting of the continuous use of equipment and labour experience on successive dams.
INDUSTRIAL SAUîS

The policy of the Authority in connection with the sale of
power and encouragement of the use of electricity in the area presents interesting features, of special importance in the development of a backward area. The figures of kilowatt hour sales for
1942 show that municipalities take 39.2 per cent., co-operatives 4.7
per cent., temporary rural requirements 0.1 per cent, (for dam reservations, or pending co-operative or municipal operation), industrial
customers 40.3 per cent., private utilities 11.0 per cent, interdepartmental deliveries 4.5 per cent., and sales to governmental
agencies 0.1 per cent. A similar analysis made in 1938 would have
shown a strikingly large percentage of deliveries to industrial consumers—a little over SO per cent.—-especially in comparison with
those consumers given preference by the Statute, of whom municipalities took only 9 per cent, and co-operatives just under 5 per
cent. The Statute, however, empowers the Authority to sell to
industrial consumers, on the sound basis of improving the system
load factor; and until the development of municipal and co-operative markets reaches the stage of complete absorption of the
T.V.A.*s power, not only will the Authority benefit by selling to
industrial users, but the municipalities and co-operatives must also
benefit as a result of a more economical use of the Authority's pro-

34

THE T.V.A.: INTERNATIONAL APPLICATION

pertíes. Also the economic life of the whole nation benefits by the
lowering of manufacturers' production costs made possible by selling power which would otherwise go to waste.
•The T,V.A. began selling to industrial consumers in May 1936,
but not substantially until 1937. Industrial contracts vary in term
from five to twenty years, with provisions for options and cancellations by either side. The companies are given terms reasonably
designed to safeguard their capital investment. Up to the
time of the war, the public agencies entitled to preference had
never suffered shortages from the sales to industrial customers, at
any rate, at the price at which the T.V.A. was able to supply. The
new war demands were so large that the T.V.A., as already noticed,,
was spurred on by the Defense Departments and authorised by
Congress to produce more power.1 The Congressional Joint Committee Investigating the T.V.A. of 1938-19392 reported that although there had been charges that the T.V.A. had been unduly
favourable to the industrial customers, the charges were absurd,
and concluded that the rates and contracts conformed with the
requirements of the T.V.A. and were advantageous to the Authority.
The problem does still remain, however, whether the T.V.A. would
not have had much more of the supply taken up by various "public,
non-profit" customers, for example, rural co-operatives, if it had
been able to charge lower than cost. Universal experience of electric supply shows the extreme difficulty of defining cost to any
particular customer, yet the T.V.A. Statute requires supply at hot
lower than cost.8
CONTROLLED RESALE RATES

The Authority sells at wholesale rates, and these are the rates
roost closely related to its own cost of production and transmission
1
Cf. Chapter II, p. 21. This was accomplished not by legislation adding to
or amending T.V.A. powers, but by means of further financial provision in the
annual
and supplementary appropriations.
2
Cf. Chapter XII.
8
There are two stipulations in the Statute which, allin all, permit considerable
elasticity of selling policy, so that rates favourable to rural co-operative development would seem to be well within the power of the Authority. Thus, Section
14 says: "To make the power projects self-supporting and self-liquidating, the
surplus power shall be sold at rates which, in the opinion of the Board, when
applied to the normal capacity of the Authority's power facilities, will produce
gross revenues in excess of the cost of production of said power . . . ". Secondly,
Section 11 of the Statute requires "that the projects herein provided for Shall be
considered primarily as for the benefit of the people of the section as a whole and
particularly the domestic and rural consumers to whom the power can economically be made available, and accordingly that sale to and use by industry shall be
a secondary purpose, to be utilised princijjally to secure a sufficiently high load
factor and revenue returns which will permit domestic and rural use at the lowest
possible rates and in such manner as to encourage increased domestic and rural
use of electricity".

MAKING ELECTRICITY AND ACQUIRING MARKETS

35

to the points at which municipalities, co-operatives and industrial
consumers can take the power over into their own distribution
systems. But, as the T.V.A. observed in a very early Annual Report,
by far the greater part of the cost of electricity in the home and on
the farm consisted of costs of distribution.1 If the benefits of the
Authority's operation in the Valley were to be passed on to the'
consumer, therefore, the contract offered by the T.V.A. must state
the resale rates. Hence, the T.V.A. contracts provide certain
standard resale rates estimated by the Authority to be reasonable
on its analysis of costs of distribution, with lower rates as the earnings of the distributors increase. A definite procedure is laid down
in the contract for the disposal of surplus revenues, the basic principle being that the distribution of electricity will be conducted
without profit to any one except the ultimate consumer. The contracte make provision for operating expenses and fixed charges,
including, of course, the properly regulated repayment of the debt
incurred in the purchase or building of the system, the remaining
surplus to be applied to (a) the construction of extensions, (6) repayment of debt before contracted maturity, with the consent of the
T.V.A., and (c) further reductions in rates. As the T.V.A. says in
its Annual Report of 1941, "These provisions assure retail customers
in the Tennessee Valley that the rates they pay will continue to be
among the lowest in the nation".
ENCOURAGING SALES

The weightiest factor in the remarkable expansion of the T. V,A.
electricity sales was the promotional policy adopted, which brought
home to a rather poor, suspicious and fairly unsophisticated body
of people, especially in the rural area, the advantages of electricity
to the point of inducing them to set up. distribution systems and
to make contracts committing themselves to purchase so much
electricity over a number of years. This was less necessary in
regard to the cities than to rural areas; first, because practically
all the cities had electricity, even though they did not own their
own distribution systems; and secondly, because the use of electricity for lighting, for the radio, for cooking, and for various home
and workshop appliances was well known. In the cities the problem
was chiefly whether the citizens could raise their civic spirit to the
point of taking action for their own benefit in terms of price and
consumption—that is, of establishing their own distribution systems. But in the rural areas a vastly different problem confronted
1
See also H. FINER; Municipal Trading (London, 1941), for comparative
British experience.

36

THE T.V.A.: INTBRNATIONAL APPLICATION

the Authority. Congress had directed it "to promote and encourage
the fullest possible use of electric light and power on farms . . .
(and) to construct transmission lines to farms and small villages that
are not otherwise supplied with electricity at reasonable rates".
Furthermore, the President had devolved upon the Authority the
responsibility for seeking ways of developing the resources of the
Valley and contributing by studies, experiments and demonstrations towards the general welfare of the area.
When the T.V.A. began operations, it found that in 1933 only
one farm in 28 received electric service. By 1939, one farm in 7,
and at the end of 1940 one in 6, was taking electricity. This important change has come about by reason of four things: the establishment of electric co-operatives, the development of low-cost
rural lines, the financing of the co-operatives by the Rural Electrification Administration1, and the adoption of electric retail rates
no higher for rural than for urban consumers. The T.V.A. has
taken its responsibility to the rural population very seriously
indeed. The fact that one of its directors is a local man is not without importance in this regard. The Authority recognises the value
of rural life as a social factor; that the drudgery of the farm and
its low income may cause a further drift towards the cities; and
that the latest gifts of science and technology ought to be used in
order to lighten and make more productive the toil of the farmer.
However, if one farm in six now has electricity, five out of six
still have not. It is an issue of public importance whether lower
charges and more sales to the rural population would not have been
more justifiable than the large sales to industry, even though the
latter is in a position (though not compelled) to pass on the benefits
of its own reduced costs of power supplied by this great public
enterprise.
The T.V.A. had to make the farmers electricity-conscious, and
to induce them to form rural electric co-operatives. In order to
avoid legal obstacles to development, the Authority, assisted by
the Rural Electrification Administration, drafted legislation for the
purpose of permitting co-operative electrical associations on a nonprofit membership basis to come into existence. The States of
Mississippi, Alabama, Tennessee and Georgia soon passed the
necessary legislation. The Authority then proceeded to interest
1
This organisation was set up by the Federal Government in 1935 to assist
the development of electrification in rural areas all over the United States.
Its funds are drawn from Congressional appropriations and it is currently lending
money to co-operatives at about 2.46 per cent, with guarantees and conditions
of repayment suited to each individual project. For example, the R.E.A. requires
each member of the co-operative to lay down a membership fee of |S, and that
all easements shall have been obtained, or permission for rights of way promised.
For a more detailed discussion of its activities, cf. Chapter VII.

MAKING Bl^CTRICITY AND ACQUIRING MARKETS

37

the social and political leaders and the officials of the counties in
which it was proposed to set up co-operatives. The newspapers in
the area carried information regarding the electricity operations of
the T.V.A. At least as effective a contribution was made by the
county extension agents1 and assistant county agents of the United
States Department of Agriculture; the fact that they move about
the area in their business of encouraging agricultural improvement,
gives them easy access to present their views. At a certain point,
it was suggested that a meeting of all the interested parties should
be called, at which T.V,A. officials would explain the rights and
obligations, the rates of wholesale purchase and retail resale. On
the Authority's side, there must be regard for the number of consumers and the density of the area covered by the co-operatives.
The co-operatives vary from 700 to some 2,000 residential and
commercial customers together.
TBe local co-operative association is composed of a number of
consumers and these elect their own board of directors, numbering
5 or 7, or IS, and voluntary officers consisting of a president, vicepresidents, secretaries and treasurer, for the most part unpaid.
Each association appoints and pays an attorney and a project
superintendent. The R.E.A. requires the submission of the proposed officials for approval, in order that it may secure the appointment of the most competent, or at least be able to give counsel as
to where competent people could be obtained.
In order that a co-operative may not be rashly established, the
T.V.A. provides instructions in what it calls its Rural Electrification Survey Plan. By following these, its officials can discover
whether there will be an adequate and sufficiently persistent demand
to repay the costs of the rural electric distribution lines and the
day-by-day supply of current. They are instructed that the mere
use of electricity on the farm for light and radio will be insufficient
to provide a profitable distribution system. The Authority's regulations and instructions guide in considerable detail the discussion
of local possibilities, in order that there maybe no mistake on either
side as a result of eagerness on the part of T.V.A. officials for additional business, and on the part of the co-operative for a new toy,
a new pleasure, or an insubstantial bargain. When the local voluntary canvassers, working under the chairman of thé committee
elected locally, make their tabulation of likely customers, this is
checked by the appropriate employee of the T.V.A., the feasibility
is determined, and the location of lines is mapped. The Authority
has to consider the economic capacity of the district, the rates
1

For the "Extension System", cf. Chapter IV.

38

THB T.V.A.: INTERNATIONAL APPLICATION

which ought to be charged, and the question of rights of way for
the lines. At one time, the contracts division of the T.V.A. Department of Power Utilisation made a survey of the proposition; more
recently, the T.V.A. and the Rural Electrification Administration
have set general standards for area-wide projects, and surveys are
made in accordance with them in the same manner as before.
T.V.A. POWBR CONTRACTS
The T.V.A., as already indicated, makes a power contract with
the co-operative. Such contracts are standard. As the Statute
requires, they hold for a maximum of 20 years. They provide for
a wholesale rate and binding resale rates. Amortisation is stipulated. Until recently, the Rural Electrification Administration began
to collect the repayment of debt 18 months after the first loan, and
stipulated 38 half-yearly payments until the debt was liquidated.
On recent loans interest payments are delayed for 30 months, and
amortisation payments for 48 months, in order to give the co-operative more time to develop sales and revenues. In the course
of time, the T.V.A. and the R.E.A. have learned to collaborate
and participate in loans, and they work closely together.
The T.V.A. power contract (whether the T.V.A. or R.E.A. finances the loan) contains further conditions for the payment by the
distributor of all current operating expenses, including (a) salaries,
wages, cost of materials and supplies, taxes, power at wholesale,
and insurance; (6) the payment of interest and amortisation; (c)
reserves for replacements, new construction, contingencies, and
a reasonable amount of cash working capital. Any surplus is then
permitted to serve as a basis for the reduction or elimination of
amortisation charges and surcharges to consumers, and thereafter
of rates; or, if the T.V.A. consents, the co-operative may use all or
part of the surplus to purchase or retire the system's debt before
maturity. The T.V.A. requires an annual report under a system
of accountancy established by the Federal Power Commission,
and such additional information as it may from time to time reasonably request. At least two years before the expiration of the contract the T.V.A. agrees to enter into negotiations for renewal or
extension. The T.V.A. establishes iûstrumentsformeasuring demand,
energy and power factors. It has the right to inspect any installation before electricity is introduced or later, and may reject any
wiring or equipment not in accordance with reasonable standards.
The co-operative is responsible for the T.V.A/s property which
is part of its operating system. The Authority lays down the details
of financial and accounting policy and renders such advisory ac-

MAKING BLSCTRICITY AND ACQUIRING MARKETS

39

counting service in setting up and administering the accounts as it
thinks reasonable. The co-operatives furnish monthly statements
to the Authority, and are obliged to allow its inspectors to have
free access at all reasonable times to the books and records of the
electricity system operations.
The foregoing rules for the administration of the co-operatives
are practically identical with those for the municipalities which
buy their power from the T.V.A. The chief difference is that,
whereas the co-operative must pay a property tax on its distribution
system to its county or State, the city treasury receives the equivalent of the State, county, and aá valorem tax from the municipal
electricity department. The latter may pay into the city treasury
an amount not exceeding 6 per cent, on the municipality's actual
investment in the electric system.1
The T.V.A. keeps continuous contact of an advisory character
with both municipalities and co-operatives. The difficulties of this
relationship are somewhat greater with the rural co-operatives
since the managers, who are, of course, salaried employees of the
co-operative, and by reason of the smallness of the area served
cannot be paid a high salary, are not highly experienced. The
R.E.A. and the T.V.A. therefore give continual attention to the
technical administrative and accounting operations of these local
agencies, so that they shall meet their obligations, conduct their
operations with a minimum of expense, and not apply to extensions
surpluses which should be devoted to meeting loan obligations.
An attempt is made to secure the services of competent managers
and the retirement of incompetent ones. As is explained in a later
chapter, the State Utility Commissioners do not supervise the
administration of the municipal electricity systems, and a serious
problem is thereby presented to the T.V.A. It knows enough of
human nature in business and politics to realise that the quality
of the results in sales and service and rates to the customers will
continually depend upon clean and efficient municipal administration. Therefore, it cannot wait until some political scandal ruins a
local system, but must currently bring home to the municipalities
their responsibility. Already the present chairman of the Board
has openly declared his deep distress at "indications of an effort to
infiltrate politics into the municipalities and co-operatives distributing T.V.A. power".2 He was afraid of the-political determination
of contracts, insurance, extensions of lines and service, of inaction
1
Problems arising out of the payment of these taxes are dealt with in Chapter 2IX.
Cf. T.V.A. Release, remarks of D. E. LIUSNTHAL: "Politicsand the Management of the Public's Business", 9 July 1942, p. 8.

40

THB T.V.A.: INTERNATIONAL APPLICATION

about unpaid bills, and other similar developments. T.V.A. officials
have also warned co-operatives against leaving management entirely to the paid manager.
In the rural areas, it has been found essential to secure a written
agreement with the intending consumers. The experience of the
T.V.A. has been that the initial enthusiasm which is productive
of a promise to purchase may not last. The Authority was therefore compelled to introduce a contract for a minimum consumption
for three years, that minimum being set by the customer. It is the
Authority's opinion that if electricity is taken for three years its
consumption will certainly increase thereafter—an opinion borne
out almost everywhere by experience. To give a feeling of security
to wiring and appliance contractors, the Authority required the
dealers to demand a deposit from the consumer.
EQUALITY OF RURAL AND URBAN ELBCTRICITY PRICSS

The Tennessee Valley Authority's price policy for power is to
eliminate differences between urban and jurai rates. Urban and
rural rates are the same except that particular contractors have a
right to make a surcharge to meet special difficulties of supply, "
but not above 10 per cent, of the common rate; and, as we have
seen, an engagement for a minimum consumption over the first
three years must be given by each customer.
From the earliest stages the T.V.A. fostered local initiative.
It continues to do so unceasingly through constant personal contact.
The T.V.A. regards its work in the extension of electricity to rural
areas as a problem not merely of increased sales, but of the beneficial
application of electricity to farm life. For example, the principals
of the local schools are informed of the Authority's social purposes
and induced to give their educational help. Local meetings are
arranged at which the purposes of the Authority are explained.
To the local wiring contractors the T.V.A. also conducts a mission,
on the best technical means of applying electricity to domestic
and farm labour, and so on. The T.V.A. induces dealers to arrange
displays and demonstrations "with the help of the State and county
agricultural extension services. Thus, there have been dedication
festivals in the High School auditorium, with a display of useful
appliances to bring home to the farmer that electricity is not merely
the genie of waffle-makers, light and radio; for the emphasis of the
Authority is on productive appliances in farm work and in the
domestic economy of the farm. The T.V.A. has a staff of home
economists who visit the homes to advise on the use of appliances,
and also a number of commercial representatives who themselves

MAKING BLBCTRICITY AND ACQUIRING MARKETS

41

help to show the use of farm appliances or bring in farm specialists
for this purpose. These latter induce dealers to come with them
to give demonstrations. The Authority indeed keeps a very watchful eye on ûie annual sales of electric appliances in its area, as
these are the yardstick of its success. There are some 800 dealers
who send in monthly reports of the number, value and kind of the
appliances sold. The following figures, taken from the Authority's
Annual Reports, illustrate the development in sales of appliances.
¡seal year

Value of sales
of electricity appliances:
domestic retad price
(doUars)

1938
1939
1940
1941

1,612,000
3,688,000
12,500,00)
18,500,000

The great increase in 1941 was due to the increase in the number
of customers served by T.V.A. wholesale distributors. The approximate average was $52.50 per residential customer.
One of the merits of this and other aspects of the development
work of the T.V.A. is the attention given to inventing, or inducing
other agencies, like the local universities and experiment stations
and private firms, to conduct research on, invent and manufacture
appliances especially suited to, the economy of the area.1
The T.V.A. does not sell electrical appliances but only electricity.
However, it co-operates with the standard makers of appliances,
gives them lists of rural customers or recommends consumers who
have asked for information to the well-known makers of the best
appliances. It should be said here that in 1933, shortly after the
T.V.A. began to function, the Electric Home and Farm Authority
was set up, a Government corporation to guarantee the credits
given by dealers to purchasers of electrical apparatus. This agency
has strongly stimulated sales in the Tennessee Valley. Its operation
is discussed later.2
In 1938 the extension3 services and their specialists conducted
526 meetings, demonstrations and schools on the farm and home
uses of electricity, attended by 12,600 people; and in 1939, 775
such meetings, attended by 24,517 people. There was a growth
in the number of specialists and additional funds for the extension
services as the number of rural lines and interest in electricity
continued to grow. The extension workers themselves were specially instructed in rural electrification at 27 training schools.
1
Cf. Chapter IX.
^8 Cf. Chapter IX.
Cf. Chapter IV.

42

THE T.V.A. : INTERNATIONAL APPLICATION

Before leaving this subject, the tremendous benefits obtainable in this branch of the Authority's development of the
general welfare of the Valley from the integration of its
activities must once again be emphasised. The extension agents
are officials, the essence of whose job is to improve agricultural
methods and raise the standard of living of those who live by agriculture. Electricity is one element serving this purpose. From
another side of its activities, the T.V.A. is directly interested in
the same purpose as the extension agents, so that the latter can
fully co-ordinate their work in both fields, agriculture and electricity, both lying within the responsibility of the Authority.
PROGRESS IN

T.V.A. ELECTRICITY RATES AND THE PROBLEM OP
SUBSIDIES

Before the T.V.A. came into the Valley, the average residential
customer's consumption was about 55 kilowatt hours per month.
Year after year the T.V.A. was beset by the cry of its critics that
it would find no market for all the power it was to produce. By 1942,
the average residential customer in the Valley area consumed 129
kilowatt hours per month and paid 2.00 cents per kilowatt hour;
whereas the average residential customer throughout the country
consumed an average of just over 85 kilowatt hours per month at
3.67 cents per kilowatt hour. Add to this the fact that retail sales
to small commercial customers in 1942 were at the average rate of
2.14 cents per kilowatt hour, and that the sales to industrial customers were made at an average of 0.77 cents per kilowatt hour, and
it is clear that the T.V.A. had to its credit a very considerable
achievement. The overall average rate paid by all customers served
with T.V.A. power at retail was 1.24 cents per kilowatt hour.
As will have been appreciated, the selling policy of the T.V.A.
has a twofold aspect: that of wholesale rates and that of retail
rates. As regards the wholesale rates, the main question is whether
the Authority sells without subsidising its customers by passing
on to them, in some form or another, services and electric power
which ultimately and directly or indirectly are paid for by taxpayers. For example, it is important to know whether the interest
rate on Tennessee Valley Authority moneys is computed on a fair
basis as compared with that which private companies must pay
for their capital; whether, again, the T.V.A. makes proper provision
for depreciation and for the equivalent of State and local taxation
to which private companies are subject, while the T.V.A., being a
Federal agency, is given immunity. Secondly, in regard to the
resale rates stipulated by the Authority, the question is whether

MAKING BLECTRICITY AND ACQUIRING MARKBTS

43

these at least secured the covering of the cost of production while
duly accounting for and meeting every item entering into cost.
These subjects have been the centre of the most acute and chronic
controversy between those who, like the T.V.A., favour public
enterprise, and those who are hostile to it. Any claim that the T.V.A.
and similar projects could, by force of example, compel private
companies to lower rates which were in fact excessive could only
be substantiated if the T.V.A.'s own bill of reckoning contained
all the items that should properly be included.
The controversy revolving about this question has not always
been conducted in a strictly objective spirit.1
Whether'the T.V.A.'s rates contain subsidies, and whether it
is or is not making a profit, depends to a considerable extent on
the extremely complicated problem of how to allocate the value
of the dams between their various uses, and so properly to allocate
the capital valuation of the investment to the generation and transmission of power. In view of the total size of the investment—
for ten dams alone it is estimated at $400,000,000—it can readily
be understood that a small percentage of difference in dividing up
the capital valuation among the three uses—^navigation, flood control and power—could make all the difference between a substantial
accountancy profit or a considerable loss on operations in any one
year. Indeed, such differences rather conservatively regarded and
by no means the most extreme suggested, were examined by the
Joint Committee Investigating the T.V.A.2 Based on the estimates
of an 11-dam system, one expert postulated an annual loss of
$4,039,000, while the chief power engineer of the T.V.A. postulated
a profit of $4,624,785. These differences were due to the fact that
the total cost of dams as allocated to power in the first estimate
was nearly $349,000^000, while the T.V.A. chief power engineer
made calculations leading to just under $265,000,000,3
The allocation of costs is of basic importance to a development
authority like the T.V.A. for three reasons. First, it must know
its own cost of production, since otherwise it might in the extreme
case (if it were acting benevolently) leave itself at the mercy of all
sorts of consumers' demand, and would have no measure of how
far it could continue to meet demands on the basis of contracts
made with consumers. It would certainly never know whether it
were losing or gaining, subsidising or losing business owing to ex- .
cessive charges. Secondly—and this is very important—without
1

A brief indication of the main problems is given in Appendix VI.
* Report of the Joint Committee IwrnstigaHng the Tennessee Valley Authority,
op. 8cit., p. 170.
Cf. Appendix II.

44

THB T.V.A.: INTSKNATIONAL APPLICATION

an allocation of costs, the Authority itself does not know how far
to press its continued building of hydroelectric dams and installations, for if the general economy of the surrounding country is considered, it may at a certain point be more economical to produce
electricity by alternative methods, such as steam-plant. Tliirdly,
without the allocation of investment costs, other figures derived
therefrom, such as rate of interest, depreciation, and amortisation,
cannot find their place in the accounts, and consequently the analysis of operations and the computation of profit and loss become
impossible. If, further, it is desired to regard a development authority of this kind as a "yardstick", or in other words, as a mathematically precise demonstration model and index of what could be accomplished in the cost of producing and. selling electricity, then of
course the "yardstick" must be visible, and the first contribution
to that visibility is the exact knowledge of how much capital is
being used for the power operations.
ALLOCATION O» COSTS

This point, of course, was seen by Congress when the Statute
was enacted. Consequently, in Section 14 of the Statute there are
careful directions requiring the valuation of T.V.A. dams and
steam plant and the allocation of the total among the various
purposes, namely: (1) flood control, (2) navigation, (3) fertiliser,
(4) national defence, and (5) the development of power.1 The findings were to go to the President, were to be regarded as final upon
his approval, and thereafter were to be used in all allocations of
value for the purposes of accountancy. This subject and the controversies to which it gave rise are briefly sketched in Appendix
VI.2 But two things may be stated here. The first is that
the T.V.A. had to establish its rates as soon as it began and therefore
long before a full valuation could be made. It appears that the
final allocation, arrived at after years of expert analysis, very
closely coincided with this first business appraisal. Secondly, of
the various theories of allocation in competition for acceptance,
the T.V.A. chose the one known as the "alternative justifiable
expenditure" theory. On the basis of this, it reported to the President, in 1938, on the three-dam system of Wilson, Norris and
1
It is interesting to note that the Statute required the allocation "for die
Eurpose of accumulating data useful to the Congress in the formulation of legisitive policy in matters relating to the generation, etc., of electric energy and the
production of chemicals. . .
As is shown later, the T.V.A. was required to
follow the accountancy system for public utilities established by the Federal
Power Commission. Cf. Chapter XII.
* Cf. also the fullest discussion of allocation by J. S. RANSMBIBR: The Tennessee Valky Authotüy (Nashville, Vanderbilt University, 1942), especially pp.
305-342.

MAKI1NG BL»CÎRI'CITV AN© ACQUIRING MAOSM0STS

4S

Wheeler, assigjaing to na'Wfation 28 per cent., to flood control 20 per cent., and to power S2 per cent; of the total cost. Late
in 1940 a further allocation was made, based now upon seven dams
as a single system—Wilson, Nortia, Wheeler, Pickwick, Guatersvffle, Chiekamauga, and Hiwassee. The respective allocations
were: navigation, 21.8 per cent.", flood control, 12.4 per cent., and
power, 6S.8 per cent, of the total investment. Nothing Was allocated
to national defence or fertiliser. Until the time of the T.V.A.'s
allocation there had never been more than a two-purpose project,
tljat is, navigation and power, requiring allocation. The argument
rqgardiog valuation and allocation in Appendix VI proves convineingly that the profits daimed by the T.V.A. are true profits
and that there are certainly no subsidies. If its power ratés are low,
this is due to the efficiency and economy of its manufacture and
transmission of power apd the effidènt distributing ñmnagement
of the munidpâlitîes and co-operatives, and to the fact that navigation, flood control and electridty properly share the cost of the
benefits derived from exploitation of the water resources of the

CHAPTER IV
THE PROPER USE OP THE LAND
Tim LAND, ITS NEBDS AND ITS PROBUîMS
The general nature of the sickness of the land in the Tennessee
Valley has already been sketched and the need for far-reaching
remedies suggested. The subject must now be considered more
carefully.
The Tennessee Valley basin contains about 26,1(50,000 acres.1
About 18 million acrçs, or 68 per cent, of the total acreage, are in
farms. Nearly one third of this is in farm woodlands, pastured
and unpastured. The other 12,000,000 are in open pasture, meadow,
and crops. There are 255,000 farm families, with an average of tve
persons in each. Thus, there are some 48 acres of crops and pasture
land per family, or nearly nine acres per person. The, average size
of all farms in Tennessee is slightly under 75 acres, and has been
growing smaller for several decades.2
Some other facts are important. . The land is located high or
low on fairly steep hills; there are many slopes of 20° or more,
and some are well over 45°. The annual rainfall, averaging 52
inches, varies from 80-to 40 indies, and the rain is usually heavy.
The soil in the Valley iis prevailingly of fine texture and dense, so
that, though it varies in different parts in use and productivity-—
there are some Í20 soil series and 500 soil types—it absorbs the
water slowly,, there is a high surface run-off, and if vegetative protection is la,cking it erodes very easily.
Of the 26,000,000 acres of forest once covering this region,
nearly half has been cleared for tillage and other purposes. Of the
14^000,000 acres of forest left, only 8,700,000 acres now contato
trees of s^w-timber size, though saw-timber is being cut 1.25 times
faster than it is being grown. Nearly three quarters of a million
acres are damaged by fire annually. Excessive cutting, burning,
grazing, and other deleterious procedures have been so widdy
practised that much of the Valley's forested area now contains only
1

Petals of land ownership and use in the Tennessee Valley are shown in.
Appendix t, table 1.
* But iihe average farm acreage increased froia 74.2 in 1930 to 74.8 in 19*Si

IBM PROPER VSn OF TUB LAND

47

inferior stands of young timber. On the land which is being cleared,
intensive agriculture has removed or permitted the loss of a large
part of the essential nourishment of planflife and the land has been
left progressively more open to natural forces of erosion and the
washing away of its chemical constituents. About 1,000,000 acres
of land, much of which was naturally unsuitable for crops, have
been withdrawn from cultivation. A further 1,500,000 are cropped
intermittently because of their depleted condition; 4,500,000 acres
are on the decline. Steep mountain land has been put into crops .
in full knowledge that five years of such use would see its destruction. Of something like 12,000,000 acres devoted to the production
of crops and pasture, more than one half is in need of substantial
change in management and use.
Thus, land which needed very special care was, in fact, by
inconsiderate agricultural and lumbering practices, put at a special
disadvantage. The growing of so-called row crops, like cotton,
maize, and tobacco (peculiarly destructive of soil fertility), stimulated by doses of commercial fertiliser, year after year steadily
destroyed the agricultural land, caused the dispersal of the top
soil, and then led to the gullying of the hillsides until in some places
little remains but exposed rock and gigantic gouges in the soil. The
large families, dependent on their small holdings, nevertheless felt
compelled to produce these cash crops. These processes had disrupted the cycle of nature, because they did not include-the restoration of the land by the use of mineral fertilisers, legumes, and winter
cover crops. One of the direct results was a poverty in livestock
and milk.
Relation of the T. V.A.'s Powers to Other Government Agencies
The agricultural functions of the T.V.A. are defined, and at
the same time restricted, by the Statute: it possesses no universal
power of government over agriculture in the Valley. Side by side
with the T.V.A. are all the services to agriculture which the Federal
Government renders through the United States Department of
Agriculture. It is essential to refer here particularly to the functions
of two Divisions of that Department, namely, the Federal Security
Administration and the Farm Credit Administration, in order to
make it clear that other institutions are making an agricultural
contribution to the Valley, in total greater than that of the T.V.A.,
and that the benefits of contractual collaboration between the
T.V.A., the land grant colleges, and the two agencies just referred
to, may be appreciated.
The Farm Security Administration, established in 1933, has

48

THB T.V.A.: INTBRNATIONAL APPLICATION

as its object to kelp needy and handicapped small- and middlesized family type farms, by assisting with loans to increase the size
of the holding, acquire tools, seed and livestock, to obtain better
security of tenure by long-term leases; to help tenants to buy their
own land or resettle on better land; and to adjust onerous private
and public debts and mortgages. This financial assistance is accompanied by information, advice and guidance for better subsistence and marketable production. There are direct grants to
extremely poverty stricken families for bas^c necessities like food
and clothes, and feed for livestock. There are rural medical care
schemes in which the family pays a contribution, and co-operatives
are encouraged for stock-breeding, tractor use, purchase of machinery equipment, foods, and so forth.
The F.S.A. conducts activities in all the States of the Union,
and therefore in the seven Valley States. Hence, its work proceeds
simultaneously with the T.V.A. farm demonstration programme;.
There are no separate figures kept for the Tennessee Valley region,
but the seven Valley States receive substantial help.1
The connections between the work of the F.S,A. and the T.V.A.
programme are clear and cordial. It has already been mentioned
that the Department of Agriculture is linked in its work with the land
grant colleges and the T.V.A. by a memorandum of understanding.
This memorandum includes in its scope the F.S.A. and the F.C.A.
and provides for their integration, especially at the county level
where the State Extension System finds its daily operation. Legally,
the functions of the T.V.A. do not extend to those of the F.S.A.,
but, linked with the land grant colleges, the programmes are brought
into connection. The farm demonstration programme is undertaken with due respect to the work of the F.S.A. and F.C.A. Clients
are selected as test-demonstration farmers in about the same proportion that the number of such farmers bears to the total number
of farms in a county; more small supervised loans than tenant
purchase loans are made. Thus, the F.S.A. assistance is of help in
furthering the Valley watershed protection and agricultural development from its angle. There may be, in all this, a certain overlapping
in that advice and educational assistance come from both Jthe land
grant college officers and the F.S.A. officers; but a complete severance of advice from financial or credit assistance would be difficult
to secure.
The purpose of the Farm Credit Administration (set up in 1933,
but with a long administrative history), is to provide a complete
and co-ordinated credit system for agriculture. It furnishes long1
Cf. Report, Administraior, Farm Security AámkiMraiion, 1941, Statistical
Appendix. Acknowledgments are due to that Departinent for information.

THB PROPER USB OF THB LAND

49

and short-term credit to farmers individually or to their co-operative
marketing, purchasing, and business service organisations. Substantial use is made of its co-operative credit1 assistance in the seven
Valley States for production, and it is not paradoxical to say that
•with increased prosperity of the Valley, fostered by the farm demonstration system, it is likely that much more use will be made
of the available co-operative credit facilities. Already, observers
believe that this beneficial development is on the up-grade. The
backwardness hitherto prevailing in regard to agricultural cooperatives has been due to the limited diversification of crops,
restriction of tobacco and cotton, and the development of local
credit systems and practices based on the latter, for a long standing
inter-relationship has developed between merchants, land*
owner and tenant. Locally and regionally, strong marketing and
purchasing associations have developed, in the last ten years, and
this is accounted for, in good measure, by the facilities and services
of the Farm Credit Administration. As diversification increases—
and this is the T.V.A.'s object—so it may be expected that cooperatives and credit facilities supplied by the F¿C.A. will also
increase.1
The Valley States also benefit by the loans made under the
auspices of the federal land banks and federal Farm Mortgage
Corporation to cope with mortgages and emergency situations
relating to crops, feed, and droughts.
The T. V.A.'s Agricultural Powers
Nevertheless, the powers of the T.V.A. regarding the land of
the Valley are wide in scope and highly important in substance.
Like the other specific powers of the Authority, valuable in themselves, they also have a supplementary worth in their integrated
Relationship with the rest of the Authority's purposes. These
powers may be briefly stated: (1) There is the general power
stated in the Preamble, "to provide for the agricultural and industrial development of the said Valley". (2) There is the power
given in Section 22, "to aid further the proper "use, conservation
and development of the natural resources . . .all for the purpose
of fostering an orderly and proper physical economic and social
development ..." by means of "surveys and general plans" and
"to make such studies, experiments or demonstrations as may be
necessary and suitable to that end". (3) Section 23 refers to plans
and legislation, among other things, for "the proper use of marginal
1
Cf. Annual Reports of the Farm Credit Administration; also L. C. SAMPBR
and E. L. MORGAN: Farmer Co-operation in Northern Alabama (Agricultural Experiment Station of the Alabama Polytechnic Institute, Bulletin 249, Mar.
1941).

50

THB T.V.A.: INTERNATIONAL APPLICATION

lands and the proper method of reafforestation of all lands in said
drainage basin suitable for reafforestation". The Statute gives
certain powers more concrete and spedfic in relation to the experimental production, testing and demonstration of fertiliser; namely,
the Authority may contract with commercial producers for the
production of fertiliser as needed for the Government's.programme
of development; it may arrange with farmers and farm organisations for large-scale practical use of the new forms of fertilisers;
it may co-operate with governmental experiment stations or demonstration farms, with farmers, landowners and associations of
these for the use of new fertilisers or fertiliser practices in their
initial or experimental periods and to promote the prevention of
soil erosion by the use of fertilisers and otherwise; it may manufacture fertiliser by such processes as appear wise and profitable
to it, in order to improve and cheapen the production of such fertiliser. The T.V.A. further has the power to donate or sell the product of its fertiliser plants so long as it is fairly distributed through
the agricultural extension system or otherwise for experimental
and educational purposes in co-operation with practical farmers;
and to implement these specific powers, the T.V.A. was given
authority to establish and operate laboratories and experimental
plants and undertake experiments for production in the most
economical manner and at the highest standard of efficiency.
It is by the co-ordinated application of these various general
and specific powers that the T.V.A. attempts to meet the problem of
the proper use of the land in a valley of retarded and sometimes
regressive land use.
These powers are permissive; and it must always be borne in
mind that the,T.V.A. has no power to compel farmers or public
authorities to carry out its policy. It must act by persuasion, so
far as others are concerned. Out of these provisions the Authority
has developed a far-seeing policy of agricultural improvement based
on the production of concentrated phosphatic fertiliser and the
demonstration of its use on farms with new farm methods. The
T.V.A.'s land policy of the highest feasible sustained productivity
is based on four factors: first, the physical nature and needs of the
land; secondly, the continuation of private ownership of most of
the land of the region; thirdly, the establishment of better methods
of production than those prevailing when the Authority entered
the Valley; and, fourthly, the deliberately chosen method of cooperation with the existing public agencies of the Valley and farmers' clubs, or "soil conservation associations", as they are officially
named.
It should be noted at once that while the T.V.A. has statutory

THB PROPBR USE OF THB LAND

51

power1 to sell fertiliser and fertiliser ingredients, its policy hitherto
has never been to enter the commercial market; it confines itself
to giving or to selling to Government or publicly established agencies only.,
A' Policy for the Sail
Having considered the problems and powers of the T.V.A. in relation to land use, it is necessary now to turn to its policy and activities. Fundamental to the better use of the land is a sound knowledge of the land. The T.V.A. "s many-sided land policy of full utilisation and conservation could only be carried out on the basis of a
more exact knowledge than was available when it began
operations. However, it is important to remember that its policy
and its activities could begin, and did begin, on the basis of such
knowledge as existed when it took office. But it has progressively
improved that knowledge by a soil survey on which something must
be said before proceeding to a consideration of that policy.
The soils of the Tennessee River Basin differ greatly from one
another and are scattered in relatively small areas in an intricate
geographic pattern. The soil types of a single small farm, or even
of a field, may differ greatly from one another as to their use, suitabilities, and management requirements. To organise the soil
survey, the State institutions and the Authority had recourse to
the United States Soil Survey, the Government agency recognised
as best qualified by its 40 years' experience of such work throughout the nation. A meftiorandum of understanding was drawn up
between the Division of Soil Survey of the United States Department of Agriculture, the land grant colleges of the seven Valley
States and the Authority to undertake this work as an integral
part of the entire Valley programme.' The work was started in late
1934 and is still in progress (1943). Beginning in 1935 with the
mapping of 352.5 square miles, the annual progress from 1936 to
1941 was between 3,000 and 3,800 square miles. In 1942 it was
1,847 square miles. The total from 1935 to 30 June 1942 amounts
to almost 23,000 square miles. Each individual soil type is defined
within rather narrow ranges as to its internal characteristics—
physical and chemical—and its external characteristics, including
slope and erosion. Each soil type has a distinct relationship to
crop production and management, and its relative suitability and
management requirements are specific.
The soils that are more important to farming can be selected for
study in-connection with the use of new forms of fertilisers through
1

Section S (á) of the Act

52

THB T.V.A.: INTBRNATIONAL APPLICATION

the various steps to be described presently. Of even greater importance is the use of the soil survey as a basis for the interpretation, classification, and extended application of results obtained
through experiments and farm experience with fertilisers, crops,
and management practices. Besides this, it assists in valuing lands
which the T.V.A. must purchase, use or sell, and in the relocation
of the several thousand farmers displaced by the building of dams.1
LAND IMPROVBMSNT BIT PHOSPHORUS FBRTIMSBR

The T.V.A.'s immediate problem, then, was to discover the
means which would simultaneously prevent erosion and improve
the productivity of the land. As regards erosion, of course, there
would be a twofold attack—indirect and direct. The former would
be implicit in the measures taken to improve the productivity of the
land ; the latter would, among other things, involve terracing and
the planting of shrubs and trees. The former, being fundamentally
characteristic of the T.V.A.'s work, is described first.
The T.V.A., on the advice of the land grant colleges, decided
that the key to improvement lay in the growing of cover crops.
For this a good plant food was necessary. The crucial question
was, which should it be ? The Statute had left to the T.V.A. a
wide discretion regarding the fertilisers it might undertake to
produce, its major objective being the improvement of their quality
and the cheapening of the cost to farmers. Several choices were
possible. Liming materials were plentiful, widely distributed
in nature and easily processed for use. Potash fertilisers of high
concentration were already available, and there was,small prospect
of improvement in their quality or price. Further, nitrogen in
suitable form for use as fertiliser was, under the stimulus of private
initiative (which was not concerned about the erosion of the soil),
already available in large quantity at a cost vastly reduced in
comparison with earlier years, while the T.V.A.'s Nitrate Plant No. 2
was quite out of date. On the other hand, the phosphate fertiliser
in common use was of low concentration and expensive to handle,
and there had been little improvement in its manufacture from
the beginning of its production a century ago. Moreover, Ten;
1
Of course, any classification of soil—the material basis of agriculture—as
detailed and as complete as this has a great many other applicatíons. For example, the effect of building a dam of a certain height upon the land at the back
of the dam can be accurately predicted^thus making it possible to arrange in
advance some of the necessary rural adjustments. Even alternative locations
and heights of dams can be studied in relation to their effect upon agriculture.
Through thoughtful generalisation broad areas may be characterised by their
agricultural possibilities, and the conclusions are invaluable in the planning of
roads, power lines, recreational areas, forest preserves, the location of processing
plants, and similar public facilities and institutions.

THB PROPBR USB OP TH» LAND

S3

nessee Valley soil was generally deficient in phosphorus, which is
one of the most widely needed fertiliser materials, especially for
stimulating the growth of legumes, although the Tennessee Valley
contains substantial deposits.
If the soil is well fortified with mineral fertilisers, including
phosphate, it is possible to grow legumes, and through these the
unlimited quantities of free nitrogen in the air can be absorbed
and led into the sou in much larger quantity than through nitrogen
fertüisef, and without causing damage as when nitrogen fertiliser
is used on row crops unaccompanied by minerals and winter cover
croife, the practice which had so largely contributed to waste the
soils of the south.1 At the same time, the growing of legumes,
especially as winter cover crops, builds back humus into the soil
and protects it from being washed away. The productive capacity
of the land is increased, and as soil erosion is reduced, streams and
reservoirs are protected from silting. The Department of Agriculture had pioneered with new metaphosphatic fertiliser production processes which lent themselves to use through the ample
electrical power facilities of the Authority.2 The Authority reckoned
that if it could produce an improved phosphatic fertiliser at an
attractive price, farmers could be led more generally to grow thé
legumes, clover, alfalfa, lespedeza8 and vetch, as regular and cover
crops, and other leguminous vegetation which would have a high
direct value as well as soil-building qualities.
One of the requirements of a good fertiliser was lower cost to
the farmer. Half of all the fertiliser used in the United States was
phosphatic; but most of it was a superphosphate containing only
from 16 to 20 per cent, of available plant food, or about 180 pounds
in each 1,000 pounds of mixed fertiliser, the whole bulk of which
had nevertheless to be transported from the mine to where it was
processed,, and then on to the farmers. An improved content of
plant food would mean reduction in handling and transport costs,
an important step towards making the fertiliser economically
acceptable4, and therefore towards persuading farmers to adopt
1
Two thirds of all the fertiliser sold in the United States of America has gone
into the thirteen States of the South to be used largely in this objectionable
system
of Cropping.
2
The production of superphosphate requires the smelting of phosphate rock
with coke and silica in electrical furnaces at a temperature of approximately
2,750°
Fahrenheit.
8
Otherwise known as Japanese clover.
4
For the year ended 30 June 1942, the cost of power used in the large-scale
production of phosphate fertiliser by the T.V.A. was a little over $376^000 as against
the total cost of about $2,300^000, that is, roughly one sixth of the total cost.
The wholesale cost of power does not markedly differ from that charged by
.profit utilities for large commercial quantities. The cheapening of the price <>f
fertiliser would therefore need to come from some other factor, and that is why
the T.V.A. looks to a reduction of freight coste.

54

THS T.V.A.: INTERNATIONAL APPLICATION

new agricultural practices. There was already a small amount of
superphosphate, called triple phosphate, on the market, with a
plant food content treble that in ordinary superphosphate; but it
had hitherto been difficult (even where attempted) to convince
farmers, not usually trained in chemistry, that this was really
cheaper to them per unit of plant food, although it cost more per ton.
This is not the place to enter into the intricate technology of
the production of superphosphate.; the T.V.A.'s technical reports
are readily available.1 Through many researches and experiments,
the T.V.A. produced first a 37.1 per cent. PaOs concentration2 of
plant food; then a concentration of 45 per cent., and finally, a
concentration of about 63 per cent, in calcium metaphosphate,
otherwise known as "metaphos".
Whether the T.V.A. can produce a fertiliser at lower cost than
ordinary commercially manufactured fertiliser of the same concentration is as yet problematical. The Joint Investigating Committee found, in 1938, that T.V.A. cost accounting on its fertiliser
manufacturing did not sufficiently exclude^all expensive experimental procedures and include all cost items on a basis clearly
comparable with private industry. Since that time a new accountancy method has been adopted, but the question involved will not
be solved until more time has elapsed. However, the savings in
freight and handling are manifest.
A calculation of savings in freight and handling costs by the
use of concentrated fertiliser carrying 63 per cent, of plant food in
comparison with 16 to 20 per cent, in ordinary superphosphates
was made by the T.V.A. in 1938. The resultant calculated prices to
the farmers were, per ton of available PzOg, $81.73 (for 16 2/3
per cent, superphosphates), and $60.59 (for 66 2/3 per cent.)
respectively. The country as a whole used only a concentration
of mixed fertilisers of the average of 18 per cent, of all three nutrients—nitrogen, phosphorus, and potash.
FSRTILISER TESTS AND DEMONSTRATIONS: RESEARCH, EDUCATION,
TECHNICAL ADVICE

The Authority could not offer a new highly concentrated phosphorus fertiliser to farmers on the mere assumption that it would
give satisfactory results when used on the farm. Each fertiliser
goes through a systematic course of experiment, beginning in the
» Cf. T.V.A. Fertiliser Processes (T.V.A. Publication, Oct. 1940).
Phosphorus pentoxide. Further experiments are still in their very earlylaboratory stages. One is the production of fused phosphate, resulting from the
removal Of the fluorine from the raw phosphate rock. Another is potassium
metaphosphate. This latter analyses about 57 per cent, available PáOj and 34
per cent. K2O2, or approximately 91 per cent, plant food.
2

TECB PROPSR US© OF TBM LAND

55

laboratory, progressing to the State agricultural experiment stations and through greenhouse tests on various soils, on fields and
plots, until finally it is tested on farms under practical conditions
by farmers themselves. The various stages in this testing procedure
are both important and interesting, and especially characteristic
of the T.V.A.
The Act establishing the T.V.A. does not limit the application
of the fertiliser experiment provisions to the Tennessee Valley, and
the Authority has therefore construed the Act to provide for the
testing of its fertilisers on à nation-wide scale. As a result, the
experiment stations in all but one of the 48 States of the Union
and in two outlying possessions have received T.V.A. phosphates
for experimental testing. In 1943 this experimental study of T.V.A.
fertilisers was actively under way in more than 30 States: the
seven Tennessee Valjey States, and the rest outside the Valley.1
The experiment station provides a guide to the State agricultural
extension services in the proper use of T.V.A. phosphates under
farm conditions.
Privately Owned Farms and Public Test-Demonstrations
The mere demonstration that a highly concentrated fertiliser
could be produced was by no means the sole purpose of the Authority's agricultural policy. The grand purpose was the influence that
could be exerted on agricultural ecçnomy and farm management.
The T.V.A. faced the fact that by far the larger part of the land
in the Valley (as elsewhere in the United States) was in the private
hands of some 250,000 farmers, most frequently in small holdings.
Furthermore, for several decades there had already been in operation in each State a system of agricultural education and improvement, administered by the so-called county extension agents who
were in the joint employ of the United States Department of Agriculture and the State Agricultural Extension Service, which is an
arm of the land grant colleges. This extension system or service
is the agency for carrying information to farmers.2
1
A table showing the expenditure on the fertiliser programme is to be found
in Appendix
I.
2
The extension system, especially concerned with furthering the progress
of agriculture in the United States of America, is the organised arrangement
for direct local education in agriculture and home economics established by
formal co-operation between the United States Department of Agriculture and
land grant colleges. The latter are State agricultural colleges subsidised by
grants of land and money by the United States Government, under the Morrill
Land Grant Act, 1862, the Hatch Act, 1884, and the Smith-Lever Act, 1914.
The last-named Act gave a national setting to the system of agricultural education
which had been commenced here and there by several States (especially in the
South after 1900), operating locally through so-called 'county agents' or 'county
extension agents'.
(Foetnale continaed everleaj)

56

rm T.V.A.:

INTERNATIONAL APPLICATION

The Authority's basic tenet was necessarily favourable to the
continuation and development of individual ownership and free
enterprise in fanning. Its own financial resources were insufficient
by themselves to produce change by purchase on a large enough
scale, and therefore it had to try to persuade all the individual
parties to participate with a sense of the value of the Authority's
policy. This point of view was well stated in the Annual Report
of 1939:
Under our system of private ownership' far-reaching adjustments in farm
and forest practices must largely rest upon the voluntary co-operation and selfinterest of those who participate. Such measures must therefore be profitable
to those who employ them if the programme is to be widely and enthusiastically
adopted.. The experience of the T.V.A. during the past year has continued to
demonstrate that landowners and farm operators, the community organisations
which they have established, and State and local agencies working in their interest are willing and competent in this undertaking, (p. 23.)

And again:
In farm and forest practice under our system of private ownership, the interests of the individual are paramount. Here at once the programme becomes
involved in principles of voluntary co-operation and local initiative, which are
basic in our democracy." The experience of the Authority has demonstrated that
these principles are not barriers. Rather they are the means of succeeding. This
programme has been planned, organised, conducted, and to a large extent financed by the fanners themselves, (p. 3.)
^

Under this programme of combino! private ownership and
co-operation among governmental and local agencies, the T.V.A.
makes the fertiliser available without charge to the farmer through
the colleges of agriculture. The agricultural extension arm of the
college supplies to the farmer supervision, leadership, and technical
information on the use of the fertiliser in the improved system of
cropping. Reports on the results of the individual farm demonstrations come to the T.V.A. from the extension services, which obtain
them from the associations or clubs of farmers which supervise
the demonstration farms.
A rather closer view of the system is essential. In 1934 the,
T.V.A. began work with the testing of its fertilisers at the various
experiment stations. This prepared the way for the farm demonstraThe chief feature of the county extension agent system is the permanent local
stationing in a given area of a person trained in agriculture and charted with the
establishment of programmes and methods of improving local conditions. The
land grant colleges and the State Boards of Agriculture appoint the county
agents; the United States Government makes grants to the former, and as a condition requires plans of extension work to be made subject to its approval. The
College is required to establish a separate division of extension work, the director
of which is chosen by the College subject to the approval of the Department of
Agriculture. The agents work with and through farmers* associations, sometimes organised as the Farm Bureau, and various youth clubs, and any other
useful approaches. Cf. Gladys BAKER: The County Agent (Chicago, 1939).

THIS PRORBR «Sl$ OF TBM LAND

^

57

tion programme Which was initiated in 1935, and has gradually
extended until, at thé end of 1941, forty-seven States had tested
T.V.A. phosphatic fertiliser experimentally, and twenty-seven
States were conducting test-démonstration programmes.
Contractual Relations with Existing Agencies
In pursuant» of the policy laid down in the Statute of arranging
with fanners and farm organisations for large-scale practical use
of the new forms of fertilisers, under conditions permitting an
accurate measure of the economic return they produce, the Authority was empowered, but not obliged, to co-operate with existing
agencies or others that might be set up and with the national or
local political institutions. A very wide latitude as to the method
and agencies through which to work was therefore left to the Authority. Indeed, the Authority could apparently have proceeded in
direct contact with the farmers, for even wheife Section 5 (e) permits
operations through county demonstration agents and agricultural
colleges, the Statute says, "or otherwise' as the Board may direct".
And it must always remain a question whether, if this had been
tried, it would not have succeeded even better than the course
actually taken; at present no-one is in a position to say.
The Authority decided that the situation, the individualistic
psychology of the southern farmer, ana its own Jeffersonian democratic ideals all required action in co-operation with existing agencies
already familiar to the farmere and the other residents of the Valley.
This policy is stated in Administrative Bulletin No. 12, Department of Agricultural Relations, which runs as follows:
All feasible means shall be employed to avoid needless duplication or overlapping of funds, facilities, personnel, or programmes of outer Government
agencies. To this end the activities of the Department shall be undertaken wherever practicable through the medium of existing national. State, and local agencies
and institutions, or in co-operation therewith. . .
At each stage in the programme the Department shall; ascertain the nature
and objectives of national programmes of soil restoration and maintenance
initiated by various competent agencies; co-operate with them in determining
the respects in which the proper use of new forms of,plant food may contribute
thereto; and supply such material as will assist in carrying such programmes
into effect. . .
In the conduct of demonstrations and in the widespread application of results,
the Department shall work in close co-operation with practical farmers, enlisting
their active interest and participation through their national organisations and
through local groups capable of assuming responsibility and supervision in their
programmes of such readjusted farm-management systems as may be brought
about through the proper use of new forms of plant food material.

The system established is based upon two contractual arrangements: (1) a Memorandum of Understanding between the United

58

THB T.V.A.: INTERNATIONAL APPLICATION

States Department of Agriculture, the land grant colleges of the
area1 and the Authority; and (2) contracts between the land grant
colleges and the T.V.A. alone.
Under the first Memorandum of Understanding, the national
atid State institutions established for agricultural teaching, research
and extension activities in the States materially affected by the
Tennessee Valley Act, having already developed comprehensive
training, research and extension projects, established valuable
facilities, equipment, and a trained personnel, and accumulated
a fund of scientific facts and experience, agree to co-ordinate the
phases of research, extension, land-use planning, and educational
activities of the experiment stations and extension systems in relation to activities in which the T.V.A. is concerned. These activities
are concerned with a unified regional agricultural problem. The
agricultural colleges of the Valley States designate a State contact
officer selected by the director of the experiment station and the
director of extension, financed jointly by these agencies, with contributions from the Department of Agriculture and the T.V.A.
This officer has the duty of familiarising himself with the agricultural interests of the T.V.A. and the Department of Agriculture,
and passing on the information to the experiment station and
extension staffs in his State. The memorandum looks to the creation of joint committees of these staffs in each State, to consider
special matters like erosion control, land utilisation, land settlement,
and rural electrification. To guide these co-ordinated agencies,
there Was established a Correlating Committee of three members,
one each from the Department of Agriculture, the Valley agricultural colleges en bloc, and the T.V.A. This Committee has a
full-time executive secretary who divides his time between Washington, the several States, and the T.VA.
The second phase is the contracts made between the Authority
and the seven Valley ¡States (and, as the farm demonstration plan
progressed, with a number of States outside the Valley) by which
the latter implement the policy of the T.V.A. These contracts
also begin with a preamble containing a statement of objectives,
as quoted above, and explain that the demonstrations are needed
in order to determine the basis for readjustments in farm practices
and systems. There is the relationship of mutual benefit, whereby
the Authority enlists the personnel facilities and relationships of
the collegesin concerted action and without duplication of effort,
l
The University of Tennessee; the Alabama Polytechnic Institute; the
University of Kentucky; the North Caroling College of Agriculture; the Virginia
Polytechnic Institute; the Georgia State College <á Agriculture; and the Mississippi State Extension Department.

THS PROPER ÚSS OF TEES LAND

59

while the funds and facilities of these colleges are supplemented
by the T,V.À. for the sendees they perform in co-operation
with it.
The contract then binds the parties to undertake to study,
determine, and apply principles of rational farm management, and
to encourage the widespread adoption thereof. They have to work
within the agreement betweep the Department of Agriculture, the
T.V.A. and the colleges. Their chief objectives are clearly stated:
readjustment of cropping systems to increase the acreage of soil
protecting crops, such as sod-formîng legumes, small grains, grasses,
and reduce the percentage of bare land and land devoted to tilled
crops; the liberal application of phosphatic fertilisers, supplemented
with lime when necessary, to promote the growth of ground cover,
and especially legumes; the use of mechanical erosion control
devices; and the progressive adaptation of these elements of soil
management systems into a sound farm business organisation providing adequate farm income.
Furthermore, the contract recognises that to achieve the purposes of the demonstrations, accurate measurement of results is
necessary, and therefore must be carried on continuously according
to established methods and techniques. This includes careful and
deliberate agreement upon the selection of counties to secure a
representative variety of soil and climatic conditions, based in
part upon the soil surveys. The land grant colleges, through their
experiment stations, take the responsibility of interpreting the
meaning of the survey and assisting in its use. The T.V.A. reimburses the colleges for funds expended in the expansion of the facilities and personnel needed to complete this survey within a givea
time, and provides the services of an expert approved by the college,,
who consults with all agencies concerned in guiding these surveys
and in interpreting and applying their results to the programmeAlso, the Authority promises to make available its own base maps
of the Tennessee Valley area, while the colleges agree to make
available their libraries, the results of investigations and experiments, the staff for purposes Qf interpretation, their research laboratories, experimental farms, facilities.and personnel. The T-VA-'s
payments are made as monthly reimburseraents to the land grant
colleges on receipt of satisfactory records.
In the fiscal year 1941 the number of active test-demonstration
farms numbered 26,541. These covered some 5,250,000 acres and
were established in 756 counties scattered through 27 States; 85
per cent, were located in the seven Tennessee Valley States.1
1

Cf. Appendix I, table 3.

60

,

THB T.V.A.: INTERNATIONAL APPLICATION

EstaUishing Farmers' Associations or CluWs
Farm demonstrations require supervision, and they are supervised by the regular county extension agents, but, in addition,
within the Tennessee Valley, some 120 assistant county agents
and 26 supervisors and special agents are employed and paid by
the State Extension Services. The T.V.A. reimburses the colleges
for the funds they contribute to the Extension Services for the payment of these agents. "County agricultural associations" are
established, and the interest and co-operation of the individual
farmers enlisted in the following manner. County agents encourage
local meetings of farm communities. Sometimes a simple business
meeting of farmers suffices, but in most cases a cdmmunity meeting,
complete with wives and children, is convened, and the proceedings-are partly social and partly educational. In the course of the
meeting the dangers threatening the land and their remedies are
described, somietimes with the aid of lantern slides and films; and
it is made dear to the farmers that they should improve the land
they now occupy, because the days of the American frontier, when
they might have eased their condition by moving to more fertile
land elsewhere, have passed away. The appeal islbo a better standard of living, and the direct relationship between better farm
methods and high income, low individual tax rates, good schools
and so on, is brought clearly, home.
The farmers are impressed with the need of organising in order
to operate the new system, ineluding the use of T.V.A. phosphate.
How this can be done is explained. Wtasre BO other orgamaatjon
is available to sponsor the t^i^: th^n^i^ «Étai^^ ^s^g tíiem>
selves voluntary soil conseraatioa of soil wptsóvemeat associations
or clubs, in order to secure a coiiiWn^tiMt of the intelligence of a
number of farmers to cope with their concrete problems.1 Thé testdemonstration farms are selected by Ike club according to type of
farming, involving differences in combinations of climate, temperature, days of sunshine, length of day, rainfall, humidity, air currents,
soil conditions, topography, density of population, and type and
proportions of crops and livestock. If the farmers themselves are
willing to undertake a demonstration, thé college will come in with
scientific help and encouragement, and the T.V.A. will make phosphate available. They karn that the T.V.A. will work with them
only through the extension system, with whieh they are already
long familiar. Sooner or later, sonae local leader among the farmers
makes contact with the county arf assfetaat county agents and
proposes a conservation assodatfea.
1
About libree quarters of these elïÉ® hseve a meintoersiiip of from under 100
up to 300.

THB PROPER ÜSB OF THB LAND

61

The Test-Demonstration in Practice
The farmers' association makes an agreement with the agricultural extension service. The fanner who has been selected as
the operator of a test-demonstration is first in the order of those
making the agreement, and he agrees to carry out certain practices
in the use of the phosphate. He will co-operate with the county
agent and assisSmt agent in developing sound methods of agriculture. He will keep adequate farming records; practise methods
of erosion control agreed upon; use T.V.A. fertiliser only on soil
protecting crops and not on inter-tilled crops, such as com, tobacco,
cotton or potatoes; refrain at least for a period of five years from
ploughing under permanent pastures to which fertilisers have been
applied; indicate on the map of his farm the acres to which T.V.A.
fertilisers have been applied, the dates and amounts per acre of
the applications; leave certain portions of each field unfertilised in
order to check the effectiveness of the fertiliser; allow free access
to his farm to the county agent or his representative for inspection
purposes. Although the fertiliser is a donation, the farmer has to
pay the freight, handling and other miscellaneous expenses on the
fertiliser received from Muscle Shoals.
The T.V.A. considers that when a fanner is a test-demonstrator, he takes on a public responsibility, and the farm, which belongs
to him, becomes a semi-public test and demonstration ground.
The T.V.A. fertiliser is not given directly to the farmer, but through
the college is made over to the association or club, which passes it
on to the farmer. The county agents and their specialists participate, hot m tfeesense of "showing the farmer how", but as scientific
advisers^ since the T.V,A. recognises that the farmer is best acquainted with his local conditions and that each farm has its own
character, and is indeed a combination of many diverse agricultural
and human facftors. The part played by the trained agricultural
worker is in applying technical guidance and educational devices,
in order that the farmers may the better determine their own
course of management.
There is very close and careful consultation between the agents,
the extension specialists, and the demonstrator. Each farm is
treated as a separate and individual problem, and each factor in
its wealth-producing activities—pasture, arable land, dairy, fruit
crops, cash crops, timber and recuperative cover growing—must
be taken in relationship with the rest since, even in the course of
the demonstration, each farmer must meet the demands of the
home and his current commitments. Thp assumption of responsibility as a test-demonstration farmer may involve quite drastic

62

THE T.V.A.: INTERNATIONAL APPLICATION

and costly reorganisation and improvements on the farm, such as
draining, terracing, fencing, and so on. Home economy may need
adjustment to what the farm is- producing. Furthermore, the
farmer has to pay for the quantities of limestone necessary to
supplement the phosphatic fertiliser supplied by the T.V.A. Hence,
it is important to overcome the scepticism of the farmer, and persuade him that he will be the better off at the end of the demonstration period and if he continues good methods. The demonstration
farmer is under the fairly continual observation of his neighbours
who formed the club and helped to designate him because of his
good standing and trustworthiness, for they wish to adopt on their
own farms those methods that prove beneficial.
The success of the demonstration is not to be measured simply
by what happens to this particular tract of land, or the quality of
it, but rather by the skill with which it is managed; and by the fact
that those in close association may take notice and be convinced.
It is not the part of that particular farmer to preach the lessons
that he may so profitably have learned ; it is rather for the association to take note, and even more for the county agents and other
extension workers to bring home the lessons of the demonstration
and to encourage all around to take up similar methods. Through
the unit farm tests, the way to an "area" test, later to be described,
is opened; As farm tests spread, the farms on the periphery tend
to start another circle of farms under test, and so the work and
influence progress.
The Alabama Extension Service made a study of 290 farms
under T.V.A. demonstration over a six-year period. An average of
57 persons had visited each farm in that period, of whom 35 had
adopted improved farm practices, and 15 had been influenced
to participate in the Agricultural Adjustment Agency's programme.
"An Accurate Measure of the Economic Return"

Naturally, in order that the demonstration may offer lessons,
it is important that the farmer should honour his agreement to keep
records and that these should be duly analysed from time to time.1
The T.V.A. does not lay down the course which the farmer has to
pursue; the State extension systems advise him on these matters,
1
Section S (&) of the Statute says: "To arrange with farmers and farm associations for large-scale practical use of the new forms of fertilisers under conditions
permitting an accurate measure of the economic return they produce". Section S
(e) adds mat the donations or sales of fertiliser "for experimentation, education
and the introduction of the use of such products in co-operation with practical
farmers" is to be conducted "so as to obtain information as to tibie value, efflect
and best methods of their use".

IBM PROPER ÜS1 OF THS LAND

63

occasionally assisted by suggestions from the correlating committee at its half-yearly meetings. ' Neither does the T.V.A. lay
down the form of records. These are prepared by the land grant
colleges, which means that there is a variation, State by State, in
content and quality. Generally they follow a farm record book
patterned after that of the United States Department of Agriculture in co-operation with thé Agricultural Adjustment Administration and the State extension economists. These books are more
or less detailed accountancy analyses for the farm, providing for
an annual recording of stocks, receipts, purchases, expenses, map
of the farm, livestock breeding, note and mortgage transactions,
purchase and sale of real estate, and so on.
It is essential for the success of the demonstration that the
records should be full and accurate. This is, in the first place, a
responsibility of the farmer assisted by the county agents; secondly,
of the State extension services; and, as the procedure has come to
be administered, only in a third and indirect way a responsibility
of the T.V.A. Yet, according to the Statute, the responsibility for
the large-scale practical use of the fertilisers "under conditions permitting an accurate measure of the economic return they produce"
rests first and foremost upon the Authority. It may be that the
full organisation and steady pressure needed to secure full and
accurate returns from the farmers could not, and cannot for some
years, be developed otherwise than through the methods already
adopted by the Authority. The Authority has not yet been able
to develop its co-operative responsibility to such a point as to ensure
that farmers keep records as accurately as desirable, or that the
county agents, the assistant agents, and other representatives of
the State extension services exert swift pressure to this end. It has
been obliged to proceed by gradual educational methods. It is
hoped that the time is not far distant when farm reports will be
complete, exact, and up to date.
The county agents have a complex and difficult job. They must
review the farm record books, and make clear to the demonstration farmer himself and to the other members of tirç association
the meaning of the results. They must also educate and persuade the farmer himself to understand the meaning of keeping
records.
The fertiliser provided by the T.V.A. is of substantial value.
For example, phosphate is normally made available for soil conserving crops at the rate of 40 pounds of triple superphosphate per
acre per year. The cost may be calculated at 1.9 cents per pound,
that is to say, something like 76 cents per acre, against which the
farmer places his labour, equipment, and hazards. The farms in

64

THB T.V.A.: INTERNATIONAL APPLICATION

the Valley area, though varying very greatly in size, are mainly
of about 25 to 50 acres, but 90 per cent, of the demonstration farms
are from 51 acres upwards1, so that year after year quite a substantial contribution to the demonstration system comes from the
Authority.2 Before the T.V.A. came into existence the extension
service had urged farmers to undertake such a system of demonstrations, but without the free contribution of fertiliser and the
joint effort of farmers the scheme was unsuccessful. Not all the
fanners who make an agreement keep it; some use the fertiliser
dishonestly for the production of cash crops. The proportion of
these backsliders, however, seems to be quite small; this is attributed partly to the good sense of the farmers and partly to the
sanction of the public opinion of the local soil conservation association.
Area Tests
Beàdes conducting the unit farm demonstrations, the Authority
also participates in area test-demonstrations, an interesting and
highly instructive supplement to demonstration on individual
farms. An area test-demonstration includes a number of farms in
the same community. The area demonstration is extremely valuable, because an entire community may be affected by a common
geographical factor; for example, it may lie in the watershed of a
small stream tributary to the river, or the single farms may be
conducting their operations as complementary to each other, some
producing milk, others crops, others pulse and small grains, others
tending herds for breeding. These areas vary from 1,000 to 10,000^
acres. In the Tennessee Valley there are some averaging 5,000
acres and containing several score farms. Such area demonstrations
are started only where considerable progress has already been made
by the test-demonstrations on angle or unit farms, and where a
considerable proportion of the fanners are interested. From tame
to time, assisted by the county agents and any necessary specialists,
the farmers make changes in the plan originally sketched for each
area.
1

About 10 per cent, of test-demonstration farms are SO acres in size or smaller,
33 per cent, are 51 to 100 acres, and 20 per cent, are 101 to ISO-acres. Though
some small farms from 25 acres up are included in the demonstrations, the main
concern of the county agent is with those of between 51 and ISO acres. This
figure has significance when it is considered that the average size of a farm in
the State of Tennessee is slightly under 75 acres, and only in Georgia does the
average
acreage go up to 110.
a
The T.VA.'s interpretation of the donations of fertiliser is that they should
not be considered as a donation but rather as a partnership arrangement whereby
both the farmer and the T.VA,, through the land grant colleges, supply valuable
goods and services in order to discover certain fundamental principles affecting
agriculture.

THB PROPBR USB OF THB LAND

65

Results of Demonstration Programme
After some six years of farm demonstration, the Authority has
been able to see results.1 These appear in reports prepared by the
extension services in special areas, based upon a single farm or
several, or upon a number of counties, and designed to show what
progress, if any, has been made along the Unes anticipated by the
colleges and the Authority.2 It is impossible at this stage of the
Authority's operations to give a complete survey, but some examples which the colleges have made public are extracted in a
later chapter.3 At this point one widespread sample alone may
be cited. It is the record gathered by the Tennessee Agricultural
Extension Service of 100 farms.
Seven stages of progress were noted and the number of farms
that had advanced to each was set down. On 71 farms that showed
greater vigour in livestock (stage II) there was an increase of 9
in the number of calves born per 100 cows. On the 37 farms showing
improvement in land use (stage IV), com acreage was reduced by
20 per cent., while acreage of legumes and hay and pasture grasses
was increased by IS per cent., and acreage of winter cover crops
was increased by 26 per cent. Furthermore, on these 37 farms the
number of cows was increased by 18 per cent., the number of calves
was increased by 49 per cent., the numbei; of cattle and calves purchased was decreased by 25 per cent., and the quantity of dairy
products sold was increased by 15 per cent. Other results are shown
in the following table.
farms

Ôt*

Results

83

I

71

II

52

III

Improved biological adjustments
More vigorous growth of legumes and grasses treated with
lime, phosphate, and other fertilisers.
Increased vigour of livestock consuming the legumes
and grasses.'
Increased yields and quality of crops following the treated
legumes and grasses.

1
The value of the T.V.A. fertiliser at present made available to the farmers
for co-operative tests has been assessed by computation of the money value of
thé nitrogen it puts back into the soil, if that amount of nitrogen had been bought
commercially. One pound of phosphate used on legumes, it has been computed,
permits the plant to utilise from 3 to S pounds of nitrogen from the air. It is
estimated that T,V.A. phosphates used in demonstrations would thus equal 124
million pounds of nitrogen drawn from the air, worth $10 to $15 million. Cf.
Budget Justification,: Hearings, Independent Offices Appropriation Bill, 1940; H.R.
1939,
p. 1804.
2
See Results of Co'OperaMse Tests, etc, by the Valley States Land Grant
Colleges (T.V.A., Nov. 1940), Parts I and II; also Carleton R. BAIX: The Work
of the
Land Grant Colleges in the Tennessee Valley (1939).
8
More detailed figures are given in Chapter XIII.

66

THS T.V.A.: INTERNATIONAL APPLICATION

Number of
farms

Results
37
33

20

9

Impromd farm management
IV Changes in land use, especially shifting row crops to
pasture and hay.
V Adjustments in kinds and numbers of livestock and livestock production practices.
Improved family welfare
VI Increased security and well-being of the family, or families living on the farm.
VII

Improved community •welfare
Increased security and well-being of the people of the
neighbourhood, community, county, area, State, region
and nation.

T.V.A. PHOSPHATES AND THB NATION
The T.V.A. is interested in concentrated phosphatic fertiliser
both because of the special needs of the Valley, and of its general
concern for the national good. By 30 June 1939, the T.V.A. had
purchased nearly 3,500 acres of phosphate lands in the Tennessee
area, costing $1,288,000 (including prospecting and land acquisition
costs), as a reserve for its own manufacturing programme.
• '
From the beginning the T.V.A. has shown concern for the national
use of phosphatic fertiliser and the ownership of deposits. It has
made surveys of the latter, and estimates of the amounts required
by the whole United States in a very long-term appreciation of the
needs of the soil. It has suggested the purchase of deposits by the
United States Government to add to those already govemmentally
owned (90 per cent, of all) in Idaho, Montana, Wyoming and Utah.
These deposits are low grade ore, but T.V.A. discoveries and refinements of production methods, by greatly decreasing transport and
handling costs, have given sound promise of their exploitation and
distribution if the appropriate hydroelectric or steam plants should
be4set up on the spot. The T.V.A. has manifested great concern regarding the disastrous consequences which may result from neglect of
the problem of dwindling phosphorus reserves. Nearly four million
tons of rock phosphate are mined annually (chiefly in Florida and
Tennessee, because close to fertiliser consuming areas), of which
one million tons are exported. The rest was necessary to meet
American needs in 1939. But the T.V.A. observes that many times
more than three million tons are needed to make up the annual
losses in the quality of American soil, and, at the rate of current
extraction, the deposits of Florida and Tennessee will be exhausted
in SO years. Hence, the Authority made recommendations to the
President for securing phosphate reserves. The recommendations

THB PROPER ÜSS OF THE LAND

67

were passed on by the President to Congress1, and the matter was
taken into consideration by a Congressional Committee. This
Committee recommended2 that a committee should be appointed
for further investigation of phosphate deposits, their ownership
and use, and other mineral resources; that the Geological Survey
be enabled to make a thorough survey of United States phosphate
reserves; that the T.V.A. experimental work be continued and
extended; that the Agricultural Adjustment Agency programme
be extended ; that an experimental plant, for education and demonstration, be established in the vicinity of the western State phosphate reserves, and that meanwhile the T.V.A. should conduct
experiments with these reserves,.especially for use on western soils;'
and that the United States Government should purchase privately
owned phosphate lands now in a non-productive condition.8
The T.V.A. does not sell fertiliser except in one case. It
made available to the Agricultural Adjustment Administration4
superphosphate for distribution as a part of the Federal grantin-aid, implementing the national soil conservation programme.
In 1938 some 36,000 tons were so used ; in, 1939,45,000. This enables
the Authority's influence towards better soil and crop practices to
be extended. The A.A.A. reimbursed the Authority on the basis
of cost of production based on available plant food, which has
varied from 75 cents per unit to 64 cents per unit (20 pounds of
P2O5).

Fertiliser companies have watched T.V.A. operations with a
careful eye, lest, as with its power operations, it should produce on
a really large scale for the open market.8 This the T.V.A. has never
attempted. The companies have even complained of the substantial amounts supplied free of cost by the T.V.A. and the A.A.A.
under the demonstration scheme. For how long the continued
1
Cf. Presidential Recommendalion to Congress on Production and Conservation
0/ Pltosphates,
20 May 1938.
2
76th Congress, 1st Session, House Document No. 21, Report of Joint Congressional
Committee to Iméstigate. . . Phosphate Resources qf U.S. (17 Jan. 1939).
a
In November 1942 a consulting committee on western phosphate was appointed,
but the war has impeded progress.
4
The Agricultural Adjustment Administration, a branch of the United States
Department of Agriculture, was established in May 1933 to maintain continuous
and stable supplies of basic farm products at prices fair to both farmers and consumers, to conserve soil resources and individual farms, and tô assist farmers
in obtaining an equitable share of the national income. In February 1942 the
Agricultural Adjustment Administration was converted into the Agricultural
Adjustment
Agency of the Department of Agriculture.
8
Mr. C. J. Brand, Executive Secretary of the National Fertiliser Association
giving evidence before the Joint Committee of Investigation (Hearings, Part X,
p..4358) said: "The T.V.A. conducts research on new processes and on the testing
Of new projects and new products, which we certainly do- not criticise, in fact
which we rather applaud, because we think that the Authority has funds to do
things which the private industry has been unable to do".

68

THB T.V.A.: INTERNATIONAL APPLICATION

experimentation on a large scale can be maintained, without doing
much more, or much less, is a serious question. As has been said,
the T.V.A. has power to sell fertiliser, but does not do so because public
opinion would probably not support it. At any rate, one of the
results of T.V.A. production of concentrated fertiliser has certainly
been to stimulate fertiliser manufacturers to produce more concentrated superphosphate and to hold down its price. This result
lias not yet assumed large dimensions, but it is perceptible, beneficial, and promises to become ever more important. It is indeed
urgent that it should"; for supposing that the T.V.A. persuades the
farmers to use superphosphate and therefore to demand it, the
educative work will have been of little avail if concentrated superphosphate is not manufactured to meet the demand.
Is the T.V.A.'s message, as expressed in its farm demonstration
scheme, catching on ? That is the test of its worth; for the forcing
quality of phosphates on crops can be tested in the laboratory or
in field plots. There are farm demonstrations in some parts of
counties, amounting in all to something like 10 per cent, of sell the
counties in the United States. The appreciable increase in the productivity of land, cattle products and poultry has been amply
demonstrated by the comparison of land farmed and fertilised
under land grant college guidance and other land.1 But the T.V.A.
has also discovered that converts have been made. For example,
in 13 counties of Alabama with three pounds of purchased phosphate for each pound of demonstration phosphate used, the improved pasture area increased from 1935 to 1940 from 2,000 to
29,000 acres; the area of winter legumes from 60,000 to 204,000
acres; the area of perennial legumes from 1,200 acres to 11,000
acres; and the area of lespedeza from 100,000 to 178,000 acres.
In south-west Virginia, by 1935, after many years of floating knowledge that phosphate and lime were needed, only 5 per cent, of the
farmers had treated their pastures. By 1940, over 70 per cent, of
the farmers had adopted this practice and were using 45 per cent,
of their A.A.A. payments for lime and phosphate. In 1940, in the
North Carolina counties in the T.V.A. area, where the demonstration programme is most intensive, farms applied 56.6 pounds of
A.A.A. superphosphate to their cropland and open pasture; but
farms in non-demonstration counties applied only 1.6 pounds.
There are many other indices of the same nature to show that the
lesson is being learned and applied. The research department of the
American Farm Bureau Federation reported in November 1940
that the T.V.A. fertiliser production and farm demonstration policy
1

Πtables ia Chapter XIII.

THB PROPBR USB OF THB LAND

'

69

were sound, and recommended the extension of the use of the improved plant foods, and that Congress furthersupport the programme.
NlTRAXBS AND PHOSPHORUS POR NAïIONAI, DBPBNCB

It was noticed earlier that an important factor leading to the
establishment of the.T.V.A. was the building by the United States
Government of nitrate plants during the war of 1914-1918 to aid
the production of munitions and fertilisers. Section 5 of the T.V.A.
Statute put Nitrate Plants Nos. 1 and 2, the steam generating
plants connected with them, and the limestone quarry, into the
Authority's charge. The Authority was required to maintain in a
stand-by condition such portions of Nitrate Plant No. 2 as were
not actually used in its fertiliser operations. The Authority, however, as has been seen, found that the production of phosphoric
fertiliser was technically and economically preferable to the production of nitrates. Nitrate Plant Np. 1 was obsolete; the War
Department did not regard it a» a military asset; it was fit only
for scrap, though the Authority left the problem alone. As regards
Nitrate Plant No. 2, the Authority, at the request of the War
Department, originally prepared a plan for rehabilitating a part
of the plant to produce apimonium-nitrate, at a cost of nearly
$1,000,000; but this was rejected, and not until 3 December 1940 did
the War Department direct the Authority to recondition the plant.
A little earlier than this the Authority had already begun to build
a new and modem synthetic ammonia works to replace the cyanindd process installed when the plant was originally built; the War
Department provided the funds both for the reconditioning and
the new construction. The Authority has planned for the production of ISO tons of anhydrous ammonia a day; when fed into the
ammonium nitrate plant this produces 300 tons daily of ingredients
for explosives. As in the previous world war, it is proposed that
the plant may later be available for experimental work with fertilisers. The phosphorus produced by the Authority is also an important element in the manufacture of munitions, and elemental
phosphorus has been sold to the War Department as a constituent
of "munitions. In order to increase its phosphorus production satisfactorily, the Authority set up a new electric furnace designed to
add the equivalent of 50,000 tons per year to the 100,000 of concentrated fertiliser already produced. At Mobile, Alabama, work
is planned for a phosphorus and metaphosphate plant, of a capacity
equivalent to 75,000 tons of the latter annually, to be ready in
1944, located at Mobile to take advantage of the large reserves of
phosphate rock in Florida, easily accessible by water transport.

10

WM T.V.A.: ÎNTSENAtlÔNAiL APPMCATION
^
DK^CT ÉROSION CONTROI,

The farm, demonstration work of the T.V.A. serves the indirect
prevention.of erosion by encouraging the growth of a matting of
leguminous and other cover crops. By itself, this is sometimes insufficient to cope with the problem of severe erosion, and the Authority has therefore taken certain other direct and supplementary,
measures. The first of these is the encouragement of terradng, an
, ancient method of making trenches and shallow dykes along the
contour of the land, to hold the water and reduce the speed at
which it runs off, making it "walk" instead of rushing downhill.
The Authority was not the pioneer in the introduction of terracing
in the Valley. In the State of Alabama, farmers' associations
organised on a county basis, encouraged and assisted by the State
extension services, had devised an arrangement with mknufacturefs
of terracing machinery for the purchase of large power grading
machines, the purchases being Underwritten by some responsible,
local agency. The assistant county agent and the district terracing
supervisor manage the machines with the use of local labour and
are responsible for the scientific layout of the terraces; the farmers
pay the associations between $3 and $4 per hour for the work.
The T.V.A., through its agricultural department and the arrangement with the extension services already described, set itself to
encourage these operations. The number of power terracing units
was SS in 1935 and 1936; by 1938, there were 70 large units and
5,000 individual and small units. The increase in the area terraced
has been shown by the fact that, in the year 1935, 26,000 acres were
terraced; by 1941 nearly 700,000 acres had been terraced.1
FORSSXRY

Soil erosion control, direct and indirect, involves thé problem
of afforestation, but afforestation goes beyond this in its economic
significance. More than half the land area of the Valley is still
1

The figures are as follows:
Year
—
1935
1936
1937
1938
1939
1940
1941

Cumulative
total acres
terraced
26.307
92,292
361,799
468,904
382,669
673,323

, In the year 1938-39 large units terraced 41,515 acres and small units 65,590
acres; and the cumulative total of 468,904 acres terraced had been contributed
as to 269;637 acres by large units and as to 199,267 acres by smaill units. In the
year ending 30 June 1938,, of the large power outfits, 14 were owned <
and '56 by associations.

THB PROPER USE OF THB LAND

71

under forest, but the timber volume is only about 10 per cent, of
the original stand. In the Tennessee Valley, forests are a means
of retarding excessive water run-off and of preventing soil erosion
and the silting of rivers; and they, are an economic resource which
produces timber and its by-products and which provides a habitat
for wild life.
So far as erosion control and reafforestation are concerned, the
Authority's soil and forest surveys and regional land use programme
indicate the areas requiring immediate attention. Through the
county agents of the State extension services, farmers apply for
soil-erosion-control work. If there is merit in the application, a
contract is made with the farmer by which he must maintain the
improvement of his land for at least five years. Then, year by
year, projects are established to construct check dams and diversion ditches, to plough in gully banks, and to mulch and matt
sheet eroded areas. This is supplemented by the planting of forest
trees, produced by the Authority in its two forest tree crop nurseries
^maintained at Clinton, Tennessee, and Muscle Shoals, Alabama,
and distributed free to farmers with whom it has contracts. In all
this work the Authority has been assisted by men from 18 to 36
from Civilian Conservation Corps1 camps located in the Valley
area. From 1933 to 1942 these camps provided approximately
S million man days of labour on forestry projects sponsored by the
Authority, being maintained, of course, by the Federal Government. Altogether some 136,000 seriously eroded and gullied acres
on approximately 15,000 farms having a total area of more than
two million acres have been protected. Up to the end of 1942 more
than 150 million forest trees had been planted in the Valley through
this T.V.A. co-operative programme, and of these, 105 million were
used for erosion control on farm lands.2
Besides the trees mainly on private land in connection with
erosion control, the Authority has planted nearly 45 million on
37,000 acres of its own land acquired from its reservoir operations.
Thus, it has also established protective strips around the margins
of lakes created by its dams.
Protection and development of the forest resources of the watershed naturally promote improved use of land and resources, ançl
thus facilitate the achievement of flood control and navigation
objectives. The Authority's activities in reafforestation and forest
development are designed to increase the infiltration of rainfall,
1
The Civilian Conservation Corps (C.C.C.) was established in April 1933
to provide employment and vocational training for youthful unemployed citizens.
It was
abolished in June 1943.
2
The advent of the war has caused the drastic reduction of these activities.

72

THB T.V.A.: INTBRNATIONAL APPLICATION

reduce run-off, and regulate the iow of streams. Fortunately,
action taken in this direction also increases the economic value of
the forest by making it more productive. Thus the general welfare
is served in a dual way through the encouragement and development of forest conservation practices in every possible manner,
with and through existing forestry agencies. The agency with which
the Authority co-operates and the type of co-operation depend .to
a considerable extent upon the type of landowner involved. For
instance, the extension service is primarily interested in farm forests;
the State foresters have an over-all interest; whereas certain public
owners are ordinarily interested only in the tracts under their
jurisdiction.
Educational Guidance of Private Owners
The problem of ownership, therefore, is a fundamental factor
to be'considered in the designing of a forestry programme, particularly where co-operation must be conducted with several agencies,
each of which is somewhat jealous of its prerogatives in this field.
To achieve management conducive to sustained yield among a
large group of scattered landowners, each with an individual education and outlook, is a very difficult task.
Farm forests cover 39 per cent, of the forest area of the Tennessee Valley and involve over 150,000 owners. As such a large
proportion of the forest resources of the Valley form part of farms,
it is realised that (as with the fertiliser programme) private ownership must be encouraged and forestry treated as but one aspect
of the total farm economy. Such a programme must necessarily
be one of education—issue of educational materials, use of motion
picture films, furnishing of free trees for reafforestation demonstrations, making demonstrations of improved forest practices, reducing
woodland grazing, and encouraging organisation for adequate fire
prevention. Thus, the farm forestry problem is approached as one
of educatmg the landowner to the desirability of so managing the
forest that maximum production and resultant income afe obtained.
The highly expert advisory assistance furnished to the Extension
Services by the Authority is having a generally beneficial effect on
practices.
Forty-three per cent, of non-farm forest1 is owned, in large holdings up to several hundred thousand acres, by corporations and
individuals, many of whom are non-residents. Although a few such
tracts are well managed, most of them are being rapidly exploited
for timber, coal, iron and phosphate. These lands become chronic1

See Appendix I, table 1.

v

THIS PROPSR VSB OK THE LAND

73

ally tax delinquent, are subject.to timber theft, and present a
serious problem in public administration. Where such landowners
have an interest in improving practices, an educational approach,
through the offices of the various State foresters, is followed. However, lack of interest on the part of these owners makes this one of
the remaining urgent problems to be solved.
The public forests represent a permanent and stable type of
ownership. These have been acquired by various public agencies,
Federal, State, and municipal, for purposes of watershed protection,
timber and game development, or recreation. On these areas longterm programmes of improvement directed towards pcoducing the'
greatest public benefits are possible, and the Authority is assisting
these agencies by making available to them the advisory services
of specialists in the various forestry fields. Were all the forest land
in such stable ownership, sustained industries and employment and
the resultant stabilisation of local economy could unquestionably
be achieved. However, the Authority believes in preserving private
initiative and trusting to the capitalistic incentive of profit, and
because of this it has long since given up its original design of solving
the forestry problem through the public acquisition of large tracts
of forest land and a policy of intense development as practised in
some European countries.
Forest Survey and Prospects
As a basis for deternaining what its programme should be, the
Authority has completed a survey of the forest resources on all
the 14 million acres of forest within the Tennessee Valley. This
survey shows that the 54 per cent, of the Valley which is covered
by forests is now producing only one third to one half of the local
employment and income which it might produce under prudent
management and protection. Even so, the forest industries of the
area manufacturing primary products employ 63,000 workers,
drawing annual wages in excess of $42 million. These industries
manufacture such products as lumber, cross-ties, veneer, fuelwood,
pulpwood, and cooperage. Other wood-using industries reprocessing
these rough products employ an additional 9,000 workers drawing
annual wages of $7,600,000. Thus, inadequately exploited, the
forest resources yet furnish employment to 72,000 workers who
draw $50 million in wages annually and produce approximately
$11:2 million worth of products.
It is estimated that in time a programme of forest development
could at least double the production of the forest, and afford employment to about 150,000 workers producing products valued in

74

THB T.V.A.: INTERNATIONAL APPLICATION

excess of $200 million. Such a development is being encouraged
by the Authority in forest and factory. In co-operation with State
engineering colleges and the United States Forest Products Laboratory, the Authority is investigating methods of producing laminated lumber manufactured from small, defective hardwood trees,
tree tops, and logging waste now considered unmerchantable. This
investigation has reached the pilot-plant stage and if successful
should add to the manufacturing possibilities of the Valley's raw
materials. Other investigations looking towards further manufacturing of raw wood are being undertaken, and it is upon the
results of such studies and the conclusions drawn from them that
the Authority relies to bring home to individuals and public agencies of the area the importance of forest conservation.
Co-operation with other Agencies
At the same time, improved methods of timber culture are being
studied and demonstrated. To this end the Authority has a memorandum of understanding with the United States Forest Service,
whereby it collaborates with the Appalachian, Southern, and
Central States Forest Experiment Stations and the Forest Products
Laboratory in co-operative investigations of experimental areas.
In addition, data are being collected and studies made on various
parts of the forested areas which the Authority has acquired in connection with its dam construction programme. These experiments
are designed to determine thé most satisfactory species and mixtures of trees to be used for reafforestation, rates of tree growth on
different types of soil, determination of the most economical
methods of handling stands of timber of various mixtures and stages
of growth, and many other studies.which have a wide and practical
applicability throughout the Valley. The information obtained is
then made available to forest landowners and agencies for use on
their own lands.
Because of its interest in flood control, the Authority, through
investigations such as the above, is also determining the effect of
reafforestation and other forestry practices upon the rate of erosion,
siltation, and water run-off. Thirteen drainages, ranging from 100 to
17,000 acres, have been equipped for such investigations. Measurements of rainfall, stream flow, and other factors, including ground
water, are taken from typical streams before treatment, and are
continued over a period of years after erosion control and forestry
treatment to determine the exact effectiveness of the measures
taken. From the results of such studies it is hoped that a quantitative measure of the effectiveness of forest cover for controlling

THE PROPSR USB OF THB LAND

75

run-off and erosion and increasing ground water storage may be
obtained.
_
Finally, the Authority is interested in the protection of forests
from fire and their care as a haven of wild life. On its own lands,
of course, the T.V.A. has an adequate number of fireguards, but
its own lands are only a very small proportion of the total acreage
to be protected. Hence it co-operates with the States-and the
United States Forest Service to stimulate concern and the proper
measures of organised protection required for some 14 million
acres of woodlands. The Authority calculates that less than 20
per cent, of this area is receiving sufficient protection. Surveys
show that an average of some 700,000 acres of timberland is burned
by some 10,000 fires annually in the Valley, that is, about S per
cent, of the total is lost each year. From the beginning the Authority encouraged and collaborated with the States in measures of
widespread education. From February 1934 to 31 December 1942
about 6,000 educational motion picture programmes were presented
to more than three quarters of a million people in the Valley States.
Children and teachers haye been enlisted in the campaign, and
hundreds of thousands of leaflets distributed. It is thought that
this has had the effect of producing more organised protection.
The Authority has also made a forest fire survey for the entire
Valley, going back to 1931, which has been made available to
Federal, State, and local authorities and enables them to see the
relative local incidence of fires and its relationship to the protection
afforded.
Us» ov T.V.A.-OWNBD LANDS
The T.V.A. has necessarily purchased large areas of the Valley.
Most of this land forms the impoundment basin behind each dam,
but the so-called "taking line" is so arranged as to include tracts
of land along the margin of reservoirs and rivers in order to provide
for safety, protection, and measures against soil erosion leading
to silting. In 1941 the T.V.A. owned approximately three quarters
of a million acres, and this has involved the Authority in the responsibilities of an owner of landed estates. In the first place, as
already indicated, some of the non-crop land has been used for
reafforestation. Secondly, land which is considered physically suitable has been put into agricultural use. The Authority itself does
not act as' farmer, but through its Agricultural Relations Department it has entered into contracts with the "soil conservation
associations" (farmers' clubs or associations) of a number of reservoir counties providing for payments by the Authority to the

76

THB T.V.A.: INTSRIíATIONAL APPLICATION

, association for advice and assistance rendered in licensing Authority controlled land. The associations classify the lands, and recommend what crops could most suitably be grown. They also recommend the tenants (or "licensees" as the Authority prefers to call
them) among the neighbouring farmers, and the amount of compensation, or rent, which the Authority ought to charge. Naturally,
the Authority's interest in the introduction of better farm practices
and improved crop rotation plays a major part in the use of such
land. In 1940 there were nearly 2,000 licences, covering about
54,000 acres, and the revenue coming to the Authority from this
source was nearly $103,000. In the last two or three years there
has been a deliberate reduction of the Authority's intake of land.
It prefers not to assume additional responsibilities or take land out
of private enterprise, and may even return lands to private ownership and use where this would not interfere with its own essential
activities.
FISHSRXBS AND WILD LIPB

The large tracts of land and lake have led to other problems—
problems of biological readjustments, as the Authority calls them.
The introduction of a number of large lakes and reafforestation in
the area are bound to affect the wild life in the river and on the
adjoining land. The denudation of the area in the past had been
destructive of wild life. The T.V.A. intends to assist the development of fish, game and fur bearing animals. Very early in its career,
the Authority began investigations of fishery in the river and lakes
to ascertain the effects of impoundment, and it is now clear that
most of the species which thrived in the river will dp well in the
reservoirs. The movement of the water for navigation, flood control,
and the production of electricity is one of the problems to be met in
fishery production. Stabilisation of water levels during the spawning
season has proved feasible and effective. Hitherto the Authority
has maintained hatcheries, but these have now been turned over
to the United States Fish and Wildlife Service for stocking the
lakes where necessary. For the most part it is believed that natural
propagation will keep the reservoirs fully productive, after the
fish have adjusted themselves to their habitat, and the stocking
of the reservoirs from the hatchery will no longer be necessary.
A census recently taken shows that in 1940 there were removed
from five T.V.A. reservoirs nearly S million pounds of fish ; the oldest
reservoir (Wilson) yielded the most pounds of fish per acre of water.
Studies have been made of the conditions under which fur
bearing animals can find a productive home in the Valley, and also

THE PROPER ÜSB OF THB LAND

77

of the food of quail. Game food trees and shrubs have been planted
in several reservoir areas. Aquatic food plants and waterfowl
migration have been surveyed. In July 1938 a refuge of roughly
41,000 acres of land and water, a part of the Wheeler Reservoir
area in northern Alabama, was designated by Executive Order of
the United States President as a migratory waterfowl refuge. It
is assigned for use by the United States Fish and Wildlife Service
as a refuge and breeding ground for migratory birds and other
wild life.

CHAPTER V
THE ADVANCEMENT OF ECONOMIC OPPORTUNITY
The primary tasks of the T.V.A., tending to develop the Valley's
water and soil resources and so raise its standard of living, have
now been described. But these by no means exhaust all its efforts
or contribution towards the main object. There are a number ôf
related activities which, together with those already described,
may properly be called economic planning for the Valley's prosperity. These activities spring from two principal sources which are,
of course, connected and complementary, though each also has
its own specific objectives. The first of these sources is the attempt
to raise the meagre standard of living by making labour easier or
more productive on the farm, chiefly by the invention or adaptation
of farm apparatus or processes. Incidentally, this assists the fulfilment of other T.V.A. purposes, for example, the inareased sale of
electricity and the conservation of the soil. Secondly, by what ara
called the "planning" sections of the Statute, namely, Sections 22
and 23, as well as the implications of the Preamble, the T.V.A. has
a more general responsibility for increasing the well-being of the
Valley. To this end, it is endowed with powers to make studies,
demonstrations, and investigations, and to propose action. This
general power has been used in the conduct of investigations into
the mineral and other resources (for instance, recreational and
tourist possibilities) and their economic exploitation. The belief
that the income of the area could most effectively be raised by a
measure of industrialisation was an additional spur to research into
local resources and industrial processes which could be of use
locally.
Perhaps the quickest route to the raising of the standard of
living would have been wholesale promotion of industry; but in the
climate of opinion outside the Valley and having regard to the
deficiency of T.V.A. powers for such a purpose, this course could
not be followed. Hence, no large-scale campaign for the promotion
of industry was undertaken or considered. But it was believed that
if cheap electricity, good transport facilities on the river, and perhaps processes that could be locally handled, were provided, and

THB ADVANCeMBNT OF ECONOMIC OPPORTUNITY

79

if this came to be known, industry would establish itself. This
would increase traffic on the river, and so again add to the income
of the region. With this general destination in mind, then, the
T.V.A. has taken the path which will presently be described, particularly emphasising its intimate understanding of, and concern for,
the Valley's problems, because the centre of its administration is
lodged in the very heart of the Valley itself.1
T.V.A. PLANNING POWBRS

Before attempting to describe the T.V.A.'s efforts to advance
economic opportunity and, in the next chapter, its contributions
to the social well-being of the Valley, a few words are necessary on
the nature of the powers of economic planning given to the Authority by the Statute. This is most essential if the powers of the T.V.A.
are to be seen in 'their proper proportion. The Statute at first sight
appears to give the T.V.A. wide powers of economic planning.
Section 22 gives powers to the President, who has transferred the
powers to the T.V.A., and these powers are "to aid further the proper
use, conservation, and development of the natural resources . . .
and to provide for the general welfare of the citizens . . . "; but
this power is limited only to the making of surveys and general
plans within the limits of appropriations made therefor by Congress.
Thus, T.V.A. powers are not designed to reconstruct the area itself
forthwith, but only to make surveys and plans, and even then,
only so far as Congress has appropriated money therefor. The
purpose stated in the same section, namely, "all for the, general
purpose of fostering an orderly and proper physical, economic and
social development of said areas", is wide in scope, but, as we must
emphasise once more, is limited to "studies, experiments, or demonstrations as may be necessary and suitable to that end".
These powers to study, experiment, demonstrate, survey, and
make general plans—whichj by the way, may be undertaken in cooperation with States or their subdivisions, or with co-operative
or other organisations—do offer, however, a wide opportunity in
its own field of planning, namely, the preparation of schemes, the
development of ideas and the making of systematic suggestions
for reconstruction and improvement. It is important, then, to
observe that the T.V.A.'s powers, though limited in regard to
putting plans into action, are wide in regard to the making of plans.
If it is not in the position of an absolute practical governor over
the area, it is at least in the position of a leader of thought.
1
Cf. 77th Congress, 2nd Session, T-VA. Statement in Hearings on S, 2721,
1942 ; and Annual Report o¡ the Tennessee Valley Authority, 1939, p. 82.

80

THE T.V,A.: INTERNATIONAL APPLICATION

Again, there is Section 23 which gives to the President of the
United States the obligation of recommending to Congress legislation to carry out the general purposes of Section 22, that is, surveys,
experiments, and so forth, and also for the special purpose of bringing about the maximum development of flood control, navigation,
manufacture of electric power, the proper use of marginal lands,
reafforestation, and the "economic and social well-being of the
people living in the said river basin". This section, then, gives to
the T.V.A. the opportunity, through the President, of proposing
legislation to Congress which might add to its powers to take action,
or might lead to other public agencies being given powers for such
purposes.
Now, as will be seen, T.V.A. planning powers, in the context of
the remarks made above, have been used. But the T.V.A. was established in an area already occupied by a number of governmental
agencies, some local and some Federal. The area was already
occupied by agriculture, industry, and other interests. In other
words, the Authority did not have before it a dear slate on which
to draw any planning that it chose. Nor is that all. It will be
noticed that the planning powers of the T.V.A. are limited by
(a) appropriations which Congress is prepared to make for the
necessary surveys and investigations, and (6) the need, in broader
matters, for further legislative power. In fact. Congress has consistently shown extreme caution in giving appropriations for purposes of surveys and research. It has been found difficult to secure
appropriations for purposes which may be regarded as general
planning, and the T.V,A. has had to restrict its scope to those, projects which can be shown to be strictly related to it» primary tasks.
This has seriously limited its scope, as has also the great difficulty
of securing the legislative attention of Congress when an addition
to the powers of a public enterprise are involved, as they necessarily
are with the T.V.A.
In addition to these external limitations on the T.V.A.'s planning power, it is necessary to remember the general character of
opinion in the country in which the Authority functions. This
is hot favourable to general planning.
Secondly, the T.V.A. has had to steer towards the advancement
of economic opportunity and the people's social well-being by its
cautious interpretation and use of its primary powers and the planning authority referred to above. In spite of all the contributions
it has undoubtedly made to the well-being of the Valley, it is necessary to notice that comprehensive planning has not been undertaken; nor, therefore, has there been the drive which would be

THB ADVANCBMBNT OF ECONOMIC OPPORTXmiTY

81

necessary to implement such plans. Further, once the demonstration period is over, the T,V.A. must simply leave the venture it has
initiated to take on, or not, with those groups of the public,
such as industry, or farmers' associations, or co-operatives, or
States, which may be interested in carrying* the results of the
plans and demonstrations into effect. There, the responsibility of
the T.V.A. necessarily ends, though its interest and .concern
may not; and because of this limitation, whatever its zeal, the
prosecution of wide and comprehensive measures is necessarily
restrained.
PROGRESS BY RESOURCES RESEARCH, TECHNICAI, ASSISTANCE AND
EDUCATION

In view of what has just been said, it is not surprising to find
that the T.V.A. has sought to assist economic progress by research,
technical assistance and persuasion. As we have already seen in
various aspects of the fertiliser, farm demonstration and power
programmes, the Authority attaches supreme importance to research into the resources of the region and the conditions under
which these may be made economicaliy valuable, and to the invention of processes and apparatus. Though the various resources
are generally known as a result of past investigations by private
agencies and public departments like the United States Geological
Survey and the Bureau of Mines, none has, or perhaps could have,
so persistently and patiently concentrated on the subject as an
authority lodged in the locality and vested with a special responsibility. This research work—since the T.V.A. must be careful in
its expenditure of public funds—is usually undertaken by arrangement with the laboratories and the local land grant colleges, with
the T.V.A. initiating and stimulating the undertaking. The Authority has, however, also conducted some research in its own laboratories entirely. Sometimes it co-operates with the research sections
of private industry.
As has been shown, the T.V.A. has no power to regiment the
region; it must proceed by persuasion and the demonstration of
the value of its discoveries. It therefore furnishes initiative, direction, publicity and expert guidance. Further, by stimulating demand for apparatus, it induces private enterprise to manufacture
this at cheap enough rates for purchase by the low-income groups
of the Valley. Some examples from the principal lines of development may be given to make both purpose and method
clearer.

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THB T.V.A.: INTERNATIONAL APPLICATION

Agricultural Appliances and Processing
One basic objective is the discovery or adaptation of machinery
and electrical equipment to permit of the better processing, conserving or marketing of the agricultural products of the area by
cheaper and more productive methods. It is essential to discover
or invent apparatus adequate to the task, and yet cheap enough
for the low-income groups of the Valley.
A combined seed and fertiliser distributor has been developed
in co-operation with the Agricultural Experiment Station of the
University of Tennessee, under a contractual arrangement, and is
now in commercial production and being sold through regular sales
channels. The patent in such a case is applied for by and belongs
to the T.V.A. A low-cost small-scale thresher has been developed
and is now in commercial production by a farm machinery manufacturer. Research is far advanced (with the Georgia Agricultural
and Engineering Experiment Stations) into the growing, harvesting
and processing of flax. Lespedeza harvesting equipment, as an
attachment to an ordinary mowing machine, has been invented,
and has allowed a doubling of the recovery of the precious lespedeza
seed.
The Authority has also stimulated the development of a general
utility half-horsepower feed grinder which is cheaper than a similar
unit on the market produced by a manufacturer, and also of an
electric curing unit which is subject to automatic control, is cheap,
and has practically no fire risk, to cure the sweet potatoes which
are grown in large quantities in the Valley and which hav« hitherto
been cured by coal or wood heat. Installing electric heaters in place
of the conventional wood stove has increased storage capacity by
10 to 15 per cent. Under demonstration, the unit has shown something like a ? per cent, increase in repack and the quality of the
product is improved. The total gain per 2,000 bushels is $134; the
total investment cost of the unit is $95. A similar process of experiment is in progress with electric units for the curing of ham,
tobacco and hay, and also for the production of a combined dairy
steriliser anCwater heater.
Hay Drying.
The development of electric hay-drying apparatus gives an
instructive insight into T.V.A. research purposes and methods.
The humidity of the Valley promotes the growth of a heavy hay
crop, but as the hay-drying season tends to be showery, hay curing
in ¿he field is very difficult. The T.V.A. and the land grant institutions conferred early in 1942 to select the most important farm
problems amenable to solution by equipment. As a result, the

T3B® ADVANCBMENT OF ECONOMIC OPPORTUNITY

83

Authority co-operated, in the States of Virginia, North Carolina and
Georgia, with State extension services and experiment stations and
the Appalachian Electric Power Company (Virginia) to explore the
value of a bam hay-drying system adaptable to almost any type
of barn, founded on the principle of the circulation of air by electric
blowers through a number of air ducts.
Fanners were assisted with designs of the dryers, advice where
equipment could be purchased, and supervision of installation.
By the end of the 1942 hay season, 34 hay dryers had been installed
in the Tennessee Valley States: 27 by farmers and 7 in college and
experimental station farms (there would have been more, but for
the wartime scarcity of equipment). For 20 dryers installed in
1942, installation costs of all kinds ranged from l&Tto $350 each,
allowing only a quarter of the cost of the motor, since this is generally
used for other jobs also. Excellent results were obtained ; the quality
of the hay was especially highly rated under United States Department of Agriculture tests. A survey of nine counties in southwest
Virginia by the Virginia Polytechnic Institute showed that farmers,
who relied on field curing lost about half a million dollars of the
value of their 1942 hay crop, whereas no losses were reported by
farmers owning hay dryers.
Food Processing and Preservation.
Producers of fruits and vegetables in the Tennessee Valley
region and other parts of the South have suffered from distance to
iparkets and the lack of properly-developed means of preservation.
In view of the growth of quick-freezing in the North and Far West
and the lack of it in the South, it was decided to conduct research
in that field, and to adapt techniques to agricultural conditions
and markets in the South, where producers are generally small
and scattered. A new immersion process of quick-freezing, along
with suitable equipment, was developed by the Department in cooperation with the University of Tennessee Engineering and Agricultural Experiment Stations. In 1940 this was put into successful
commercial use by a farm co-operative in Cleveland, Tennessee.
A small portable freezer has also been developed for use in freezer
locker plants and in scattered small-scale operations. Research
has been conducted on freezing techniques generally in co-operation
with Georgia Agricultural Station. Improved methods of cold pack
freezing have been developed and tested in field operations. This
experience has enabled T.V.A. engineers in the last two years
to give technical assistance to packers in Georgia, Alabama,
Tennessee, and Virginia in the freezing of over 4,000,000 pounds
of strawberries.

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THB T.V.A.: INTERNATIONAL APPLICATION

In 1938 a refrigerated barge was constructed by the T.V.A. to
demonstrate the feasibility of eorabined storage and transportation
facility. It delivered strawberries to customers as far afield as St.
Louis and New York. Both this and a second barge are to be used
as mobile units for research in complete food preparation and processing. They contain facilities for investigating the problems of
preserving local agricultural food products by dehydration, canning,
chemical and other means, all of which are being studied with reference to their technical and commercial aspects. The work of the
plant is co-ordinated with the research and basic investigations
conducted in co-operation with the State Agricultural Experiment
Stations and Extension Services, and it will be used to demonstrate
the technical and economic feasibility of the processing and equipment thus developed.1
Again, the T.V.A., working through the extension system, has
assisted in the development of community "walk-in" refrigerators,
in order to secure that the meat produced on the farm shall be properly conserved for home use. Owing to the extremely warm climate, the farmers in the Tennessee Valley are unable to keep fresh
meat for any length of time, and consequently, where individual
refrigerators are not available, pork is preserved by salting. Salt
pork is not a good article of continual diet; moreover, about a
quarter of the pork slaughtered on southeastern farms is spoiled
before it can be cured. If a low-cost community refrigerator could
be developed, and operated by 10 to 2S families, fresh rather than
cured meat could be consumed; and furthermore, there would be
practical inducement to put land into pasture for veal or beef. In
the demonstrations, the farmers paid the operating costs. On the
basis of the results, which were. extremely favourable, literature
was prepared and articles published in trade journals, in the hope
of stimulating private manufacturers; but blueprints were also
given so that any intelligent country shopman could make the unit
himself, after buying the parts. By 1941,19 such refrigerators were
in operation independently of T.V.A. aid, on a private basis where
space was rented, CM* on a co-operative arrangement. The T.V.A.
is also testing a unit of especially large capacity in which freezer
compartments for each family are included, with space allowed
for the preparation of meat for storage.
1
A small pilot dehydration unit was constructed and assembled at the Georgia
Agricultural Experiment Station where the various methods and techniques in
the dehydration of southern agricultural raw materials have been studied. The
data taken from this small unit operation are being studied in the design of a
larger commercial unit, and supplied to the Agricultural Engineering Development Division for use in their field demonstration programme with four small
community-size machines.

THB ADVANCEMENT OF ECONOMIC OPPORTUNITY

85

Cottonseed Cooking.
Another process developed by T.V.A. methods which may
prove of very great ultimate significance is the improved production
of cottonseed oil. For something like half a century no progress had
been made in the equipment and method of handling cottonseed
in the mills. When the cotton fibre and lint have been removed
from the pods, seed is left, which is actually worth something like
17 per cent, of the total value of the cotton crop, and from which
oil, meal, and hulls are produced. A good deal of the meal and the
seed produced in the Valley was sent out to other parts of the
United States for processing. The University of Tennessee College
of Engineering, which had begun investigations at the instance of
local representatives of the industry in 1929, thought that this was
due to the existence of many mills too small to employ adequate
capital. Big mills had their own research laboratories and could
keep up with the times. The problem, then, was to improve the
technology of the small local mills, and more especially the major
operation of cooking the cottonseed. Through the financial and
moral co-operation of the T.V.A., suitable units were designed for
use in the small mills. Cooking time was reduced from between 1
and 2 hours to 20 minutes, and the oil yield so increased as to promise an increase in profit of $1.00 a ton, considerably more than
the former total profit of the average mill. Some of the devices
were invented by the T.V.A. engineers themselves, and others by
the University of Tennessee staff. The patents are to be exploited,
not by the T.V.A. directly, but by a non-profit research corporation (the directors of which are prominent businessmen) set up by
the University of Tennesses. From the small mill, the oil-cake is
sold to local farmers as fegd for cattle.
The T.V.A.'s interêâflg this experiment is not a direct money
return, although it has'íüpplied about one half of the $90,000
required for research and demonstration, but the possible increase
of the Valley's wealth. Only a part of the fees for the use of patents
will go to the T.V.A. ; the rest will finance further research. By 1942,
twelve private mills in the Valley States were using the new cooker,
which is now being manufactured under licence by three important
firms.
Minerals
From the beginning of the Authority's operations, there has been
a keen interest in the possibilities of the Valley's mineral resources,
and even further, in the possibility of creating conditions conducive
to a substantial degree of industrialisation. Hence careful attention

86

THE T.V.A.: INTSRNATÎONAL APPLICATION

was paid to the primary task of locating, discovering and evaluating
the natural resources of the area and to the experimental demonstration of their uses.
The Authority's investigations disclosed reserves of crude china
clay or kaolin in the area. Of equal importance, the particular
contribution of the T.V.A. Ceramic Laboratory (co-operatively
with representatives of the industry) was to develop a superior
method of refining the crude clay so that it could compete successfully with imported china clays in the finest translucent whitewares. The result has been that several American ceramic plants1
are continuing the use of^ North Carolina primary kaolin, or are
substituting the clay of improved quality, for imported china clay.
In 1939, some 16,000 tons of highly refined clay were thus
produced; in 1940, over 30,000 tofls. Experts believe that this»
enterprise may grow to four to five times its previous capacity.
The laboratory also demonstrated the high quality of translucent
whiteware which could be made in experimental electrically fired
kilns, designed by the Authority. Thus two objectives were achieved
simultaneously: demonstrated quality of clays in finished products,
and the demonstrated qualifications of high temperature electricallyfired furnaces as an alternative to the traditional methods. The
laboratory was subsequently turned over to the United States
Bureau of Mines for a continua.tion of the electro-technical research
connected with minerals and for further experiments designed to
increase the industrial utilisation of Valley minerals.
In the last decade industrial advance seems to have taken the
path of chemical, rather than purely mechanical, progress. The
present developments in the Valley may therefore be leading to the
creation of new products and the use ôf new raw materials. Supplying cheap electricity in the T.V.A. region does not merely mean a
cheaper source of mechanical power; it also makes possible the
development of electro-chemical and electro-metallurgical industries
which have heretofore been unprofitable owing to the high cost of
electricity employed in the processes. Chemical industrialists and
technicians therefore need to reconsider the use of the mineral
raw materials of the area..
In the past, one of the most important developments of the
region has centred in the coal and iron industries. There are extensive raw material resources for both of these, and their future
development is even more promising, since it will include certain
advances hitherio impossible. Iron may be utilised largely in tibe
form of special lines of iron and steel in alloys. Scattered deposits
of manganese ores, lesser deposits of chromite, and some even
scarcer alloy materials indicate that in the future the T.V.A. area

THB ADVANCSMSNT OF ECONOMIC OiPPORTUNlTY

87

may produce ferro-manganese, ferro-chromium, ferro-silicon, and
other ferro alloys on an extensive scale. The manufacture of these
will be rendered possible by the fact that electro-metallurgical
methods supplied by cheap electric power will be available. New
technology in ore dressing opens up a new field for the production
of mineral resources not hitherto utilisable because the material
mined or quarried did not meet the commercial specifications.
Examples are the production of ilmenite (titanium), kyanite, and
barite concentrates by froth flotation; also, utilisation of low grade
phosphate through better means of concentration. Thus, a constant
reappraisal and economic study of the minerals of the area is required if the best use is to be made of them.
The development of adequate transportation facilities on the
Tennessee River has also opened new possibilities for the development of the raw material resources of the Valley. There are large
coal deposits contiguous to the Tennessee River that have been
made accessible by the improved navigation facilities. These have
been studied and appraised and substantial amounts of coal are
now being rained and shipped on the Tennessee River from deposits
that till now could not be profitably worked. The movement of
limestone from a quarry on the river for the production of calcium
carbide is about to start.
Tourist Trade
The Authority has created some pretty lake land, and, mainly
under the influence of its Department of Regional Studies has
realised the potentialities for recreational use. The States in the
region had no recreational programme, and four, had no organised
park systems. Several demonstration parks were established by
the T.V.A,, and there are other sites yet to be developed. The
parks already established were not constructed by the Authority
itself, but, pursuant to its regular policy, through other agencies
already in operation in the area—in this case through the National
Park Service's materials, technical assistance and counsel and the
labour of the Civilian Conservation Corps.
The Authority itself has operated the parks1, and has attracted
masses of people at the week-ends and holidays with its facilities
for horseback riding, boating, swimming, camping and "vacation
cabins. Restaurant facilities are operated under concession.
Other parks are being built, and the Tennessee State Department of Conservation will operate them on standards of develop1
In 1934, the T..V.A. was accepted by the United States National Park
Service as a "park authority".

88

THE T.V.A.: INTERNATIONAL APPLICATION

ment set by the Authority. The parks, which are on T.V.A. land,
will be leased to the State of Tennessee, and, as development proceeds, to other States, at a nominal annual rental.
In an area which includes the Great Smoky Mountains and other
fine scenic resources, the Authority has seen the opportunity of
attracting visitors. By arrangements with the Tennessee State
Planning Board, assistance was given in the creation of a planning
commission to serve the counties adjacent- to the Tennessee
boundary of the Great Smoky Mountains National Park for the
development of recreational facilities and business. The Authority
does not possess the power to secure that local communities conform to standards of beauty and health necessary to exploit this
potentiality, either by itself taking action or by requiring them to
do so. But it has done the next best thing by trying to induce the
local States, municipalities, and civic organisations to confer with
it and with each other in order to secure co-ordinated and adequate
action. By the deliberate planning and design of the Authority,
the dams are of remarkable beauty, whether as vast structures or
as waterfalls. By 1942,11,000,000 people had visited the dams, from
every,State and many nations. The Authority has published a work
on the scenic resources of the area, and made reports on the opportunities for economic returns from recreational developments. There
are great potentialities iñ this field, especially in the chain of lakes
over which the T.V.A. has practically full powers of utilisation.
But the Authority itself, as already mentioned, has not had sufficient independent power to put into effect the wider measures it
thinks necessary. Its own powers are limited to "demonstrations",
and now. that it has demonstrated in five parks, and made its surveys, the demonstration period has drawn almost to a close. It now
needs more powers, at least over its own lands. In 1940 the Authority recommended to the President, aúd through him to Congress,
the necessary measures.1 Foremost among these was theTDroadening of its own powers to construct and operate recreational facilities
on the properties acquired for water-control purposes, utilising the
labour of the N.Y.A.2, W.P.A.8, and C.C.C.4 Yet it may not press _
1
Cf. 76th Congress, 3rd Session, Document No 565, .Report on the Recreation
Development
cf the Tennessee River System, Jan. 1940.
2
National Youth Administration, estabhshed in June 1935, within the W.P.A.,
to provide work-trcdning for unemployed youth and part-time work for needy
students.
3
Works Progress Administration, established on 6 May 1935, to co-operate
with local State and Federal sponsors in the execution of a programme of piublic
works projects. In July 1939 it was reorganised as Works Projects Administration, when N.Y.A. was put underwits aegis. The W.P.A. was abolished in 1943,
and the N.Y.A. transferred to the Training Division of the War Manpower Commission.
4
Cf. p. 71.

THB ADVANCEMENT OF ECONOMIC OPPORTUNITY

89

for these powers, as an alternative still offers in arrangements with
the States/Indeed, late in 1942, the Authority made an agreement
with the Tennessee Department of Conservation whereby the latter
assumed responsibility for development, operation and maintenance
for recreational purposes of Authority-controlled properties in the
State, excepting those lands located in dam reservations. The
spirit of the agreement was the explicit recognition that the public
should be encouraged to look to the State rather than to the Authority in matters of recreation. In connection with its reservoir programme, the T.V.A. may recommend the purchase of, or itself
purchase, land for public access and recreation on the advice of the
State Department of Conservation. The State Department of
Conservation is responsible for advising sponsoring groups on the
form, conditions, financing and standards of development and
operation; the leases or licences are then made by the Authority,
if satisfied with the situation as reported by the Department. The
Department becomes responsible, for conducting studies and investigations of the recreational value of the Authority's lands.
Industry and Freight Rates
Careful and persistent studies made by the Authority have
revealed to what a largç extent, the system of rates prevailing in
the United States in so far as they affect interterritorial economic
relationships, discriminates against the South-West, the SouthEast, and the Interior West. The Chairman of the T.V.A. has
declared;
The system of 'interterritorial freight rates has handicapped and hamstrung
the efforts of these various regions to engage in that measure of manufacturing
of their raw materials which is economically sound. At the same time it has
stimulated the export in raw OP semi-finished form of those natural resources.
Thus, the South-West, the South-East and the Interior West have become predominantly raw material areas, whereas the North-East, having an advantage
by reason of intertemtorial freight rates, has become predominantly industrialised. . . The importance of the interterritorial freight rate system is very great
indeed . . . and is only in recent years becoming fully understood and comprehended.1

This theme is important to the T.V.A. because it is fundamentally interested in securing a rising standard of living in the Valley.
The Authority has been much concerned at the fact that the regions
which produce raw materials are.also places of low income, whereas
those which live by the production of manufactured goods, or the
1
Paper on Freight Rates and Southwestern Industry, by D. E, LIMBNTHAI,
(University tíf Texas, Nov. 1941).

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THB T.V.A.: INTERNATIONAL APPLICATION

processing of raw materials, are areas of high income. This is
strikingly exemplified by the lowness of income in the south-eastern
States and in the Tennessee Valley. It is a difficult problem to lift
up the economic standards of a region even where all factors, like
natural resources and human skill, are to hand, but even more
difficult to make anything of an area where these have been allowed
to deteriorate. Hence it is of the utmost importance that at least
no artificial maladjustments should be permitted to remain a
moment longer than is necessary after their discovery. The T.V.A.
therefore undertook to make it plain to the public and the agencies
of government that the south-eastern States were being subjected
to irrational discrimination.
In a number of studies1, including a report to Congress, the
Authority has shown to what a great degree the northeastern
States are given a preference in the freight rate system, especially
in manufactured articles which might be produced in the South as
well as anywhere else. In other words, this artificial obstruction
operates as though the northeastern section were protected by a
tariff wall as regards imports of manufactures and a subsidy to its
competitive cost of production against southeastern rivals, and a
bounty on its purchase of raw materials and food,2
The T.V.A. has publicised the facts, and this and other forces
caused the Interstate Commerce Commission in 1939 to undertake
an investigation of class rates in the United States east of the Rockies. In 1940 Congress amended the Interstate Commerce Act to
include a prohibition against undue and i unjust discriminatioii
among the regions. The T.V.A. has sought and is seeking equality
of opportunity among the regions of the United States. At the
request of the President, it has co-ordinated the preparation of the
economic evidence from the South and West to be put before the
Interstate Commerce Commission in its class rate investigation.8
It bases its appeal on the need to integrate the nation by reform
of an unbalance between the workshop regions and the raw materials regions of a single society. It believes that mile for mile equality
of rates will make for the decentralisation and diffusion of industry
over the whole nation, and so produce greater stability of welfare
and assist the diversification of industry which is natural to all
areas, but is now thwarted by rate distortions. It argues that regional specialisation, exaggerated by disparity of rates, militates
against full production and the maximum national income.
1
The Interterritorial Freight Rate Probkniç} the U.S.A., 7 June 1937iand Supplemental
Phases of the Interterritorial Freight Bate Problem of the U.S.A., 27 Apr. Í939.
2
Cf. Ford K. EDWARDS: Territorial Unit Costs for Railroad Freight Service,
1939 (I.C.C. Docket 28300, Exhibit 13, introduced in Sept. 1942).
» Cf. Exhibit and Testimony, I.A.O. Spottswood (I.C.C., Sept. 1942).

THE ADVANCBMBNT OF BCONOMIC OPPORTUNITY

^

91

Direct Promotion of Industry

It is clear from the foregoing account of the T.V.A.'s economic
activities, and even more from its aspirations and continuing
concern, that its interest in the economic welfare of the area is
intense and, so far as time and possibility go, laudably successful.
A rather wider aspect of this subject is the question of a more comprehensive and forceful attempt to secure the development of industry in the area. The present Chairman of the T.V.A. has stated
that the South needs an increase in income derivable from greater
reliance on manufacturing or processing its raw materials.1 There
are interests which strongly desire this, such as business groups;
there are hundreds of thousands who can be said to need it, whether
they are articulate or not. When cotton mills were opened, small
as the wages were, there was a rush to get work.
A serious problem was whether the Authority should actively
encourage the establishment of industry in the area. Another was
whether industry would feel the attraction of the opportunities in
the Valley, increased by the availability of cheap power. But
development was slowed by the fact that electricity was not yet
available. Secondly, the Authority, because of its public character
and unprecedented position, has been confronted with opposition
in this initiative. Thirdly, there is resistance to industrial development by publicists and members of Congress, who fear adverse
effects on industries in their own areas.
Some have even challenged navigation activity on the ground
that there will be decreased rail traffic, and losses to the coal industry. Fears of losses to coal sales and railway coal haulage from
hydroelectric development have been expressed by industrialists
and labour unions.2
The minority members of the Congressional Joint Committee
Investigating the T.V.A. in 1938-1939 viewed industrial development with disfavour. On the T.V.A. ceramic experiments they say:
Moreover, these expenditures have been paid for by tax-payers in other sections of the country where the ceramic industry is more highly developed and
where, if such experimentation were.made, better results could have been
achieved.8
' Cf. D. E. LüUBNTHáI,: Restoration of Economic Equality amone Regions of
J
ife 2¡7.5^4., 21 Mar. 1940, p. 314.
Yet stimulation of the use of electricity by the T.V.A. has been a clear
benefit to coal producers, since in systems other than that of the T.V.A. electricity is chiefly generated by steam. Tennessee, Alabama, Georgia and Mississippi used ten times the coal in the generation of electricity for public use in
1942 as compared with 1933.
» Minority Report, p. 312. Cf. Chapter IX.

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THE T.V.A.: INTERNATIONAL APPLICATION

Conscious of such feelings, the T.V.A.'s attitude to industrialisation was to limit its action to the development of the basic
resources of the area, river transportation facilities, security from
floods, cheap electric power, agriculture, and the study of mineral
resources. It is thought that when the advantages are known, and
discriminatory freight rates against the region are removed, industry will come of its own accord without a campaign of promotion.
Already there were industries establishing and expanding themselves before the second world war began, and the T.V.A. claims
that this was due to its. activities as described above. The Authority
observes that industrial growth in the Valley between 1933 and
1939 took place at a greater rate than in the southeastern States
as a whole or the United States as a whole:
The Tennessee Valley in 1939 had 721 more manufacturing plants and 40,952
more industrial wage earners than in the depression year 1933, a gain of S3.4 per
cent, in plants and 41.7 per cent, in wage earners, according to census figures.
The southeastern States as a whole in the same period showed increases of 41.1
per cent, in number of plants and 33.9 per cent, in number of industrial wage
earners. The United States as a whole increased 30 per cent, in plants and 30.2
per cent, in wage earners.
The Tennessee Valley also showed an increase in manufacturing since 1929,
a boom year, although industrial activity in the nation as a whole declined. The
Valley's 122 counties had a total of 139,074 industrial wage earners in 1939,
compared to 127,010 ten years earlier, a gain of 9.S per cent. The South-east's
gain was 3.8 per cent, while the nation declined 1Ô.8 per cent. Actually, these
gains were somewhat greater and losses less, due to changes in classification
omitting certain repair and other industties in the 1939 census that were included
in the 1929 census.
Industrial growth in thé Tennessee Valley since 1929 has been due partly to
expansion of established industries, in chemical, textile, rayon, aluminium and
various other branches of manufacturing, and partly to location of new industries
in hosiery, garments, shoe, woodworking, phosphorus, and other lines. These
¿gains more than offset the heavy losses in industry suffered during the depression.1

There has been a growth in the manufacture of manganese,
Terro-alloys, phosphorus, electrodes, aluminium, rubber products,
flour, and, under Government sponsorship, warfare chemicals.
Such industries have come into the Valley primarily because of
low-cost electricity and the availability of mineral resources. Since
1941, other plants have been introduced or expanded, most not
requiring a heavy power load. Examples are: textiles, paper tissues,
flooring and wooden boxes, medicinal preparations, printing, dairy
products, ammunition, steel products.
1
Cf. 77th Congress, 2nd Session, Senate Committee on Agriculture and
Forestry, Hearings en S. 2361, 16-19 Mar. 1942, p. 300.

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93

The war has stimulated industry in the Valley, as outside it.
Some of the plants may, stay, and may well be joined by other
units, for there will be abundant power now that steam plants have
been added to a greatly expanded hydroelectric system. The
Tennessee Valley will be subject to all the hazards of the whole
nation, and of all nations^ for that matter, in respect of post-war
readjustment, and is at present alert to the fact. The situation
will require exceptional clarity of thought and resolution on the part
of the Authority; for it involves the relationship of the economy
of one region in the process óf special development to the economic
policy of the whole nation of which it is a part.
At the present stage of the T.V.A.'s work of fbstering economic
welfare1, the results may be considered beneficial to the community
as a whole, for it has concerned itself not with competition with the
production of other regions of the United States but only with
increasing the welfare of the Valley's inhabitants. This it has done
by: (a) considerably reducing their electricity costs, and extending the use of electricity; (&) arresting the waste of soil resources
and increasing the yield of the earth, thus raising incomes; (c)
reducing costs of transport, which must stimulate industry and
permit some purchase of commodities from wages or securities or
savings; (d) preventing damage from floods, and thereby making:
the money which would have been spent on repairing it available for
constructive activities and purchases; (e) discovering processes and
resources which add to the wealth of the area and the whole country,
with almost negligible competition with existing interests.

1
The activities described in the foregoing paragraphs, as well as those in the
following chapter on the social well-being of the people, fall almost entirely into
the T.V.A.'s budgetary classifications of "Development Activities" and "Related
Property Operations". The net expense on these operations (income was negligible in comparison) for 1933-1942 is displayed in Appendix IV, tables 4 and 5,

CHAPTER VI
THE PEOPLE'S SOCIAL WELL-BEING
If, as will by now have been appreciated, the planning powers
of the T.V.A. are limited, on the one hand, to studies, proposals,
instruction and persuasion, and on the other, to planning in the
sense of the wise and far-seeing conduct of its primary tasks, the
Authority has, nevertheless, assumed responsibilities and made
measurable progress in their fulfilment.. Some other activities of a
"planning" nature but also of direct executive force result from
its general responsibility for the increase of the welfare of the
region, as well as for the consequences of its own activities on the
life and amenities of the region.
One of the most striking and stirring features of the multifarious
activities of the T.V.A. has been the intensity of its regard for
human relationships, and its conscientious assumption of responsibilities arising out of a profound feeling for human Values. Coming
into an area with new ideas, devices and public works, the Authority
caused a disturbance, in some cases necessarily severe. It determined that so far as it was in command of the situation it would
do everything possible to secure satisfactory readjustment. This
aim has been pursued in the T.V.A.'s physico-economic studies and
regional planning, in its relationship to the local governing authorities, in its policy of relocation of families, schools and roads, and
in its attitude to public health and general education.
RBGIONAI, STUDIES AND PLANNING

It is evident that the Authority's activities involve readjustment projects which the local agencies must be induced, and in
some cases even compelled, to accept. It ië uselêss'for the Authority
to push ahead regardless of social and economic consequences; and
it can only estimate what these will be if it is well-informed. Moreover, the Authority has an interest in and a clear responsibility for
raising the general well-being of the area. It therefore makes studies
of local administration, and these are available to the local agencies,
the States and civic bodies with an interest in improvement. Thus,

THB PBOPLB'S SOCIAL WBLL-BBING

95

the Authority has made research studies of municipal government
in Mississippi and Tennessee, published by the Mississippi State
Planning Commission and the University of Tennessee. Under
co-operative agreements with the Authority, the State Universities
of Alabama and Georgia have made studies of the municipal government systems of those States. A series of studies emerged from the
need to ascertain the feasibility of extending electricity distribution,
the justification for taking land for reservoir property, and the
effects of this and its operations on the economic situation and
public finances of cities and counties. Some study has been made of
county organisation and administration in all the seven States,
since there is very frequent contact between them and the Authority. In Tennessee and Mississippi the municipal situation of a
hundred cities has been analysed.
The social and economic effect» of the building of dams on the
surrounding area have also been carefully studied. It has been
necessary to consider and report upon industrial developments in
the South, the problem of municipal government subsidies to industry, occupational distribution and trends, the migration of the
population. Information has been collected on the growth and
decline of local industries and plants, transportation facilities,
schools and many kindred subjects. All in all, these studies contain
a large amount of extremely valuable analytical material gathered
on a scale more comprehensive, and certainly more purposeful,
than ever before. However, they do not, in themselves, furnish a
grand design for the economic and social prosperity of the region.
The spur to the production of such a design would have to be the
possession of the power to implement it and, as has been explained,
such power has never been given to the T.V.A.
The specific objectives of the T.V.A., and its general mandate
to plan under Sections 22 and 23 of the Statute, have given it an
impetus to collaborate with the local authorities in order to foster
better planning. In this sphere of physical and physico-economic
planning, it is obliged to proceed by means of patient demonstration and persuasion.
Thus, there have been especially close and helpful contacts
between the Authority and the Planning Boards of the States.
Until 1940, the T.V.A. had no organic relationáhip with the local
authorities concerned with planning, but nevertheless achieved
much by personal and continuous contact and the exchange of information and counsel. Various concrete services were rendered,
such as the establishment of land-use studies by North Carolina,
the creation of county-planning commissions in Tennessee, the
furthering of organisations to develop recreational and tourist

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THB T.V.A.: INTERNATIONAL APPLICATION

facilities, studies in a regional highway system, and the purchase
of sub-marginal lands. Fqr the State of Tennessee, in 193S the
Authority actually prepared legislative recommendations to promote planning, zoning and conservation.
One illustration is both apt and important. When Guntersville
Dam was to be constructed, much fine river-bottom land, the chief
resource of the community, was threatened,anditwasatfirst thought
that a town of 3,000 people was doomed. The T.V.A. met civic
representatives for a discussion of the problems involved in its
plans for safeguarding the industrial section and for relocation,
which assured the town of a promising future provided it could
help to transform itself from a small inland agricultural and trading
township into a developing centre of trade and recreation. The
city council created a planning conunission, which, with the technical assistance and advice of the T.V.A. and a co-operative agreement with the Alabama State Planning Commission, made plans
to prevent damage to recreation by industriaî development and
vice versa, and assisted the development of a public park and a
harbour for boats. The town has become a trans-shipment point
for gasoline, automobiles, wheat, flour, and other bulk commodities.
Recently the T.V.A. assisted the planning commission to prepare
a waterfront plan covering 20 miles, and in conformity with this
the T.V.A. was authorised to build a commercial terminal. The
town had 2,836 inhabitants in 1930; by 1940 the population had
increased to 4,398.
In the middle of 194Ó an addition was made to the community
planning work of the T.V.A. by thé establishment of a regular
planning assistance programme. This system was designed to
bring about a more concerted and continuous relationship between
the T.V.A. and the local urban conimunities. The chief purpose
was to discharge the responsibility of the T.V.A. for community
readjustment in reservoir-affected communities. It was proposed
to aid the solution of community readjustment problems and to
secure the establishment of planning as a recognised function of
local government; an4 this was to be attempted by stimulating
local planning programmes of the State Planning Commissions
until sufficient public interest could be secured to assure their continued existence and expansion, and by experimenting with the
methods of local planning and of rendering technical planning
service to small communities. The Authority also proposed to assist
in preparing model pilanning legislation and instruction material
for school curricula.
The usual T.V.A. procedure of co-operative contracts was
adopted, and these were made with the Alabama and Tennessee

THB PBOPLB'S SOCIAL WSLL-BBING

97

State Planning Commissions. The Commissions employ resident
planning technicians and have the responsibility for initiating and
guiding the local planning programmes. The T.V.A. reimburses
them for the expenses of this programme and, furthermore, supplies
a technical staff of three to five men to assist the Commissions in
furnishing technical service to the local planning programmes. In
the Tennessee contract, it is provided that the State Planning
Commission shall supply equal funds with the T.V.A. for local
planning assistance to local communities.
Under this arrangement, both in Alabama and Tennessee a number of urban communities have set up Planning Commissions and
begun planning programmes. These Commissions have actively
concerned themselves with zoning, sanitation, defence housing,
recreation development, improvement in the maintenance of
forested lands, highway and waterfront planning, and community
relocation.
The usual train of events is for the local Planning Commission
to report on its problems to its own community, to define in general
the answers to those problems, to make the necessary studies on
which solution can be founded, and then to communicate more
formally with the T.V.A. department concerned—it may be the
Department of Reservoir Property Management, or the T.V.A.
Forestry Relations Division, or the Department of Regional Studies.
The T.V.A. then either offers observations on a revision of the plan
or may actually be asked to produce the chief draft on the basis
of the material submitted. •
The State Planning Commissions provide funds and technical
advisers, and in some cases have been able to utilise tíie technical
help of the National Resources Planning Board. It has been possible
also, as a result of conferences between the T.V.A. and the State
Planning Commissions, to secure the assistance of planning technicians from the Federal Housing Administration.
It is believed that interest in regular planning as a function of
local government can best be stimulated by the demonstration of
successful planning, and by making it clear that planning possibilities are a responsibility and opportunity of the community
itself, though the State and the T.V.A. may be called upon for
technical help. Again, the stimulation of interest in the community
itself for its own planning has meant the maintenance of continuous
contact with civic groups and all the organs and agencies of public L
opinion, and this still remains a great problem. Experience points
to the need for each community, or group of communities where
these are too small for independent financing, to have a full-time
paid officer in charge of planning administration and the stimula-

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THB T.V.A.: INTERNATIONAL APPLICATION

tion of interest in it. Another element of T.V.A. technique is the
direct or indirect circulation of model planning and zoning ordinances and material for school use on community planning.
It is possible that the Authority would have made igreater
progress in such planning activities (for example, in the development of recreation, parks, roadways, improvements in municipal
and county government, schools) if it had had the power, not
merely to plan and demonstrate and suggest developments to the
local authorities and to Congress, but itself to undertake the necessary work through its own officials. That, however, raises the
question of the comparative merits of fairly quick achievement by
an outside authority, as against the slower action of the inhabitants
of the area itself, under the skilled guidance and encQuragement of
a friendly outside agency.
The Relocation of Families
When a dam is nearing completion, the backwater areas
must be scheduled for clearing and flooding; farms and houses will
be inundated, and the families living there must be removed.
Though the people themselves have always made the decision as
to where they will move, at the beginning of the Authority's operations the question arose whether such families should be advised
to move out of the area altogether, since some of them lived on
very poor land, and the total amount of good land in the area was
not great. It was decided that so far as possible the people should
be kept in the Valley. Their land (including house, permanent improvements, etc.) is acquired by the Authority at replacement
cost on present appraised value. The appraisals are made on the
assumption that the seller is not a willing one, and this permits
some indirect compensation for disturbance, removal and readjustment.
The Authority has taken the problem of removal, resettlement
and readjustment very seriously. Principally in co-operation with
the Agricultural Extension Services (by contractual arrangement
with the land grant college^), plans for evacuation of the area and
the relocation of the displaced families are formulated well in
advance. The county agente give aid to the farm families in their
resettlement problems. They discuss with them their economic
and social problems; provide lists of farm property for sale or
rent; assist in inspecting and selecting new farms and in the wise
reinvestment of the price of the old farm; and give realistic and
objective advice on these matters and on farm programmes. Once
the families are resettled, the county agents keep in touch with

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99

them until they are able to continue satisfactorily without help.
The Farm Security Administration, Federal Housing, i National
Youth Administration, Works Progress Administration, Civilian
Conservation Corps and Social Security Board, together with the
various State Departments of Welfare, are brought in to collaborate
where the case so requires. It has also been possible in many cases
to assist families by giving them employment on some of the Authority's own projects—the dams, relocation of roads and railways,
reservoir clearance—upon satisfactory report as to their qualifications from the personnel department of the Authority.
By 1 February 1943, over 11,272 families had been relocated,
most of them to their own satisfaction and advantage. Some families not actually relocated were adversely affected by the purchase
of lands they had formerly farmed, or by the closing of roads or
flooding of former marketing centres. These too were assisted in
their adjustment to new conditions by the assistant county agents.
Reheating Highways
The Tennessee Valley Authority is legally liable to make good
the damage done to public as well as private property by flooding
or other taking out of use. The Authority, therefore, is responsible
for replacing flooded roads with highways of similar character
and affording reasonably similar service to the residents.
The Authority has the alternative of paying an agreed sum to
the local authority for the replacement of the road, or building
the road itself and then handing it to the local govenunent. It
has chosen, the latter alternative and has taken the improvement
view of its obligations, looking at least to replacement of equivalent
service, and not merely to calculation of equivalent cost. However,
it also has regard to the value of the land served by the road; if the
former is unproductive it may pay to buy the land and save the
cost of relocation; or, as in one case, the road may be relocated to
improve the land-use pattern.
The T.V.A. has on its engineering staff specialists in highway
and railroad relocation many of whom, through their previous
experience, are familiar with local conditions and with the local
governing authorities in the Valley. These engineers study the
problems raised by the construction of a reservoir project and
prepare an integrated plan of highway adjustment which is carried
out after full discussion with each local authority concerned.
The T.V.A, suggests improvements in standards; for example,
wider roads, bridges of concrete instead of wood, or better types
of pavement* These improvements mvolve greater capital cost,

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THB T.V.A.: INTERNATIONAL APPLICATION

but pay in the long run because of the reduction in maintenance.
The local authorities, of coursé, must agree to contribute the difference between the cost of replacement in kind and that of the higher
standard road. Payment for such improvements is usually made
in kind; for example, by construction of pavement or of entire
sections of highway.
A typical example of improvement in standards was the construction of a bridge across the Norris Reservoir on the Clinch
River. The cost of the bridge desired by the Tennessee State Highway Department was approximately $200,000 in excess of the
cost of a bridge equivalent to that which was inundated. The bridge
was constructed and paid for by the Authority, and in compensation
the State constructed one of the other highway relocations for which
the Authority was responsible.
In replacing existing roads of poor type the Authority has
frequently improved the standards because its machinery, being
adapted to the construction of wider roads, can build them as
cheaply as it can build roads as narrow as those replaced. A large
proportion of the construction work of highway relocation is carried
on by the Authority with its own forces. The remainder is performed under contracts.
Schools
Difficult problems arise in regard to public schools that are
either flooded or made inaccessible and worthless because of the
relocation of people. After a co-operative survey with the county
superintendent and the State Department of Education, the T.V.A.
buys the schools by agreement; if this is impossible, as happened
in one casé, it proceeds by condemnation. The T.V.A. endeavours
to contribute to the improvement of the educational situation in
the area. Its Department of Personnel (Training Division) decides
after the survey which school, if any, or what location, would best
serve the school population after readjustment. In one case, at
Guntersville Reservoir, it was possible to buy out six schools, and
to use the compensation paid to the county to build a single consolidated school on an up-to-date design, a happy solution which
the local authorities had long wished, but for which the capital
had hitherto been lacking. Similar arrangements were made at
several other places.
Some difficulties of inadequate attendance at the schools of a
single county caused by the relocation of population have been
overcome by arrangements made by the T.V.A. for additional
pupils to come from across the county borders. This is seemingly

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PEOPLE'S SOCJAL WëLL-BBING

101

a small problem, but it is difficult because jurisdiction over education invariably arouses the obstinacy of the respective local parties.
The T.V.A. has dealt with the problem successfully. _
Besides the obligation of the Authority to provide for the relocation of schools, there is another educational responsibility arising
from the need to provide schooling at elementary and high school
stages for the children of the workers on its dams. State Governments do not recognise a liability for providing tax-supported educational facilities for those on Federal Government property in the
same way as they do for their own regular inhabitants. The Authority provides tuition through its own personnel, or induces some local
school to supply the courses it requires, making a small contribution
to the cost of the teacher.
The T.V.A., following the lines of advanced educational thought,
seeks to make the local schook more than an instrument of formal
tuition, and therefore encourages the use of the school as a community centre. This connects very well with its programme of
education in electrification, and all its agricultural developments
like farm demonstration, the control of soil erosion, forestry and
fire protection. It encourages education by the use of documentary
films, which it circulates.
In the arrangement of school facilities for children of employees
in the construction villages, the T.V.A. has only in two cases taken
the course of building a school itself. The first was Norris High
School, part of a planned community- on a permanent basis. The
other was at Muscle Shoals (Wilson Dam), which is a Government
reservation, where the village was too far from the nearest school
facilities. In all other cases, it has been able to carry out the policy
it prefers, namely, that of making a contract with schools in the
vicinity through the county education authorities whereby the
T.V.A. pays a per pupil fee on condition that its pupils are guaranteed a standard of education which will at least put them on a par
with other children of the same school age when they move away.
Altogether the T.V.A. provided, in 1938, for some 561 elementary
school children and 325 high school children in this way. At the
same time, the contract provides for job training, general adult
education, and recreation.
The Authority may stipulate the length of the school year, the
qualifications of the teachers, and the water supply in the school.
Moreover, the Authority requires that a member of its training
section shall be a member of a committee to be appointed by the
local school board to make recommendations to it for improving
the educational service and assisting the setting up of standards
for, and in the selection and approval of, teachers. These stipula-

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THB T.V.A.: INTERNATIONAL APPLICATION

tions are made only where necessary. It is the business of the
training division of the T.V.A. to safeguard the maintenance of
such standards, and the Authority also has a part-time principal
supervisor of elementary education who visits the schools and
reports to the Authority. On. several occasion», the T.V.A. has
successfully proposed the dismissal of teachers falling below the
standard.
The Authority's intention is ultimately to hand over the direct
administration of schools, even on its own properties, to the State
and county governments, who, it considers, are and ought to be
responsible for schooling. Recently the T.V.A. has sought more
continuous co-ordination of its own responsibilities and those of
the States of Tennessee and Kentucky. The T.V.A. provides an
education officer for each appropriate area, and the States establish
a co-ordinating committee of all appropriate agencies for a concerted attack on educational problems.
PUBLIC HEALTH

The T.V.A. maintains a Health and Safety Department, the
activities of which go beyond mere concern for the health of the
Authority's employees, dealt with in a later chapter1, and reach
far out into the well-being of the communities in the Valley.
The work of the Authority in the field of public health falls into
two broad classes: public health problems, such as malaria and
stream sanitation, caused by changes in environmental hygiene
consequent upon the Authority's construction programme and the
entry of large bodies of workers from outside; and research and the
promotion of public health administration, based upon the Authority's responsibility for plans and studies to raise the general wellbeing. The T.V.A. must also consider its general legal liability for
damage done to third parties by health risks. Furthermore, public
health properly forms part of the educational interests of the
Authority.
Sanitation and Malaria Control
The Authority is interested in securing clean, sanitary living
quarters, wholesome food and a safe water supply in order to safeguard the health of its employees. For this purpose, its own officers
at its camps see that the water supplies, the sewerage works and
the sanitary facilities of houses and dormitories reach a proper
standard; but a wider area needs control, and this is served by
T.V.A. inspection and collaboration with the State and local health
departments in charge of such services. For control purposes
i Cf. Chapter XI.

THE PBOPLB'S SOCIAL WELL-BRING

103

studies have been made of the various effects of pollution of the
Tennessee River and its tributaries, in which the T.V.A. Health
Department collaborates with other departments, as well as with
the State Public Health Departments and the United States Public
Health Service.
The vital branch of the Authority's activity is malaria control.
As is well known, in various parts of the world malaria has destroyed
the economic possibilities of whole regions. If the disease were
allowed to run its course, all the navigation possibilities and all the
hydroelectric power in the Valley might come to nothing. In more
than half the Tennessee Valley malaria is endemic, and there are
infection rates from 0 up to 60 per cent, in the samples collected
in blood surveys. Whenever water is impounded south of the Ohio
River a potential breeding place for the malaria-carrying mosquito
is created. It was necessary, therefore, for the Authority to establish
expert supervision in the preparation and maintenance of reservoirs,
to set up arrangements for controlling the mosquito on the reservoirs already impounded, and to take such further steps of research
and collaboration with neighbouring communities as would improve
the economy and efficiency of the measures for control. The T.V.A.,
by thorough collaboration with State health departments, which
have for many years treated malaria, has secured useful developments
of State regulations for each reservoir. With experience, greater
care has come to be spent on reservoir preparation ; this has meant
slightly larger capital costs, but has considerably reduced the annual
costs of maintenance thereafter, while increasing effectiveness.
The Authority has undertaken very extensive investigations
into malaria, in co-operation with the Department of Preventive
Medicine of the University of Tennessee, which indeed it helped to
establish.1 Its researches, which cover thousands of individuals in
different biological and economic contexts, could not possibly have
been undertaken without the collaboration of the Health Departments of the States of Alabama and Tennessee. This co-operation
is developed in other directions, and co-ordinated with a health
educational programme, and so a wide defence belt against the
transmission of malaria outward from the reservoirs and the river
and inward from the valley communities to its own employees is
secured.
Collaboration with Local Health Agencies
In order that there may be mutual service and assistance between the authorities in the area and the T.V.A. in the perspective
1
For some time T.V.A. paid a grant of one third of the salary. Three fifths
of the physicians of Tennessee are educated at the school.

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THE T.V.A.: INTERNATIONAL APPLICATION

sketched above, and especially to make sure of thehealth protection
of employees in the areas of the major construction operations and
services, the T.V.A. has other co-operative undertakings, supported
by T.V.A. grants-in-aid, with several counties in Tennessee,
Alabama, and North Carolina, Mississippi and Kentucky. The
agreement is made with the State authority, which then agrees
upon a public health programme in the appropriate counties. It
undertakes to employ for these services only such persons as are
jointly approved by itself and the T.V.A., and to submit progress
and financial reports to the Authority. The T.V-A.'s interests are
secured by the arrangement that its grant-in-aid shall be made
monthly upon receipt of a certificate that the services have been
duly performed; and the companies make monthly and annual
progress reports.
The official health agencies and the Authority jointly plan a
health programme with special emphasis upon environmental
sanitation and immunisation against smallpox, typhoid and diphtheria. The Authority reviews the qualifications of health department personnel assigned to its areas. There is such an intimate
continuous day-by-day relationship between the T.V.A. staff and
that of the local agencies present in the field that the T.V.A. has
achieved more than it might have done through inspectors. In
certain instances, however, the Authority also appraises the work
of the local agencies on the basis of the "Appraisal Form for Rural
Health Service", developed by a committee of the American Public
Health Association. All the progress reports are discussed very
soon after their submission by the T.V.A., the State Department
of Health, and the local Health Department. Although the financial
sanctions have been utilised on two or three occasions, they have
involved only the adjustmeût of minor administrative routines.
Public Health Education
Beyond such direct health activities, the T.V.A. assisted in the
establishment (by contract with the University of Tennessee and
the Tennessee State Departments of Health and Education) of a
very widespread and thorough attempt to promote public healthby promoting popular education on the subject.1 The system is
now altogether in the hands of the State of Tennessee, but the
T.V.A. still serves in a consultative capacity. Originally the Authority contributed certain grants to the State of Tennessee to start
the provision of a number of health educators and of courses of
'.This further developed a scheme started in Jan. 1931 by the University of
Tennessee, then assisted by the Commonwealth Fund, a private agency.

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PSOPLB'S SOCIAL WBLL-BSING

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preparation for health educators. At one time, the Authority had
a power of approval of the curriculum, the plan and staff. The
purpose of the scheme is to secure the creation of a widespread
health consciousness through the training of so-called ''public
health education co-ordinators", to be certificated by the State
Education Department. Elementary and high school teaching
manuals and a syllabus for a field extension course for elementary
teachers have been written. There is a University Professor of
Public Health Education (to whose salary the T.V.A. originally
contributed) supervised by the University, and a State official
called the Health Education Co-ordinator. A State Committee
representing the University, the State Departments of Health and
Education, and the T.V.A. directs the scheme. There are connections with the extension division and the health departments of
various cities and counties, and many local civic agencies and
social and educational agencies have been brought into the network of co-operating units. Considerable public understanding of
and interest in the work of the public authorities has been awakened
by lectures and field demonstrations. This may be expected to
have practical effect on public hygiene in the near future, for in
public health the authorities cannot possibly secure their results
by mere action and exhortation—they must place heavy reliance
upon the intelligent and loyal co-operation of all the people. A
similar co-operative health project was undertaken in Alabama.
Thus, by a small money grant, the T.V.A. was able to help to start
a much larger effort by the local agencies themselves, and to gain
an influence over an area much more extensive than is available to
it by a rigorous interpretation of its rights and obligations under
the Act. Wide facilities are obtained immediately at relatively
small cost. In the T.V.A. construction villages the Authority continues to make an annual grant to the counties for health services
rendered by them, and it has stimulated three times as large a contribution by the counties themselves, producing a standard which
the Authority itself would otherwise have had to maintain alone.
It is highly possible tíiat with the decline of the Authority's calls
upon their services, and of its grant, the new standards will not
be allowed to sag.
In its health activities, the T.V.A. has been substantially helped
by the United States Public Health Service. It has borrowed consultants from the latter, and continuously sought its advice and
occasionally its supervision. For example, a very far-reaching
enquiry into tuberculosis has been undertaken under its direction
with the assistance of the Valley States and the authorities. Part
of the purpose of this study is to determine the respective causative

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THB T.V.A.: INTERNATIONAL APPUGATION

parts played by the economic, the social, and the climatic factors,
The United States Public Health Service also manages grants to
the States in the Valley as elsewhere, and, knowing the connection
between the Authority and the States, it can advise accordingly.
The success of the contractual system is partly due tb the fact
that at the head of the T.V.A. Health and Safety Department
there is a distinguished public health administrator, Dr. E. L.
Bishop, most of whose professional career has been spent in the
service of public health administration in Tennessee.
It is in the outstanding national distinction of its administrators
and experts that the T.V.A. finds the way to acceptance of its
enterprise and guidance. The previous local service of its own employees is by no means a necessary preliminary to fruitful cooperative relationships, but it is sometimes useful in convincing
the local inhabitants that a man's ambition is fully satisfied in the
service of their welfare.
GBNBRAI, REGIONAL EDUCATION AND TECHNICAL ASSISTANCE

TheT.V.A. has a special interest in the general education of the
people of the Valley, over and above its interest in the education
and training of its own employees. The latter has usually, but not
always, been the T.V.A.'s point of departure, and various aspects of
the subject are discussed in a later chapter. The general education
of the Valley, recognised as indeed a vital constituent of sustained
economic and social progress and even a pre-condition of the attainment of technical skill, is conducted along two lines: (1) the encouragement of library services; and (2) stimulation of local schools
and civic agencies.
In the Tennessee Valley area one half of all the counties have
no public library service whatever. The T.V.A. does not supply
books to its employees directly from a department of its own excepting the technical works and works relating to the economic, social
and other operations of the Authority; these it supplies from its
technical library or by loan from National and State libraries as
needed. Apart from this, it makes arrangements by contract with
State and local public library agencies. The T.V.A., for its part,
pays a grant to these agencies, which agree to supply library service
to the construction projects and also to work towards the establishment, independently of grants from the Authority, of permanent
library facilities for these areas. These arrangements have not only
achieved the immediate purpose in supplying collections of books
at the dams. They have also encouraged the extension of library
service by towns to the surrounding counties; and services have

THS FBOPLB'S SOOAL WBLL-BBiNG

107

been continued for the general benefit of the area by the local
agency after the T.V.A. had withdrawn its financial support. In
one case, the county voted a special tax to continue the countywide library service first begun in response to the needs of T.V.A.
employees.
A more concerted attack on the subject of library facilities was
made in the spring of 1940, when librarians representing the local
State and National agencies upon which the T.V.A. principally
depends for its library services met to examine the problems and
explore the possibilities of a more effective co-ordination. University of Tennessee and T.V.A. staff members led the discussions.
In the spring of 1941 a permanent organisation, the Tennessee
Valley Library Council, was established to study the problems, to
serve as a liaison group in directing the efforts of libraries towards
a solution, and to promote the co-óperation of libraries among themselves and with related agencies.
The Authority believes that it is desirable to bring home to the
people of the Valley the general significance of its own activities,
partly with t%e practical object of securing the intelligent cooperation of the people in the effoits of the Authority to improve
their condition, but also for the general purpose of widening their
outlook, and showing the relationship of their traditional local
institutions to the work now being done in the regional area and
with the Federal authority. Therefore, since 1936, the T.V.A. has
sponsored a number of conferences between itself and representatives (usually the presidents) of the Land Grant Colleges in the
area, iñ order to prepare a curriculum and a doctrine, as it were,
and an organisation through which it might be taught. The basis
is, of course, the powers and purposes of the Authority and the
economic and social consequences of its activities, and particular
emphasis is'laid on democratic participation of the local agencies
and inhabitants in the Authority's programme. It is desired to enrich
the training and educational programmes at those points where
the T.V.A. has specific interests, and identify the mutual interests
of all agencies in the Valley in the use of appropriate instructional
materials.
In September 1938, an Advisory Panel on Regional Materials
of Instruction for the Tennessee Valley was established, composed
of representatives from the universities of the Valley States apd the
heads of certain of the research departments of the T.V.A. This
body, served by a Principal Supervisor of Instructional Materials,
provides suggestions and materials which may be organically
related to the curricula in the Tennessee Valley schools at all levels.
Thus, for example, the T.V.A. Department of Forestry Relations

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THB T.V.A.: INTERNATIONAL APPLICATION

supplies material in non-technical language to the Bureau of School
Service of the University of Kentucky to illustrate the applied
economics of the area, for instance, by bringing home to the pupils
the relationship between a more adequate diet and tree-crops.
Local school programmes and other materials have also been devised
to deal with farm and domestic economy. A series of readers is
being prepared by the Bureau on the growth and management
and exploitation of tree-crops, for use in the experimental schools.
An original emphasis on the production of tree-crops for sale was
changed híío an emphasis on home-consumption by the farm
family. The T.V,A. Department of Regional Planning Studies
has produced, with the assistance of the Advisory Panel, a booklet
called Communities for Living, a collection of popular material on
the subject of local planning. The teachers who used the experimental edition assisted in the production of a final revised edition.
. The Advisory Panel is thus a kind of clearing house through
which its members, all experts in some particular field, and the
members of the various teaching institutions and local communities
connected therewith, seek the most appropriate pattern and methods of community and regional tuition. The T.V.A. has an
enormous amount of information, highly conscious in its marshalling
and dissection of social facts, and through the Panel this is made
available and adapted to educational use, among the teachers in
the Valley, at the universities, as at the lower levels of education,
and.so permeates the younger generation in the Valley. In this
way the T.V.A. makes living contact with the people and needs
of the Valley, and the people of the Valley are gradually helped to
realise the significance for them of this powerful Federal agency
of regional resources development.
Finally, no reader of the preceding chapters on the T.V.A.'s
activities can have failed to notice the frequent references to the
technical assistance given by the T.V.A. to the region as well as to
its concern for education. The farm demonstration programme is
almost entirely a process of education and assistance by a body of
trained agricultural experts. The rural electricity programme, with
its home economists and, demonstrators, its T.V.A. accountants
to guide the administration of the co-operatives, and the invention
and provision of electric apparatus, is another example. The
advisory relationship between the T.V.A. power departments and
the municipal electricity undertakings is one more aspect of the
value of the T.V.A.'s technical knowledge and ability to the public
agencies and people of the area. The publication of the T.V.A.'s
research studies in the social and the economic field, its advice on
physico-economic planning, its encouragement and assistance at

THB PEOPLE'S SOCIAL WBLL-BSING

109

conferences of civic and State agencies, its dissemination of the
facts regarding its own or collaborative inventions of agricultural
apparatus, produce-conserving and processing methods, the extent
and quality of mineral resources, and so on, are further contributions to the raising of the level of technical skill, ability and control
over economic processes. In certain of the agricultural, industrial
and manufacturing processes to which reference has been made,
T.V.A. experts actually demonstrate the manufacture and application of newly invented apparatus and devices.
All this is in addition to the public health education just described, to the fostering of general education by the T.V.A.'s concern
for public libraries and its connection with schools for children and
adults with the object of making clear the relationship of its purchases and programmes to the economy of the region, and to the
Authority's efforts to raise the standard of vocational skill of
its own workers. The Statute wisely provides that the T.V.A. may
call upon the departments of the Federal Government for advice
and assistance, which the latter have an obligation to render at the
President's request. This power has been very amply used, and
so the skill at the disposal of the Federal Government is mobilised
for the Valley's benefit.
This function of bringing to the Valley the assistant» of physical
and social science and technology is of supreme importance, since
it is the procedure best calculated to enable the people to stand on
their own feet in the course of time. For all experience of economic
development"—and the T.V.A. is consciously guided thereby—
shows that the soundest foundation of progress is knowledge, both
technical and general, possessed and applied first by leaders, and
in the long run, by dissemination through them to the broad masses
of the people» There is indeed a close and causative correlation
between the quality and diffusion of education and expert skills,
and the general level of economic productivity.

CHAPTER VII
THE CORPORATE AGENCY AND ITS METHODS
OF OPERATION
After considering in the foregoing chapters the problems faced
by'the T.V.A. in the fulfilment of its purposes, attention may now
be directed to its characteristic methods of operation, and therefore
to its most significant administrative features. These are (1) its
corporate form; (2) its democratic and contractual collaboration
with existing public agencies and the people in the Valley; (3) its
"regional" area of responsibility; (4) its integrated resource development and therefore its multi-purpose character; and (5) its method
of procedure by technical assistance and education.
THE CORPORATION

The T.V.A. is a corporate agency of the United States Government. It is important to consider what was intended by vesting
in a corporation the powers which Congress thought necessary for
the development of the area. Congress might have lodged the
various powers separately in the several departments of the United
States Government in Washington, and have arranged for special
co-ordination among these departments so far as their activities
related to the Tennessee Valley. But the purpose was tó treat all
the problems of that area as integrated; and this led almost with
iron logic to the establishment of an authority on the spot, that is,
to territorial decentralisation or régionalisation. The second idea,
developing simultaneously with the first, was that a special instrument of administration ought to be devised better adapted to the
functions to be exercised than were the traditional departments
of the Government. In his Message of 10 April 1933 to Congress,
requesting the creation of a Tennessee Valley Authority, the President asked for "a corporation clothed with the power of Government, but possessed of the ñexibility and initiative of a private
enterprise". This meant:
(1) That it should be endowed with certain specific powers
in relation to persons and property and in relation to its own purposes.

CORPORATE AGBNCY AND ITS MBTHODS OF OPBRATIOÑ

111

(2) That it should have succession in its corporate name; and
the power to sue and the liability to be sued in its corporate name,
to adopt and use a corporate seal, to make contracts for the purposes and through the procedures provided in the Statute, to make,
amend and repeal bylaws, to purchase or lease and hold real and
personal property necessary for its business, and to dispose of any
personal property, to exercise the right of eminent domain1 in the
name of the United States, and to proceed by condemnation where
necessary for the purposes of the Act.
(3) That it should be empowered to appoint its personnel with
exemption from United States civil service rules and4 to organise
its internal affairs with comparative freedom.
(4) That, since the Authority must come under some superior
national' control, it should be assigned special relationships with
various of the controlling departments of the Federal Government
designed to secure political responsibility, but without subjecting
the Authority to a straitjacket.
In the words of the House representatives on the conference
committee on the T.V.A. Bill: "We have sought to set up a legislative framework but not to encase it in a legislative straitjacket.
We intend that the corporation shall have much of the essential
freedom and elasticity of a private business corporation."2
Congress seems to have chosen the corporate form for four
reasons. In the first place, those who originally drafted the early
Muscle Shoals Bill wished to establish an authority which (o) might
be an altogether private corporatiqn, and if not, (&) would have
political interference in its administration reduced to a minimum
by the corporation's independent power to appoint its own employees; (c) would have its own self-contained financial balancesheet, which would provide the incentives and correctives of profit
and loss necessary to good business effort; and (á) would be able
competently to plan for the future, because it would have freedom
to buy and sell without having to wait upon annual appropriations
from Congress.
Secondly, various analogies were adduced in the course of debate
when hydroelectric power began to play a large part in the legislators' mind; for instance, the Ontario Hydroelectric Commission,
and electricity administration in places of great repute like Tacoma
and Los Angeles.
Thirdly, there were precedents for a corporation owned by the
Federal Government. As far back as 1904 the Panama Railroad
1
2

To take property compulsorily with compensation.
73rd Congress, House of Representatives, Report No. 130,1933, p. 19.

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THS T.V.A.: INTERNATIONAL APPLICATION

Company had been taken over by the United States Government,
which had continued to operate it substantially as though it were
still a private corporation. The Alaska Railroad had been managed
in much the same way since 1914, Then, in the course of the war of
1914-1918, a number of powerful corporations were organised by
the United States Government to run emergency fleets, to buy
and sell grain, to build houses, and so forth.1 In 1924 the Inland
Waterways Corporation was established to take over from a Bureau
of the War Department a commercial transportation service on the
Mississippi and Warrior Rivers. This corporation was endowed
with capital stock, and was given power to move funds from one
branch of its transactions to another, to establish a reserve against
accidents and to borrow additional capital, flexibility in contractual
relations, and relaxation of the full degree of audit of its accounts
by the Controller-General in order to permit a proper flexibility
of business judgment.
Fourthly, since the last war, administrative theory had
moved strongly towards the detachment from the traditional
controls of administrative agencies which had the characteristics of an industrial or commercial enterprise. This development was due to a questioning whether civil service methods
of appointment and the settled procedures of administrative control
collectively known as "red tape" could not be improved upon; and
whether it was really possible for Congress annually to make a
genuine review of the detail of administrative activities, or advisable
for it to intervene continuously in rather trivial everyday matters
of administration. It was further believed that independent accounting and financing would stimulate responsibility anci enterprise, and that if an agency were set up with these characteristics,
a special esprit de corps might be promoted conducive to the will
to increase revenue receipts and keep down expenses. Indeed,
the men who drafted the first post-war Bill to deal with Muscle
Shoals deliberately adopted the corporate form to meet the foregoing considerations.
These tendencies, which also operated in other countries at the
same time, have persisted in the United States. More public corporations were set up during the great depression. Indeed, the most
considerable of all, the Reconstruction Finance Corporation, was
established in 1932. Later, with the "New Deal" administration,
1
Instances are: The War Insurance Corporation (1918); the United States
Shipping Board Emergency Fleet Corporation (1916); the Food Administration
Grain Corporation (1917); the United States Housing Corporation (1918); the
Sugar Equalisation Board (1917), etc. Cf. H. A. VAN DORN: Government Owned
Corpor^ons (New York, 1926).

CORPORATE AGBNCY AND ITS METHODS OF OPERATION

113

there came in quick succession the T.V,A., the Homeowners' Loan
Corporation, and a long, succession of others.1
It should be observed that the term "public corporation" is a
name given to a type of administrative agency and does not imply
that all such corporations have identical administrative characteristics. The nature of every public corporation is determined in
each particular case by the legislature, which endows it with characteristics appropriate to the functions it is designed to perform.
To sum up.the aims pursued by establishing the T.V.A. as a
public corporation, it was desired, first, to exclude politics and
partisanship in the conduct of its business. This was to be secured
principally by having the directors appointed by the President of
the United States; by exempting T.V.A. employees from the
requirements of civil service regulations and, at the same time,
requiring the Authority to set up its own merit system. Secondly,
the Authority was to have financial flexibility in obtaining, spending and accounting for its funds, and was to establish its own separate annual accounts to show the state' of its business at proper
intervals. Thirdly, it was to have.a degree of freedom in carrying
out certain transactions, such as purchasing land, equipment, and
other properties, and the power to make out-of-court settlements
in disputes with other parties. Fourthly, to assure the continuity
of its policy and activity, it was to have power to appoint and
regulate its own staff and set up its own procedures, and also to
have a margin of moneys for use in continuing its operations.
Fifthly, it was to have power to sue without going through the
agency of the Federal Department of Justice in order to ensure
flexibility; and liability to be sued directly on much the same basis
as any ordinary business, in order to give confidence to its clients.2
1
Since the be^innin^ of the second world war, a number of new corporations
have been established m the United States underthe Reconstruction Finance
Corporation for the procurement of stocks of materials necessary to the national
defence programme; among these is the second edition of the Export-Import
Bank, established in 1940, to promote the development of natural resources in
Latin America, leading inter aiia to the establishment of development corpora.tions in Bolivia, Ecuador and Haiti.
In Great Britain, whose experience in this respect has been as carefully followed by American students as United'States' experience has been watched by
the British, there are some notable instances of administration by public corporations; for instance, the Port of London Authority (1908), the Central Electricity Board (1926), the British Broadcasting Corporation (1927), and the London Passenger Transport Board (1933). Cf. L. GORBON: The Public Corporation
in Great Britain (New York, 1938); and T. H. O'BRIBN: British Experiments in
Public Ownership and Control (London, 1937). In Germany the administration
of the railroads and postal services, shortly after the end of the world war, was
vested in independent corporations, the Reichsbahngesettschaft and the Reichspost.
Similar developments in the case of railroads occurred m Austria, Belgium,
Greece,
Poland, Rumania and Switzerland.
2
Cf. in particular David E. LIUSNTHAI, and Robert H. MARQUIS: "The
Conduct of Business Enterprises by the Federal Government", in Harvard Law
¡Review, Feb. 1941, for an interesting analysis of the nature and operation of
public corporations, with some special reference to the experiments of the T.V.A.

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THB T.V.A.: INTBRNATIONAL APPLICATION

The T.V.A. cannot do what it likes; it can do only the things
which are specifically permitted or commanded in the Statute, and
can reasonably be implied from such permission and commands.
Its powers are further governed, of course, by the general character
of the United States Federal system of government. The Authority
stands inside a (institutional syàtem founded upon a basic law and
developed by interpretation over ISO years. In that Constitution,
the Federal Government (Congress, the President, and the Courts)
has powers; the States have powers and. rights; individuals are
guaranteed certain rights, and, in some cases, immunities from the
action of Governments and rights of suit against them. The Authority, therefore, has in the first place to be careful not to overstep
the powers vested in it by Statute and Executive Order under the
powers derived from the Federal Constitution, nor to deny rights
which other agencies and individuals properly possess.
Since the.T.V.A. is subject to the law of the land, its actions
are subject to control by suit brought against it in the law courts;
and the wide extent to which it is open to such challenge has been
shown in practice by the number and diversity of the actions
brought against it. Its suability, with the right to make settlements
out of court, has clearly focussed responsibility upon it and impelís
it to make settlements wherever feasible and on terras most conducive to its business interests.
DSMOCRATIC CoW,ABORATIÔN

The T.V.A. entered an area in which local political agencies
already existed—the States, the municipalities, the counties. These,
and most of the politically conscious citizens, looked with much
gratitude and some eagerness to the establishment of the T.V.A.
It was evident that, in the fullness of time, considerable benefits
would accrue to the region. At the same time, the Board of Directors was given a responsibility which was, as it were, exclusive;
that is to say, no provision was made in the Statute (so far as
T.V.A. powers were concerned) for self-government by the people
of the area, whether through direct nomination of all or one of the
directors, or through the election of an executive or advisory body
supplementary to the Board. There was, and is, no democratic
government in the sense of a locally-elected body of local directors
of the T.V.A. responsible to the local constituency. As directors,
the President selected three men of energy, capacity and public
spirit, fully sensitive to and aware of their responsibilities, and
intensely alive to the pioneering opportunities provided. A twofold danger therefore arose. One aspect was that the directors and

CORPORATS AGENCY AND ITS MBTHODS OF OPERATION

US

staff might regard the area as a backward colony, to be administered, it is true, with unbounded benevolence, but nevertheless
from above. The other was that the inhabitants of the Valley,
southern people proud of their own institutions and folkways and
still affected to some extent by memories of the Civil War, might
suspect and resent the intentions and activities of the directors,
however well-meaning.
The problem involved was not successfully solved at once. In
the first few months of the Authority's advent in the Valley, soma
resentment was roused by observations made by one or two of the
directors which led people, on the whole erroneously, to believe
that an alien authority was claiming charitably to improve them.
The attitude of the leaders of the Valley people themselves is best
expressed in an article written in 1937 by one of themselves, George
Fort Milton, as follows:
At the beginning some of us resented rather deeply the paternalistic attitude
at the top. These outlanders seenied to have come down here to reform an illiterate, godless lot who would not wear shoes; they could teach us that there was
really some merit in occasionally employing footgear. . .
However, it soon developed that this was by no means the general purpose
and policy of the Authority; there was exhibited at least an equally vigorous
idea on the part of some of its controllers that Tennessee Valley Authority's
purpose in this Valley was not to redeem a backward race by demonstration;
that rather it was to afford opportunity to people who, whenever given opportunity, promptly embrace it. This new tone and attitude, an index to Tennessee
Valley Authority's own capacity for self Vacation, was a happy change. Today
one hears fewer whispers of this zeal for reform, but rather a growing understanding of the merit of the people of the region. And with the change on the
part of the Authority has come a companion change of the people's own attitude.
Tennessee Valley Authority is now of us and not of others. Its roots have begun
to sink. It is no foreign Santa Claus, but the spirit and purpose of the Valley.

The change noted came from several causes. In the first place,
it was feared that the co-operation of the local population would
not be forthcoming, and that this would stultify the Whole programme. Secondly, one of the three directors was drawn from the
community in which the Authority was to operate and was thus
in a position to interpret to the Board the attitude of the inhabitants. Thirdly, it was realised that for good government, realistic
information is necessary, and that such information can never be
fully available to the Authority unless it is offered by the people
and the agencies of the people themselves. Any process of survey
and research based upon the unilateral action of tíie Authority will
not only be more expensive but will be less accurate and full.
Fourthly, there are existing interests, for example, the land grant
colleges, and the local government units and the States, with in-

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THB T.V.A.: INTBRNATIONAL APPLICATION

fluence and with powers (including the police power, that is, the
actual power of government), which the T.V.A. does not itself
possess, but which are necessarily complementary to its own
powers and able to make or mar its policies.
That is not all, however. The Authority came to recognise that
perhaps its greatest potential contribution to social well-being lies
in stimulating the energies of the people themselves, in assisting
their own spirit of self-help and initiative. It cannot be said that
ideas ever went as far as a transfer of the authority of the Corporation to the local people themselves; but there is a definite conviction that if the Authority were ever to cease to exist it could do so
with the assurance that, so far as its responsibilities are concerned,
the local population had been brought tó some appreciation of
their own civic capacities and obligations. This point of view is
expressed in the T.V.A.'s Annual Report for 1936 under the rubric
of "Local Self-Reliance".
The T.V.A. operates in fields in which national interests are directly involved
and in which nothing short of national action can be effective. The roles of the
States, and of cities, counties, districts, and voluntary associations within the
States, are enhanced, not diminished, in importance by this recognition of interest
and jurisdiction. Co-operation, not destructive competition; Federal responsibility in Federal and inter-State matters, with local initiative and self-reliance
in matters of a local nature—these are policies by which the development of the
Valley is being and should continue to be guided.
The planning of the river's future is entrusted to the T.V.A. The planning of
the Valley's future must be the democratic labour of many agencies and individuals, and final success is as much a matter of general initiative as of general consent. The T.V.A. has no power or desire to impose from above a comprehensive
plan for the social and economic life of the Valley. It does desire to carry out its
own responsibilities, within its proper legislative and constitutional limits, in
such a way as to be consistent with the orderly development of the region, ajid
it therefore needs to be cognisant of the major conditions, forces, needs and
purposes of the Tennessee Valley area.

In recent years this conviction has become even more conscious.
In a series of addresses and articles the present chairman of the
Board has systematised and stressed the democratic, decentralised
approach. Many benefits are obtainable by the centralisation of
authority, but they may be defeated, and will certainly be reduced,
by the centralisation of administration, while they will be enhanced
and preserved by the decentralisation of administration.
The T.V.A. was so designed as to permit the Authority to make its decisions
in the field, close to the people and their problems. It is in the field that adjustments and modifications adapting the Federal programme to meet the actual
needs of local situations are more readily developed; it is in the field that citizen
participation can be enlisted. That power to decide in the field is, I believe, the

CORPORATE AGENCY AND ITS MBTHODS OF OPERATION

117

heart of any decentralised programme, the quality without which there can never
be an administration at the "grass roots".
Our unique contribution has been that both by tested means and by newly
adopted practices we have been "self-conscious" in our efforts to discover just
how far and how effectively in its administration a Federal programme can be
brought closer to the people and their problems, how far a Federal agency can
take local and State instrumentalities into active partnership.1

Only so will the atrophy of local endeavour and the drying up
of initiative be avoided; and reliance on a "diet" of fundamental
principles and "a priori reasoning" by an absentee Government
be replaced by facts and judgment from the grass roots.
The same theme is neatly and responsibly expressed by the
present General Manager:
The right to help formulate plans and recommendations, to accept or reject
recommended programmes and courses of action, or to seek out alternatives, or
to do nothing at all, rests with the local community and its representatives.
The T.V.A. does not share this right; as a democratic institution created by
the joint action of all communities it is itself an expression of this right. It does
share as a consequence the responsibility of participating with the communities
in their educational task of assuring that the exercise of their fundamental right
of self-determination shall be increasingly wise and farsighted.2

Thus, the Authority cannot and does not abdicate its own
elementary responsibilities as defined and controlled by Congress.
But, as has been seen, it has most deliberately and painstakingly
devised its administrative arrangements so as to share in the making
and execution of policies with the States, the municipalities, the
land grant colleges, rural electricity co-operatives and farmers'
clubs, local commissions of public-spirited citizens and those engaged
in business. By a series of contractual and co-operative agreements
it has stimulated farm demonstrations, the application of electricity
to rural productive activities, the raising of the level of education
and school accommodation, the improvement of public health,
the physical planning of the area, the extension of libraries, the
development of recreational facilities, and many other aspects of
social existence in the Valley. "For in the scene of general bigness",
says the chairman, "men continue to come about the same size.
There is still a limit to the energy and wisdom of the best; and so
that many men may share in carrying out the vision of a few, we
must learn how to decentralise administration."3
It may therefore be said that while the T.V.A. is not politically
1

The T.V.A.: A Step Toward Decentralisation, Address by David E. LIUBNDirector, Tennessee Valley Authority, before the University of California,
29 2Nov. 1940.
Gordon R. CI,APP: "The T.V.A. Programme", in Journal of Educational
Sociology,
Nov. 1941, p. 147.
8
David E. LIMBNTHAI,; "The T.V.A. and Decentralisation", in Survey Graphic, June 1940.
THAI,,

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THB T.V.A.: INTERNATIONAL APPLICATION

removable by the local inhabitants through any agency or procedure they can use, and is accountable only to the Federal legislature
and executive, nevertheless it is sensitively responsive to the local
inhabitants because (a) Congress designed a method of collaboration in the Statute; (&) Congressmen continually require the exercise
of collaboration; and (c) the continuous presence of the T.V.A.
directors and staff in the Valley itself inevitably produces responsiveness through every-day meetings, face to face, between government and citizens. Two of the directors have lived in the centre
of operations for ten years, since the T.V.A. began. A number of
the higher personnel have a like length of residence, and many more
employees have lived all their lives in the Valley. They may be
presumed to identify themselves with the good of the people of the
region.
Yet they are the producers and not the consumers of T.V.A.
services, so that the identity cannot be perfect. It must be remembered that there is an alternative form of organisation: a region
with a government of its own, locally elected and locally accountable.
Some have asked whether, if one of the first three directors
was appointed because of his representative standing in the South,
it is not desirable to go further along this path, and appoint several
representative directors. There is indeed something to be said for
the establishment of a Regional Council, nominated by major
political agendes like the States. Such a council, however, would
need to be on an advisory basis only, to have no share in sovereign
decision, for the latter alternative could only mean dispute and
confusion in the development of the programme of an Authority
whose finances come from the Federal Government. Political
influences have on some occasions (although unsuccessfully) pressed
for the building of dams in certain areas, or the early starting of
works to coincide with political interests. As things are at present,
these are suppliants without a sanction; and that is the most they
ought to be. For the funds come from the Federal Government,
and there has hitherto been little tenderness on the part of Congress towards special interests in T,V.A. matters. Indubitably,
in a sovereign representative council governing the T.V.A.
with funds provided by the Federal Government, irreconcilable
attitudes and wrangles would be provoked by the problem of
the expenditure of funds provided by the Federal Authority.
The coal and railway interests, capital and labour, have already
challenged various developments of the T.y.A. before Congress.
Had they been members of a sovereign council of the Tennessee Valley it is doubtful whether the T.V.A.'s own programme

CORPORATB AGENCY AND ITS MBTHODS OF OPBRATION

119

and policy as based on Federal enactment would ever have been
undertaken, or even if it had been, what its cost and shape might
have been.
A comprehensive advisory council is a different matter. The T.
V.A. consults various occasional advisory bodies on special subjects;
there is, however, no standing advisory council of local representatives giving comprehensive geographical or functional representation.
The emphasis of the T.V.A. on deraoaratic collaboration would be
better implemented if such a council were instituted, especially in
the operating, planning and development period towards which the
T.V.A. is moving now that the major construction work is practically completed. On a long-run view, great advantages to the
Valley could be expected from such an advisory council, for (a) the
T.V.A. would not need merely to guess at the relative strengths
of local bodies of opinion; (&) a valuable reservoir of information
would be made available to it; (c) its own justification of its policies
might be more intimately and vividly communicated and broadcast; id) a sense of participation by the Valley would be fostered;
(e) more cohesion between the general and special representative civic bodies would be promoted; and (/) experience in the
practice of democratic administration of a whole region would be
gained.
Collaboration with other Government Agencies
The theme touched upon above, namely, thé T.V.A.'s contractual relationships with other agencies of government, requires
some further discussion at this stage. These contractual relationships are of particular interest in connection with the problems
of the relationship between an international resources development
authority and development agencies in assisted countries, as well
as that between such national agencies and the already existing
political areas and institutions, especially where different sovereign
States are involved.
When the T.V.A. came into the Valley with its own powers
and responsibilities, it met a number of governmental agencies
already there. Some of these were coeval with the beginnings of
government in the United States, such as the States, the counties,
many cities, and so on. There were also the local branches of the
Federal Government Departments, as for example, the Department
of Agriculture, the Bureau of Mines, and the Array Engineers.
These, like the T.V.AM had powers and responsibilities. The T.V.A.,
or rather those who set it up, faced the alternative of establishing
a complete new set of departments of its own and ignoring the

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THE T.V.A.: INTERNATIONAL APPLICATION

existing agencies and their functions, or co-operating with them.
The first alternative would have meant: (a) overlapping, as for
example, in the farm demonstration'scheme (T.V.A., Department
of Agriculture, and State Extension Services) ; (6) some gaps, as
for example, in the exploitation of the recreational resources of the
Valley (T.V.A. and States) ; (c) actual conflict of purposes, as for
example, in respect of the power sales policy of the T.V.A. and that
of the cities; and (¿) uneconomical, inefficient, or inconvenient
administration due to the non-use of the most suitable agency for
the function to be fulfilled (e.g., the soil survey).
However, since it was the deliberate policy of the T.V.A. to
encourage and assist action by the agencies supported and controlled by the public in the Tennessee Valley, the second alternative
was adopted. The T.V.A., as already noted in connection with its
agricultural, power and health programmes, for example, has
accordingly entered into scores of contractual relatidnships with
States, counties, cities, local co-operatives. Federal departments,
academic, civic, and scientific institutions, for specific purposes,
and has thus sought to produce a continuous and dynamic intsi^connection. In this procedure the T.V.A. stands in the centre, as it
were, as the co-ordinator of activity, usually giving the lead and
planning the joint attack on the connected problems of the region;
from the earliest stage on. Its contractual arrangements often
imply a sharing of expense with the Federal agencies or a financial
grant-in-aid, on conditions, from itself to the local agencies, whether
States, counties or universities. By trial and error, but generally
with early success, it has solved the problems involved in such a
situation. These are : (a) selection of the agency whose legal authority and practical capacity are most appropriate to the power to be
exercised—for example, the Bureau of Mines to conduct the later
stages of the T.V.A.'s ceramic clay researches; (b) clear definition of
the share of responsibility assumed by the T.V.A. and its colleague
agencies, as illustrated by the Memoranda of Understanding on
farm demonstration of on public health; and (c) where the statutory
responsibility for a function is the T.V.A.'s, and especially where the
Authority pays a grant-in-aid for example, farm demonstration,
public health, laboratories, local stíhools. The T.V.A. has unquestioned responsibility for the success of the ventures zynd for the
means of securing it, whether by supervision or otherwise. In connection with this latter point, it is possible to value highly the farm
demonstration work of the T.V.A. and still speculate that the
T.V.A. might achieve more by direct relations with and supervision
over the demonstration farms than intermediately through the
Extension System.

CORPORATE AGENCY AND ITS METHODS OF OPERATION

121

as RESPONSIBEWTY
The Corporation is vested with responsibility for an area of its
own. An area drawn most appropriately to fit certain economic
needs, it cuts through the boundaries of seven States, boundaries
which (like political boundaries throughout thg world) were established in historical conditions altogether remote from contemporary
economic and technical considerations. There is a demarcation
of territory, and the assignment of obligations and powers relating
to it. The basis of the unity and identity of this area is the physical
fact of the river and the watershed itself. The question arises
whether such a conspicuous physical factor and tie is essential to
the demarcation of an area of development with special responsibilities, or whether governments can be freer in their choice of
area, and yet achieve good technical and social results. Examination of the climatic, topographical and economic characteristics
of the Tennessee Valley shows that, though the river is a unifying
element, there is considerable diversity in them, and that in regard
to economic activity various parts of the Valley are integral parts
of agricultural or industrial economies transcending the Valley.
For example, south of the river is the Alabama Cotton Belt; up to
Nashville, a populous industrial and commercial area, and so on.
However, conclusions will best follow an examination of the Statute
and the practice developed from it.
The Statute mentions, in the preamble, "the Tennessee Rivec
and the Tennessee Valley". The enacting clause looks to "the
improvement of navigation in the Tennessee River and Mississippi
River Basins". For electricity purposes, real estate may be acquired
"at any point along the Tennessee River or any of its tributaries".
Thé navigation clauses, again, envisage "the promotion of navigation on the Tennessee River and its tributaries, the control of the
destructive flood waters in the Tennessee and Mississippi Drainage
Basins". Then, finally. Section 22 (relating to the planning powers
of the Authority for raising the general welfare, and other purposes)
seems to widen the area by including "the Tennessee River Drainage
Basin and such adjoining territory as may be related to or materially affected by the development consequent to this Act". Moreover, there is the authorisation contained in Section 12 giving the
Authority power to sell electricity anywhere "within transmission
distance", and power to interconnect with other electricity systems. This, as well as certain points in the other clauses quoted,
very substantially extends the range of the powers, responsibilities
and administrative interest of the Authority beyond the mere
basin, which has an average width of some 50 miles. With this
latter index may be compared the economical transmission distance
THE REGIONAI, AREA

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THB T.V.A.: INTERNATIONAL APPLICATION

of about 250 miles from any point at which electricity is generated.
Some sections of opinion, not over-friendly to public enterprise,
were perturbed, when the T.V.A. was asking for new bond-issuing
powers in 1939, about the possibility of an even greater widening
of the T.V.A.'s area of enterprise in electricity supply.
There is no doubt that the drainage basin is a useful unifying
concept for a resources development area, whether in the United
States or any other country, but it is not the only one possible.1
In the case of the Tennessee Valley, it will be recalled that the
Federal Government's recognition of the economic and social
distress of the Valley drew attention to the region as a subject for
public development. Generally speaking, three questions arise in a
consideration of the proper area for development: first, what is the
area already defined for administration; secondly, for what people
and groups, over that area, is the Authority made responsible; and
thirdly, and very importantly, what are the established relations
by the development authority with the people and agencies inside
and outside the demarcated area for carrying out the functions for
which it is both directly and indirectly responsible ? Development
by the Authority has, in a large number of cases, been successful
only when the Authority has taken very special care to act as a
part of tibe greater economic and social body within which it has
its being.
The importance of the navigation powers of the T.V.A., as
already noted,? is by no means confined to that stretch of river
from Knoxville toPaducah for which the Authority is primarily
responsible; the river is linked with the Ohio, the Cumberland and
the Mississippi to the Gulf of Mexico. This linkage has many
repercussions. The railway and motor transport systems in the
vicinity are part of the interest, even if nqt the primary responsibility, of the Aulhority; the Authority has'already raised the
question of river transport and its problems (the establishment of
terminals and the planning of roads leading thereto) and the problem of interterritorial freight rates.2
So also in regard to flood control. Reference has already been
made to the T.V.A.'s contribution in holding back the masses of
water in the higher reaches of the Tennessee, so as nqt only to save
the cities on that river, such as Chattanooga, from inundation,
but, more important still, to help the Lower Ohio and Mississippi.
The necessary relevance of the Authority's activities, transcending the immediate area of administration, is nowhere more
strikingly manifested than in its electricity operations.
1
Cf. for general discussion, UNITED STATBS NATIONAI, RBSOUKCBS COMmWBS: Beetonal Factors in NaMonal Planning, Dec. 1935.
« Cf. p. 89.

CORPORATB AGENCY AND ITS METHODS OF OPERATION

123

Through its own transmission lines and the actual range of its
own supply, and the contracts for interconnection with great
neighbouring power companies, the Authority already stretches
hundreds of miles beyond the immediate area of the Valley.1 Even
that is not all, however, because two questions of economic development have been raised by the T.V.A. rates for electricity: first, the
effect of cheap rates upon industries in other parts of the country
(and whether such industries may or may not set up in the Valley) ;
and secondly, if it can be demonstrated that these cheap rates are
in fact subsidised because the Federal Government has financed
the Authority, whether other areas in the country may not justifiably challenge this special benefit. The T.V.A. has a tough problem
here, but for the moment it is enough to notice that this is a problem
of interregional adjustment which a local authority has to face.
In the fertiliser and farm demonstration programme, the Authority itself gradually realised that, experiment would give the truest
results if the donations of fertiliser were distributed all over the
country and tested under the widest variety of conditions. The
fertiliser and farm experts in the Authority have sought to make
plain to the whole nation the importance of the phosphatic element
in the soil. Here again, the range of interest and concern goes far
beyond that of the Valley, and the matter has even been considered
in relation to international export policy. The T.V.A. operates
its fertiliser and farm demonstration programme outside its own
area in connection with the Department Of Agriculture and the
land grant colleges, and the area of operation of these agencies
is of course very wide.
Nor, more narrowly considered, is the Tennessee Valley completely coincident with the T.V.A.'s purposes. The Valley of the
Tennessee is regarded by many people as having as its natural
complement at least the Cumberland Valley. Indeed, in the course
of the 74th and 75th Congresses, Bills were introduced for the
addition of the Cumberland to the area of jurisdiction of the T.V.A.,
and in 1941 Congress was again considering this question. It was
reasonably urged that more of thé State of Tennessee would fall
within the Authority's region, Tennessee being the chief State in
1
In the drought of 1940, the Authority delivered power to the Aluminunt
Company of America (Alcoa), then deeply engaged in the production of aluminium for defence purposes, brought by it from Arkansas and North Carolina.
Also, when the Commonwealth and Southern Companies were drought-stricken»
they were helped by the same means. When the Hiwassee Dam was under construction, the T.V.A. had no transmission line of its own in the vicinity. It saved
the cost of constructing or buying one by an arrangement with Alcoa which gavé
power to the T.V.A. on the site in exchange for power to the Alcoa in Tennessee.
Extra power needed for defence industries was obtained from steam plants
outside the area.

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THB T.V.A.: INTgRNATIONAL APPLICATION

the Authority's field of activity, but, under existing conditions,
divided into two disconnected areas; that the portion that would
be newly included was extremely important, comprising as it did
an area industrially, commercially and agriculturally productive;
that there would be added to the resources already under development by the Authority high grade coal, hardwood forests, tobacco
areas and agricultural land; that social and economic ties corresponding to the social and economic influences exerted by the
area outside would be established; and that there was a kinship
of the regions in resources, terrain, and the economic bases of population and culture. The interconnection of the two river basins
would be of benefit in relation to floods on the Mississippi, additions
to power supply, and ease of navigation.1
Since 1933, something like 120 State and city planning boards,
occasionally advised by the National Resources Planning Board2,
have been established in the area of the T.V.A. The relationships
of the Authority with these agencies, in so far as they fall within
its area, have already been considered.8 The point of present interest is that planning agencies have come into being in an area
larger than that of the Authority itself. At the conferences of the
southeastern section of the National Resources Planning Board,
T.V.A. officers from time to time played a considerable part, and
the T.V.A. and N.R.P.B. stimulated each other's ideas and researches. The Authority has principally addressed itself to the
stimulation of many agencies inside, on the borders of, and outside
the Valley. By these connections, the Authority is enabled to
exercise a useful influence on the whole of the seven States, though
its own area covers only a part of each.
This discussion of the relationship of the T.V.A.'s own specific
area to its concern and responsibility for parts of the United States
beyond its boundaries suggests several conclusions. First, that the
Authority's area has been necessarily restricted in order to secure
a sharp focus of attention upon its resources and problems. Secondly, that while an area of special development need not necessarily
be based upon electric power or the control of a river, the development agency must have authority and power to deal with its problems in terms of the area that, these problems affect, and there
may be sub-areas or trans-areas to meet special problems involved
in each of its several powers. A small valley authority may have
to fit into a larger entity; an immense valley may need sub-regions;
1
2

Cf. 77th Congress, 1st Session, Hearings on S. 1539, pp. IS ff.
This agency was established in 1934 as the National Resources Board to
prepare and present to the President a programme for the development and use
of land, water and other national resources. It was abolishedin June 1943.
« Cf. p. 119.

COHPpRA'm AGENCY AND ITS MSTHODS OF OFBRATION

125

plain and country may need division; mountain masses may need,
a single control though they are under several sovereignties. Thirdly, the delimitation of the area lies, to a very large extent, in the
discretion of the Government; it depends upon what the Government wishes to secure. Fourthly, any one area is necessarily embodied in the integument of the total economic system of a nation,
is affected by the rest of the economic system, even as it affects
and contributes to it; hence, there must always be problems of
adjustment. And, finally, the machinery of adjustment may take
the form of a voluntary agreement between the development area
and its neighbours, but in the last resort must be operated by the
Government of the whole nation.
^
INTBGRATSD

RgSOURCB DBVSW)PMSfcT AND A Mtn,TI-PüKPOS«

AuraoRrry
The Tennessee Valley Authority places great emphasis and
importance upon integrated development. It believes that undue
insistence upon one branch of its operations, however important
in itself, falls short of the possibilities of its mode of operation.
It looks at the area in terms of all its needs and of all its resources
together. Manifestly, the several powers vested in the Authority
have facets and significance for each other over and above their
direct values. It has been seen, for instance, that the electricity
programme has its own direct importance, but it also contribua
to increasing the productivity of the farms and raising the value
of farm produce, by making possible the preservation of locally
grown food and thus also contributing to improved diet. Again,
reafforestation ministers to the improvement of the soil and of
farm economy and the redevelopment of timber industries and, by
holding the topsoil on the land, aids in preventing the silting of
rivers, and thus assists navigation and the production of electricity.
Furthermore, the fertiliser and farm demonstration operations are
aided by the electricity programme and, in their turn, aid it, because
a wealthier ^farm community will look to electrical apparatus as
part of its production methods and comfort in living. The power
to conduct research and demonstrations is useful in promoting the
productivity of the area, because it may result in the discovery of
valuable mineral resources which may either be sold elsewhere or
(as in the case of certain clays processed in the area) used by industry, which may be decentralised by the use of the Authority's
supply of electric power. Once again, issuing from the duty of
constructing dams, there is a whole host of health problems,
the effects of which are not confined to workers on the construction
projects and the answers to which have wide repercussions. All these

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THB T.V.A.: INTERNATIONAL APPLICATION

functions, furthermore, minister individually to the civic education of the people in terms of their domestic economy and farm
practices, and to the art of democratic self-government in the cooperatives.
It would be possible, of course, for each of these powers to be
exerdsed by a separate authority, and it has been suggested1 that
certain of the powers devolved to the T.V.A. might well be administered by separate agencies; for example, its farm demonstration work might be undertaken by the United States Department
of Agriculture. But such a development would mean the loss of
the supplemental values, which are most perceptible and better
capable of being planned and achieved where a single unified authority is responsible for all of them together; and moreover, as has
been suggested earlier, would raise the possibility of parallel agencies
acting either in jealous separation or uneasy co-ordination, although
even such emergent problems are not insoluble.
The Tennessee Valley Authority, then, derives much of its
significance from the fact that it is a multi-purpose authority.2
The powers listed were conceived of by those who established it as
a govemmentally integrated means of achieving integrated resource
development. They had in mind, and the T.V.A. has had in mind
from the beginning, the comprehensive promotion of all the resources in their interrelationship, each resource being utilised in
companionship with the others and their purposes. The single
powers, therefore, are parts of a well-woven web, and all the parts
together make the strength of the Authority and its value for the
region. Each facet of each resource and power has, besides its
own significance, a supplemental one for the rest of the resources
and powers, and the development of each is consciously managed
from this point of view, so that from the very integration an additional value is obtained which is greater than the sum. No single
power, therefore, can be regarded as standing alone; it is always
a contributor to, and needs contribution from, all the rest. This
has clearly emerged from the description already given of the
various phases of the Authority's work.
1
Cf. Report 0} the Joint Committee Investigating the Tennessee VaMey Authority,
op. 2 cit., Minority Views, pp. 275-277.
It should not be forgotten, in the interests of proportion and perspective,
that the great cities of the world, not to speak of the smaller ones, are also multipurpose authorities, for instance, the great metropolitan centres of New York,
London, Buenos Aires, Vienna, etc. When it is urged that the T.V.A. is a multipurpose authority, the implied contrast is with'such public corporations as the
Central Electricity Board or London Passenger Transport Board in Great Britain,
or the Inland Waterways Commission of the United States, which are vested with
responsibility for a single function. But it is all a question of degree, for even
these single functions fall into a plurality of purposes.

CHAPTER VIII
MANAGEMENT AND PERSONNEL
THB BOARD Oï DIRECTORS

The chief administrative arrangements of the T.V.A. are exceptionally instructive to those who seek to understand its success,
for they attempt to answer the two vital problems of securing
administrative and techjiical efficiency, and excluding the influence
of politics from the direction and conduct of the undertaking. The
various sections of the Statute establish but meagrely the bare
foundations of its administrative system.
Supreme in the direction of the affairs of the corporatioa is the
Board of Directors. The Statute says (Section 2 (g)) that "the
Board shall direct the exercise of all the powers of the Corporation".
Under this Board there are some thousands of employees, the basic
principles of whose selection are stated in the Statute. As to the
organisation of departments and committees and councils and the
hierarchy of staff by which the executive work of this public enterprise is achieved, the Statute is almost silent; the Board of Directors
is free to establish such organisation on the basis of the Statute
(Section 3) under the following provision:
The Board shall without regard to the provisions of civil service laws applicable to officers and employees of the United States, appoint such managers,
assistant managers, officers, employees, attorneys and agents as are necessary
for the transaction of its business, fix their compensation, define their duties,
require bonds of such of them as the Board may designate and provide a system
of organisation to fix responsibility and promote efficiency. Any Appointee of
the Board may be removed in the discretion of the Board. No regular officer or
employee of the Corporation shall receive a salary in excess of that received by
the members of the Board. . .

Thus, the Directors are in a position of paramount importance.
There are three directors, one being chairman. The Board is
appointed by the President by and with the advice and consent
of the Senate.1 Directors are removable by Congress at its discretion; they are removable by the President if found guilty by him
1

Section 2 (a).

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inn T.V.A.: INTERNATIONAL APPLICATION

of applying political tests or qualifications in the appointment and
career of officials of the Authority or of acting in such matters
otherwise than on a basis Of merit and efficiency.1 By a ruling of
the Courts, the President also possesses (and has exercised) the
right to remove directors, based upon his constitutional duty to
see that the laws are faithfully executed. In appointing the members of the Board, the President is empowered to designate the
chairman. The directors are appointed for a term of nine years,
but the terms of appointment are arranged so as to stagger the
term of each director, those first taking office having been given
terms of three, six and nine years. Any two directors are empowered
to carry on the affairs of the Corporation in the absence of the third
director from board meetings.
When the T.V.A. was being developed, much consideration
was given to the question of appointment and qualification^ It
was clearly realised that the Vesting of such an important trust in
the Authority, especially with the latitude permitted to a corporation, meant that the experiment would stand or fall by the quality
of the directors. The majority report of the House of Representatives introducing the T.V.A. Bill (fi.R. 5.081) said:
It is a great responsibility imposed upon the members of the Board, but it is
a great opportunity that will come to those chosen for this great service. For such
position of trust and responsibility, undoubtedly the President will search the
nation over for the right men to whom to entrust-not only this vast investment
of money but this gre9.t responsibility not only to the people of that section of
the country, but to the people of the whole nation. If, through the incapacity
or the indifference of the members of the Board, this great humanitarian project
should fail, then progress along this line in other parts of the country will be set
back for two or three generations.

Congres?, then, wished to exclude political appointments and
influence, and to ôecure a clear objective devotion to the purposes
of the corporation. As for political impartiality, it was hoped that
the long term of office—nine years, which is longer than that of
most commissioners in other Government corporations—would
exclude partisanship. Further, the fact that the Statute had placed
the general power of dismissal in the hands of Congress to some
degree encouraged the hope that the Chief Executive would not
intrude. Finally, the staggering of the terms of office of the directors
was designed to produce a consistency and continuity in policy
which might not be possible if the reappointment of all directors
fell at one time; a further important consideration was that the
staggered terms overlap the normal four-year terms of the President
of the United States, and this was expected to frustrate the hostile
1

Section 6.

MANAGEMENT AND PERSONNEL

129

designs of a a©w and unfriendly President.1 It is important not to
ignore the effect on the T.V-A/s speed and attack in its early years
of the thought that it might have only four years of a friendly
President's term ip which to lay its foundations securely. Had it
been'" assured of a succession of benevolent controlling authorities,
it would have been less hasty in some important matters of power
policy, and would not have made enemies.
As regards administrative competence. Section 2 of the Statute
lays down three stipulations. First, no director may have a financial
interest in any public utility corporation engaged in the business of
distributing and selling power to the public, nor in any corporation
engaged in the manufacture, sale, or distribution of fixed nitrogen
or fertiliser or any ingredients thereof, nor in any business that
might be adversely affected by the success of the corporation as
a producer of concentrated fertilisers or electric power.
Secondly, members of the Board are not, while in office, to engage
in any other business, but are to devote themselves to the work of
theoerporàtion; that is, they are to be full-time officials. This has
been rather important as it has meant that the directors have been
on the spot most of the time, and a close identification of their
views with those of the region has resulted.
Thirdly, "all members of the Board shall be persons who profess
a belief in the feasibility and wisdom of this Act". This clause is
intended to.exclude from consideration those who obviously could
flot be held to believe in the feasibility and wisdom of this novel
public enterprise. Some evidence of loyalty was needed, and a
similar declaration has been required of all the officials of the corporation also. Whether this profession can govern those who
appoint and those who are appointed is an elusive problem in human
psychology. ít does not, of course, exclude bom, jWe differences of
opinion as to what the Act means and how it should be fulfilled,
nor has it done so.
, The directors receive a salary of $10,000 a year. Some members
of Congress believed that it was impossible to secure men of the
requisite ability and character at such a salary when they might
earn much more in private eaterprise. Some also believed that the
directors Could not be non-political. But these prognostications
have been decisively refuted by experience,
1
It is ¡ntetvesting to observe the conwnents on this of Mr. Wendell Willkie
who, as President of the Commonwealth and Southern Utilities, had found it
difficult to reconcile the policy of the T.y.A. and the President with the policy
of the utilities;. Yet on Í4 June 1940 (in a Scripps-Howard Press interview), he
declared: "Any President of thé United States who triés to turn T.V.A. mck
to the private utilities would be extremely unrealistic"; and "Now let us give
T.V.A. à really honest chance to see what it can do of it cannot do for the benefit
of all the people".

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THB T.V.A.: INTERNATIONAL APPLICATION

Thus, there are three directors, full time, all legally with equal
power, though one is chairman. Legal equality soon encouraged
a struggle for prédominance. This resulted in the early years of the
T.V.A. in a threefold division of the Authority's work. The too
evident disadvantages1, i.e., the inability to introduce a logical
division and proper co-ordination of departmental activities and
the disturbance caused by conflicting loyalties, were overcome by
the focussing of management in a general manager under the authority of the Board, to be described later. In a multi-purpose authority
coherence in policy and unity and drive in management are more
than usually important.
Whether a full-time board of three directors was, or is, necessary
is doubtful. It was not the deliberate result of careful congressional
meditation on alternatives. Various methods of administration
are conceivable for such public enterprises as the T.V.A., for instance, by a single administrator responsible only to the President
(or other superior control), and unaided and unaffected by any
colleagues, advisory or executive, sharing his responsibility; by a
single administrator with the executive power and responsibility,
but required to consult an advisory board ; by a single administrator
subject in all things to direction and control by the board of directors; or, as in the case of the T,V.A., by fully collective administration, yet with the majority of two directors able to overrule the
third, even if the third were chairman.
Experience of the first eight years of the T.V.A.'s operation
(during which there were moments of confusion, dissension, strain
and loss of time) certainly raises the question whether a board of
three men each with equal authority could not be better replaced
by a singlç administrator. To this, the Minority Report of the
joint congressional investigation answered that it would be better
to have five part-time directors paid on a per diem basis or by a
reasonable annual salary, employing a manager and acting as the
directors of an ordinary business corporation.2 But the Majority
Report considered that concentration of responsibility in a single
administrator would be inefficient, because the range of interests
to which the T.V.A. must give skilled attention was too large for
a single person, especially as 'the T.V.A. was moving along novel
and untried paths.8 The directors of the T.V.A. agree with the
latter opinion. Yet it is difficult at the operating stage at which
the T.V.A. has arrived, as distinct from the earlier policy-forming
1
See Report ttfthe Joint Committee Investigating the Tennessee VaUey Authority,
op, cit., and more especially Heatings, Vols. 1, 2, 3 and 6.
• Report, op, cit., p. 277.
• iWa., p. 26.

MANAGBMBNT AND PERSONNEL

131

stage, to discover what a full-time board does that a part-time
board could not do.
Initially, the Board of Directors assumed almost all powers
for itself, including administrative detail. This led to confusion,
and the Board finally consigned administration to various offices and
departments, and, in particular, put a general manager between
themselves and the detailed fulfilment of their orders. Consequently, the Board keeps in its own hands the major decisions
concerning its exercise and development of the discretion vested
in it by Congress and the coherent guidance of the whole enterprise; matters of general policy, such as the relative weight to be
given to its various programmes, the speed and scope of each main
item of administration within such programmes, the adoption of
the annual budget, which, in a sense, is a financial focus of the
various lines of enterprise in the Authority as they thrust forward.
It approves all appointments carrying salaries above $5,600 a year.
It must approve purchases of over $10,000 a year, and it reviews
purchases where the lowest bid is not accepted. The directors also
represent the Authority on important occasions before the public,
the President, and Congress. They direct, and sometimes participate in, the general strategy of relationships with other governmental authorities. They take a leading part in stating to various
public bodies the general purpose and standards of enterprise of the Authority; this duty falls especially upon the
chairman.
The General Manager
The general manager is the chief administrative officer to whom
all departments and officials report. He* is responsible for the
execution of policies and decisions of the Board subject to the
latter's control. He prepares the Board's agenda, issues notice of
its meetings, presents subjects for Board action, and notifies the
departments of the Board's policies and decisions. It is his business
to keep the Board currently informed of the activities of the Authority, to make recommendations, and to prepare special reports
upon the Board's request. He exercises considerable unifying
power and managerial authority—through his duty to prepare and
submit to the Board the annual budget estimates. Naturally, he
assists in the process of commending the budget to the United
States Bureau of the Budget and the relevant committees of
Congress.
The general managers of the Authority have hitherto interpreted their duty as not to assume all the tasks of administration

132

THB T.V.A.: ummtAXimAL APPUCATIOK

i

themselves, but rather to evoke from the various experts in the
employ of the Authority the best that they can give in terms of
advice and action, They remove obstadtes to the free and progressive activity of the departments, funnel information to the
Board (by various forms of reports, oral and written), and transmit
the policies decided upon by the Board to aU the various
services and experts employed to do its bidding. They seek to overcome the ignorance of employees at different levels of responsibility
of each other's duties and special part in the T.V.A.'s collective
purpose, in order to reinforce coherence of direction.
There are board-staff conferences arranged at the request of
the Board of Directors, the general manager, or one of the departmental directors in order to provide the Board with information
regarding the fulfilment of a policy already adopted, or to elicit
from it direction regarding policy considerations which may arise
out of the working programme of a department and give concern
to the staff. At such conferences there are present not only the
chief of the administrative department, but also members of the
departmental staff; and thus an opportunity of direct contact
between the supreme direction and the executants of policy ís
provided, with beneficial effects on the understanding and morale
of both parties, and on unity of action and timing.
Consultatifs
The work of the Authority and the planning of the Board have
been much assisted by the calling in of expert consultants. These
have sometimes acted as a committee, as with the committee of
three public utility experts who examined and reported upon the
problem of allocation of dam costs, or when hydraulic engineering
experts have been called in to give their opinion on the planning
of a dam or some particularly difficult phase of its construction.
There are very many instances in which an individual who is master
of a special field has been consulted ; for instance, on labour policies,
legal questions, power finance policies, health and ^safety problems,
tax studies, engineering, employee training, and so on. Advice is
sought in connection either with the preparation of a policy or with
technological improvements in processes or, again, in the form of a
general review and appraisal of work already in progress.
Here again can be seen a further aspect of the T.V.A.'s contribution to the welfare of the region in providing and bringing together
the most expert advisers for the solution of its problems. ,
The following organisation chart of the Authority shows the
distribution of duties:

MANAGEMENT AND PERSONNE!,

133

II
ES

1°

la 8

t
5$
3 CA

I

5 |

&

o

—
si

s~

§

1

J3:

1=1
T

The character of these duties has for the most part been explained indirectly in the various chapters describing the functions
of the T.V.A., but a word of explanation is needed in regard to the
Management Service and Regional Planning Councils. These councils are meetings of members of the various departments for the

134

THS T.V.A.: INTERNATIONAL APPLICATION

discussion of matters common to them, or subjects which, though
not requiring a collective decision, may commonly concern the
departmental responsibility of each. For example, at the Management Service Council there may be a discussion on T.V.A. publicity, the recruitment of staff, the T.V.A. and industrialisation; and
at the Regional Planning Council a review of the significance of all
T.V.A. activities, of land-utilisation maps, or malaria control
operations, or negro problems. These discussions tend to encourage
esprit de corps and mutual understanding of each other's problems;
they are educational rather than executive or even advisory. Once
again, by this device,- it is sought to secure in a multi-purpose
authority which might easily degenerate into cross-purpose departments, a sense of unified and co-ordinated advance.
PBRSONNBL

As with other parts of the system, Congress sought for T.V.A
employees the guarantees of political independence and efficiency.
Congress had to find t^e answer to two problems. One was how
to secure a defence against political influence; the other was whether
the T.V.A. should have its own special procedure to secure merit
and efficiency appropriate to its special and local tasks, or be
subject to the general-procedure of the United States Civil Service
Commission. The devices to answer the first question were simple,
though difficult to apply. The answer to the second involves issues
of great importance in Government undertakings of an economic
character, and some brief observations on thea long and serious
debate which occurred on this question before the T.V.A. was set
up, which continued later and has not yet ceased, are necessary at
this stage.
Those who were anxious to have the United States Civil Service
Commission recruit staff for the T.V.A. and regulate its classification, salaries, its conditions of work, retirement and the rest—
in other words, to embody the T.V.A. staff entirely in the one
million United States civil servants—wished to exclude patronage
and political influence by subjecting the T.V.A. to the regular
procedure by which the United States has sought to solve the question of political "spoils". The method generally .is universal open
competition and (usually) written examinations, with uniformity
of treatment for all departments and agencies of the Government,
no matter what their function. When there is such uniformity of
practice, congressional controls are also easier.
On the other hand, those legislators who wished to endow the
T.V.A; with freedom to be its own employing authority aimed at

MANAGEMENT AND PERSONNEL

135

giving the T.V.A. business vitality appropriate to its own special
function of economic development.
The legislators sought:
to write a Bill that would establish a Government Corporation on the same
basis of opération as the great industrial corporations of America are run—
the United States Steel Corporation in its efficiency, for instance. To accomplish
' that efficiency the captain of thé team has to have absolute command. It is
the only way in which efficiency can be obtained.1

They were afraid to have the Authority's employees selected
by an outside agency (the United States Civil Service Commission),
on the ground that this would mean applying a test which no man
engaged in that particular business in a private way would apply,
and depriving those responsible for the success of a business undertaking of the guarantee of efficiency, the right to hire and fire.2
Finally, many also believed that if the T.V.A. staff were appointai
by the United States Civil Service, then, so long as a candidate
could satisfy the usual wholesale tests of ability, he could be appointed to the T.V.A. even if he were an enemy of public economic
enterprise and unwilling to work for its success.
The upshot was the inclusion in the Statute of Sections 3 and 6.
Section 3 has already been quoted.8 The amplest creative opportunity was thus afforded the Authority. The power to remove any
employee at the discretion of the Board is a clear indication of the
flexibility with which Congress, after long argument, decided to
endow the Authority in order to meet the problem, so awkward
in Government employment, of getting rid of the "deadwood" of
incompetent workers.
The Authority's guarantee against political perversion is embodied in Section 6:
In the appointment of officials and the selection of employees for said Corporation, and in the promotion of any such employees or officials, no political
test or qualification should be permitted or given consideration, but all such
appointments and promotions shall be given and made on the basis of merit and
efficiency. Any member of said Board who is found by the President of the United
States to be guilty of a violation of this section shall be removed from office by
the President of the United States and any appointee of said Board who is found
by the Board to be guilty of a violation of this section shall be removed from
office by said Board.

The rule against political considerations is strong and unmistakable. The command that merit and efficiency shall rule is equally
firm and clear. What conditions should be established to secure
1
Cf. 66th Congress, 2nd Session, Congressional Record, 1 Dec. 1924, pp.
298-299.
» Ibid., p. 190.
» Cf. p. 1.

136

THB T:V.A.: INTBJRNATIONAL APPLICATION

the supremacy of merit and effideney was a matter left freely to
the Board and its properly deputed officers.
Freedom from Political Influence
As regards political intervention in appointments, the Authority
was, from the beginning, subject to heavy pressure. This came
sometimes from the chief party agents. Federal and local, of a
political party, but more frequently from members of Congress
from whom constituents had begged recommendations for jobs.
From the very first, the T.V.A. firmly rejected all attempts at
patronage. In this it was, at its request, assisted by the authoritative influence of the President of the United States. A T.V.A.
report made in 193S,"at the most critical period, showed that about
10.1 per cent, of all applicants for jobs had recommendations from
members of Congress, butconly 3.2 per cent, of those actually
appointed had such recommendations, and, of course, this latter
figure is no indication that the recommendation was a deciding
factor. Over the whole history of the T.V.A., there is no doubt that,
though subject to pressure, and though sometimes subject to temptation, it has resisted political considerations successfully enough
for their influence to have been negligible.
Originally, the T.V.A. followed the United States Civil Service
rule that officers and employees, while retaining the right to express
tiheir opinions on all political subjects and to vote as they pleased,
should take no "active" part in political management or in political
campaigns. At the employees' request, in accordant» with the
Authority's employee relationship policy, to be discussed presently1, a more liberal rule was adopted. In the first place, an
obligation was put on every employee of the Authority not to use
his authority or official influence, directly or indirectly, to control
or modify the political action of any other person; hot to engage
in any form of political activity during the hours of duty, nor at any
other time to take such part in political activities or campaigns as
to impair his effectiveness in his position or the programme of the
Authority, irrespective of party or political issues. It was also
resolved that no officer or employee should be prejudiced in his
career because of his political views or activities, unless these tended
to discredit the integrity of the Authority in carrying out its programme.2
—
Cf. Chapter X.
"
2! With
the passage of the Hatch Law in 1939, the Authority's Political Activity
Policy was supplemented to include the provisions of this law, applicable to employees' in all Federal departments and agencies, under which termination of
employment is mandatory for any violation of the specific prohibitions set forth
in the law.

137

MANAGEMENT AND PERSONNEL

Merit and Efficiency
Though the T.V.A. is free from any geographical limits of selection, it has come about that employees from i&e Valley States themselves have secured what is perhaps a disproportionate number of
the total jobs,1 This is because of the concentration of the Authority's work in the Valley; and, in regard to industrialhourly workers,
because it would be unwise to recruit them from all over the United
States with the prospect of their being turned off as soon as a construction job was finished. Although, for example, _the salaried
employees of the Authority, are not required to be residents of the
Valley, about 75 per cent, of them are from the Valley States. It is
reasonably to be expected that men to fill the highest positions in
the T.V.A., being experts witíi a national reputation, should be
sought primarily for their competence, and that the place of their
origin should be only a secondary consideration. Familiarity with
problems of the region is a definite asset in some types of work.
Where this cannot be adequately obtained together with technical
competence, subordinate officers with local backgrounds are employed as assistants. The T.V.A. has attracted, trained, and utilised
a very able body of personnel officers, whose record of work in
providing the skilled professional, administrative and scientific
staff, and the thousands of construction workers belonging to 100
different occupations, and in handling the problems of classification
and personnel relations, is outstanding in the contemporary public
services of the united States.
TOXAI, NUMBER OF PERSONS EMPWJYED BY THE T.V.A. PROM
YEAR TO YEAR
Annual
workers

Year

30 July
December

January
July

1934
1935
1936
1937
1938
1939
1940
1941
1942
1942

(combined)
(combined)
5,225
5,715'
5,696
5,744

iMrsr
8,979
13,122
15,032

Hourly
workers

9,392
7,955
7,219
6,493
7,343
14,548
20,637
26,179

Total

7,114
12,504
14,617
13,670
12,915
12,237
14,296
'23,527
33,759
41,211

1
As a concession to the Federal character of the United States, there is an
important rule in the United States Civil Service which runs: "Appointment
to the public service aforesaid in the departments at Washington shall be apportioned among the several States and territories and the District of Columbia
upon the basis of population as ascertained at the last preceding census" (Civil
Service Act, 1883, Seç. 2).

138

THB T.V.A.: INTERNATIONAL APPLICATION

NXJMBBRS AND AVBRAGB SALARIES OP ANNUAL EMPLOYEES AT
31 DECEMBER 19411
. Classification service

i Professional and scientific
Sub-professional
Clerical, administrative, and fiscal
Educational
Inspectional
Custodial
Total: Annual employees binder the salary policy
Trades and labour annual employees
Total: All annual employees

Number of
employées

1,926
1,433
3,717
7
2S9
1,260
8,602i!
2,097
10,699

Average
salary

(
1

$3,373
1,618
1,844
1,960
2,145
1,934
2,167s
1,767
2,092 |

1
Hourly employees in the Trades and Labour Service, comprising from one half to two thirds
of the total personnel, are excluded from this table.
' Figure at 31 Jan. 1942.

To recruit employees for administrative, clerical, scientific and
professional grades, the T.V.A. does not, like the United States
Civil Service Commission, have regular examinations with a nationwide announcement of date and requirements and subjects of examinations.1 Instead, it circularises a number of colleges and
institutions of higher learning and invites applications for positions.
The applications are reviewed, interviews sometimes held, and
a list or register of possible appointees is produced. Those not
appointed remain on the register, and are periodically circularised
regarding their wish to continue there. In the case of the United
States Civil Service the examination results in an order of merit,
and when an appointment is to be made the head of the department
chooses from three names in the order of merit certified by the
Civil Service Commission. Those lower down on the register are,
considered only later, in their relative order, as vacancies occur.
The register is then closed until the next examination. The T.V.A/8
register remains open, however, and any individual may apply at
any time for inclusion in it. Since its beginning the T.V.A. has
had 600,000 applications for positions of all types.
The personnel department is very dependent on the records of
the candidate's previous career. The Authority obtains additional
information concerning a candidate through reference enquiries
of unusual detail sent to previous employers and to other individuals
who know the applicant well. The standing of a candidate, especially for the higher posts, in a particular field can be ascertained
from universities, tibe officers of professional organisations and
similar sources.
1
For certain clerical and custodial positions, the Authority does utilise aptitude tests for the preliminary selection of candidates, and from these tests
registers are established. A variety of other factors beside test marks are considered.

MANAGKMBNT AND PERSONNfíL

139

When there is a vacancy in the T.V.A., the personnel department provides the records of several of the best qualified applicants
listed on the register. It frequently assists the heads of departments and supervisors in analysing the qualifications of candidates.
The appointing officer may choose, at his own discretion, any of
the names submitted to him, or ask for others. This system renders
unnecessary a regular widespread examination with the trouble
and expense of making up a numerical order of merit. The officer
making the appointment has more latitude in considering ability
and the very important personal equation of fitness than where
only three names are submitted to him, as in the Civil Service;
since selection is based on no.predetermined order of merit established by written competition, the possibility is open, though it
by no means follows that it is taken, of preferences on the basis of
personal friendship or professional or academic relationship. As a
matter of fact, complaints of the operation of this factor have been
made in a number of casés.1
However, it should be remembered that principal officers are held
strictly responsible for securing results in the programme under
their direction. Moreover, no positions in higher grades are filled
until the director of personnel, the general manager and the Board
of Directors have approved the appointment. Thus, the procedure followed obviates the choice of incompetents. Of course,
in the selection of the T.V.A.'s principal officers, such as the heads
of the various departments, very special care is exercised. It is not
only recognised ability in the profession that is needed, but some
guarantee that the employee will fit in with the purposes and policy
of the T.V.A.
Generally speaking, therefore, the T.V.A. approaches business
rather than civil service practice in the appointment of its personnel.
Classification and Saiaries
The T.V.A. established an elaborate and appropriate classification of its employees, closely following Federal practices, but
utilising its autonomy to make suitable modifications. Classification in the T.V.A., like all its personnel services, does not merely
consist in putting names and men into a classification of jobs;
1
Professor Leonard White, of the University of Chicago, and sometime
United States Civil Service Commissioner, in a report made to the Joint Investigating Committee, says: "There is evidence that the recommendations of
foremen and supervisors have as a matter of fact played considerable part in
the actual selection for certification for appointment. . . While it.does not
appear that political influence has been effective in selecting persons for appointment, selection probably has been influenced under the T.V.A. system by personal acquaintance more than would have been the case under the rule of civil
service certification."

140

THB T.V.A.: mXBRNATIONAL APPLICATION

in the process of classifying jobs afld men into the great subdivisions
of administrative work, the necessary changes are made in the jobs
themselves and the numbers, procedures and personnel relationships required tô do a designed task.
Dovetailed into the classification plan is the salary plan. The
scale of salaries for clerical, administrative and professional positions in the T.V.A. is generally that obtaining in the Federal Civil
Service up to and including $6,500 a year. From that point, the
T.V.A. has a larger proportion of-higher-paid officers to, total personnel than have the Federal departments.1 Suggestions that
salaries should correspond to those of the State of Tenaessee cannot
stand against the argument that a Federal public policy conducted
through a Federal agency provided with Federal funds, and responsible to Congress and the President, can be maintained only
oft the basis of Federal standards of salary.
For eadi salary grade theire are three rates, known as the entrance, the standard, and the maximum rate. Appointtnents and.
promotions are madç at efitrance rates^ and employees receive the
standard rate for their grade after a minimum of one year of satisfactory service. After that, they proceed to the maximum, on the
basis of a demonstration of superior qualifications and achievement.
A Service Rating Plan calls for semi-annual reports. An unsatisfactory report means transfer, demotion or dismissal. After
employees achieve the standard rate for their grade and receive
"satisfactory" as their report, the rule is "as you are". Where the
rating is "unusually satisfactory", one, two or three merit points
aré given. It is possible to advance to the maximum grade if six
such points are gained in a period of not more than three years:
A board of review of members of the personnel department considers all ratings of "unsatisfactory" and "unusually satisfactory",
made in the first place by the employee's supervisor. About one
in a hundred of tíie salaried employeesàs recommended for merit
points at the semi-annual ratings. The number of those who
achieve the requisite points for the maximum is, of course, very
much smaller—in the opinion of some of the employees, unjustifiably small.2 Promotion
The Authority has no formal promotion procedures or examinations, but in practice promotions are granted because, under the
method of appointment, all employees have a chance of appoînt1
The T.V.A. goes up to $9,500 a year for its General Manager and one or
twoaother officers^ this is much higher than the Federal Civil Service.
For example, on 31 Dec. 1941, among 8,602 employees in all services, 75.9
per cent, were at entrance, 23.9 at standard, and only 0.2 at maximum rates.

MANAGEMENT AND PBRSONNBL

141

ment to vacancies in higher grades. As a matter of fact, in the
first few years, development in the T.V.A. was so rapid that some
young men who entered it moved upwards at a very early age to
new positions of great authority and considerable income. A study
made by the T.V.A. itself in January 1941, covering the twelve
months from November Í939 to November 1940, showed that there
were 2,868 promotions in a total of 6,500 annual employees. This
is entirely unparalleled in ^py civil service.
As the Authority has no special promotions procedure, however,
the existence of a vacancy is not drawn to the attention of all those
who may legitimately be aspirants for promotion. Theemployee is not
in a position to know whether his record is receiving consideration.
This could be overcome by the public announcement of such a vacancy, and the acceptance of application from any qualified employee.
Hourly Workers
The foregoing remarks apply to the employment of the salaried
or annual employees. But hitherto, in its years of construction and
development, the T.V.A. has had a much larger number of hourly
or wage-paid workers of a skilled, semi-skilled or unskilled kind.
When the T.V.A. commenced operations in 1933, a time of heavy
unemployment, scores of thousands made application for employment. The Authority, true to its ideas regarding efficiency and
humane relationships, attempted to proceed by individual interview.
The method proved far tooexpensive.and it was impossible to attract
needed types of skill except by specific advertisement. Therefore,
the Authority turned to the practice of wholesale examination,
based upon tests of ability to understand printed and oral instructions and of mechanical aptitude, devised by the experts of the
United States Civil Service Commission. Nearly 39,000 applicants
were examined in four days in 138 cities and towns in the Valley
under the supervision of local United States Civil Service Boards
of Examiners or by local school officials. Trained interviewers,
using the ratings at the examination and the experience record,
selected the workmen for the first three projects from the register
thus established. Under the test of experience carefully analysed,
the examination results were found to be highly correlated with
efficiency on the job and consequent promotion.
Examinations were held in 1936, 1938 and 1939, as the Authority proceeded with each main stage in its construction plan. Only
in the case of the additional projects authorised in the war emergency of 1940 was the examination method dispensed with.1 It is
1
In this case employees already with the T.V.A. were assigned to 85 per cent.
of the supervisory posts of the Cherokee Dam and about 75 per cent, of the
skilled workmen posts. Skills were becoming rare in the face of widespread

{Footnote continued overleaf)

142

TOM T.V.A.: INTERNATIONAL APPLICATION

clear, upon consideration of the various specialised occupational
or trade tests for skilled labour, that the Authority has provided
adequate technical tests. The oral interview given to all applicants
for skilled labour appointments may perhaps, on the whole, be
regarded as superfluous, since it is costly and has had little effect in
modifying the result of the written examination.
-* No part is allotted or allowed to trade unions in the recruitment
process, with some slight exceptions to be noticed in the next
chapter. The United States Employment Service similarly played
no part in the early recruitment, nor has the T.V.A. since then
relied upon it other than casually1, believing that its own direct
method gives the desired results better than any alternative.
The T.V.A. does not draw on the country generally for its workers, but defines an area around or contiguous to a construction
project. The reason for this limitation is, first, that there is a
greater supply of labour than is required in the area defined, and
secondly, that if the examination area were unlimited, the cost
would be immense, since applicants would expect to be examined
in a place convenient to themselves. Furthermore, it is unwise
to induce a worker and his family to migrate from one part of the
United States to another for a temporary Job.
The Authority is not summary in its dismissals, but gives every
employee a fair opportunity, through a procedure of appeal up to
the Personnel Department, of justifying himself before separating
him from its service. It has field personnel officers at the centres
of operations to pr®mote good relationship and deal with difficulties at the earliest stage. Its policy is to endeavour to continue the
service of its workers, an economical proceeding which avoids the
expense of fresh recruitment and retraining in the service. While
this policy has not been carried to excess, taken together with the
other factors of great care at the stage of recruitment, training
workers for other tasks, and sensible practice in regard to transfer,
it has kept the turnover of employees small. This is not due to any
automatic acquiescence in the retention of incompetent workers,
even though the supervisors are reluctant to set down in the semiannual reports a mark of "unsatisfactory" which might mean
dismissal. On the construction projects, where a rather heavy turndemand, and it became necessary to call for workmen in certain trades (electrician, lineman, boilermaker, steamfitter, machinist and iron-worker) wherever
they could be obtained, so that wide publicity was resorted to. 25,000 applications received were rated in four classes on the basis of the candidate's experience",
wherever possible, references of prospective employees were checked (frequently
verbally),
and all individuals hired were selected by skilled interviewers.
1
Only since the war brought with it emergency demands for labour, widespread transference problem? and stringent Government regulations has the T.V.A.
entered into co-operation with the local placement machinery of U.S.E.S.

(

MANAGEMENT AND PSRSONNEL

143

over might be expected, it was in fact only something lilçe 8.8 per
cent, in the fiscal year 1942, a figure reflecting an increase due to
wartime conditions. The Authority has introduced an "exit interview", a special procedure of interviewing those about to leave its
service in order that there should be no misunderstanding of the
reasons by either party.
There are extremely strict rules regarding the employment of
relations in the Authority. No employee may hold a position involving administrative or supervisory relationship with one to
whom he is related by blood or marriage in the first, second, or third
degree of consanguinity. Two members of the same household
related by blood or marriage in the first, second, or third degree of
consanguinity cannot be retained in employment if either receives
a salary in excess of $2,000 per annum. .
AH in all, the personnel of the T.V,A. has been, and is, of very
high quality. Though their morale was from time to time subjected
to severe strain as a result of the distribution of the Authority's
work between three directors, dissensions in the Board, and the •
litigious hostility of the public utility companies, in the main the
employees remained proof against such shocks. During the depression some had been especially attracted to the Authority's service
by the public purposes for which the Authority was established;
and at the date when it began operations it had the pick of many
professional men of great and growing repute. But the intense concern of the directors for the success of their enterprise, leading to
meticulous, and sometimes even excessive, care in choosing their
staff, whether personally or through their directors of personnel,
was also an important factor in building up an efficient service.
According to the Joint Congressional Committee:
It appears that the Authority has been able to attract a group of higher
administrative personnel whose previous average earning power under normal
conditions was considerably higher than the salaries they now receive from the
Authority.1
There have been several Congressional attempts to bring the
staff of the T.V.A. under the United States Civil Service Commission2, ostensibly on the grounds suggested in our earlier discussion,
1
Report of the Joint Committee Investigating the Tennessee Valley Authority,
op. 2cit.
The Joint Investigating Committee recommended entry into the United
States Civil Service Retirement Plan, but the T.VA. has its own scheme, supported by the joint contributions of employees and the T.V.A., which provides
the following benefits: service retirement optional at 60 years of age, compulsory
at 70; disability retirement for total disability after five years of service; lump
sum death benefit of one half year's salary; return of employee's contributions
with interest at termination of employment for whatever cause before retirement;
and deferred annuity to employees terminated involuntarily after ten years of
service, if not discharged for cause (Management Services Report No, 1, T.V.A.,
1942, p. 27).

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THB T.V.A.: INTERNATIONAL APPLICATION

not always with the success of the enterprise as the first consideration. A large number of the employees have looked with favour
on the greater security of the Federal Service; the advance within
each grade along seven steps, as compared with the two provided
by the Authority (the second one being highly problematical) ;
rather wider possibilities of transfer; and the benefits of a Civil
Service retirement plan, which it has been extremely difficult for
the Authority to provide owing to its comparative smallness and
the anticipation of a severe reduction in its staff with the conclusion
of construction development. Futhermore, the United States
Federal Civil Service examinations are notified to the whole country. The Joint Investigating Committee, after careful consideration of the chief aspects of the T.V.A.'s personnel administration,
concluded that the Authority's need for flexibility required that
it should remain master of its personnel policy until the completion
of the period of construction. Subsequently, there might be a
reconsideration of the question of including under the regular Civil
• Service the junior and routine positions, but not, be it noted, the
higher officers. The Committee observed :
The Authority has no easy task. Its success must depend in the future, as in
the past, on imagination and initiative as in private enterprise. Even more, '
because of its public character and responsibility, the Authority must find means
to accomplish satisfactory results under limitations of attitude and ethical behaviourfarmorestrictthanthosecommonly expected of aprivatecorporation... The
Authority has been able to co-operate with other governmental agencies, Federal,
State and local, sometimes by providing personnel or the means to be used in
hiring personnel. . . It has served as a device for obtaining desirable results
without arbitrary use of Federal power and with a maximum of democratic
participation. The Civil Service Regulations would have to be carefully limited
to avoid serious interference with this form of co-operation.1

When the Ramspeck Act of 1940 removed all legal obstacles
to the application of Civil Service regulations to all Federallyowned corporations, the T.V.A. was expressly exempted.
The T.V.A.'s methods and experience hitherto seem to be a fully
satisfactory answer to the question whether public enterprise can
attract to, and retain [in its service, men and women who will
continuously work with devotion and initiative. If men are given
work, scientific or organising, in office, laboratory or field, with a
demonstrably high social value; if the work has meaning for them,
and if there is security for the continuance of the service and the
livelihood it provides, then they may be expected to serve with
high, sustained, and ever-developing efficiency, free from undue
envy and acquisitiveness.
1

Report of the Joint Committee, op. cit.

CHAPTER IX
FEDERAL CONTROLS AND STATE RELATIONSHIPS
The T.V.A. was endowed with considerable autonomy of management; but since it is a public body with governmental purposes
and powers and funds provided by the Government, it was not
intended that it should be altogether immune from external controls. The chief aim was to exclude partisan intervention and inessential and obstructive administrative checks and routines. Yet
the T.V.A. must come under certain ultimate public controls, and,
it must also solve the problem of interrelationships with the States
in which it operates, since they possess certain independent powers.
The subject of external controls, then, falls into three well-defined
divisions: (1) Presidential and congressional controls; (2) Federal
administrative departmental controls; and (3) State relationships
with the T.V.A.
PRESIDENTIAI, AND CONGRBSSIONAI, CONTROL

From the standpoint of control, the T.V.A.'8 most continuous
connection with the Federal Government is probably that between
it and the President of the United States. This connection derives,
in part, from certain directions in the T.V.A. Statute, but on the
whole more essentially from the President's constitutional position
as Chief Executive. In the latter capacity, the President is vested
with the executive power under the Constitution; he is commanded
to "take care that the laws are faithfully executed" and he "has
the right to acquire the information in writing of the principal
officer in each of the executive departments upon any subject relating to the duties of their respective offices".1 The powers have not
been regarded as a mere formality, but in fact the expansion of
governmental activities and the development of a vast administration in Washington and in the field have resulted in the President's assumption of the responsibilities of a legislative, political
1
United States Constitution, Section 1, Article 2; Section 3, Article 2; Section
2, Article 2, clause 1.

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THB T.V.A.: INTERNATIOIÍAL APPLICATION

and administrative leader, executive co-ordinator, arbiter, and
disciplinary authority.
The Statute gives the President two rights of supreme importance to the T.V.A.: to appoint l¡he three directors by and with the
consent of the Senate, and to designate which among them shall
be chairman. In addition to this, the judicial interpretation of his
general constitutional power gives him the right to remove directors.1 The exercise of the joint powers of appointment, designation
of chairman and removal has decisively determined the quality of
the T.V.A.'s administration. The right of removal and the right
to reappoint or not to reappoint at the expiration of directors' terms
have, as experience has shown, caused the T.V.A. administration
to follow the presidential lead, and to seek his guidance in most
matters of supreme policy, for the directors could not avoid looking to him for assistance and direction. Pursuant to his powers,
the President continually intervened with encouragement, counsel,
assistance, and sometimes command, on major issues, the principal
of which were: (1) the speed and magnitude of the construction programme; (2) the power policy, especially in relation to the speed and
extent of replacement of the private utilities by public enterprise;
(3) the annual financial appropriations to the T.V.A.; (4) the
relationship between the T.V.A.'s power programme and economic investment in public utilities in general; (5) the relationship
between the T.V.A. and other power enterprises of the United States Government, and the main lines of T.V.A. administration and
its standing and prestige before the public. In addition to this, he
encouraged the use of the Authority's general social and economic
planning powers, helped to defend it against political intervention in its appointment of employees, and gave encouragement
by occasional ceremonial visits, and legislative support when the
T.V.A. required amendment of its powers.
The removal of the first chairman from office by the President
settled a question of crucial importance in the supreme control of a
quasi-dependent Government corporation.2
Legally, the corporation was clearly put under control of the
President, and it was even regarded as in no wise differing, except
in degree, from any other administrative office or agency. To this
extent, then, its flexibility, which means its power of uninterrupted
1
It must also be noted that Section 6 of the Statute gives the President power
to remove any member of the Board he finds to be guilty of a violation of the rule
forbidding political tests or qualifications in the appointment of oflScials and the
selection of erpployees.
As to the general power to remove, the ruling judicial decision is in Morgan
vs. aT.V.A., 115 Fed. (2rf) 990 ff. (Dec. 1940).
Cf. Report of the Joint Committee Investigating the Tennessee Valley Authority,
op, cit.; also 75th Congress, 3rd Session, House Document No. 155, p. 89.

FBDBRAL CONTROLS AND STATB RELATIONSHIPS

147

business initiative, is limited. It is administratively essential to
require Federal co-ordination of all Federal agencies. It is essential
for the whole nation that there shall be general Federal direction
of such important economic activities as those of the Authority,
since they must fit into the general economic movement; but
T.V.A. experience certainly raises the problem whether immediate
supervisory authority, closely exercised by an overburdened Chief
Executive, is the best possible arrangement.
In addition to his general right of supervision, the President
has a number of specific powers given to him by the Statute. Only
permanent provisions are considered here.
The President has power to direct that the assistance, advice
and service of any officer, agent or employee of any executive
department or independent office of the United States shall be
rendered to the corporation for the better execution of its duties.
Under this provision, the President has furnished the help of the
Corps of Engineers, the United States Geological Survey, the
Biological Survey and the Federal Power Commission, and other
agencies. The President may provide for the transfer to the Authority of real or personal property of the United States, as he may
think necessary, from time to time, for the purposes of the corporation. There is no record of such action. The Board is obliged to file
with the President (and with Congress) each December, a financial
statement and report on the business of the corporation covering
the preceding governmental fiscal year. This has been done regularly. When the Comptroller General has audited the transactions
of the corporation, one of the four copies goes to the President.
Section 14, which requires that the Board shall allocate and charge
to the various programmes the value of its dams, requires the reports to be submitted to the President, whose authorisation is
necessary before they become final and can be utilised as the book
value of the properties. The first of such reports was submitted
in June 1938, the second in November 1940. Section 17 gives the
power to investigate whether in the control and management of
the dams or properties undue or unfair advantage has been given
to private persons, partnerships or corporations by any officials or
employees of the Government, or whether in such matters the
Government has been injured or unjustly deprived of its rights.
As already observed, the President is empowered, by Section 22,
to make surveys of and general plans for the Tennessee Basin, and
this power was by Executive Order transferred to the T.V.A. He
has further the power, under Section 23, of recommending to Congress measures for the better, implementing of the purposes of the
T.V.A.

148

THB T.V.A.: INTERNATIONAL APPLICATION

Congressional Authority and Control
The power of Congress over the T.V.A. is far greater than that
of the President, for Congress established the T.V.A. and has the
power to abolish it. Its power is exerted through five principal
means. First, Congress has the power to expand, contract, amend,
vary and quash the functions and procedures of the Authority by
the process of legislation. Secondly, it has the power to grant or
deny financial provision, and to apply the procedure, the accounting, and the examination of estimates this entails. Thirdly, there
is the power to call for the reports which the Statute requires to be
submitted to Congress by the T.V.A. Fourthly, there is the power
of criticising the administration of the T.V.A. in the course of
debate in Congress; and finally, there is the power of investigation.
The question of Congress's part in the financial provision of the
T.V.A. is dealt with later1; brçadly speaking, Congress has made
the T.V.A. almost entirely dependent upon annual appropriations,
but has hitherto so respected the argument and claim for administrative latitude that it furnishes lump sums without itemised appropriation, on a kind of gentlemen's agreement that the Authority
does not abuse the elasticity thus accorded to it on sufferance.
From the beginning. Congress has watched the T.V.A. with
continuous and acute concern. On five occasions the Statute has
been amended. On each of these occasions there was not merely a
debate on the specific propositions; there was also much discussion
and controversy regarding the powers and status of the Authority.
Particularly was this so during the amendments made in 1935,
when there was a remarkable political onslaught on the Authority. The amendments introduced in May were not passed until
late in August, and the Authority was refused the power to
issue bonds to the amount it wished, and allowed only half the
amount under restrictive conditions. There was an attempt to
subject it fully to the audit power of the Comptroller General.
Moreover, the House insisted that the T.V.A. submit to Congress, not later than 1 April 1936, recommendations for the unified
development of the Tennessee River system. Again, Congress has
had before it, but has never taken a decision on, the inclusion of
the Cumberland Valley within the competence of the T.V.A.
Other interventions of Congress have come in its further regulation of the T.V.A.'s obligation to pay sums in lieu of taxes to the
States in which it has generating property and in which it operates.
In 1941, the relationship between the T.V.A. and the Comptroller
General regarding the audit of the Authority's accounts was finally
1

Cf. Chapter XÍ.

FEDERAL CONTROLS AND STATE RELATIONSHIPS

149

settled by an amendment to the Statute, after very extensive
enquiries and animadversions in Congress time and time again
from 1933. Once again, in 1942, an attempt was made in the Senate
to subject the appropriations of the T.V.A. to the same kind of
itemised authorisation as prevails in the ordinary departments.
Utilising its power under the Statute to call for reports. Congress
took the opportunity at the time of the amendment of the Statute
in 1935 to command that on or before 1 January 1937 an allocation
report should be filed with Congress, and that thereafter the T.V.A.
should file in its annual reports a statement of the allocation of the
value of the newly-completed properties. For reasons already
indicated, in spite of frequent congressional questions the T.V.A.
could not meet this date, and was compelled to ask Congress for
an extension of time; the report was actually submitted in June
1938. When Congress gave the T.V.A. new bond-issuing powers
in 1940, it required annual reports on the service of these bonds.
Another opportunity for congressional surveillance of the T.V.A.
comes when Congress is debating some aspect of United States
Government which converges upon or cuts across the interests of
the T.V.A. Thus, in 1935, when Congress was discussing the
Public Utilities Holding Bill, one of the directors of the T.V.A.
was called to give evidence, and the committee' took the opportunity to launch forth on a protracted interrogation about the
Authority. Witnesses from the T.V.A. have been called before
most of the committees of Congress dealing with various aspects of
"Conservation Authorities" included in proposals before Congress.
Another example of this method of intervention and comment is
the debate on a proposal to make all posts in any independent
establishment of the United States Government, paying a compensation of $5,000 or more to its experts or attorneys, subject to
appointment by the President and the Senate only. Similarly, in
April 1940, when Congress was debating a proposal to extend the
civil service system of the United States Government, T.V.A.
principles and practices were debated. All in all, such interrogations have kept the Authority alert, because directly or indirectly
it has felt a responsibility for answering such comment, in the one
sure way of making its administration efficient enough to exhibit
at any moment.
The United States Congress has assumed that the power to
legislate implies the power to institute committees of enquiry, with
power to send for persons and papers under penalty and to require
testimony under penalty. Such a power of investigation of course
applies also to the T.V.A. When, therefore, disagreements among
the directors in 1937, leading to dismissal of the chairman by the

ISO

THE T.V.A.: INTERNATIONAL APPLICATION

President, became very acute and public, both friends and foes
of the T.V.A. urged a congressional investigation.
Congress finally agreed on a series of no less than 19 questions
going into most of the chief aspects of the policy and administration
of the Board, but also including questions regarding the attacks
on the T.V.A. by litigation and the competitive business tactics
of the private utilities. Extreme partisans on both sides were
not included in the committee. It was voted $50,000 to do its work,
a sum insufficient in itself, but the Committee benefited from the
services of various Government departments for special investigations, for instance, the Federal Power Commission to analyse the
T.V.A.'s accountancy methods. To examine the engineering and
power operations of the Authority's work, the then General Manager
of the Los Angeles Power Department was appointed. The General
Accounting Office lent its services for the examination of the
Authority's accounts.
The enquiry lasted from 25 May to 21 December 1938, and was
conducted in Washington, Knoxville and Chattanooga. The Committee made an extensive tour of the Valley projects, took 6,200
pages of evidence, and had submitted to it 588 exhibits. It reported
in April 1939, the report falling into majority and minority findings.
Six members of the Committee presented a majority report; a
minority of three members wrote a minority report, while one of
the latter also filed a separate report.1
The principal findings of the reports have been noted in earlier
and later chapters. With very minor exceptions, the majority found
that the T.V.A. was economically, efficiently, honestly and con-v
stitutionally administered, and praised the social benefits of its
activities.2
The investigation marked a turning point in the career of the
Authority: it was a dividing line between the years of trial and the
years of assurance. It had a healthy effect on the whole organisation. While it necessarily threw an enormous burden on the directors and officials of the T.V.A. in the marshalling of information
and opinion about their own activities and procedures, clarification
of the T.V.A.*s aims and methods resulted from the process of selfjustification and cross-examination.
The officials felt the disciplinary energy of Congress, and the
effect was substantial, pervasive and lasting.
What has been said about the effect of this investigation holds
good also of the other means by which Congress exercises control
1
Gf. 76th Congress, 1st Session, House Document No. 56, Parts 1 and 2,
Report of the Joint Committee Investigating the Tennessee Vaüey Authority; Part 3,
Engineering Report; Hearings, 1939, in 14 Parts.
» Idem, Part 1, pp. 6-10.

FSDBRAL CONTROLS AND STATE RELATIONSSIPS

1S1

over the T.V.A. It cannot, however, be expected that such control
will be altogether objective and technical; in its nature it is bound
to be political, because it is necessarily exercised or controlled by
party government. But on the whole, the T.V.A. has been given
fair latitude for the fulfilment of its chief tasks.
FRDBRAJ, ADMINISTRATIVA DBPARTMBNTAL CONTROL

Aiidit by the United States Comptroller General
Audit is one of the most usual and essential means of Government control over the actions of departments, agencies or offices.
It normally bears on the legality of the transactions and, either
directly or indirectly, the economy and efficiency of the actions
taken. Questions of law affect efficiency through the sanctioning or
forbidding of certain actions; hence the importance of clarity on
the legal position.
The T.V.A.'s financial transactions require independent external
audit. The main problems are what kind of audit will best further
its purposes and business flexibility, and what agency shall conduct
the audit. The T.V.A. Statute provided that the United States
Comptroller General, an officer of the Federal Government, should
audit the accounts of the T.V.A. not less frequently than each fiscal
year, and through his own personnel.1 Copies of the audit were to
go to the President, the Chairman of the T.V.A., and Congress,
while another copy was to be available for public inspection at the
T.V.A.'s principal office.
The T.V.A. claimed that it was exempt from the Comptrolíer
General's audit (as other United States Public Corporations were
exempt by statute or by judicial decision) because Congress had
intended to endow the Authority with the flexibility of private
enterprise. The T.V.A. was prepared to (and actually did) institute
an annual audit of its own by a reputable firm of private accountants. But to submit to the Comptroller General meant that he
would apply to the Authority certain rules applicable to ordinary
United States Government departments which would stultify the
Authority's progress. By virtue of these rules the Comptroller
General could disallow payments made by the T.V.A. not only on
grounds such as fraud or mishandling of funds, but on his officers'
own independent different interpretations of the Authority's statutory powers, and thus make T.V.A. officials personally accountable
for restitution. He could apply tibe general rules of the united
States Government requiring purchases by competitive bidding,
1

Section 9 (6).

152

THE T.V.A.: INTERNATIONAL APPLICATION

even though these were inappropriate to the T.V.A.'s work and
operations. He could require his prior authority for the settlement
of claims against the T.V.A. on contracts, transfers of land, and
all other transactions, .thus depriving the Authority of freedom
to take action. He could require that its printing work should be
done in the Government Printing Office. His officers, although not
trained in business methods, could interpret the T.V.A.'s business
powers as conferred by statute, and all books, vouchers and documentary proofs would need to be made available to him, in Washington if he wished, regardless of the inconvenience and obstruction
to the T.V.A.'s business. Furthermore, such audit could occur
simultaneously with the transactions, and so, by challenging them,
delay their completion.
The T.V.A. resisted, but was overborne by the strategic position
of the Comptroller General, who could and did enforce his view
by refusing to certify transfers of money from the United States
Treasury to the T.V.A. Fund, a course which he was able to take
owing to the ambiguity of the law as set down in the T.V.A. Statute.
In 1935 the T.V.A.'s claims to flexibility in its purchasing methods were recognised in an amendment to the Statute.1 It received
exemption from the normal rule of advertisement and acceptance
of the lowest tender and was allowed to act "in a manner common
among business men" in the case of emergencies, repair parts and
equipment required for supplies or services previously furnished
or contracted for, and items under $500; and it was also permitted
to take into account the quality of the goods and services and the
bidder's standing as regards finance, responsibility, skill and reliability.
The T.V.A. was also given the right to see any report made
by the Comptroller General with a reasonable opportunity to
examine his criticisms and compile a statement thereon to the
President and Congress.
Another amendment of the law in June 1941 made the T.V.A.
specifically liable to audit by the Comptroller General, but at the
same time allowed it considerable latitude. The Authority was
authorised to spend and make contracts and agreements upon such
terras and conditions as- it thought necessary, including the final
settlement of all claims and litigation so long as the Board considered these to be necessary for the carrying out of its statutory
powers. Where the Comptroller General took exception the exception might be conclusively wiped out by the T.V.A. certifying that
the expenditure was ijecessary to carry out the provisions of the
Statute.
1

Section 9 (&).

FBKBRAL CONTROLS AND STATB RELATIONSHIPS

153

Thus there is supervision over the T.V.A., with latitude. The
former has its uses; it produces a general carefulness in the management of public funds, and in some specific cases, such as travel
expenses, purchasing procedures, the keeping of accounts and »
records, the Comptroller's eomments have been valuable to the
T.V.A. and new forms, regulations and procedures have been
adopted on the basis of his suggestions.
The Federal Power Commission
One of the purposes of making the T.V.A. a corporation was to
secure independent accounts and accurate analyses of business
operations. The Statute obliges the T.V.A. to keep complete and
accurate books of accounts.1 Further, in order to enable data to
be accumulated on which to base policy regarding the production
and sale of electricity and chemicals, the T.V.A. is obliged to keep
accounts showing the major components of its costs2, to be kept
"according to such uniform system of accounting for public utilities" as the Federal Power Commission may prescribe.
The Federal Power Commission is authorised to prescribe
accounting systems for public utilities who are directed to comply
therewith ; the T.V.A. and similar agencies,are included.3 The Commission's accounts were established in June 1936 in consultation
with many expert bodies, including the accountants of the T.V.A.
Slight modifications were allowed for the T.V.A. to meet peculiarities inherent in its position. For example, the T.V.A. has ho "capital
stock", an item which appears in this Uniform System of Accounts;
nor any "investments in Associated Companies". The rules of the
Federal Power Commission requires annual reports; and the T.V.A.
accordingly has an elaborate system of plant records to satisfy this
requirement. In its contracts the Authority requires its own municipal and co-operative customers to follow the Federal Power Commission system of accounts for agencies distributing electricity and
to furnish an annual report.
The Federal Power Commission examined the T.V.A.'s power
accounting system for the Joint Investigating Committee in 1938.*
Its report notices some derogations from the Commission's own
rules. The Commission thought that "the books lack the completeness, the definiteness and the finality which are to be expected from
well-kept books of accounts", though it admitted that this was due
in some measure to the fact that construction was the predominant
1
2
s

Section 8 (6).'
Section 14.
Public Utilities Act, 193S.
^ Cf. p., 150.

154

THB T.V.A.: INTERNATIONAL APPUCATION

activity. It urged that the time had come for improvement. Even
at that time the T.V.A. was making changes to satisfy the Commission's criticism, and more has since been done. Thus the corrective power of the Commission fulfills a valuable function. The
T.V.A. does not attempt to produce profit and loss accounts to
match those of private firms, but makes public analyses of its operations in such a way that the public, which is interested in comparisons, has available all the figures and explanations necessary
to construct the appropriate standards. This has certainly been
achieved in the T-V-A/s published annual reports and in the annual
analyses of financial conditions of its public power customers.
The United States Government now has a number of hydroelectric plants besides the T.V.A.1 The important question has been
raised whether their rates for power sales should be regulated by
the Federal Power Commission so as to introduce some uniformity
of public principle. Whatever might be the value of such a regulation, the Federal Power Commission has no authority over the
rates set by the T.V.A., which is fully independent in this matter.
In this respect the Authority differs from Bonneville (which includes Grand Coulee), which requires the approval of the Commission for its electricity rates.
T.V.A.
There are two special problems in the relationship between the
T.V.A. and the States which require discussion: State or local taxation of the T.V.A.'s properties, operations and employees; and the
T.V.A.'s freedom from the jurisdiction of State utility-regulating
commissions.
STATE RELATIONSHIPS WITH THE

Power of the State to Tax
It is clear that if the seven States had an unfettered right to
tax the T.V.A., its operations and its employees, it could be made
the victim of extortionate and obstructive charges, and even deliberately crushed. On the other hand, the T.V.A.'s freedom from taxation would deprive the States and the counties of taxable properties and activities.' 'The problem was and still is to discover a
just road between the extremes,
A famous judgment in a controlling case says that "the power
to tax is the power to destroy".2 To avoid such implied destruction,
1

These include Boulder Dam, Bonneville and Grand Coulee. Cf. E. A.
op. cit.; also 77th Congress, 2nd Session, United States Senate, SubCommittee of Committee of Commerce, Joint Hearings, 1942, on "Columbia
Power
Administration".
2
By Chief Justice MARSHAIX, in McCuUoch vs. Maryland, Supreme Court
of the United States, 1819.

ABRAMS,

FSPBRAL CONTROLS AND STATS RSLATIONSHIPS

155

the agencies and instrumentalities of the Federal Government have
had since the beginning of the American Federal Constitution
immunity from measures by the States, among which is taxation,
which might obstruct or frustrate the exercise of their powers. The
T.V.A. benefits from such immunity, unless Congress should otherwise determine.
When the T.V.A. was in process of formation, the other side
of the question was raised. It was argued that the States ought
to be compensated for the loss of the waterpower in their rivers
and for the flooding of valuable tax-bearing agricultural lands.
Some alleviation was sought from the additional burden of taxes
which industry would have to bear, or be compelled to migrate
to other States.
Consequently, Section 13 of the Statute provided that S per
cent, of the gross proceeds received by the T.V.A. for the sale of
power from hydro-power plants in Alabama should be paid to the
State of Alabama, and S per cent, of the proceeds from power
generated at Norris and any other dams located in the State of
Tennessee should similarly be paid to that State. Further, from
the gross proceeds of any additional power generated at other
dams 2% per cent, should be paid to the State of Alabama and
2H P61, cent, to the State of Tennessee. Such percentages might
be revised and changed by the Board upon approval by the President, but not more often than once in five years, and not without
giving the States an opportunity to be heard.1
The sums involved were not very large. However, the problem
was rather the very serious dislocation caused in the finances of
government of certain of the counties, especially when the T.V.A.
acquired the Tennessee Electric Power Company's properties. The
States and the localities had heretofore levied taxes on the electric
utilities and reservoir lands which had now come into the possession
of the T.V.A. and the municipalities. The total amount of tax was
estimated at nearly three and a quarter million dollars, some 92
per cent, of which went to Tennessee, and the rest to Mississippi,
Georgia, Alabama, Kentucky, and North Carolina. The losses
of the latter States were not great, but were expected to increase
as the Authority extended its operations. There was considerable
agitation on the subject in the Valley States; politicians and associations—for example, the Tennessee Taxpayers' Association—
urged more generous donations by the T.V.A., blaming the public
management of power, and especially the T.V.A., for their loss.
As a matter of fact, only about half this amount was actually
1
The order of payments deriving from this provision, for the two States
together, was $41,753 in 1933, rising to $527,593 in 1940.

156

THE T.V.A.: INTERNATIONAL APPLICATION

a loss; the rest was diverted to other Government agencies (for
example, to the municipality which had become the power distributor) and could be corrected by the State legislature.1
The problem was not simple. First, the T/V.A. believed that
in view of the substantial annual saving (some $9,000,000) to the
consumers resulting from its low price for electricity, the States
ought not to be grasping. Secondly, there was the serious issue
whether power profits made by the T.V.A. should be used to reduce
Federal contributions to the Authority's operations or granted to
the States and counties in the Valley. In its wholesale power rates,
the T.V.A. allowed for a 12^ per cent, tax equivalent, but the
practical tax issue was how much cash should actually be paid over
to State and local governments and how much virtually returned
to the Federal treasury. Thirdly, there was the parlous financial
situation of certain counties which had relied to an extraordinary
degree on the single source of taxation—ad valorem property tax—
for their budget.2 If the T.V.A. made grants to the States, this
would not necessarily mean assistance to the stricken counties;
the States might not pass on the grants.8 Fourthly, the original
arrangement applied payment by the T.V.A. to two States alone,
but the other States mentioned were also losing taxes. Moreover,
the original section of the Statute based the payments upon the
place of generation of the electric power, and so gave undue advantages to Alabama, where most of the power was generated,
while allotting far less than was lost to Tennessee and other States
where the Authority conducted operations through generation and
transmission facilities from which revenues had ' formerly been
obtained by the States and local authorities.
The T.V.A. was extremely sensitive to the hardship involved.
Had it been able to exercise an influence, it would have attempted
to secure some of the overdue economical reorganisation of county
government as one ingredient of a final settlement. But, as has been
seen, it does not exercise pressure, however enlightened and benevolent.
As a result of conferences with representatives of the States,
tax experts, and the men of the counties, the Authority made proposals, embodied in a statutory amendment4,^ to deal with the
1
For the figures, â. A. T. EHSLMANN: "Public Ownership and Tax Replacement by the T.V.A.", in American Political Science Review, Vol. XXXV, Aug.
1941,
pp. 727-737.
2
Nine counties in Tennessee thereby lost between 10.6 and 28.3 per cent, of
their revenues, so drastic a loss as either to ruin their services or to require an
impossible
increase in taxation or financial assistance from outside.
3
In 1942 Kentucky passed a law requiring power undertakings to replace
county and other taxes.
* Section 13, 26 June 1940.

FBDBRAL CONTROLS AND STATE RELATIONSHIPS

157

situation. The Authority was to pay to the States and the counties
each year certain percentages of the gross proceeds derived from
the sale of power, a minimum being guaranteed. The percentage
was to be 10 per cent, for the fescal year 1941, to be reduced by
one half per cent, for each of the following years, down to 5 per
cent, in 1949, and to remain at that rate1 annually thereafter.
These payments, the Statute said (following certain precedents)
were in lieu of taxation, and as a further safeguard to Government
immunity it specified that: "The corporation, its property, franchises and income are hereby expressly exempted from taxation
in any manner or form by any State, county, municipality or any
subdivision or district thereof".2 One half of the payment would
be distributed among the States according to each one's proportion
of the gross proceeds of the power sales to the total of all the proceeds of all power sales by the Authority; and the second half
according to the percentage of power property held by the corporation in that State compared with the total value of such property held by the Authority. The Statute also stipulated a minimum payment to each State and to the counties.3
The T.V.A. is required to report to Congress by 1 January 1945
on the operation of the provisions of this amendment, the benefits
received by the States and counties, the effect of their taxable
values, and such other information as may be pertinent for future
legislation. This is wise, for the policy is as yet only in the making,
and the problems are new. Should the States expect to recover
all they might have had from private firms ? How much should
be paid, and for how many years ? How far should the benefits
conferred by cheap electricity and the navigation, flood control
and agricultural programmes be taken into account, for some
such account must surely be taken? In the fiscal year 1941, the
1
The reason for the decline of the percentage year by year is to meet the rise
in the
estimated proceeds from power as the Authority's operations are extended.
2
Senators were extremely watchful of State encroachments on Federal rights.
Cf. 76th Congress, Senate Committee on Agriculture and Forestry, Hearings
m S.
2925, 1940, p. 33.
3
Not less than the amount on a two-year average of the State and local ad
valorem property taxes formerly levied on the power property purchased and
operated by the Authority, and on the portion of reservoir lands related to the
dams held or operated by the T.V.A. and allocated or allocable to power; and
further, a guaranteed minimum annual payment of not less than $10,000 to each
State where the Authority owns and operates power property. The share of the
counties, was to be paid directly, by deducting from the total due to each State
the average of county ad valorem property taxes. The justification for this minimum payment is that in the early stages of a construction project the State or
local health departments, highway and education authorities must take certain
action involving expenditure, and therefore a $10,000 payment gives assurance
of substantial compensation when needs are likely to bfe most urgent and the
loss of tax basis keenly felt. Actually, the minimum payment proviso has not
been invoked, as construction of the power system has been so rapid as to bring
the States substantially more than the minimum.

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THB T.V.A.: INTERNATIONAL APPLICATION

T.V.A. paid $1,499,417; in 1942, $1,859,416. A further $1,850,000
of tax and tax equivalents were provided by municipalities and
co-operatives distributing T.V.A. power. In so far as T.V.A.
activity improves the general economic development of the region,
the general fiscal strength of the States and local bodies is improved. And when the sums replacing State and local property
taxes are added, the compensation seems generous indeed.
So far, the counties have resisted any reforms, by consolidation
or otherwise, which would rationalise their organisational functions in the light of modem services and administrative science,
though they are poor and though the State of Tennessee has authorised and facilitated consolidation.
Taxation of T.V.A. Employees by the States
Until 1939 the incomes of employees of the Federal Government were not taxable by States in which they resided and worked,
and this immunity applied to T.V.A. employees. Immunity followed
the judgment which declared unconstitutional discriminatory
taxation against instruments of the Federal Government. The
gravamen of that judgment, however, lay in the issue whether the
taxation was or was not destructive of the objectives of the Federal
Government. With the passage of time it was realised that the
issue of reciprocal immunity of State and Federal officials from
income tax was a matter of expediency and degree rather than
an absolute principle.1
The heavy Governmental burdens of the 'thirties raised anew
the question whether the State and Federal Governments should
continue to deprive themselves of a considerable revenue basis,
and in April 1938 the President recommended to Congress the
termination of tax exemptions. In 1939 the Supreme Court allowed
the taxation of a Federal Government employee by the State of
New York.2
Hence, the States in the Tennessee Valley which have an income tax on earnings, such as Kentucky, now tax T.V.A. employees
who are resident in the State on the same basis as all other residents.
The income tax on the employees has not proved a burden on the
operation of the T.V.A.
The United States Supreme Court is, of course, available to
protect the T.V.A., like any other agency of the Federal Govem1
The establishment of the Federal Reserve Bank system, with many branches, was followed by congressional authorisation for State taxation of these
national banks at a rate not greater than that assessed upon moneyed capital
in the hands of individuals coming into competition with them. (Iowa—Des
Moines
NiUionai Bank vs. Bennett, 284 U.S. 239, 1931.)
2
Graves vs. People o/ State of New York, 306 U.S. 466, 1939.

FBDBRAL CONTROLS AND STAT^ RELATIONSHIPS

159

ment, should any tax threaten the due fulfilment of its purposes
by "undue interference". For, as Mr. Justice Holmes (qualifying
the opinion of 1819) said in a Supreme Court judgment: "The
power to tax is not the power to destroy while this court sits".1
It should be noted that the issue has not been raised in the
courts whether a Government corporation, as an entity, can be
constitutionally made liable to taxation by the States or the other
local government units in which it may operate.
ImmunUy from Control by State Utility Commissions
Just as the T.V.A. has successfully proceeded upon the assumption that it is properly free from the power of the States to tax, it
has also preserved its immunity from interference by the States
in pursuance of their right to regulate the public utilities which
operate in their areas. There are public service commissions in all
the Valley States except Mississippi. All except Virginia require
a public utility to obtain a certificate of necessity and convenience
as a condition of doing business. In order to preclude the possibility
of legal challenge to the freedom of the T.V.A. by interested persons2
on these grounds, statutes were passed by Alabama and Tennessee
in 1935 exempting fronj all control by the Public Service Commissions Federal agencies owned by the United States or joint
stock companies in which the United States held more than 50
per cent, of the voting shares or stocks. These were deemed "nonutilities". The municipalities operating power undertakings were
also exempted from control. Kentucky followed suit only in 1942.8
This immunity has been essential to the development of the
T.V.A. The Commissions exercise a jurisdiction over purchases,
leases, extensions, rates and services, accounting practices, security
and reserves, records, properties, and management, and can charge
inspection and supervision fees. Their power could be used to
cripple, even to kill. The utility commissioners are popularly
elected, and are fully in the cockpit of State and local politics.
Unfriendly commissioners could damage and retard T.V.A. development, if not frustrate it altogether.
' One other point needs mention. While the T.V.A. is not subject
to regulation by the commissions, it itself regulates the municipalities and co-operatives by the terms of its contracts. This regulating
authority (among other things) was challenged on the ground that
1
2
8

Panhandle OU Company vs. Mississippi, 277 U.S., 1927.
Some annoying suits had been brought by coal ana ice companies in 1934.
In Kentucky it was argued that to waive the power of the State Utility Commissions over the TW-A. would be "in complete abdication of local authority
that is unwise, unhealthy and uniatriotic". Cf. article by Prof. A. T. EDBMIANN,
in Journal of Land and PubUc Vtuity Economics, Nov. 1942, pp. 481 etseq.

160

THS T.V.A.: INTERNATIONAL APPLICATION

it was an invasion of the sovereignty of the States1, but the Authority's power was sustained by the courts and established in various
State laws.
Thus, the Authority has acquired good standing by its immunity from regulation,' and the power granted to it by the States to
do business with the municipalities and co-operatives and to regulate their practices through the making and enforcement of contracts. Since it has this free scope of power it also has the responsibility for sound municipal and co-operative administration of
power undertakings.

1

Tennessee Electric Power Co. et al vs. T.V.A. et al.

VA

CHAPTER X
THE EMPLOYEE RELATIONSHIP POLICY AND LABOUR
When the T.V.A. decided to œnstruct its dams and other plant
by its own direct labour force, rather than have the system built
for it by the United States Corps of Army Engineers, or under
contract with private firms, it assumed responsibility for the solution of the usual economic and social labour problems, and the
special problems of a public authority. Organisation of labour
among the occupations on the construction jobs was quite strong
from the beginning, through membership of the national and international unions; some 90 per cent, of the skilled workers on the
construction projects were members of trade unions. In the United
States, construction work has often been notorious for rough labour
relationships, and the T.V.A. was determined to set a good example. This was necessary even for the sake of obtaining results.
The T.V.A. has instituted organised relationships with its employees, including among other things recognition of their voluntary
associations, collective bargaining and grievance procedures, wage
settlement, and co-operation of management and workers in certain
managerial spheres. The T.V.A. was established at the inception
of the New Deal, a time of liberal hopes and experiments in labour '
relations in the United States.1 From the beginning, the Authority
built up its relationship policy and machinery, with the full, continuous, active and genuine collaboration of labour representatives.
The T.V.A. Employee Relationship Policy, established after 1
joint discussion, became effective on 1 September 1935. It was a 1
policy of the Board, and not a bipartite agreement between Board 1
and workers; the latter came only in 1940. Its importance in the I
eyes of the directors was well stated by the chairman of the Board, '
Mr. Lilienthal:
If we fail to establish fair and decent relations between the human beings
working on that job the whole project in my judgment would be a failure, even
if every other objective were reached.. What permanent good will it do to our
* Cf. iNTBRNATtoNAi. LABOUR OtPïCB: NoMonol Recovery Measures in the
United States, Studies and Reports, Series B (Economic Conditions), No. 19
(Geneva, 1933); and Social; and Economic Reconstr-uction in the United States,
Studies and Reports, Series B, No. 20 (Geneva, 1934), Chapters VI and VIII.

162

TES T.V.A.: INTERNATIONAL APPLICATION

country to save our soil, to control floods and to distribute cheap electricity,
if those goals are reached through the exploitation of labour? That wouldn't
be progress—it would be reaction. Unless T.V.A.'8 labour policies are just, thé
whole programme is wrong.1

Attention must be drawn to the principal features of this policy,
and to some of the most important issues involved in it. In the
first place, the Authority is an agency of the Government of the
United States, and therefore is not as free as a private employer
to develop the relationship between employees and management;
it must conform to national policy, and the Federal Government,
which supplies the funds gathered from the people of the United
States in taxation, must be in final control. Within this limitation,
the governing principles of a progressive programme of employee
relations could be established: "The Authority will support as
favourable labour standards and employment conditions as are
consistent with the national welfare". Rules on labour standards
and conditions of employment were not to be adopted or changed
without thirty days' published notice of what was proposed, and
until the duly authorised representatives of the employees had
had reasonable opportunity to confer with the supervisory staff
and the Personnel Division.
TEDS RIGHT TO ORGANISE AND BARGAIN

The Policy requires management and supervisory staff and all
employees to give honest, efficient, and economical service, and
this applies to their organisations and associations.
Members of the management and supervisory staff and the supervised employees of the T.V.A. together comprise an organisation for public service. The
wholehearted co-operation of all members ... is essential.

The right of employees to organise and designate their own
representatives, free from any restraint by the management, for
the purpose of collective bargaining and employee-management cooperation, is established. Union membership is favoured; but
neither membership nor non-membership as a condition of employment or career as an employee is required, and discrimination
among employees or their representatives on this account is forbidden.
The majority of the employees have the right to determine the
agency or person to represent them as a whole. In case of dispute
about this, tíie Personnel Department of the Authority must
attempt to adjust the dispute on its^nerits. If the parties agree,
the representative may be determined by an election. If the Per1

Speech made at Detroit Labour Day Celebration, 2 Sept. 1935.

SMPLOYB^ RBLATIONSHIP POLICY AÏSTD LABOUR

163

sonne! Department cannot adjust this type of dispute, either party
may call in the National Labor Relations Board.1 It was thought
•that the good will of the T.V.A. towards organised labour might
result in the establishment of the "closed shop", but the T.V.A.
has carefully safeguarded itself on this matter. The Authority, as
representative of the public, felt that it could not permit any other
agency to determine who should and who should not obtain employment, and it could not maintain that membership in a union was
by itself evidence of that "merit and efficiency" which the Statute
prescribes as the exclusive title to a job and career with the Authority.2 Yet, in considering questions of appointment and promotion,
membership of an association which fosters the collective interests
of a body of workers is taken into account as one of the many elements making for efficiency; it is regarded as an index of co-operativeness.
WORKING CONDITIONS

Grievances regarding labour standards, pay, classification,
hours, conditions, and so forth must be and are handled by the
employee or his representative up through the various levels of the
organisation to the chief supervisory officer, whence there is an
appeal to the Personnel Division.
A procedure is set for the determination of the hourly and
annual rates of pay, to be discussed later. The eight-hour day is
established3; overtime rate is fixed at one and a half times ordinary
pay, excessive overtime being regarded as indicative of inefficient
supervision and workmanship; and one day of rest in seven is
provided. Periods of marked unemployment are met by the reduction of hours to the minimum consistent with efficiency of production and a reasonable minimum income. The Authority does not
permit employment of persons under 16 at all, or the employment in
hazardous occupations of persons under 18. As sound public policy
requires that the most efficient should be employed, the T.V.A.
1
In practice, the Board has refused to accept such disputes for adjudication
unless the parties agree in advance to abide by the decision, since the National
Labor Relations Act does not give the Board jurisdiction over Government
agencies.
2
In the course of negotiations in 1940, the Tennessee Trades and Labor Council once again raised the question of the "closed shop". The proposal was rejected
on the same grounds as before, though negatively, that is, on the grounds that
non-membership of a labour union does not demonstrate lack of merit and efficiency. Cf. Collective Bargaining in a Federal Agency, address by G. R. CUAPT,
Nov.
1941.
8
By a revision of the E.R.P., effective on 1 June 1938, and fof hourly employees only up to 1 Jan. 1938, the scheduled work week for hourly employees
was 40 hours or less; but it was possible to require employees to work an extra
day at regular pay-rates. For annual employees the work week ranged from 39
to 48 hours, but was in the main a 5-day, 40-hour week.

164

THJJ T.V.A.: INTERNATIONAL APPLICATION

policy is to bring in fresh blood as it sees fit, and to offer equal
opportunities for raising the standards of those already in its service.
"Employment is not a vested right." Employees may be suspended
from pay status by supervisors, subject to a written statement of
the reason; no discharge, however, may be made without the prior
fair hearing of the employee or his representative, at his request,
and the approval of the Personnel Department. As already mentioned, the Authority keeps personnel records as a recorded and
challengeable basis for appraisals of merit and efficiency. It promises (and provides) adequate provision for health and safety,1
EFFBCTIVSNBSS OF COLLBCTIVS BARGAINING

It can be said that the T.V.A. has amply fulfilled the conditions
of its Employee Relationship Policy in every respect. This has been
done consciously, and with considerable pride. The Authority is
a "model", but not a lax, employer. The stipulations and the general
tenor of the document show that it has instituted "collective bargaining". There is every reason, indeed, why public services should
establish rules binding them in their pay and service relationships
with their employees. But for various reasons such arrangements are
rare in the United States, though not in other nations, where
experience has shown the objections commonly raised to be groundless, especially where the governmental unit corresponds to that
of a very large firm, and, like the T.V.A., conducts business operations, and not general services in relation to the whole of the
public which were the maih function of the basic and older departments of government. Yet the T.V.A. has safeguarded itself in the
Introductory Statement, for it bears a first duty to the public. It
does not surrender its final authority, any more than the employees
surrender their right to strike. But each party has agreed to a relationship which will avoid the irrational insistence on "public authority" on the one side, and the strike on the other, and arrangements
have been made to utilise every reasonable device for securing
justice to the claims of both sides.
The implementing of the Policy and the safeguarding of labour's
rights have on labour's side been carried out by the unions. The
trade and labour workers of the T.V.A. are highly organised in
craft unions, and affiliated with the American Federation of Labor.
In 1937, 13 of these labour organisations, representing some 85
local unions of T.V.A. employees, set up the Tennessee Valley
Trades and Labour Council. The Council, formally recognised by
both the Authority and the affiliated unions, represents labour at
t Cf. Chapter XI.

"

•

RMPLOYKE RBLATIONSHIP POLICY AND LABOUR

16S

the annual wage conference (to be described presently) and on
various joint committees, and plays a considerable part in formulating and facilitating employee relationships. The clerical, professional, and other "white collar" workers have been slower to organise. There is the Tennessee Valley Engineers Association, which
is without national affiliation. The American Federation of Federal
Employees, the National Federation of Federal Employees, and
the United Federal Workers of America include some T.V.A. employees. The Public Safety Service Employees Union, affiliated
with the American Federation of Labor, was acknowledged late
in 1940 as collective bargaining agent for T.V.A. guides and guards.
Finally, the general office employees made the American Federation
of Office Employees their union in March 1942.
Although the Authority has evinced its clear intention to deal
justly and amicably with its employees, some of the latter have
occasionally gone on strike, and both sides have admitted dangerous
friction from time to time. The T.V.A. has been troubled by the
usual clash of management and labour interests and by personal
grievances, but on the whole the record of ten years is smooth
adjustment. The Tennessee Valley Trades and Labor Council, in its
statement to the Joint Investigating Committee in 19381, expressed
great satisfaction with the working of the system of collective bargaining, in spite of real conflicts of interest and opinion.
There have been four strikes in eight years. None of these was
authorised by the Tennessee Valley Trades and Labor Council,
and only one was approved by the international union concerned.
The longest strike, which occurred in July 1939 and lasted from
three days to a week at the various projects, was in protest at a
jurisdictional assignment and was called by a single craft organisation. The dispute between the two crafts was settled within a week
by the President of the Tennessee Valley Trades and Labor Council,
who was delegated to act as his representative by the President of
the A. F. of L. The second strike was caused by inter-racial antagonism at the Kentucky project in November 1940. The officials
of the labour unions and officers of the Tennessee Valley Trades
and Labor Council urged the local union members to adhere to
the procedures for orderly settlement embodied in the agreement
with the Authority signed in August of the same year, and the men
went back to the job after 3J^ days, although the local situation
had been extremely tense. The other two- strikes were confined to
one trade at a single project. One instance was a jurisdictional
dispute, and the matter was settled within 48 hours. The second
was due to a misunderstanding by a group of men of the cause of
1

Hearings, 1939, Part 8, pp. 3362-3365.

166

THS T.V.A.: INTERNATIONAL APPLICATION

dismissal of one of their members, and the stoppage lasted 40
minutes.
The Employee Relationship Policy did notinits firstyearswinthe
wholehearted acceptance of all the engineers working for the Authority, most of whom had come from jobs and environments where
labour organisation and unions were regarded with aversion. Discipline by the supervisor was regarded as an unquestionable sovereign
right of management, and appeals against it as subversive. The
Authority claims to have modified this attitude considerably by
steady education, in which the field officers of the Personnel Department, acting early on the spot, have been effective. The Policy improved morale and co-operativeness, in spite of some lapses on both
sides, and, as the T.V.A.'s Chief Engineer declared, paid in excellent unit costs of construction and operation.
The final statement of the Employee Relationship Policy says
that the Board of Directors looks forward to the establishment of
joint conferences between employees and management to secure
systematic co-operation, and recognises that responsible employee
organisations are a step towards this development. It proposes that
such co-operative conferences might devote themselves to furthering
the objectives of the T.V.A. by considering such matters as the
elimination of waste in construction and production, the conservation of materials, supplies and energy, the improvement in quality
of workmanship and service, the promotion of education and training, the correction of conditions making for grievances and misunderstanding, the encouragement of courtesy in the relations of
employees with the public, the prevention of hazards to life and
property, the betterment of employment conditions, and the
strengthening of the morale of the service. Not until the second
world war were such conferences actually established, with the important exception of a conference which helped to establish the T.V.A.
apprenticeship training system1, and one in the fertiliser works where
fairly frequent meetings for the discussion of conditions of work did
much to improve morale and suggest improvements in operation.2
WAGS POLICY

With regard fo the Authority's wage policy and procedure, the
Statute lays down a standard.. It requires (Section 3) that all con_
i2 Cf. Chapter XI.
~
"
The wartime joint councils seem, hitherto, to have been chiefly concerned
with absenteeism. They have, however, been valuable in making clear the need
for interruption of work due to overriding priorities for T,V.A. equipment transferred elsewhere; in the rearrangement of work time-tables; in offering useful
technical suggestions to increase job efficiency; and in raising productive morale.
Cf. ImsisXA'noiiAitLABOxm.OwTnc®: British Joint ProdMtion Machinery, Studies
and Reports, Series A (Industrial Relations), No. 43 (Montreal, 1944).

EMPLOYBB RSLATIONSHIP POLICY AND LABOUR

167

tracts to which the corporation is a party shall contain a provision
that "not less than the prevailing rate of wages for work of a similar
nature prevailing in the vicinity" shall be paid to labourers or
mechanics. Disputes regarding the prevailing rate are to be referred to the Secretary of Labor, whose decision is final. Further,
in determining the prevailing rate, due regard must be had to those
rates which have been secijred through collective agreement by
representatives of employers and employees. Where the Authority
itself does the work, the prevailing rate of wages must be paid in
the same manner as though such work had been let by contract.
For the determination of the prevailing rate of wages, the T.V.A.
established a regular annual conference with the various labour
unions, and included certain basic fegulations, some of which have
been mentioned, in the Employee Relationship Policy.
*
Wage conferences began to be held in 1935, and have since
taken place annually. Under the current procedure (1943), the
T.V.A. management and the Tennessee Valley Trades and Labor
Council, representing the Authority's employees in the trades and
labour classifications, have agreed that the statutory term "vicinity", describing the area from which wage data will be secured
for consideration at the annual wage conference, should be defined
as including the entire watershed area1, together with certain
adjacent urban centres.2 Wage facts are collected also from major
war construction projects in this area, public utility power companies extending into the area, and 21 major companies in the
chemical, fertiliser, and related industries operating within the
areaConstruction wage data are collected by representatives of the
Personnel Department by personal visits to the cities and major
war projects. Nonsially; T.V.A. representatives first meet the
local union officers to secure information on wage rates, number
of men employed, .working conditions, in all occupations at the
major contractors and projects in the area, and then meet unionised contractors in each craft from whom they secure like information. The survey of maintenance and operating rates is made
through personal contact with all electric power generating companies in the area which have union agreements, and with the major
industrial companies doing work most comparable to that performed by the T.V.A. Department of Chemical Engineering. In
addition, some data on maintenance rates are secured from em1
Including the cities of Asheville, North Carolina; Knoxville, Chattanooga,
Bristol, Johnson City, Kingsport, Tennessee; Tri-Cities, Alabama (Tuscumbia,.
Florence,
and Sheffield).
2
Atlanta, Georgia; Birmingham, Alabama; Memphis, Tennessee; Louisville,.
Kentucky; Jackson, Nashville, Tennessee; and Paducah, Kentucky.

168

THE T.V.A.: INTERNATIONAL APPLICATION

ployers whose names are furnished by the local union representatives
met in connection with the construction survey.
All wage data thus secured, as well as facts furnished by the
labour organisations, are submitted to a Joint Committee (T.V.A.
management and labour) on Wage Data, which in open meeting
reviews the information and, without evaluating it, certifies its
authenticity to the Wage Conference. This weeds out inaccuracies
and resolves conflicts regarding the basis and nature of the information. The Wage Conference itself, which lasts about three days, deliberates on each specific wage request made by the unions on the basis
of the facts thus tabled, and the management's proposed schedule.
There are, after all, various rates paid in the vicinity in the 200
trades and labour classifications employed with the Authority.
Intensive discussion between T.V.A. supervisory officers, personnel
technicians and employee representatives results in a schedule.
Some of these rates may not be acceptable to members of the
Tennessee Valley Trades and Labor Council, but most will be.
The schedule is submitted to the Board of Directors for approval
on the understanding that appeal may be made against those rates
not accepted. The Council and any disapproving international
union is free to appeal to the United States Secretary of Labor for a
finding of fact regarding any rate not accepted ; the rate stands in
the absence of a finding of fact which revises it. The T.V.A.
has never pursued a policy undercutting the best known wage
rates.
Two points may be mentioned in regard to the wage conferences.
First, thé conferences are genuine in the sense that the Authority
is prepared to be and is influenced by the arguments. There are
fierce and earnestly stated differences of view, and from time to
time the workers call in especially able representatives to advocate
their case. They have, indeed, appealed to the Secretary of Labor
on two occasions, on both of which the International Association
of Machinists challenged the management's interpretation of prevailing wage facts.1 Secondly, the T.V.A. has had to meet the
question of the representation of the workers. Some who were not
affiliated with the American Federation of Labor have on occasion
put in an appearance at the conferences, but have been compelled
by the consensus of opinion to withdraw. One union affiliated to
the Congress of Industrial Organizations was consequently accommodated by a separate conference so long as it actually represented
a. unit of employees.
Out of the experience of collective bargaining, there arose the
1
In the first case (Nov. 1938), the Association's view was upheld; the second
difference (Nov. 1941) is not yet decided.

BMPLOYBB RELATIONSHIP POLICY AND LABOUR

169

feeling that the Authority might carry its arrangements with labour
further. Some matters, such as classification, hours of work, leave,
and working conditions, were removed from the jurisdiction of the
Wage Conference, after various devices had been tried to relieve it,
including subcommittees or special sessions. In 1941, classification
was removed to a standing joint committee to act as and when questions arose. For changes in working conditions, direct negotiation
at the request of either party was prescribed. Such special joint
procedure came to be regulated by the General Agreement made
in August 1940.
THE GBNBRAL AGRBSMBNT

The genesis of the agreement is described by the present General
Manager, formerly Director of Personnel and, as such, presiding
officer at the wage conferences, as follows:
Labour relations in the T.Y.A. between 1935 and 1940 moved into a programme of active and two-way co-operation under this (the Employment Relationship) policy. But it was soon apparent that something was missing. Labour,
through the Tennessee Valley Trades and Labor Council, a body created by the
various unions in the Valley with which the Authority has dealings, proposed
that the Employee Relationship Policy of the Board be supplemented by a signed
agreement to be negotiated and formally executed by employees through their
organisations and by the Authority.
Negotiations went forward and proceeded to a mutually satisfactory conclusion. On August 6, 1940, the Authority and fifteen unions representing T.V.A.
employees in the trades and labour services of the Authority pledged their agreement to principles and devices of collective bargaining in a great public enter-

The Employee Relationship Policy was rather in the nature of
a set of principles by which the Authority bound itself; the agreement binds both sides to its principles and procedures. The former,
though established by consultation, was unilateral; the latter is
bilateral. A permanent joint conference was established to determine conditions of work and pay, to adjust all disputes growing
out of grievances or out of the interpretation or application of
established labour standards, and to promote intensive labourmanagement co-operation between the Authority and its employees.
This joint conference was held to be indispensable to the fulfilment
of the T.V.A.'s public purposes and required a clear-cut mutual
understanding between the Authority and its employees, through
the processes of collective bargaining.
1
Public Works Employee Relations, Address by Gordon R. CXAPP, General
Manager, T.V.A., before the 1942 Public Works Congress, Cleveland, Ohio,
20 Oct. 1942,

170

THE T.V.A.: INTERNATIONAL APPLICATION

The Agreemeht, which embodies the Employee Relationship
Policy with a few modifications and additional clauses, is selfrenewable, except that after one year it may be reopened at any
time by the Authority or by the Joint Council in joint conference
on 90 days' notice by either side. While the agreement remains
in force, then, the principles are binding on the T.V.A. as well as
the workers; and the Council and its members agree not to encourage or sanction employees leaving their service, but rather to
comply with the agreed procedures to resolve all disputes and
difficulties. The Authority rejects responsibility for settling jurisdictional demarcations; however, it asserts the necessity of assigning work to carry out its programme and therefore leaves it to the
unions to settle such questions, promising to alter its assignment
of work when agreement is subsequently reached among the unions.
Where disputes between employees and the Authority cannot be
settled by the procedure provided under the Employee Relationship Policy, a joint conference may be established to attempt
settlement. There is also provision for a joint board of adjustment to make a further attempt at settlement; the members of the
board of adjustment have annual office and the chairman, and
secretary are alternately a member of the Council and a member
of the Authority. Beyond this, the parties agree to go to arbitration before an impartial person from a regular panel designated
by the board of adjustment.
Joint co-operative committees are to be set up representing the
Authority and the employees at convenient points in the Valley
to consider the matters enumerated in the concluding statement
of the Employee Relationship Policy, and conclusions reached by
unanimous decision will be referred for action to the appropriate
officers of either or both parties. A joint Valley-wide co-operative
conference will meet at least twice a year to review the conclusions
reached and action taken by these committees, and in general to
promote discussion and action on the subject matter indicated.
A central joint council on apprenticeship ^provided for to lay
down minimum standards conforming to the standards of the
Federal Committee on Apprenticeship or subject to its approval.
A set of supplementary schedules on hours of service, holidays,
days of rest, overtime arid call work, and other matters is appended
to the Agreement, covering a large number of points which often
give rise to bad temper and disturbing disputes.
Thus the T.V.A., working on the assumption that the skill of
the workers will be fully enlisted only when there are institutional
mechanisms through which they can appreciate that they are
fairly treated, and that this is the key to good morale, has success-

EMPLOYEE RELATIONSHIP POLICY AND LABOUR

171

fully operated its system of collective bargaining, unshaken by
the pessimistic theories of doubters. A tribute to the success of
this policy was paid by President Roosevelt at the dedication of
Chickamauga Dam on Labour Day, 1940, in the following words:
This dam, all the dams built in this short space of years, stands as a monument
to a productive partnership between management and labour, between citizens
of all kinds working together in the public weal. Collective bargaining and efficiency have proceeded hand in hand. . .

CHAPTER XI
SOME EMPLOYEE WELFARE SERVICES
HBAI/TH AND SASBTY

The T.V.A. employs a medical staff who examine the health
of all employees before admission to employment, provide treatment for occupational injuries, make periodical re-examinations
and reports, especially as regards communicable diseases, give
typhoid, smallpox and other immunisations, and minor treatment.
There are medical units at each construction project to deal with
minor injuries and the emergency treatment of major injuries.
In construction villages remotely situated, the Authority provides
general medical care, for which employees and their families pay
a fee to meet cost.1
The T.V.A. co-operates with the United States Employees'
Compensation Commission in regard to employees who suffer
disablement, and where the services of specialists are required, the
facilities of the United States Marine Hospitals or other places
indicated by the Commission are available.
Dam construction is complicated and heavy work, involving
the use of dangerous'machinery like tractors and drills and cement
pourers, often on sloping and broken ground, and the possibility
of injury is very great. There is also much danger in electricity
operations, and special anxieties arise out of the toxic dust of the
fertiliser powdering process.
The T.V.A. has secured a remarkable improvement in accident rates, as regards both number and severity. This has been
achieved by careful attention to design and operation of equipment
by safety devices, assignment of workers to jobs least dangerous
to themselves and others, records and investigations of accidents,
the safety education of all workers for awareness of dangef, and
first-aid training. In all this it has constantly called upon the
1
To 30 June 1942, there had been 253,257 alleged service-connected injuries;
the Authority's medical units had administered 576,561 treatments; 13,500
initial compensation claims had been prepared and submitted to the Compensation Commission. Not a single case of smallpox had been reported, and only two
certified cases of typhoid had occurred in about four years, though a yearly average of 15,700 employees had been exposed to a fair degree of hazard.

SOMB BMPLOYBB WBLFARB SSRVICBS

173

advice of such other departments of the United States Government as the Bureau of Mines, the Bureau of Marine Inspection
and Navigation, and the Army Corps of Engineers.
The Authority's safety record1 compares very favourably with
national averages as reported to the National Safety Council. In
1942, T.V.A. accidents were below the national average in frequency
to an extent varying from nearly four times on reservoir clearance
and more than twice in dam construction to 10 per cent, less in
chemical engineering. In accident severity T.V.A. accidents are
nearly 14 times less severe than the national average in powerhouse operations. Just under half as severe in dam construction, and
a third as severe in reservoir clearance; with twice the severity in
construction and maintenance.
The National Safety Council in its publication of country-wide
accident rates for the construction industry gives the relative rank
of various units in relation to othero organisations doing similar
work. For: 1941 the 17 units of the Authority's Construction
Department took 13 first, second or third places in merit.
JOB TRAINING AND ADUW EDUCATION

As a direct outcome of its interest in the welfare of its employees, the T.V.A. has training courses in or near the job. The general
object is to improve the ability of the employee for his own sake,
as well as to secure greater efficiency in his T.V.A. work. The
Authority promotes courses in the local universities, with the same
object, but also to assist the vocational or professional advancement
of the employees. For example, by arrangement with the T.V.A.
the University of Tennessee provides various courses for employees
needing education in such subjects as engineering or public administration. Again, the T.V.A. provides for adult education, by arrange- ment with the local schools at various stages and at its own cost,
that is to say, for more general tuition in social and economic subjects and by means of discussion forums, besides initiating the measures already described for securing the interest of the schools of
the area in the T.V;A. regional idea and purposes.2
T.V.A. policy regarding training has shifted since its inception,
though the general object has remained much the same. From the
beginning, the T.V.A. has been extremely anxious to provide such
1
In the first fiscal year of the Authority's operations (1933-1934), the accident
frequency rate (number of lost time accidents per million mánhours) was 55.7,
and the accident severity rate (number of days lost per thousand manhours)
was 5.06. By the ninth year (1941-1942) accident frequency had been reduced
to 14.1, &r a little over one fourth the frequency in the first year, and accident
severity to 1.95, a total reduction of almost two thirds.
2 Cf. Chapter VI.

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IBM T.V.A.: INTERNATIONAL APPLICATION

training as would better fit the man for his job, prepare him for
promotion, and also render him more capable by increased yersatility to take other jobs if necessary, once a construction job had
finished. There was to some extent the desire to carry the experience
of able workers from project to project. But originally, the Authority pursued particularly far-reaching aims, introducing, for example, a dairy and pasteurising plant and creamery, and including
all sorts of what may be called "white-collar" subjects as well as a
large variety of trades. The result was excessive expenditure proportionately to the small numbers who could possibly attend the
various courses. The programme was carried on without reference
to the needs and standards of private industry, and lacked the
independent support of the employees. Therefore, without losing
sight of the original main purpose, the Authority redefined its procedure to meet the expressed wishes of the employees and the needs
of the towns in which they lived. The policy of the Authority is
now directed more narrowly than at first to the improvement of
skill in relation to present and future jobs with the Authority. It
may be mentioned that this redefinition of the T.V.A.'s educational
training programme was stimulated by Congressional criticism.
The job training scheme includes the provision of classes, either
by the Authority itself within the community buildings on the job,
or, as at the cities of Knoxville and Chattanooga, by contractual
arrangement with the local technical schools or colleges. All classes
are voluntary and come into existence whenever a sufficient number
of workers or their organisation requests them, and the programmes
are fitted to the shifts of work. They are conducted by voluntary
instructors selected by the employees in consultation with the
T.V.A.'s training representative. On 28 February 1942, 1,354
employees were enrolled in 76 courses, covering a wide range of
subjects, and at the same time 1,036 employees were participating
in a formal recruitment training programme. Less than 10 per cent,
of all employees are enrolled at any one time, but about one fourth
of all the employees take at least one course during the year.1 As
is to be expected, not all the employees take advantage of the facilities provided for their welfare. Moreover, the fact that the Valley
is an area of scattered communities complicates the problem of
providing, education and increases the expense involved.
The training programme includes definite apprenticeship training, on the basis of plans made jointly by T.V.A. management and
labour. Before the T.V.A. began its operations, apprenticeship
_ * For analysis of training activities for 1934-41, see Hearings, ^jib-Committee on Appropriations, House of Representatives, Independent Offiœs Appropriation.Bill for 1941, p. 1691.

SOME EMPLOYAS WELFARE SERVICES

175

training in the southeast of the United States hardly existed.
But after two or three years of construction by the Authority,
when a fairly long period of work could be foreseen, the organised
crafts realised the value of an apprenticeship programme, and in
1936 asked for its establishment. The State Departments of Education and the Federal Committee on Apprenticeship gave their
advice and assistance. At first, the programmes of apprenticeship
were planned by each craft and locally administered by a con*mittee consisting of representatives of the craft union and the
T.V.A. management, the personnel officer, the training staff, and
the local vocational education agency. These committees agreed
on a proportion of apprentices to journeymen, the methods and
standards of seleption and a plan of instruction, selected candidates
for apprenticeship, supervised their progress, and then, after final
examination, accredited them as journeymen.
It was soon seen that co-ordination among the various local
plans was necessary, and joint committees were set up for each
project. In 1938 further co-ordination was brought about on the
suggestion of a Federal Committee on Apprenticeship by the creation of a Central Joint Council. This Council on Apprenticeship
has ten members, five representing organised craft employees, three
representing supervisory management, and two representing the
personnel department. Minimum apprenticeship standards for all
T.V.A. programmes have been established by the Council. In mid1941 there were 284 men enrolled in apprenticeship programmes
for seven crafts. At the end of the fifth year of operation, the programme had produced 201 journeymen, all of them acceptable to
their craft unions and to private employers.
Since practically all the T.V.A. projects are located in rural
areas, the community centre which forms part of the village is a
very important unit in the whole scheme of recreation and general
adult education. Here again, individual volunteers and employee
groups or associations conduct a large number of activities including
discussion groups, forums, educational and recreational films, and
classes in languages, literature, psychology, and other subjects,
under the organising supervision of the training division.
CONSTRUCTION VILLAGES AND LOW-COST HOUSING

On all project sites, excepting Chickamauga, which is within
easy distance of Chattanooga, the Authority has been compelled
to provide housing for its employees. Although low cost has been
a serious consideration, since normally the accommodation is
valuable only for the time it takes to build a dam («.c, three or four

176

THB T.V.A.: INTeRNATIONAL APPLICATION

years), it has not been the only one. The T.V.A. has taken into
account how many permanent dwellings are needed for the operating personnel once the construction period is over, and of these
dwellings, the great majority have been built at a cost in labour
and materials of a little over $5,000 each. Where temporary dwellings were concerned, it has built in an open, spacious layout houses
of four to five rooms of very good quality at about $975 a house.
The houses are rented on the basis of the governing rate in the
neighbourhood for like facilities. Failure to provide the houses
would necessitate long-distance travel for the workers, which
would not be conducive to their punctuality or freshness on the
job. The usual municipal services and utilities are provided under
T.V.A. management, and the Authority also operates commissaries
and cafeterias. There are construction camp dormitories for single
men. There are club rooms at these centres and the library collections referred to earlier are lodged there. Facilities for games,
gymnastics, meetings, lectures and the showing of motion pictures
are provided. On the whole, there is a very small bookkeeping
loss on total operations, but this is regarded as justified on the
grounds that the conditions attract good workers, keep them fit,
raise work morale, and so conduce to a net economy on construction costs. Losses are charged to construction costs.
In the building of the construction villages, the T.V.A. took
the opportunity of adopting special methods of constructing the
workmen's cottages to provide a demonstration of sound building
and domestic equipment with low costs.1 The project aroused
nation-wide interest because it provided a S-roora cottage for less
than $1,000 and a duplex house of two 4-room, 2-bedroom units
at less than $900 per family unit. When war conditions began
urgently to demand additional housing, the T.V.A. was made
agent of the Federal Works Administration to build ISO houses of
a demountable type. These constitute a radical departure in
method of construction, invented by the T.V.A. In appearance,
durability and habitability they are in no wise inferior to the conventional house. Houses to accommodate a single family are made
of three sections, and duplex cottages accommodating two families
are made of four sections. They are constructed in slices, that is,
of uniform-sized portable sections, with all their fittings in them.
These are made and assembled at T.V.A. assembly lines at
Sheffield, Alabama; each section is on small wheels to facilitate
assembly. When they have been fitted together as a complete
house and equipped inside, they are unbolted and each section is
taken by truck trailer to its permanent foundations, where the sec1

Cf. T.V.A. Memorandum: "Housing at Hiwassee", 16 May 1938.-

SOMS BMPLOYBB WBLFARB SBRVICBS

177

tions are set up, bolted and meshed together. The advantage of
this demountable house is that it can be taken down to meet a
new housing need elsewhere, or to replace existing substandard
housing. Further, the house is permanent in value, for it is not
designed to last only a few years. If the need remains, the house
can serve durably on its original location. The houses cost (at
wartime prices) about $1900 each, including electric stoves, hot
water heaters, refrigerators and oil-burning space heaters. Moving
costs to a distance of 30 or 40 miles are some $300 per house.1
EMPLOYMENT AND TRAINING OF NBGRO WORKSRS

, In the Tennessee Valley, according to the census of 1930 and
subsequent calculations, negroes number about 10 per cent, of the
population, though the proportion varies from one place to another.
Negro workers would like employment on the same terms as the
white employees of the T.V.A. ; that is, in strict relation to their
individual merit and efficiency in open competition with all candidates for jobs, by the process described in a later chapter. They
would wish not to be regarded as a separate community or as a
labour commodity, separate from the general body of working men
and women. The T.V.A. entered an area in which there are traditional and inveterate social patterns regarding race, and whatever
the private feelings of individual members of its administration,
as a Federal agency it did not feel that it could at one stroke change
an obstinate situation. Within these limits, however, the T.V.A.
has done a great deal to give employment opportunities to negroes
and to help them to benefit from its educational and social programmes.
Whereas negro spokesmen have asked for full equality of opportunity, especially as the T.V.A. is a Federal project and not a
private company, the T.V.A. has felt it possible only to proceed
gradually. Its general principle is to employ negroes in the ¡proportion they bear to the total population, that is, .some 10 per cent.
This, of course, has to vary a little according to the local situation.
In some places—at dams in the centre of negro population—a somewhat higher proportion is employed; in others—for example, at
Hiwassee, where there were no negro residents and special housing
facilities would have been required—no negroes were employed.
The very large majority of negroes are employed on unskilled
labour, but in the last few years the T.V.A. iias made progress in
giving some semi-skilled and skilled jobs to negroes. There are
some negro foremen ; there are several white collar workers, clerks,
1
Cf. T.V.A. Report: "T.V.A. Demountable Houses for Defense Workers",
8 July 1941; and "Portable Housing", in Pencil Points, July 1942.

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THB T.V.A.: INTERNATIONAL APPLICATION

laboratory helpers and instructors. Negro personnel officers of the
T.V.A. handle the interviewing, placement and training of negro
personnel. Some negro county extension agents are employed by
the State Extension Services and so assist m accomplishing the
agricultural programme of the T.V.A.
Before 1938, there were cases of maltreatment of negroes by
supervisors on the construction jobs, by threats, violent language,
and, in some cases, physical violence. There had been harsh disciplinary action, arbitrary transfers, dismissals and cutting down to
lower paid work. Investigations by the T.V.A. and subsequent
disciplinary and educational measures have very much reduced
such incidents, and the improvement has been aided by the better
assimilation of the Employee Relationship Policy.
Negroes are not included in the T.V.A. apprenticeship system
in the same way as white workers, but an agreement has been
reached with labour unions whereby negro apprentices are to be
placed in the lineman and carpenter apprenticeship programme.
In operator training for operations in the Wilson Dam Chemical
Works, negroes have full access to this training and are being
promoted on the basis of it.
At each project, where the family units or dormitory space
for single employees have been available for negroes, they are equal
in every respect to those provided for white employees. It is the
policy of the T.V.A. to provide accommodation for recreational
activities here and there throughout the Valley and the facilities
are placed where there is the greatest need. Thus, there are no
recreational facilities for negroes at Norristown or Big Ridge Park,
but a separate park for negroes has been developed at Chickamauga, which has a large negro population.
In the T.V.A. villages there are negro sections and these have
their own organisations, assisted by the T.V.A., for welfare purposes, for recreation, for community services; for adult education;
and the provision for them is as liberal as for other T.V.A. workers.
Special attention has been paid to the particular interests of the
negroes, with the co-operation of local associations or clubs founded
and managed by the negro workers themselves, and sometimes
assisted by college-trained friends and instructors who happen to
live or work in the vicinity. Some examples may be given of the
activities referred to. At Wheeler Dam, training programmes
embraced health and sanitation, carpentry, brickmasonry, home
mechanics, tool subjects, music, job training, games, and library
service. Community gardens were planted and play areas developed. Courses in general adult education gave an elementary
knowledge of farm budgeting and the use of business forms, like

SOME BMPLOYBB WBLFARB SBRVICES

179

money orders, cheques, notes and contracts. To meet the needs
of those who worked at the dams but lived in nearby communities,
T.V.A. clubs were organised in the latter. There are weekly meetings of these dubs, their programmes including home mechanics
and improvement, handicrafts, gardening and farming, health,
poultry raising, canning, the showing of documentary and other
films, plays and music. At Pickwick, a negro community building,
school and workshop were provided. Here, the negro labour association helped to conduct a programme similar to that outlined above.
There were also classes in home making, and parent education.
The workers who are employed at Chickamauga mainly come
from Chattanooga. The T.V.A. therefore assisted in the formation
of a Chattanooga Community Council on Adult Education, on
which a large variety of civic agencies were represented, to be advised and assisted by the T.V.A. Training Division and its negro
staff member. This body administered in Chattanooga a negro
programme of job training, recreation, a Little Theatre, health
education and library service. Naturally, a proportion of the
financing was supplied by the T.V.A. As a result of these activities
the Tennessee State Department of Education appointed a negro
director of vocational trade education. At Guntersville, another
device was adopted. Many negro workers lived at Huntsville, some
miles away. The T.V.A. contracted with the agricultural and
mechanical college for negroes to conduct the negro training programme. It established a council on community study and service
to discover procedures and disseminate information. A special
member of the Faculty directs,the various teachers who conduct
the training activities. Library service has been provided, and also
classes in social studies, job training for workers and other citizens
of Huntsville, and recreation for workers and citizens, with a
chorus of 100 voices.
Little headway has been made against the social prejudices of
the Jabour unions in the Tennessee Valley. There are negro members of some unions at Wilson Dam in the fertiliser operations but
otherwise they are almost entirely excluded. It is in the hands of
the labour unions to prevent ill-treatment of negroes and to make a
place for their negro fellow-workers to get skilled or foremen's jobs,
and if this co-operation were forthcoming, no doubt the hand of the
T.V.A. would be strengthened.

CHAPTER XII

, THE FINANCING OF THE T.V.A.'s ACTIVITIES
The financing of the T.V.A. multi-purpose system has two chief
aspects: (1) the T.V.A.'s own financial basis; and (2) the financing
of the municipalities and co-operatiyes which are the distributors
of T.V.A. electric power. Each of these aspects involves interesting problems for development works, and substantial sums are
involved in both.
In nearly 10 years of operation, the T.V.A. has administered
very considerable sums of money. By 30 June 1942, the financimg
of its activities had cost almost $600 million.1 Of this total sum,
$570 million had gone to the construction and acquisition of navigation, flood control and electric power assets; some $8.25 million to
fertiliser assets, that is, plant, equipment, phosphate lands and
rights, and fertiliser stocks; and there were $12 million iñ general
assets. The combined municipal and co-operative capital amounted,
oit 30 June 1942, to nearly $107 million.
T.V.A. FINANCING
The T.V.A.'s current operations have been substaiatial.2 Its
financial turnover and the revolving nature of the funds it uses in
power operations have already been noticed8, and also the characteristics of its expenditures on the fertiliser, reservoir property and
1
To be exact, $591,402,239. Cf. Budget Summary for 1944, Appropriations
Sub-Committee,
Independent Offices, Hearings, p. 457.
2
Cf. Tables of net income or net expense in Appendix No. I. In summary,
these current operations for the period 1933-1942 are as follows:
$

in millions

Bower sold
Profit on power
NavîgoWtty of the river
Flood control
Power losses (1933-1938) ,
Power profits (1933-1942)Fertiliser and farm demonstration programme
Reservoir properties operation
Development activities
* Neti
s

Cf. Chapter III.

70
16
S
SM
%
16 a
16 a
6
12^"

THE FINANCING OF T.V.A. ACTIVITIES

181

development programmes. The relatively small revenues which
the T.V.A.1 receives serve to offset the expenditures which come
out of T.V.A. general funds, replenished when necessary by
Congressional appropriations. How the long-term financing of
the activities of the Authority, especially the construction of the
dams and river works, is effected, and the procedure by which the
funds are applied to its purposes, are highly important questions,
especially in the case of a public corporation, since the value of this
form of organisation lies in the extent td which it provides security
for business latitude and initiative. The experience of the T.y.A.
in this respect may have a particular interest for governments
contemplating the several or joint financing of development works
of any magnitude.
Bonds or Appropriations?
Two principal methods of financing the T.V.A. were open to
Congress. The Authority might have been empowered to borrow
the necessary capital and the amount required for current expenses
during development, the debt and dividends to be repaid from its
earnings in due course; and in this case it could either have sold
bonds on the open market, or have borrowed the whole or part of
the funds from the United States Treasury. The other method was
for the T.V.A. to be financed entirely by Congressional appropriations in much the same way as the ordinary activities of the Government are financed—that is, by coming to Congress annually, offering estimates of need and then, after cross-examination, being
awarded what Congress believed to be adequate. For reasons
which are explained below, the latter method (with a slight qualification) was adopted.
However, the T.V.A. did receive some bond-issuing powers,
that is, the power to raise loans for specific purposes. The problems
at issue, whether and how far the T.V.A. should have such loanraising power, were clearly stated in discussions in Congress or its
committees; both the T.V.A. and Congress found a mixture of advantage and disadvantage in the use of such a power. On the one
hand, the Congress would have liked relief from the need of finding
appropriations annually, year after year, for a long period, but
realised that if the T.V.A. were given a loan-raising power, it would
escape from Congressional control over its activities, exercised
through the Authority's need to go to Congress annually for fresh
money. Congress was extremely sensitive on the question of
allowing the T.V.A. excessive latitude of operation and expansion.
On the other hand, the T.V.A. favoured the possession of a bond1

Cf. Chapter IV.

182

THE T.V.A.: INTERNATIONAL APPLICATION

issuing power, because it would thereby obtain freedom and business latitude ; and because, being obliged to make provision for the
payment of interest and the repayment of the debt, it would acquire business independence and its own internal, disciplinary
power over its operations and administration based on an independent balance sheet. Again, there was the T.V.A.'s need for a sufficient sum to buy out the property of the private power companies
en bloc and not piecemeal, since the latter course would necessarily
have meant the destruction of their economy. But against these
considerations was the great fact that the T.V.A.'s total unified programme was going to cost a very large sum of money which Congress could not be expected to give all at once ; and more ijnportant,
that until the T.V.A. showed signs of being able to repay, the
investment market would hardly be ready to advance the substantial funds required, and the T.V.A. must necessarily wait
several years before the fruits of its work could even begin to materialise.1 Finally, there were some T.V.A. activities, such as its
planning, its agricultural programme, its public health work, flood
control, transportation, forestry, and the rest, which were not of a
business character like the power undertaking, but were more in
the nature of the ordinary social benevolent activities normally
financed by Governments, not out of loans, but from tax revenues.
Therefore, the principal means of financing came to be by Congressional appropriations, and only very small latitude was allowed
in the bond-issuing or loan-raising powers of the T.V.A.
Section IS of the Statute authorised the Board to issue serial
bonds to the amount of |50 million running 50 years at 3}^ per
cent., to be issued and sold on the credit of the United States with
the approval of the Secretary of the Treasury. The money was to
be used "in the construction of any future dam, steam-plant or
other facility to be used in whole or in part for the generation or
transmission of electric power".
In 1935, the Authority itself put forward an amendment to the
Statute, providing for additional powers to raise funds. The Authority asked for power to issue $100 million in 50-year 3J^ per cent,
bonds over five years, for the purpose of acquiring existing electric
distribution systems and transmission lines. Thus provided, the
Authority could have bought the entire system of any private
company, and could then have resold individual parts to municipalities or other bodies. Congress rejected the proposal and the
T.V.A. received only the limited power of issuing bonds up to $50
million (Section 15 («)), this power being further restricted by the
1
It will berecalled that until and including the fiscal year 1938, the T.V.A.
bore a loss on its power operations.

THB FINANCING OF T.V.A. ACTIVITIES

183

stipulation that such funds should be used for making loans to
States, counties and municipalities, and non-profit organisations
for a period not exceeding five years (Section 12 (a)).1
Hence, the T.V.A. was partly compelled and partly chose to
move along the line of annual Congressional appropriations until,
as it were, it came of age.2 And in fact, when by 1939 the major
litigation had resulted in fortifying its authority, the T.V.A. was
able to ask Congress successfully for a further power of borrowing
in order to buy out the principal system operating in its area (the
Tennessee Electric Power Company) and other smaller systems.
But here again it may be observed that Congress did not give the
Authority power to borrow an unlimited amount, nor even to raise
$100 million8 as it wished, but deliberately meted out only the right
to raise the exact amounts required for the relevant contracts.
Congress was resolved iiot to permit any free expansion which
might have followed a large and unconditional grant. Under Section IS (c), therefore, amending the Statute, the T.V.A. was authorised, with the approval of the Secretary of the Treasury, to
issue bonds not to exceed $61 million, and the purposes and amounts
were specifically stated.4 The bonds were not to bear more than
3^ per cent, interest—the rate needed the approval of the Treasury—nor to be sold at such price as would return more than 3J^
per cent, on the investment. They were guaranteed by the Treasury. A complete statement on expenditure of the funds derived
from the sale of bonds was to be filed every December with the
President and Congress. The proceeds could not be utilised for
loans until the contract had been approved by the Federal Power
Commission. The authority to issue bonds was limited to 1 January
1941.
Simultaneously with the grant of this bond-issuing power.
Congress provided for the extinction in July 1939 of the other bondissuing power of thé T.V.A. already mentioned.
1

—
Chapter II.
.
2 Cf.
In fact, the T.V.A. made use of its bond-issuing powers only in a minor degree.
In 1938-1939 it issued $8,300,000 in bonds at 2}4 per cent, falling due on various
dates up to 1961. These were sold at par to the Reconstruction Finance Corporation. The purpose of the bonds was the acquisition of properties from various
electric utility companies in the Valley. The Reconstruction Finance Corporation is a United States Government Corporation, established in Jan. 1932 to
extend
credit to agriculture, commerce and industry.
3
This was not to be an addition to, but a replacement of, the existing power
to borrow
$50 million under Section IS and $50 million under Section 15 (a).
4
Not more than $46 million for the Tennessee Electric Power Company and
Southern Tennessee Power Companyjnot more than $6.5 million for certain
named parts of the Alabama and Mississippi Power Companies; not more than
$3.5 million for rebuilding, replacing and repair of the utilities thus purchased;
not more than $3.5 million for construction of various facilities to connect the
properties bought with the T.VA.'s power system; and not more than $2 million
for loans to public distributors to buy any of the properties concerned.

184

THE T.V.A.: INTERNATIONAL APPLICATION

Lump Sum Appropriations
The T.V.A. has, therefore, been obliged to come to Congress
annually for its financial provision, except for an annual sum of
$1,000,000 secured to it by the Statute, which it may retain for the
specific purpose of defraying emergency expenses and ensuring
continuous operation.
Up to 1 July 1942, the T.V.A. had received through Congressional appropriations (mainly annual) $667,969,270.
The annual appropriations have been provided as lump sums
in general terms. The annual Congressional formula votes money
merely for the purpose of carrying out the provisions of the T.V.A.
Act of 1933, as amended from time to time, including the continued
construction and the beginning of certain named dams, investigation of sites therefor, the acquisition and clearing of the necessary
land, highway relocation, the construction and purchase of transmission lines and other facilities, and all other necessary works
authorised by such acts, for printing, for vehicles, for rents, and
all necessary salaries and expenses.
This lump sum method, which has been followed from the
beginning, differs very widely from the usual method of appropriation by minute itemisation of purposes and sums for expenditure.
The lump sum method, which permits financial flexibility within
each year, has often been challenged in the Appropriations Committees of Congress and in the course of debate in Congress itself;
yet there remains what may be called a respectful, if not unreserved, acceptance by the majority of the view that, since the
T.V.A. is so much of a business enterprise and has so many experimental and developmental features, it should be given a reasonable
latitude.
This does not, however, mean that the Authority has been or is
able, or desires, to do as it likes without submission to Congress's
wishes. In fact, the T.V.A., like every other agency of the United
States Government, is subject to the Budget and Accounting Act
of 1921, and is obliged annually to submit its estimates to the
United States Bureau of the Budget. Occasionally this agency
sends a field agent to the Authority's offices to make investigations,
to ask questions on such items of the estimates as seem to him to
require it, and to report to the Bureau. Normally, the Bureau
exercises its review by scrutinising documents submitted annually
by the T.V.A. and at supplemental hearings of its officials before
the Bureau in Washington. How much is to be assigned to the
T.V.A. as a whole, and how much to each particular item of its
work within that total, is then recommended by the Bureau to the

TBS¡ FINANCING OF T¿V.A. ACTIVITIES

185

President, who passes on the recommendation in the United States
Budget to Congress, after having required the Bureau to make any
amendment he personally may consider appropriate. At the three
stages—upon inspection of the estimates by the field agent of the
Bureau of the Budget, the Director of the Bureau, and the President—the Authority is obliged fully to justify its request by evidence or argument, and is given ample opportunity to offer alternatives. It may happen, and has happened, that the claims of the
special needs of the Valley, sound in themselves, must in a year of
economic and budgetary difficulty be reduced to meet the general
national stringency.
Consequently, the T.V.A. has given special attention to the
problem of displaying the work of the Authority to show clearly to
Congress its purposes, its plans and the expenditure in relation to
each. In the latest development (fiscal year 1943), this "Budget
Justification" appears in the form of programmes, thus:
I.
II.
III.
IV.
V.

Navigation, Flood Control and Power,
Fertiliser,
Related Property Operations,
Related Development Activities,
General Asset Accounts.

Then, under each programme, there is a subdivision into projects,*as for example:
Programme III
1. Reservoir Area Operations,
2. Village Operations,
3. Maintenance of National Defence Properties,
4. General and Administrative Overhead Expenses.

To each of these programmes, projects and items, a very painstaking explanation is furnished, together with statistical tables and
other supporting material, so that Congress may have a thoroughly
vivid and realistic account of what the Authority is doing and
hopes to do. It should be noted again, however, that Congress does
not vote the budget in this itemised form, but as a lump sum.
Congress, in accepting this method, nevertheless presses its
own specific recommendations where it thinks them necessary.
It has from time to time intervened in the administration of the
Authority by the device of decreasing the amounts requested1; and
in some cases has threatened to take very drastic measures. Congress could at any time change ils method of granting from a lump
1
Congresshasnotbeen friendly to "planning" and "studies" activities unless,
these are inseparably and demonstrably connected with the T.V.A.'s primary
and immediate duties.

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THB T.V.A.: INTERNATIONAL APPLICATION

sum to itemised appropriation. It has not done so, because the
general idea of the public corporation was that the T.V.A. should
be tethered by as few strings as possible, and because T.V.A. administration has been regarded as satisfactory. But, where Congress,
as now, votes a lump sum, is it permissible for the Authority to
expend all or any portion of that lump sum on any activity authorised by the provisions of the T.V.A. Statute, even though the Appropriations Committee might have indicated (but not legislated) by
items the specific amounts that should be spent on the different
projects ? The answer is that the T.V.A., as a matter of law, is not
bound by the clearly expressed intent of the Committee. But, as a
mattçr of policy and with a sense of responsibility, the Board does
its best to adhere to this intent, which is plainly expressed by full
debate and qualified acceptance of the T.V.A/s budget in the
House of Representatives Appropriations Sub-Committee, and to a
lesser degree in that of the Senate. Where, therefore, the Appropriations Committee has thus steadily and deliberately made its
will known—for example, to slow down regional studies and aerial
mapping, and to widen the area of farm démonstrations and fertiliser distribution beyond the States of the Valley—the Authority
conforms, acting in the spirit of Congressional recommendation,
but it does not regard the penny index as the mark of its duty.
It tries to meet Congress's wishes, and where this is technically
impossible, conscientiously expends the minimum required by the
situation. The result is that the Authority has a practical power of
what is known in public financial parlance as virement, that is, of
diversion of moneys to and from the different items, to an extent
never tolerated in the case of ordinary Government departments.
Examples of Congressional reductions in the amounts asked for by
the T.V.A. are very limited and, in addition, have only a restricted
interest. What is interesting is, first, that there is the regular sum
of $1 million already mentioned to meet unforeseen contingencies,
and secondly, that in its estimates the Authority naturally makes
an allowance for contingencies which the Congress may and usually
does accept. For example, the power estimates for 1943 contained
an item: "Allowances for changes in revenues and decreased production expense in event of a dry year . . . 1,500,000 dollars".
It is a fact of the first magnitude, however, that the T,V.A.
cannot always be certain that it will get the amounts of money it
requires at the time that it makes the demand. But as a general
rule, the appropriations it has deemed necessary have substantially
been accorded, and even where, as in a few cases. Congress was^,t first
inclined to reduce the amount demanded, the Authority was ultimately able to justify its demands to the satisfaction of both Houses,

THB FINANCING OF T.V.A; ACTiyiTmS

187

The Appropriations Committee subjects the Authority's officials
and directors to a quite extensive-and detailed cross-examination
year by year both as to policy and the tempo of its execution.
The value of its scrutiny lies in its regular attention to; (1) the
ppeed, progress and economy of the construction programme; (2)
the development and cost of the specific programmes and the
search for criteria of their effectiveness; (3) the direct and indirect
cost of the T.V.A. to the United States as a whole and the place
of the T.V.A. in the total economy of the United States, in other
words what other parts of the United States are getting in return
for the tax contribution; (4) publicity operations of the T.V.A.;
(S) the quality, size and payment of the staff; (6) specific problems
like land purchases, the allocation of costs, the location of particular
dam sites, the respective economy of steam plant and hydroelectric
plant. The T.V.A. does not, indeed, have scope for an^ substantial
mistake or illegality. This process has quite a salutary effect,
though sometimes, as in the case of anybody under crossexamination, it may be uncomfortable for the officers and directors
who may have to battle for their point of view against a hostile
policy. At any rate, the method clarifies for Congress and the
public the implications of the T.V-A.'s policy, and may even sometimes make these implications clearer to the Authority itself.
There is a certain weakness in the procedure, for the membership
of the Appropriations Committee changes and the same ground
may therefore have to be gone over year by year. The strength
of the supervision lies in the fact that though a cross-examination
takes place only once a year, its effect lasts all round the year
both as a result of strictures and praise, and anticipation of what
the Committee is likely to say at the next session.
The T.V.A. possesses one further element of elasticity. In
Section 26 of the original Statute, the Authority was permitted
to retain its earned revenues from power and the other services
it might render, and was not, as in the case of other Government
agencies, required to turn the money over monthly to the United
States Treasury. When ordinary Government agencies and departments turn their funds in to the United States Treasury, they fall
under administrative and legislative control, because funds cannot
then be drawn out to spend without a special Treasury warrant,
and that warrant must be based upon a legislative appropriation.
Section 26 required the Authority to pay into the Treasury not
all its proceeds, but only its net proceeds, and even so to pay them
in only at the end of each calendar year. The latitude thus permitted to the Authority can be appreciated when it is considered
that the definition of net proceeds in Section 26 means proœeds

188

THB T.V.A.: INTERNATIONAL APPLICATION

after deducting from gross revenues "the cost of operation, maintenance, depredation, amortisation and an amount deemed by the
Board as necessary to withhold as operating capital or devoted
by the Board to new construction". This text was so liberal, and
left so much to the discretion of the Board regarding the magnitude
and timing of its construction, that in the period of construction
there could be no net proceeds to turn over to the Treasury.
This section of the Statute came under very heavy criticism in
1935, when the T.V.A. was seeking to have the Act amended to
give it greater bond-issuing power. In place of the original section
another Section 26 was written, which requires the T.V.A. to pay
its revenues from the sale of power or any other products it manufactures and from any other activities, including the disposition
of property, into the Treasury at the end of each calendar year,
excepting for the amount the T.V.A. considers necessary for operating expenses, and for a continuing fund of $1 million to defray
emergency expenses and to ensure continuous operation.1 This
would seem to give the T.V.A. a real latitude on all operating
matters; but it excludes the application of moneys to new construction, as formerly permitted. Thus Congress, while allowing
the necessary elasticity for continuous operation, reserves to itself the right of annually financing construction activities, except
such as might be interpreted as "emergency expenses". Under
this sytem, the T.V.A. has actually established and maintained a
' "T.V.A. Fund" in the Treasury of the United States, in which
are placed all the moneys appropriated to it for the year, and the
receipts which come to it in that fiscal year. Congress reappropriates to the T.V.A., for use in the succeeding fiscal year, such
moneys as still remain in the T.V.A. Fund, including the unexpended appropriations and receipts it has deposited. The T.V.A.
subtracts this balance and its estimated receipts for the succeeding fiscal year from the total of its own estimates for both capital
and operating expenses, and the amount of the difference is the
"new money" requested, which Congress reviews and passes upon
as the appropriation for the year. Then the T.V.A. draws its money
from the Treasury on the basis of "accountable warrants", countersigned by the Comptroller General, thus transferring amounts
it requires to its own cheque accounts.
Thus the Authority has been accorded a considerable amount
of flexibility. Flexibility is not freedom, but conditional freedom;
1
It may be noted that many of the corporate agencies of the Federal Government are permitted to use their revenues in their own operations ; e.g., the Reconstruction Finance Corporation, the Inland Waterways Corporation, the Comjtnodity Credit Corporation, the U.S. Maritime Commission and the Home
Owners' Loan Corporation.'

THB FINANCING OF T.V.A. ACTIVITIES

189

and the amount possessed by the Authority is considerably greater
than that possessed in normal times by any ordinary department
of the United States Government and by most of the other Government corporations.
There have been proposals to put the T.V.A. on the same footing as ordinary Government departments. The latest came in
March 1944, when it was proposed to the Senate that all proceeds
derived by the Board from the sale of power or any other products
manufactured by it, and any other activities, should be paid in to
the Treasury every month and should "not be expended until
subsequently appropriated by the Congress". The T.V.A. protested very vigorously against such restrictive proposals, on the
grounds that it would be subjected to a financial strait-jacket inappropriate to a business organisation.
• The principle of flexibility is Very important to any Government corporation likely to be involved in business analogous to
that of the T.V.A. If the Authority's right to spend were dependent
on items defined in the Appropriation Act, it could not, without
illegality, go outside them. It could not get releases of money
from the Treasury to meet an emergency, and would need, therefore, to be able to anticipate emergencies, whereas a real emergency is, by definition, impossible of anticipation. The Authority
has engaged itself to supply so much firm power, and it Ijas contracts for the non-fulfilment of which it is liable to suit for damages.
But hydroelectric power production and transmission are so much
affected by weather conditions that between a very wet year and
an extremely dry one the difference in T.V.A. generating and
operating expense may be as much as $5 million or $6 million.
A single storm might do a million dollars' worth of damage to
transmission lines. Again, the demand for power may suddenly
increase, as happened in September ¿939 when the Aluminum
Company of America had suddenly to expand its production and
asked for additional power. These contingencies cannot be provided for under the United States budget procedure, which obliges
the Authority to prepare its annual budget estimates from 14 to
26 months before the date on which expenditures may actually
be made. A good instance of the difficulties is provided by the
estimates prepared in the early summer of 1939 and filed in December 1939 for the fiscal year ending 30 June 1941. Power revenues
for the year were estimated at roughly $14.7 million and the total
direct power expenses at $5.6 million, so that the net income would
have been about $9 million. Actually, power revenues were
just above $21 million, and expenses just below $9 million,
with a net income of just over $12 million. If the Authority's

190

THB T.V.A.: INTERNATIONAL APPLICATION

revenues had been frozen in Congressional compartments, their
utilisation for increased operation resulting from expansion of
war industry would have been impossible.
It seems fortunate, then, that Congress retained such elasticity
for the T.V.A. Another, although a clumsier, way of achieving
the same effect would be to allow a very considerable unallotted
sum at the discretion of the Authority. It might be noticed, incidentally, that the T.V.A. does not, as private corporations and
some Government corporations do, deposit its moneys in private
banks or lodge them in investments; as already stated, the money is
placed to the credit of the United States Treasury from time to time.
The T.V.A. power programme is already self-supporting.1 As a
result, there has again been raised m a new form one of the aspects
of the problem of financing by issue of bonds. The T.V.A. seeks a
feeling of freedom and flexibility. It is strongly aware of the psychological constraint of the method of appropriations and of the
ever contingent possibility of attack on its activities and future
enterprise. It looks to budgetary practices which will make manifest the self-sustaining character of its business operations. The
payment of interest obligations on what was virtually a Congressional loan (i.e., all the appropriations to date) during the construction period, would meet one of the suggestions made fairly often
by critics; and the Authority would then feel better able to claim
its reasonable degree of administrative autonomy. From time to
time, therefore, the Authority has declared its readiness to make
interest payments to the Treasury—though so far it has not actually
done so. The Joint Committee investigating the T,V.A. in 1938-392
recommended that the T.V.A. should pay back to the Treasury
the capital advances plus interest.
The Authority has, however, ploughed back an equivalent of
such interest payments into the programme each year (after a full
disclosure of its intent to Congress) through the budget-review
process, and by asking Congress annually for a lesser sum than
would have been necessary if the T.V.A. had, for instance, alienated a sum to the Treasury as interest payments.8
1
Cf. figures in footnote on p. 191.
' Cf. Chapter IX.
' According to its latest pronouncement on this subject, the T.V.A. is studying
a scheme which, if approval, would permit it to fund all the outstanding appropriations chargeable to power; in other words, 65 per cent, of the amounts appropriated and spent on the water-control programmes. Its object is not only to be
self-supporting, but to show that it is self-supporting by presentiilg a balance
sheet that businessmen will recognise, in the usual form, and paying interest on
bonds issued against this portion of the programme. When additional funds are
needed, they would simply be added to the liabilities in the usual manner. Cf.
77th Congress, 1st Session, Part II, Sub-Committee of the Committee of Appropriations, House of Representatives, Searings, pp. 514-515.

THB FINANCING OF T.V.A. ACTIVITmS
INVBSTMBIW

191

m T.V.A. POW»R DISTRIBUTORS

T.V.A. municipal and co-operative distributors had, at 30 June,
1942, a combined capital of roughly $107 million. As will be seen
from the table below1, some 60 per cent, of this sum had been
obtained by bonds sold to the public; some 4 per cent, was lent by
the Tennessee Valley Authority; 16 per cent, was lent by the
R.E,A. ; and some 8 per cent, was composed of grants from Federal
agencies, particularly the Public Works Administration. Some
observations on the sources of this capital must be made here, as
it represents in fact loans made for development, and its nature is
therefore important. The Electric Home and Farm Authority's
development of sales of appliances is also of interest.
Soie of Bonds to the PtibUc
No special observation needs to be made on the capital derived
. from the sale of bonds to the public by the municipalities and cooperatives. They are secured on the electric revenues, and the
interest rates range from 2.32 per cent, up to 4 per cent.? The
public very rapidly took jip the bonds:, having confidence in tbe^
capacity of the power undertakings to prosper and therefore to
meet their interest payments and loan repayments. It may be noted
merely that;the establishment of the T.V.A., a public enterprise,
and the establishment by the municipalities and co-operatives of
power undertakings, gave private enterprise an opportunity of a
desirable invèstment.
1
The capital structuré of T.V.A. power distributors at 30 June 1942 was as
follows:

Particulars
Iiong-term debt
Tennessee Valley Authority
Rural Electrification Administration Bonds held by the public

$
3,777,141.20
16,634,916.04
60,675,663.87
81.087,721.11

CaBilal
Investment of municipalities
Memberships of co-operatives
Received from consumers
Grants from Federal agencies
Other capital

983,131.36
1,038,581.59
2,284,542.64
8,856,272.12
111,756.92
13,274,28443

Barned sntpliis
Total

12^87v627.79
106,949,633.53

Cf. Financial Statements for the Fiscal Year Ended June 30,1942, Municipalities
and Coopératives Purehasmg Power from the Tennessee Valley Authority.
*. Memphis sold general obligation bonds, and here the interest rate was as
low as 2.19 per cent.

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THB T.V.A.: INTERNATIONAL APPLICATION

Loans from the T.V.A.
The T.V.A. Statute gave the Authority a variety of powers to
make loans. The right to "dispose of surplus power" and "make
contracts" and "to exercise such incidental powers as were necessary
or appropriate" to the express powers, permitted the transfer of
real and personal property to municipalities and co-operatives on
an instalment payment plan to enable them to purchase and dis^
tribute T.V.A. power. Then, secondly, the T.V.A. had the power, for
a period of five years from the enactment date, of "extending credit"
to the States, municipalities, counties, and non-profit organisations, for the purpose of enabling such agencies to acquire, improve
and operate distribution facilities as well as inter-connecting transmission lines, preserve existing distribution systems as going concerns and avoid their duplication.1
Under both the permissions mentioned above, the T.V.A. has
made loans to municipalities and co-operatives, in the form of advances of property2 or work. They were made at the rate of 3 J^ per
cent. ; were subject to amortisation in the time and by the periodical
payments set by the T.V.A. ; and were secured by a lien on the
properties and the revenues of the debtor.8
Where the property to be purchased from the utilities comprised
a distribution system which would go to a municipality and a
generation and transmission system which would appropriately
become the property of the T.V.A., the Authority bought all the
properties in a Joint transaction with the municipalities concerned,
the costs being shared according to the valuation of the respective
properties going to each. The T.V.A. met its share of the biggest
transaction qf all under the special power given it by Congress in
1939 to issue bonds to the value of $61 million by issuing, in August
1939, bonds to the amount of $50 million to mature not later than
1969, at up to 3J^ per cent.'interest.4
LOANS KROM THB RURAL ELSCTRIMCATION ADMINISTRATION

In a previous chapter6 reference was made to the promotional
assistance obtained by rural co-operatives in the Tennessee Valley
1
Under Section IS («) the T.V.A. issued, on 9 Jan. 1939, only obligations in
the amount of $272,500 bearing inteirest at 2 1/8 per cent., due 1948, and sold
at par to the United States Treasury. This amount was to enable two electric
co-operatives
to acquire properties and construct transmission lines.
2
Another power with the same effect has also been used, though sparingly.
This is the strictly time-limited power possessed by the T.V.A. under Section
4 (è) to dispose of real property. Here, however, in order to honour fully Section
12 (<ï),
the T.VA. did not purchase or «instruct property for the purpose of resale.
8
Such loans must be approved by the Federal Power Commission.
i
TMs money was first obtained by the T.V.A.from the Treasury, to which
interim certificates bearing Ji per cent, interest were issued, pending sale of bonds.
•
» Cf. Chapter III.

THB FINANCING OF T.V.A. ACTIVITIES

193

area from the Rural Electrification Administration. This Federal
organisation was established on 11 May 1935, not for the Tennessee
Valley only but for the whole nation, "to initiate, formulate,
administer and supervise a programme of approved projects with
respect to the generation, transmission and distribution of electrical
energy in rural areas". Most of its loan funds as authorised by
Congress were provided by the R.F.C. The establishment by
President Roosevelt of this Administration was the culmination
of a long process leading from the perception, many years before,
of the value of electricity to rural production and welfare, and the
observation that the private utility companies seriously neglected
the rural areas, concentrating only upon the densely populated
areas where large and easy profits were to be made. The R.E.A.,
with a large capital, fosters the establishment of electricity distribution systems by making loans to rural co-operatives. It has officers
throughout the country whose business it is to stimulate the establishment of co-operatives and to induce associations of rural people
to enter into loan contracts for this purpose. The R.E.A, also concerns itself in various ways with research and other measures for
the reduction of distribution costs, for example, by means of cheaper
transformers, line construction and accounting, and with the development of cheaper appliances, teaching farmers how to make
appliances at home. Of course, in its loan contracts, it insists upon
the proper procedures for management and continually seeks to
improve their administration, by personal contact between its own
officials and the local managers and by correspondence.
As to financing, the co-operatives served by the T.V.A. can be
placed in three categories: (a) wholly financed by the T.V.A.; (b)
wholly financed by the R.E.A. ; and (c) financed jointly by the T.V.A.
and R.E.A. Before the R.E.A. was established, all the co-operatives
obtained their funds, both for construction and acquisition, from the
T.V.A. The R.E.A. is limited by statute to the financing of new rural
lines and the acquisition of predominantly rural properties which
can be used as a nucleus for the construction of additional new
lines. While, therefore, the Authority has withdrawn from the field
covered by the R.E.A., it has still been necessary for it to finance
acquisitions by the co-operatives when the acquisitions which the
R.E.A. was competent to finance did not offer adequate possibilities for additional rural electrification. On 31 December 1942,
there were 45 co-operatives receiving service from the Authority.
Six of these were wholly financed by the Authority, 28 were wholly
financed by R.E.A., and 1J were jointly financed by T.V.A. and
R.E.A. Of the six originally wholly financed by the T.V.A., two
have already paid off their entire debt.

194

THB T.V.A.: INTERNATIONAL APPLICATION
LOANS PROM THB PUBLIC WORKS ADMINISTRATION

The financial co-operation of the Reconstruction Finance Corporation in the operations of the T.V.A., mentioned above, is only
one of a number of financial devices additional to those of Congres^
sional appropriations and the power of the Authority to issue bonds.
Another is the assistance given to municipalities by the Public
Works Administration to which reference has already been made.1
The Public Works Administration, a department of the United
States Government, was established under the National Industrial
Recovery Act, as modified and continued by the Emergency Relief
Appropriation Act of 1935. It was the business of the Administrator of this organisation to prepare and carry through a comprehensive programme of public works, including the construction,
repair, and improvement of public highways and parkways, public
buildings and any publicly-owned instrumentalities and facilities;
the conservation and development of natural resources, including
the control, utilisation and purification of waters, prevention of
soil or coastal erosion, development of water power, transmission
of electrical energy, and so forth. In order to increase employment
quickly, the Administrator was empowered to make grants to
States, municipalities or other public bodies for the construction,
repair or improvement of any such projects. Such grants were to
be not in excess of 30 per cent., later increased to 45 per cent., of the
cost of the labour and materials employed upon such projects.
The Administrator's office, of course, made every enquiry to
determine whether the price the municipality was to pay, in
constructing a distribution system or in buying it from the utilities,
was a reasonable one. In either case, the municipality was encouraged to plan for the lowest price of establishing its own distribution
system. Where the utility claimed too high a purchase price, the
city was encouraged by the possibility of constructing its own
facilities with the kssistance of the gift of 45 per cent, and for the
rest a very long-term loan with low rates of interest.
With such encouragement, eight cities in Alabama, two in
Mississippi, eleven in Tennessee, and one in Kentucky, had been
allotted total grants of $7,626,685 and given loans of $6,420,000
down to 1 December 1937, a total aid of some $14 million against
the approved estimated cost for construction of electric generation
or distribution systems of nearly $24 million. By 30 June 1940,
29 cities in all had actually received $6,302,196 in grants; while
something less than $1 million in loans was still outstanding.2
i8 Cf. Chapter III.
~.

Cf. 77th Congress, 1st Session, House of Representatives, Independent
Offices Appropriations Bill for 1942, Hearings, p. S12.

THB FINANCING OF T.V.A. ACTIVITIBS

195

The cities usually decided upon the works leading to Public
Works Administration, assistance by a special referendum on
whether or not they should have a public electricity system. The
P.W.A., however, laid down the policy that it would advance no
funds until the city had satisfied the Administrator that it was
unable, after reasonable efforts made in good faith, to acquire on
reasonable terms and conditions the facilities of the existing private
utility with which the project would compete.
THB ELECTRIC HOMB AND FARM

AuTHORiry

As indicated earlier in connection with water power utilisation1,
one very important method of promoting electricity sales is to
develop the purchase of appliances. If the appliances are too costly
there is a clear limitation on the outlet for electricity, and it is therefore of the greatest interest to â generator of power to influence
the cost and purchase of electrical appliances. This can, of course,
be done by consultation with the dealers and manufacturers, and
the T.V.A. has used this method. But it has.also invented an
ingenious financial device for promoting the purchase of apparatus,
a special form of instalment buying. Under the authority of the
President, by Executive Order, there was set up a public corporation (incorporated in the State of Delaware) known as the Electric
Home and Farm Authority (E.H.F.A.) which would buy from the
dealer in electric appliances (who might be one of the utility companies) the note or bill given him as acknowledgment of debt by
a customer who bought appliances from him. In other words, the
E.H.F.A. was a financing organisation which, through the dealer,
put credit at the disposal of the consumer for the special purpose of
electric appliances. The dealer was enabled to do business and
receive the price of his appliances at once from the E.H.F.Á., which
bore the risk. The dealer's part in the transaction was threefold:
to collect the instalments on the payment of the debt as arranged
and transmit them to the E.H.F.A., and to assume the obligation
of the contract; to promote the sale of appliances; and to co-operate
with the E.H.F.A. and the T.V.A. in devising cheaper apparatus.
This system was fostered by a guarantee of E.H.F.A.'s obligations
given by the Reconstruction Finance Corporation, though the
T.V.A. looked to the possibility that the credit might eventually
come through the commercial banking system.
It happened that the three directors of the T.V.A. were directors
of the original E.H.F.A., and some doubt was raised whether the
T.V.A. directors could hold this position consistently with their
'Cf. Chapter III.

196

TBM T.V.A.: INTBRNATÏONAL APPLICATION

obligations under their own statute. They therefore resigned from
the E.H.F.A. In 1935 the E.H.F.A. was made national in scope, and
afterwards did some remarkable things not only for the Tennessee
Valley area, but for the whole country. It had a capital of $850,000,
and contracts with 5,000 accredited dealers, to whom it was of great
assistance, especially in the case of the smaller firms, by its arrangements for discounting paper. It was especially beneficial in financing
electrical and gas equipment. Particular attention was given to
financing the more expensive units of electrical apparatus, such as
refrigerators, stoves, various cooking devices and cooling units,
some of which have a high initial cost, but are of substantial continuing productive value. Down to the middle of 1941, the E.H.F.A.
had financed no less than $40 million worth of purchases, with a
total loss on collections of only $40,000. It had earned a surplus of
$701,000, and had established a reserve for losses of nearly $340,000.
Its rate of interest was lower than the market would charge (5 per
cent, was its prevailing rate), and it operated in the smaller communities which the larger finance companies usually avoid. Its
activity, with a yearly volume of business of about $17 million,
was claimed to have helped to hold down interest rates and charges,
and was of benefit to all concerned, buyers, utility companies, and
dealers. The E.H.F.A. operated in some 37 States, and its contracts on 31 March 1941 numbered 284,000 in round figures. Of
these, over 46,000 were in the State of Tennessee, nearly 11,000 in
Mississippi, over 6,000 in Alabama, over 26,000 in Georgia, 4,600
in North Carolina, 1,500 in South Carolina—making 95,000 or just
about a third of the total in the Valley States. The E.H.F.A. was
dissolved in 1943, as war conditions made credit and supply for
civilian use an anomaly.

The total capital outlay on the T.V.A.'s own undertaking
and its municipal and co-operative power distributors to 30 June
1942 is of the order of $707 million. In the provision of this, Congressional appropriations subscribed by far the largest share (some
six sevenths) ; bonds issued to the public contributed the next
largest sum, and Federal credit, development and public works
agencies, like the RIE-A., P.W.A. and E.H.F.A., supplied the rest.
The last-named devices are particularly interesting as being supplementary to the main form of financing the T.Vj\.., namely. Congressional annual contributions. They supplied a special fillip to the

THB FINANCING OF T.V.A. ACTIVlTIBS

197

various dynamic aspects of the T.V.A.'s power business development. Whether it would be wise for development authorities in other
countries to depend on the contingent annual grant of fresh appropriations for their work would depend on the steadfastness of the
political body responsible for the control of funds. The system
worked successfully in the United States. Elsewhere the commitment of a capital sum adequate to a long-term, unified plan of works
might require, at the very outset, the grant of a full capital sum or
the establishment of some other form of guarantee, in order efficiently to fulfil the entire programme of works.

CHAPTER XIII
INDICES OF PROGRESS
It is clear from the preceding discussion of the activities of the
Tennessee Valley Authority that it has considerable achievements
to its credit in this first decade of its existence. But its progress
cannot be properly appreciated without some understanding of a
number of general factors, some of which have contributed to its
success, while others have limited its scope. Before stating the record
of economic and social advancement, therefore, some attention is
directed to these more general factors and particularly to the limitations upon T.V.A. enterprise.
LIMITATIONS ON

T.V.A. ENTBRPRISB

The T.V.A. operates in the highly developed economic area
of the United States of America. This gives it various advantages
and1 subjects it, in a sense, to various disadvantages.
In the first place, the T.V.A. benefits by being able easily to
draw on the accumulated knowledge, experience and educated
personnel of public and private enterprise and all the institutions
of research and .training. Again, though it may suffer from railway
charges that burden its goods as compared with those of other
regions of the nation, at least there are cheap and excellent communications with markets and sources of supply. Furthermore,
the T.V.A. operates in a settled country, and is not cut off from
its vast economic background by such obstructions as man-made
barriers (for example, tariffs) or hampered by natural obstacles
(such as jungles, swamps, mountains or insect pests) which stultify
economic development in primitive parts of the world. Compared
with any authority conducting development works from the beginning iii an underdeveloped economy, it enjoys tremendous advantages.
At the same time, however, since the T.V.A. exists in a mature
economic society, it is unable to strike out along paths which may
seem to it beneficial. It is limited by its Statute; by certain United
States constitutional prohibitions; by psychological forces and
^interests which are expressions of private enterprise. In the pre-

INDICES OF PROGRESS

199

vailing climate of opinion, and having regard to the vested interests
in the United States, to have sought to undertake ^a number of
otherwise desirable activities would necessarily have aroused
much opposition, and it is important to state clearly some specific
things that the T.V.A. has not done nor sought to do before appraising its achievements.
(a) The T.V.A. does not, like commercial concerns, sell the
fertiliser it manufactures in the open market, nor seek to produce
the quantities to satisfy such a market, although a number of legislators have at various times since 1919 urged that it should do so,
and although, judging by the amount of electricity sold to industrial
consumers, it has a plentiful surplus of power for such operations
after having fulfilled its obligation to give preference to non-profit
public agencies and co-operatives. Its fertiliser operations, therefore, beneficial as they are, seem to go beyond the purely experimental, and yet not to reach out for the regional and national economic advantages that might lie in production on a commercial scale.
(Ô) Rather the same comment applies to T.V.A. experiments
and investigations of various minerals and manufacturing-and processing methods. It may sell or rent its patent rights; but it does
not, either through its own labour forces, or, for instance, through
co-operatives, conduct or encourage their local exploitation.
(c) The T.V.A. does not sell electricity below cost. If it had a
wider direct responsibility for executing economic plans of its own.
making as extensive and important as those embodied in Sections
22 and 23 of the Statute, it might very well have chosen to sell less
electricity to big industrial consumers and more to rural consumers
below cost, even perhaps making free grants for important economic purposes, for example, terracing by power-driven machines,
the operation of farming apparatus, or food processing. It sells
to the rural consumer at the same prices as to the city consumer,
and sometimes the price to the former is even higher by reason of
certain surcharges. Can rural rehabilitation and the decentralisation of industry develop as fast as may be desirable in these circumstances?
While it is true that one farm in every six was receiving electric
service at the end of 1940 as compared with one in 28 in 1Ô33, it
should not be forgotten that there are still five farms out of every
six without it. When the Majority Report of the Joint
Committee Investigating the T.V.A. asserts that there is no evidence that the preferred consumers have suffered by reason of
supplies being sold to industry, the question is raised whether small
town and rural productive users could not absorb much more electricity if prices to them were lower.

200

THB T.V.A.: INTERNATIONAL APPLICATION

(d) After a short time the T.V.A. ceaáed to encourage producers' co-operatives.1 There would seem to be substantial scope for
the development of processing, canning, rural crafts and work shops
(for example, in relation to the forestry policy of the T.V.A. and the
woodworking industries) in order to open the way to part-time
employment or opportunities additional to purely agricultural
pursuits. Such co-operatives have, in many parts of the world2,
proved to be valuable forms of industrial organisation and particularly responsive to the provision of technical guidance and electric
power.
(e) The T.V.A. has not pursued a policy of acquiring large public
estates for public development. It has, of course, acquired some
lands, particularly on the margin of the reservoirs, but even in the
latter case it has restricted itself to the minimum and is tending
to reduce its commitments. It was therefore unable to conduct
certain programmes, for example, the encouragement and organisation of the tourist traffic, and even more, the improvement of forests
and forest management, with the breadth and at the speed which
only public ownership can make possible.
(/) In defining T.V.A. "planning powers" (Sections 22 and 23),
the Statute gave no wide and substantial authority for the "general
purpose of fostering an orderly and proper physical, economic and
social development" of the area, but specified only that such plans
and surveys could be made as "may be useful to the Congress and
the several States". The President was given power to recommend,
from time to time, legislation for this purpose and, among other
things, for reafforestation and "the economic and social well-being
of the people living in said river basin". It cannot be said that
there have as yet emanated from the T.V.A. for Presidential and
Congressional consideration any plans of substantial significance in
the sense of these articles, though the services referred to in Chapters V and VI and such reports as those on a phosphatic policy for
the nation and inter-regional freight charges are of great value, as
studies. .
RESULTS ACHIEVED

Subject to the foregoing considerations, the T.V.A. has to its
credit some beneficial achievements. Though it would be valuableto record the economic and social progress directly attributable to its
i

1

Cf. Report of the Joint Committee ImesiigaMng the Tennessee Valley Authority,
in Hearings,
pp. 1458-1460.
2
Cf. LBAGUB OF NATIONS: Co-operative Action in Rural Life, Survey Prepared
by the Co-operative Service of the International Labour Office for the Proposai
European Conference on Rural Life, 1939 (Geneva, 1939).

INDICES OF PROGRESS

201

activities arithmetically and unambiguously, this is a very difficult
thing to do.
There are three kinds of obstacle to any conclusive appraisal.
In the first place, the T.V.A. has existed for barely ten years,
and of that time much has been spent in foundation works,
the full value of which will accrue only when all are in complete
and integrated operation. Thus, all the dams planned and begun
are not yet finished, but each additional dam adds a more than
proportionate amount to the system's output. Again, the full effect
of navigation improvements will only be seen when there is a complete 9-foot system, when terminals have been built, and when all
those concerned have become aware of the value of the new means
of transport. In the development stage the expenditure is wholly
disproportionate to the immediate returns, a fact well known to
business promoters; it may be remembered that until 1938 the T.V.A.
was "losing" on its power programme, More than this, the first
year or two were a time of organisation and preparation, and shortly
thereafter T.V.A. efforts were handicapped bylegal obstacles. Some
features of the scheme require a long time to catch on, but after a
deliberate educative process, progress will come cumulatively. The
best example of this is the farm demonstration programme.
Hence, the statement of progress to the present, if in terms of
immediate statistical records of gain, underrates the contribution
of the T.V.A. There are still things in the making, where the work
has been and is being done, the foundations have been laid, and the
money disbursed, the returns on which will become concrete in a
few more years.
Secondly, there are some results which cannot be stated in
figures at all, since the figures cannot be gathered. The T.V.A.
area is not a closed statistical area like a nation with a guarded
and custom-housed frontier over which the corporation exercises
the power to command information. The States have this power
in some respects; the Federal Government has it in others. But
the T.V.A. falls in between. It cannot compel individuals to fill
out statistical and other forms. Thus, for example, the T.V.A.
cannot gather widespread information about savings or deposits
before and since it came; such jurisdiction is in the hands of the
other authorities referred to, and is indeed exercised in some respects by the- Federal Reserve Bank system, but on a basis which
does not at all coincide with the T.V.A. area. Similarly, the T.V.A.
cannot verify the effect of its health activities in general, because
people move into and out of the T.V.A. portion of the States, and
any action by a neighbouring Government agency, regarding the
gathering of vital statistics is not within the jurisdiction of the

202

THB T.V.A.: INTSRNATIONAL APPLICATION

T.V.A. Hence, while some indices of progress are available, others
are not, nor can they be deduced from figures collected by other
agencies.
Finally, even where the figures are available (for example, regarding the increase in employment since 1933), it is very difficult to
segregate the contribution to economic advance of the T.V.A.
itself, since the T.V.A. is only one factor among several, and a
factor not fully co-ordinated with the existing governmental authorities^—Federal, State, county, city, and so forth. Great national, even international, forces may be in operation, of which the
T.V.A. becomes an instrument rather than a cause, raising or
depressing the welfare of the Valley. The trends of international
tradfe, of domestic investment, of general economic optimism and
pessimism, have their influence which affects and screens the effectiveness of the T.V.A. itself. The same applies to the lesser causal
effects of the other governmental and social agencies in the Valley.
It is well, therefore, that the reader- should have in mind the following indices from the United States Statistical Abstract:
Wholesale prices
1926 Average "100

1929 —95.3
1933 — 65.9
1934 — 74.9
1O/Í5--80.0
1936 — 80.8
1937 — 86.3
1938 — 78.6
1939 — 77.1
1940 — 78.6
1941 — 87.3

Farm prices
Aug. lew-July 1914 "100

1929 —
1933—
1934—
193^
Iváo —
1937 —
1938 —
1939—
1940—
1941 —

14<5
70
90
1U8
114
121
95
93
98
122

With these warnings in mind, the progress in the Valley since
the T.V.A. entered it, may now be appraised with reference to
the Authority's various activities.
Electric Power Development
The power operations of the T.V.A. are shown in the table given
in an appendix on the basis of the T.V.A.'s own accountancy practice, allocation of costs among the various purposes of the dams,
and determination of the items entering into costs.1 The financial
results are very favourable, for electricity revenues now pay not
only for electricity operations (including liquidation of debt) but
for almost all other T.V.A. activities. In brief, the T.V.A. computes
its investment in power facilities (straight line depreciation allowed
for)2 as, roughly, $86 million in 1939, $179 million in 1940, $187
1
Cf. Table in Appendix I. Certain controversial issues arising in this connection
are briefly considered in Appendix III. "
!
The most severe method of loading the accounts with charges.

INDICBS OF PROGRESS

203

million in 1941, and $250 million in 1942. This means for 1939 a
net return of 1.6 per cent.; for 1940, 2.5 per cent.; for 1941, nearly
4 per cent.; for 1942, 4 per cent.1; and for 1943, an estimated 5
per cent.
There are clear benefits from the T.V.A.'s electric power
activities.
The principal benefit is the addition of some 2,0Q0,000 kilowatt
capacity to the already existing resources of the Valley, and the
prospect within two or three years of about 850,000 kilowatts
more. Output was already 6,000 million kilowatt-hours in 1942;
it should be 10,000 million kilowatt-hours in 1944. If this capacity had not been added, and if the existing power companies
had stimulated consumption by T.V.A. methods and at the
T.V.A.'s speed—a hypothesis altogether unlikely, at any rate
as regards speed—consumption might have reached its present
level; but it is more than likely that the amount consumed would
have been generated by steam and not by water power. The hydroelectric capacity would have been wasted; it is now available for
use. When the costs properly attributable to navigation and flood
control are allowed for, the kilowatt-hour production costs much
less than the best competing steam power. There is the long-run
effect, also, that coal is conserved, or may be used for other purposes for which it is indispensable, and is rather cheaper than if
it were still needed for the competing use. In view of the predicted exhaustion of oil wells in the United States such water
power is an important asset, and in time may even become an
indispensable one.
Secondly, the T.V.A. contributed largely to a rise in the consumption of electricity by residential customers from 55 kilowatthours per month in 1933 to 129 kilowatt-hours in 1944. (The United
States national average was 50 in 1933 and 80 in 1940.) At the
same time, the fall in price meant that by 1942 the average residential customer in the Tennessee Valley was paying 18 per cent,
less for a consumption of 51 per cent, more power as compared
with the United States in general; the fall was from a residential
rate of something like 4 cents and more per kilowatt-hour prevailing in the area to about 2 cents per kilowatt-hour. (The national
average was 3.9 cents per kilowatt-hour.)
Calculated on the basis of what would have had to be paid at
T.V.A. rates for amounts consumed before the introduction of
T.V.A. rates, the estimated annual consumer savings due to the
1
Expenses were greater than normal' in 1942, owing to war demands for
power in a year of unusually low-stream flow requiring the use of more expensive
steam-generated power.

•204

THB T.V.A.: INTSRNATÏONAL APPLICATION

T-V-A/s activities were $9 million a year distributed thus: 36
per cent, to residential customers; 26 per cent, to industrial customers; 35 per cent, to commercial customers; and 3 per cent, to
street-lighting customers. Most cities have earned substantial
electricity surpluses at the above rates, making it possible to reduce
their taxes or give better social services. Thus, in the fiscal year
1941 municipalities and co-operatives earned a combined net
income of $4,166,000; in the fiscal year 1942, $3,546,000; the
amounts being available for improvement and expansion of the
«lectric systems, retirement of power indebtedness, and the further
reduction of taxes, after paying taxes and tax equivalents amounting to 6.54 per cent, and 5.93 per cent, of the power revenues in
the two years respectively. Four million dollars is no mean percentage of the tptal tax revenue of the cities.
Thirdly, the T.V.A. has made cheaper power available for industry, a gain especially important in electro-metallurgical industries. This must mean either cheaper products benefiting the people
both inside and outside the Valley, or more wages or more profits
(or both) ; and in either of the latter two cases it cannot fail to result
an increased purchasing power on the part of those connected with
the industries.
Fourthly, the T.V.A. has brought electric light and power to
the farms. Thus, from one farm in 28 with electric service in 1933,
there has been a rise to one in six; and the rates are the same as for
the cities. The increase has been about fourfold in Tennessee compared with less than double in the whole of the United States. The
consequences are that productive activities have been made easier,
with a saving of labour and time, and some of the processes and
appliances have made it possible to use resources which were wasted
before; for example, hay which could not be naturally dried, or
sweet potatoes which could not be cured by the stove method ; and
to preserve farm produce hitherto wasted, such as meat, fruit,
•vegetables and butter. It can be imagined what this development,
when fully exploited, would mean to the Tennessee Valley (and to
other countries where terrain or climate make production difficult
or the preservation of perishable foods almost impossible), if these
appliances, instead of being used by only a small proportion of the
farmers, came to be the staple of farm economy. A survey of work
methods in all but a few countries of the world shows that by far
the majority of mankind, especially in rural areas, are still beasts
of burden. Electrical devices offer the opportunity of lightening
this toil, and of converting a hand-to-mouth economy, which is a
low-standard economy, into a more roundabout process in which
the goods produced can be put on a timetable of consumption

mmiem®&jBmmsss$'

Mm

Hbes&DWm-kiïi'.Aé mem'wHî&iktfy ¡can be preserved for consiatmjptíi&w^ "
i0r»â4fe&^i;-"• -.^ •'.•;: :,';::.-.l'-', .>'•'..'•_/' .','

. 7-^~- ~/:. :'[; •:

:• ; Ehét'M^éóm of fhe larmia: iia^iiius contriimtóár to óutiitíoá
ímpvmr&mmM, It has also eontributed tô tike larm demcsastrâtion
jppâgtamaàê;, ^twEh apiftt ml} ha^e-1# èffecté^oa dîéfc ^Cwecpéfr
itAas î^dèd a new social value to. rurtó
wM<^'^o some ¡^t^t-omy-^
the 4nft to 't]fe townsc *f h^
ííuticte^ of tíéGtó^. ápparaj;^ in ^f ^^
âi^jshôw»; ia ^ie
f#Û©wlttg tableare ©ot èJWÈurÊiy-or^iîefly rural, but tliey.refleçt tófe
OT^ap^jtwb^ equipment /With labour-rsaving aad prodiaetive"
|8^eii^is.an;d^amátó6¿:" '•';',-•-•; ';' ,'.-/•...
;'/ .„,'":.Sales of electriolty appliances,
domestic rêw{.t»i<$è

Fiscal year

/ ^^

•

1939
1940
íMí ..

hmjm • -

;0
%le8 te UíB-ífñítéd States in 1940 were $32 per restâettlW ctffihmer
empale «âth ^4$'
-4p8Sts;.per PesiaêittW-raJStomw te^
i'J _^r '
; ;'• . " .'

©ífÉfiy,, T.V.Ai.efeeÉáC: |¿sHey;haa. àietèd MJkie|aii^^¿ t-Q;tii^
Is^eiâtog-^electrfcîty rates by oAét,agencies in thè Valley asá
pÉtsî^, as îpiefollomag tablesh^ws:
;>
•;\:' "' 7 "v-^ ; .
i

- '"i

' • " . - ~ Âiwage rate per £*rfii

..g^tofiteiiï .^sfe^ii ." .

-v-'- i' V

^v-.' ,:'.-•-

; ;i933^ •••&&{ I $38

srs9:

1^9

!

•' ,
1940

'>^

\im,ïi

;
• ©'.S. effit&e îfl&is&y-. j'
. ^
4.39 '-4.14 : 4.iOÔ : 3.84 ; , 3:j3' ;
j.âiialtotim'Po^f^îÊQ;^ ,.• ", - ' 4.62- 2.9? : . 2.fS'i i 2.16*. ::t.ï&i !
i Shwi^PajHi isIecMe Co.
sMi 3.74 i l.M : 3.231 2,.f7 ! 2M\:
, jQ^tgia F«>«êr Co.
•J.M": :3:.04 «;93 ; 2:84 - 2.74 ;
'l£e8*ttd£y"©tSlMes.-Có. , •• , ' 6.25 S.OS i J.Oi 4.92 ¡ 4rM : 4.« ::'
; JLoujsvîllé C88&Bléc(sácCfe.: .S.J8 3.77 i&M- .S-,!*: ;*.28 3.tOH
j'Tèèâ^asé ¥?|lfev authority, ;'
1,83 i M 2.16 : 2.06 2. es,
•

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í^:be:Mtíc6dvWÍ& thê^rêat Wane "
mBi%mwáf: fysteîô' gisiitg M far' 4^M-^^AW;©rEat i^feesraa^ íite^iaJf .©f ificsdíiM; ' 'Soi íar, |h© :^V.^,1»» itodé ¿"saitlables 'eanïmuôus "
, %mâ^mmm0^siíf-'mi&&• charinei?4é4'/miles"l<pg^r#ni• t&¿ 'ScíomA
„: ©1 #e-''Ií©®ffliS8€te:'tóChattaEíoesga.^ ^;:;- V /i-;: ^ .:".
;'••.. "•_, " ;.: -• ^ -, 'fíét.íeveñ w#.lafein^Mplête^yèteiQ'tíyer'traffiels«
;\l%Ê^:»l^-âie.%HÎlS::;;";/'^

-•'- . : ^> " "J v\' '^ ^ ••.••':-'" ^.í'-

206 ,

THE T.V.A.: INTERNATIONAL APPLICATION
TRAPPIC ON THS TENNBSSBB RIVER, ,1928-1941
Selected commodities
in tons

Totals
Calendoi
jrear

1928
1929
1930
1931
1932
1933
1934 •
1935
1936
1937
1938
1939
1940s
, 1941<:

Total
million
tons

2.ir -

2.04
2.46
1.24
.74
.94
1.49
1.89
2.16
1.37
1.06
1.11
2.16
3.09

Total i
million
ton-miles.

Forest
products

Petroleum
jaoducts-

Grain

46.40
38.40
46.70
27.70
16.34
32.65
43.15
69.40
66.40
55.33
55.68
91.31
97.42
138.40

228,738
197,341
200,832
94,975
60,566
84,855
103,222
111,042
171,010
209,943
131,859
128,219
141,699
166,880

_
—
—
—
-—

-^
—
—

¡J Represents approximately 130 automobiles.
*c Represents approximately 4,100 automobiles.
Preliminaiy. ^

'—.

—•

_—
—
—
—

i—

—
——
62,568 -- —-

103,201
90,967
115,375

-

6,001
43,140
85,232

'

Kg
iron

Automobiles ,

26,000
31,000

—
——
—
-^—
—
—
—
—
-—
—
—
— - —
—
—
—
—'•

i
2,262 —
12,832
175»
16,608 6,180*'

,

This sho^s a fall in traffic between 1930 and 1939 due, in large
part, to the general economic depression, but thereafter a sharp
rise in ton-mileage, due in part to the lifting of the depression but
• also to the improvement of the river channel. There is at present a
degree of traffic ascribable directly to the war. Yet, since until the
outbreak of the war the-trend of traffic in ton-miles was upwards,
a permanent benefit may be conceded. Working on a conservative
basis, and after a widespread survey, the T.V.A. has estimated an
upward trend which in 1945 (the first full year after the improve.ment is completed) will reach 2,600,000 tons, or over twice the present non-Government movements on the river; and in 1960,
6,173,000 tons. The T.V.A. also estimates savings to those who use
the river now at $3,450,000 in 1945 and annually on that basis; and
when the river is used on the 196Q basis., at $8,000,000. These developments are postulated on the building of terminals, the establishment of common carrier services, the, establishment of truck barge
rates, and the growth of the shipment of very miscellaneous cargoes
into and out of the Valley,
Flood Control Benefits j
To an area afflicted by large and small floods, the T.V.A. has
brought a sense of security and relief fronf damage. So far as can
humanly be foreseen, the flood control programme has eliminated
the risk of flood; its capitalised value to the alluvial valley of the
Mississippi is calculated at some $200 million. Chattanooga can be

INDICES OF PROGRBSS

,

207

spared occasional annual damage of some $1 million a year. Besides
this, the T.V.A.'s contribution has saved lives, and has averted
the stoppage of current business and other activity during floods,
and the waste of time and material by many public agencies in
taking remedial and rescue measures.
farm DemmstraMon Benefits
The number of farms affected by T.V.A. demonstrations in 1942
inside and outside the Valley was some 27,000. The number of
forms within the. Valley was 23,000. The numberof acres concerned
in the Valley was nearly 3,300,000, equivalent to one in four of the
total farm acreage. If the improvements accomplished on these
farms had been all that the T.V.A. intended, they would already
have represented a substantial improvement in the standard of
living of the Valley; but, as already explained, the farms are demonstrations, and have affected form methods among neighbours.
There is no estimate of the numbers indirectly affected, but some
indication of indirect value is shown by the fact that in Alabama
about 24,000 farmers visited 81 demonstration farms in a 3-year
DetailecT results are not yet available on ar comprehensive
enough basis, but sample studies have been made of which some
illustratidns are given in Appendix I- They indicate highly favourable trends in all the States. Thus, since 1934, there has been on
the demonstration farms quite a substantial decrease in the land
left idle and that formerly devoted to destructive crops like corn
and cotton. There has been an increase in hay and pasture acreage
and in the number and quality of livestock and poultry. A considerable rise in milk and egg production has followed, leading, in
Alabama, to the installation of cheese and butter-making plants.
A very large advance is noticeable in the per acre yield of cover
crops, of hay, and in the saving of, seed. Particularly valuable has
been the increase in winter legume cultivation. In some cases it is
apparent that the chief benefits are yet to come, for many farms
have preferred to reduce their cash crops and undertake soil conserving practices which are certain to result in more considerable
production and cash eropsthan before.
Forestry and Fishery Prospects
The T.V.A. has caused the planting of some 150 million trees.
Some of these are for timber, others for their crops. Some have been
planted with special concern for the arrest of soil erosion and the consequent prevention of the silting up of the river and the reservoirs.

208

THB T.V.A.: INTERNATIONAL APPUCATION

It cannot yet be estimated with accuracy how much silting has
been avoided by the plantings, since obseirv&tions over many years
will be needed to verify predictions. It will also be some decades
before the improved croprbearing trees show results, and with them
their effects upon local diet and the improvement of livestock.
As for the growth of timber for industrial purposes and uses,
here again the full measure of benefit is a matter of the future. But
since there is a calculable rela:tionship between jtrees cut down and
planted. It can already be said that the alarming waste of the preT.V.A. days has been arrested-(although war needs have speeded
use abnormally) and that it is dearly foreseeable that the area will
once again be a tree-bearing district with an increasing number of
trees, based upon a proper timber economy.
If the measures proposed and stimulated by the T.V.A. are
carried out, then according to T.V.A. estimates the number of
people employed in wood industries will in thé course of time be
increased from 72,000 to 150,000 and the earnings from these industries will rise from $51 million to $200 million.
it will be realised from what has already been said on forestry
prospects that where a development agency is concerned with resources, the growth or the maturity of which (as in the farm demonstration scheme) must depend upon nature, the results of the development plans can only be seen'in the span of time which nature
imposes. In the present case this span is the time required for the
maturity of trees, and the task of the Authority is rather to clear
away the obstacles to their planting and natural growth, and to
plan for the utilisation of the products as they become available.
This takes time.
The average loss of timber by forest fires in the Valley has equalled an area of some 700,000 acres per year, or 5 per cent, of the total
forest cover, being equivalent to a total burning every 20 years.
Although there is not at present any definite indication of progress
in this field, it is expected that the T-V-A. educational and administrative activity will help to reduce this waste in due course.,
T.V.A. reseiwch and stimulation of attention to fisheries in
the river, the sorting out of rough fish and stocking with improved
varieties has already brought some addition to the Valley's welfare
and is certain to increase this very largely. Ip 1940,5 million pounds
of fish were taken in, five T.V.A. reservoirs^
Benefits from Industrial and other Processes
The processes and equipment for farm and other use produced
by the eiforts of the T.V.A. were described m the chapters on the

INDiqSSOPPROGRasS

209

advancement of economic opportunity and the people's social
well-being, but the benefits may here be summed up in words, if
not in figures.
(1) Some resources have been discovered, especially a number
of minerals which, with tibe improvement of technology and contemporary industrial demand, are sure to be of economic benefit
to the region and tibe nation. Among these are: china day, alumi*
nium-bearing days, vermiculite, mica, etc.
{2) The T.V.A. has demonstrated the economic availability
and use of certain resources, for instants, the processing of clay
lor porcelain and the processing of cottonseed.
(3) The T.V.A. has denionstratêd processes to preserve foods
for home uáe or shipment by freezing or preserving fruit and vegetables, by dehydration, and by refrigeration (community refrigerators, etc.). These processes may have a very great effect upon
the economy of the area when they are fully developed. Hitherto,
some of the products have been wasted as a result of weather conditions and because of the lack of transport facilities at economical
rates. Others, again, hâve been sent out of the area to be processed
elsewhere. The processing will save much of tibe expense of transport and tibie waste by spoiling, thus encouraging farm methods
more diversified tiian before, to indude cultivation of the hitherto
nbn-storable products.
^
(4) The T.V.A. has invented or adopted special apparatus,
instrumental to agricultural processes, such as the cottonseed
cooker, furrower, the seed harvester, the hay dryer, the tobacco
dryer, the ham curer, the com shucken Its work in this respect
has Consisted largely in adapting known instruments to the kind
of agricultural conditions prevalent in the Valley and to the small
cash income of its farmers. By its blueprints it has enabled farmers
to make the apparatus; while private manufacturers are already
producing equipment on the basis of its designs.
(5) In connection with some of these processes and instruments
there are patent rights. Hitherto, the amount annually obtained
by the T.V.A. for the use of these rights has been small; but in
terms of long-range policy the T.V.A.,aims at getting the inventions used rather than making a money revenue from their use.
Employment Opportunity and General Welfare
In discussing the employment opportunities created by the
T.V.A.*s activitie&, the direct employment provided by the T.V.A.
itself since it began operations cannot be left out of account. The
T.V.A.'s own labour force rose from 7,114 in July 1934 to a peak
of 41,211 in July 1942, and was 33,759 in January 1943.

210

TH® T.V.A.: INTBRiNATIONAL APPLICATION

The development of electricity distribution in the co-operatives
and the cities has added additional employment opportunities to
those existing before. It is true that the T.V.A. system is coincident
with the area of operation of the former power companies, and that
the major effect has been rather the transfer of management. But
the total consumption and number of consumers have increased
and,there has been a consequent increase in the numbers serving
them, and though the exact comparative figures are unpbtainable
an appreciable increase in employment in the electricity supply
trade must also be assumed.
A number of people throughout the United States have also
had employment since 1933 producing equipment and raw material used in the construction of the damsj the cement, the cables,
the transmission lines, turbines, shovels, concrete mixers, steel
sheeting, and all ancillary apparatus. This number cannot be de;
termined, but may be surmised from the figures of T.V.A. annual
purchases of materials: Thus, the T.V.A. has spent an annual average
of $20 million on. materials. Assuming that 70 per cent, of this
went to labour^then at $1,500 per year some 10,000 persons would
have been employed. A large part of this gain is^due to the T.V.A.'s
development efforts, even supposing that in its absence others
might have done the job.
There has, further, been a perceptible growth of industry in
the Valley. The industries which show ah increase from 1930 to
1940 in the T.V.A. public power area are: forestry and fishing, construction woodworking, paper, - chemicals, textiles and rayon,
hosiery, garments, shoes, upholstering, aluminium, food products and
public utilities. There has been a decrease in iron and steel. Besides
this, there has been an increase in employment in relation to trade,
finance, and professional occupations. The extent of increase in
urban population and employment in the various industries may
be seen k\ the table opposite from the United States census.
Another measure of industrial activity is provided by the increase of wage earners and their wages and the value'added by
manufacturing. This is shown for 1929, 1935 and 1939, as follows:
MBASURBS OF INDUSTRIAL ACTIVITY, 1929, 1935 AND 1939
T.V.A. PUBLIC POWER AREA

Wage earners (thousands)
Wages (millions)
Value added by manufacturing (millions)
Source: Censtis of Manufaâurers,

1929

1935

1939

136.4
$112.4
$327.1

124.6
$ 84.7
$228.5

147.4
«113.8
$316.3

•^

Again, these data may be set out in a different form in order to

211

INDICES OF PROGRESS

give comparison with trends in the seven Valley States and in the
United States as a whole.
DISTRIBUTION OF POPULATION, AND DISTRIBUTION OF BMPLOYMBNT
IN SBL^CTBD CLASSIFICATIONS, 1930 AND 1940, T.V.A. PUBUC
- POWBR AiRBA (145 COUNTIES)
(tnlhtmsands)
Per cent, change, 1930-40
Distribution

Population
Total:
Rural farm .....
Rural non-farm .
Urban: Total...
2,500-10,000 .
10^000400(000 .
100,000 and over

1940

1930

Power
area

Sewen
Valley

United
States

3,670J

4,036.8

10.0

9.6

7,2

2,028.9
667.5
973.7
269.3
71.8
632.6

2,086.9
812.6
1,137.3
300.3
136.9
700.1

2.9
21.8
16.8
11.5
90.7
10.7

2.5
15.9
16.9
18.6
18.4
13.7

0.2
14.2
7.9
10.3
12.3
4.6

29.1
17.3
38.1
155.5
9.1
6.7
10.4
23.1
47.8
12.6
57.3
158.7.
18.4
55.5

31.7
16.4
54.1
164.5
9.6
10.1
12.3
13.9
68.0
17.6
58.6
175.7
20.1
66.7

9.0
-5.6
42.0
5.*
5.7
49.6
17.8
-40.1
42.4
39.7
2.2
10.7
9.3
20.1

11.6
-4.0
28.8
8.3
11.0
56.5
16.1
-17.8
47.3
51.9
0.3
13.6
10.6
18.6

^Employment
Forestry and fishing...
Extraction of minerals.
Construction ........
Manufacturing: Total.
Woodworking ..
Paper
Chemicals .........
Iron and steel .....
Textiles and apparel.
Food products .....
Public utilities .. ;
Trade
Finance
Professional
•....

Source: Census of Population, 1930 and 1940.

COMPAiRII^ON OF TRENDS"IN MEASURES OF INDUSTRIAI, ACTIVITy
IN THE T.V.A. PUBLIC POWER AREA (145 COUNTIES),
SEVEN VALLEY STATES, AND THE UNITED STATES
{1929 = 100)
Power area
Subject
193S

Wage earners
Wages
Value added by manufacturing

Seven Valley
States

-

Unlfeàl
States

1939

193S

1939

193S

1939

91
75

108
" 101

93
82

114
109

86
67

94
84

70

9?

65

95

62

81

212

TH* T.V.A.: INTtRNATIOÎiAI. APPLICATION

Some indication of increasing welfare is discernible in the business statistics, that is, sales and receipts of retail and service establishments, although tile warning given earlier regarding changes
in the price level and the effect of the great nationrwide causes of
prosperity or depression m»st of course be borne in mittd. The comparison between the power area, the seven Valley States- and the
United States figures shows the power area substantially better
off than the Valley States, and considerably better off than the
whole nation.
Since over one half of the State of Tennessee lies inside the
T.V.A. area, incomes in Tennessee in the years 1929 to 194$ compared with those of the tfnited States as a whole may be regarded
as especially significant in showiiig a favourable trend. From the
standpoint of family income the trend is even more favourable than
for the per capita income, since the size of the Tennessee Valley
family unit is greater than in the United States in general.
PER CAPITA INCOME PAYMENTS IN ALABAMA, MISSfôSIPPI, TSN.NES8EE, AND IN THE UNITED STATES, 1933 AND 1940
[' "•• ••"•

—-

- '

;—-—
Per capita income

Area -

United States
Three States
Alabama
Mississippi
Tennessee

1933
(dollars)

1940
(dollars)

Peroent^crease.

368
1419
139
121
18Í

579
274
268
220
320

S7
84
93
82
77

"-

•

;

!

Source: UNITBD STATES DSPARTMSNT at COMHSRCB: Survey of Cuneta Business, Jvif 1942.
. teïates of 1933 population used in comp-"—- "••• '""
"-• •'
» "•••-•• ^-i—- »••—
Statistical'AbstrQct vf the United States, 1939

Perhaps some further indication of increasing welfare, as resulting from the combined power, industrial and agricultural improvements, or at least an increasing confidence in its advent, may be
seen in two indices: (a) the fairly sharp rise in new dwelling units,
and (6) increased sales and Receipts. Between 1935 and 194©, the
number of new dwelling units construction as a percentage of the
total existing in 1940 tyas nearly 13 per cent; "urban construction"'
was 7.2 per cent., "rural non-farm" was 20^5 per cent, and "rural
farm" was 13.2 per cent, of the total units in their respective categories. These figures are for the T:V.A. Public Power Área.1 In sale»
and receipts the T.V.A. Power Area shows a much more marked
rise between 1933 and 1939 than the united States as a whole and
the seven Valley States:
•m i

1

m

M—^-—

i

.

.

-ni

i

n ni

-.i

Census of Housine, 1940, Vot IL

i

"i

•

m. .i. i

j - n- mm •••ir> j

ii

!..

• •• mm—m m m

•

i •••! i •—

213

INDICES OF PROGRESS

SAINES AND RBOPPTS OV RETAIL AND SERVICE ESTABWSHMENTS,
T.V.A. FDBUC POWER JÜStEA (145 COUNTIES), SEVEN VAM^EY
STATES AND UNITED STATES, 1933 AND 1939
(*» thousands) '
^ion

Power area s
Seven Valley States
United States

Total 1939

Per capita
1939

Per cent.
Change,
1933-1939

762,321
3,992,947
45,462,207

$189
198
.345

86.6
80.9
69.9

Total 1933

$

408,435
2.207,4ÍO
26,762,339

$

•

Source; Census of Business.

The increase in the tourist traffic sincç the opening of the dams
and the installation of recreation facilities should also be counted
into the employment opportunities and money turnover. On this
it is possible to offer only some arithmetical surmises of the benefit
accruing to the Valley. Thus, there has been a stream of visitors
to the T.V.A. dams. Registration is not required at all dams, but
conservative estimates count these at ah average of about one million a year, although since 1937 the numbers have been one and a
half mülion rising to over two million in 1940. According to figures
of the United States Travel Bureau, North Carolina received $100
million and Tennessee $81 million from recreation travellers in 1938.
Not all of this came td the Tennessee Valley parts of the State, and
py no means all can be attributed to the T.V.A. programme.
Further, no figures are available from the portions of the other five
States falling in the T.V.A. area. But the figures given are an indication of the magnitude of the T.V.Á.'s recreational value and of
what may be expected when the chaitt of lakes, the mountains and
forests are fully prepared, to receive visitors and tourists. It is
estimated that recreation travellers in Knoxville in. 1939 spent an
average of $4 a day per head; and Knojcville's income from recreation travellers in that year was estimated at $3 million. Fishermen
spent variably $6 a day. Sporting equipment is being sold much
more substantially; fishing tackle and boats, for example. In 1934
there were two small boat-building and repair shops in Knoxville;
in 1939 there were nine.
Population and Health
n.
It has been noted that the Tennessee Valley was an area of emigration, which would to some extent imply that its younger people
were seeking opportunity outside the region. Though it is impossible to isolate figures for the Valley itself, a related computation
shows a slowing down of this trend. The figures for Tennessee are

214

THE T.V.A.: INTERNATIONAt APPLICATION

more significant than the others, if it is recalled that by far the
largest portion of the Valley lies in Tennessee, and that the major
operations of the T.V.A. occur in there. The decline in migration
from the State in the decade 1930-40over that of 1920-30 is shown
in the following table, From 192Ô to 1930 altogether 120,000 (net)
migrated from Tennessee; between 1930 and 1940 the figure
declined to 31,000.
BSTIMATKD NET CIVEWAN MIGRATION IN RgLATION TO POPULATION,

1920 TO 1930, AND 1930 TO 1940
1

Region

Virginia
North Carolina
Georgia
Kentucky
Tennessee
Alabama
Mississippi

Average number of
migrants per year
1920-1930

1930-1940

23,600
1,000
• 41,900
20,800
12,000
15,300
10,500

900
10,000
14,800
11,600
3,100
19,800
8,100

Average yearly
migration rate
1920-1930

1.0
1.5
0.8
0.5
0.6
0.5

1930-1940

o3
o.5

0.4
0.1
0.7
0,4

:

Source: Henry S. SHRYOCK, Jr., Bureau of the Census: "Interned Migration and the War", in
Journal of the American Statistical Association, p. 20.

For reasons given earlier in this chapter it is not possible to
offer any statistics to show the effect of T.V.A. activities on the
health of the area. The general judgment of tlxose concerned, and
of the civic bodies, is that health has at least been maintained ; and
that, in particular, the measures taken against malaria have prevented any increase in the disease in the face of a grave additional
tíireat.

The T.V.A. has brought to the Valley the opportunity of outdoor recreation and some figures of the extent to which its facilities
have been used indicate an increase in welfare from this cause.
This does not show itself in monetary terms, as the ïacilities are
free, though it is partly reflected in the increased turnover in thé
sales and receipts of retail and service establishments and in receipts
from tourists. Rather is it reflected in the direct benefit: that comes
from the many outdoor activities made possible by the lakes, and
parks built by the T.V.A., or by the States under its stimulus, and
the care for scenic opportunities, roads and other fadlities for
access to them.

INDICES OF PROGRESS

215

Social Gains
How the T.V.A. fosters better educational opportunities, library
service, job training, apprenticeship and rural education has already
been described. These and its other activities have been conducted
in a scientific, humane and up-to-date spirit, and through democratic institutions. It has consciously sough|; to make clear the
meaning of the integrated development of resources to the people
of the region and the potential value of such development in raising
their standard of living. It has vivified interest in the Valley, and
given hopes to the local populationi It has contributed to turning
the people's attention to the local government institutions of the
area by its local government studies and has stimulated the universities by posing próbtems, suggesting and co-operating in research,
and in some cases (for example, in public health) making grants in
aid of their work. In an age when social aiid economic welfare is
bound to depend more than ever on the science and art of administration, that is, the organisation, management and application of
employees and skill to achieve a collective end without waste of
effort and material, the T.V.A., by the conscious planning of its
activities and methods, has been a notable experimental model,,
and its successes have been invaluable demonstrations.
Although it is in the nature of things as yet impossible conclusivtly to Ucuionstrate in figures the impact of the T.V.A. on every
aspect of the Valley's progress, the geneial feeling of the population
cannot be omitted as evidence of improvement. When the T.V.A.
entered the Valley, it was met, as it were, by a large question mark.
That question mark dwindled under the -influence of the farm
demonstration programme and of much reduced bills for electricity
service. As the full breadth of the T.V.A.'s multi-purpose programme became clearer, and each branch of its benefits became
more manifest to the public in practical development, theiquestion
mark was replaced by a note of enthusiasm and of co-proprietorship. A very large proportion of the population now talk of "our
dams" and "our T.V.A.1' with pride. The people of the Valley,
individually and through their many civic organisations, now
believe that their welfare has been increased, that it will be further
increased, and that the cause is the T.V.A., and they look with
disapproval on any measures which would seem to diminish the
powers and strength of the T.V.A. It would be a mistake to ignore
testimony of so widespread and steady a nature.

CHAPTER XIV
THE PROBLEM OF AN INTERNATIONAL T.V.A.
THS

T.V.A. AS A

MODSL

This examination of the functions and operation of the T.V.A.
was undertaken for two reasons: to record an experience valuable
to those generally interested, in the possibilities and conduct, of
public development works, and, more especially, to distinguish
the problems facing an international agency seeking to assist the
development of the resources of underdeveloped countries. In the
Introduction attention was drawn to the growth of opinion favourable to the establishment of such an agency. The purpose of such
an institution—an international resources development authority1—
would presumably bç to contribute to raising the standard of living
in underdeveloped countries by means of long-term credits and
technical assistance which would foster economic enterprise. In some
degree, which would have to be the object of serious enquiry, financial assistance and administrative support of these enterprises would
come under the general gbod offices of such an international agency.
From the fàets presented in the body of the study may be
deduced the implications of the T.V.A. for international action,
and the possible alternative solutions can be appraised. But no
demonstration model can be regarded as suitable for adoption in every
identical feature by other countries, or even in other areas of the
same country, in the expectation that identical results will follow.
The T.V,A. is not transplantable without reservations and qualifications; its characteristics merely help to bring out the problems and
to suggest alternative solutions.
1

On 24 November 1943 the United States Treasury published a proposal for
the establishment of an international bank of reconstruction and development.
The "Bank of Reconstruction and Development of the United and Associated
Nations" would provide for the establishment of a fund of 10,000 million dollars
to be used for collaboration with, and as a supplement to, private long-term
investment for the purpose of stimulating the development of productive resources
of underdeveloped countries; the fund is to be used either as guarantees of private
investment or as direct loans made by the Bank where the borrower has failed
to obtain credits from private sources on reasonable terms.

THB PROBI^M OF AN INTERNATIONAL T.V.A.
TH»

217

VALtm OF DSVBLOPMBNT SOB^ttOÎS

The cardinal feature of the T.V.A. is that it was deliberately
established and given responsibility for the^welfare of an underdeveloped area.
'
It was the answer to a complex of economic and social
problems, which involved the relationship between a nation and
one of its regions, poverty-stricken, but with resources capable of
development.1 National authorities felt that the welfare of any
region of Hie United States was an important contribution to the
whole nation, and wpre convinced that the particular area's own
latent wealth should be promoted. The feeling, expressed in the
conservation movement, had long been growing that the resources
belonged to all the people who made up the U.S.A.; and that this
implied the responsibility of all for the development of such resources in whatever area they existed. That the Valley should be
ignored and the scope and pace of development set entirely by
s
private enterprise was rulecLout.
With this evolution of the T.V.A. in mind, it may be asked
whether the richer nations of the world recognise the value to world
economy of international assistance to tibe underdeveloped areas
-within it. The world is full, as the Tennessee Valley was full, of
as yet unéxplôited or not fully exploited industrial opportunities
and the auxiliary transport and distributive facilities. There are
mineral resources, agricultural possibilities, and underemployed
labour power all over the world awaiting utilisation. There are
rivers and canal systems^ railway systems, roads, harbours, dock
facilities, power resources,. and, particularly in our own day, air
transport arrangements, awaiting full development.* As with the
T.V.A., the international problem is not merely one of the discovery
and exploitation of resources, but of making them available.8 As
the T.V.A. has proved valuable, instead of harmful, to the Whole
of the United States of America, international development works
may play the same part in tiie world economy at large.
A very serious problem, among the several which led to the
establishment of the T.V.A., was the need to provide employment.
It Was thought there would be direct opportunities of employment
on tibe construction job itself and that substantial orders for con.,•'--

1

^

.

'

tj

Cf. Chapter I.
• * It has been calculated that two thirds of the world's total output of wealth,
that is, economic goods and services, are produced in the industrial countries containing less than one third óf the world's population ; and that about a half of the
world^ total production is provided in four countries. Cf. Colin CIARK: Cowáítions of Economic Progress (London, Macmillan, 1940), pp. 2 and 3.
» Cf. Chapter V.

218

THE T.V.A.: INTERNATIONAL APPLICATION

structáon and operating equipment would support employment,
in the industries providing it. After the T.V.A. was started the
problem was how to usé -the developed resources to increase the
opportunities and profitability of labour and so raise the standard
of living.'
MIGRATION OF WORKERS OR MIGRATION OF CAPITAL ?

One of the results of the stagnation of agriculture and industry
in the Tennessee Valley was a steady migration from there to other
parts of the United States. The T.V.A. was itself faced with the
problem of improving the land of the Valley, assisting the relocated families into new homes, and applying better farm practices or assisting families to settle outside the Valley. Without
better land to go to and a knowledge of better methods of farming
it was no use taking the second course. Such a course-was also
regarded as defeatist, since it was believed that the land could be
developed and the family made more prosperous; and mdeedr side
by side with the T.V.A., there was the action of the Farm Security
Administration and the Farm Credit Administration, the first
assisting the poorer farmers by loans, grants and guidance, and the
second by credits.1 Migration is, of course, a possible, but à difficult
solution for the problem of people who live in underdeveloped
areas; but, whereas migration to areas of better opportunity in the
United Statesof America was open tb the inhabitants of the Tennessee Valley because the whole territory was one area of common
citizenship, such action is not so simple on a world scale for
would-be migrants from underdeveloped countries to countries
which will afford them greater opportunities. ILpeoples in the less
developed countries are denied thé alternative open to the people
of the Tennessee Valley, then Governments may be more easily
persuaded to furnish credits and technical assistance.
The T.V.A. is an attempt at intensive cultivation of a particular
area now that (as the economists affirm2) "extensive" development
»Cf.
Chapter IV.
2
For example, HANSSN: Fhcal PoUcy and Business Cycles, 1941, Chapter
XVI; Temporary National-Economic Committee in Hearings, Part 9; and wid.,
CüRRIS, pp. 3520 et sey.., where it is argued that the economic opportunities for,
investment available in the 19th century were the consequence of there being
vast uncultivated or semi-cultivated areas and great demand for goods by an
increasing population. More recently, it is argued,; the jiasic capital installations—mines, railways, factories, telecommunications, etc., have been .provided
and required, not total replacement, but only maintenance, repair and improvement. Even such improvement, it is argued, gives more productive results with
less capital outlay than before. Hence, economic expansion is to be sought bymore intensive cultivation, industrial and otherwise,- of the opportunities stitl
remaining. Even then it is thought difficult to discover ways of using all the
natural savings and feared that in default of a comprehensive fiscal policy some
of the saving^ may be simply sterilised by hoarding.

THB PROBLEM OF AN INTERNATIONAL T.V.A.

219

over the whole country has already established a mature economic
structure. Development by the T.V.A. offered a further outlet
for the constantly increasing saving of the community, and served,
moreover, as a means for the transfer of capital goods from the
more to the less developed areas of the U.S.A. Attention may also
be drawn to the principle on which the Electric Home and Farm
Authority, connected with the T.V.A., operated. The United
States Government guaranteed credits (that is, somebody's savings)
to dealers in electric apparatus who, in^turn, could stimulate sales
by granting credit to purchasers of the equipment. The U.S. Government thus, in effect, gave the purchasers of apparatus time in
which to save to pay, and contributed to employment opportunities in the electrical apparatus industries.
PUBLIC SUPPLBMBNTS TO PRIVATB INVBSTMBNT IN THS
V
TBNNBSSB^ VALLEY

The usual private channels of investment were/in the case of
the T.V.A.7 unable to supply the capital—600 million dollars—
a period long enough to achieve results. In terms well known
to readers of The Wealth of Nations1, the problem was1 not soluble
except by deliberate1 unified planned provision. A large investment
had been made in the area by the electric utilities, but that did
not at all touch the question of establishing the works nepessajry
to improve navigation, control floods, develop the hydroelectric
possibilities, côpe with soil erosion, confront the problem of reafforesitation, take the risks of encouraging rural electrification, and plan
the development of the mineral production and processing work
of the area. Mr. Henry Ford's bids for purchase and lease at Muscle
Shoals were found unsatisfactory for two instructive reasons: some
legislators thought the entrepreneur's reward was an excessive
share of the resources to be developed, and others were uncertain
whether, even if a single entrepreneur in his own lifetime could
successfully conduct the exploitation of such mighty resources, it
would be wise to trust to the ability, of unknown successors.
WHICH RBSOTJRCES?

The United States Government could have chosen to pay no
special attention to the Tennessee Valley at all, and to promote
^Book IV, Chapter IX. "According to the systetn of pâturai liberty the
sovereign has only three duties to attend to; three duties of great importance
indeed, but plain and intelligible to the common understanding ... and thirdly,
the duty of erecting and maintaining certain public Works an^d certain public
institutions which it can never be for the interest of any individual or small
number of individuals to erect and maintain ; because the profit could never repay
the expense to any individual or small number of individuals, though it may
frequently do much more than repay it td a great society."

220

THB T.V.A. : INTÈRNATIONAiL APPLICATION

experiments in the manufactux^ of fertiliser through the United
States Department of Agriculture and conduct farm demonstrations
all Over the country. In the matter of hydroelectric development,
the Ü.S. Government gave priorities to developments in various
other parts of the United States. An international agency would
have a wide latitude of choice ïamong resources calling for development and since there would still be private investment it could
develop its own most useful line among a generous number of
alternatives. The choice of the Tennessee Valley was a major
political decision taken in response to a number of forces and interests, to benefit both the Valley and -the whole jcountry. So, in the
case of any development scheme which an international agency
might consider, there would be the problem of adjustment between
the interests of the lending and thé recipient countries. Some
resources are complementary to industries already in existence in
other parts of the world or in the recipient nations, as for example,
"rubber which is being produced in Brazil jar tung oil in China. The
opening up of roads, railways, harbours, docks or airports frees
the way to wider markets and reduces the'waste connected with
the attempts of producer and consumer to make contact with each
other. The provision of electric power might fe an important
boon not only to the countries where it may be generated but to
the countries which possess fuel resources that are expendable,
like oil, since it lessens the competitive demand for them. Development might, in some cases, involve adjustment in the industrial
activities of the contributing countries. -For example, in the early
history of the T.V.A., ccwil mining interests and coal miners were
perturbed at the extension of the area in which the T.V.A. conducted hydroelectric power operations. Such problems are capable
of solution in a variety of ways, but the ways need to be studied
and appKed.1
Mm-Ti-çuRPosB AUTHORITY?
The T.V.A. is a multi-purpose authority, that is, it develops
simultaneously a number of naturally related resources. This may
or may not be possible elsewhere. No slavish search for precisely
what the T.V.A. offers could be commended; still less any restriction to its scope. Each case has its own economic and social merits
and difficulties. Inr the T.V.A.'s case, there was an obvious economic advantage in joint exploitation of the water resources iSn relation to a number of regional needs. Elsewhere, a single purpose—
for example, merely processing milk—might be enough; or, for all
l
Cf. Eugene STALBï: World Economic Peoelopmmt, Studies and Reports,
-Series B (Economic Conditions), No. 36 (International Labour Office, Montreal,
1944), p. 185-199,

THE PROBLEM OF AN XNtBRKATIONAL T.V.A.

221

Europe, it might be the building and operation of a high-tension
electric grid, dependent upon water power (Alps), oil (Rumania),
and coal (elsewhere)1; or an international sponsor might think: it
advantageous to attempt the integral and total development of all
the resources of an area, on a scale tíiat went beyond that of the
T.V.A. This is indeed, what the Chilean Development Corporation does.
THS AREA OF DBVBIíOPM«NT

In an early chapter attention was drawn to the character of the
area entrusted to the T.VrA., and it was observed that areas of
development, whether financed nationally or internationally, need
not be restricted to valleys, although mention,has been made of
the Danube, Yangtze, and the Jordan Vglleys. It happens that in
the case of the TV.A., the resourbe to be developed was a river,
and therefore the watershed tfos an area which could be delimited
for special attention. However, it was observed in the first place
that the river was part of a vast inland watear transport system some
five thousand miles in size. On the other hand, some of the activities of the T.V.A., for example, farm demoûstration, experiments
in the manufacture of phosphatic fertiliser, soil surveys, etc., were
objects not necessarily bound by the physical features of the Valley,
and administrable, perhaps even more effectively, over the whole
of the United States. The important lesson to be learned from the
regional aspect of the T.V.A. is that existing political divisions of
the world and their frontiers, whether States or their subdivisions,
are not selftsuiîici^it economic units. For rezurce development
the proper area may be less than a squaremile (a mine), or it may
embrace a whole continent (for transport or power). The character
of the resource is the key to the character of the area of development, and since the world's resources are multifarious, so the regions
to be developed are multifarious in character. But that is not aH.
It has already been observed that the. choiœ of that particular'
Valley, and of a valley, was not based solely upon a geological construction, but was a major political decision designed to satisfy a
variety of extra-Valléy economic intetests. The problem involved
is the relationship between such a region and the national or world
economy of which it is a part. •
A RBSoxjRcas Stm-wsr
The selection of the regions and the resources whose development is to be assisted raises the question of contemporary know* Cf. World Power Conference: Gesamtbericht, Band xix, Europa's Grosskrafainùm, by Dr. E. Oskar OUVBN (Beriim, 1930).

222

TBEB T.V.A.: INTERNATIONAL APPLICATION

ledge of these resources. It was earlier noticed that until the T.V.A,
set to work with a specific responsibility for the welfare of its region,
several of the Valley's resources had never been persistently and
_ scientifically investigated in the hope of rendering them available
for use. It may be thought th^t our knowledge of the resources
of the world is by this time complete. The truth is far otherwise.
Some areas have been very thoroughly prospected and certain
resources, such as oil and tin, have been searched for all over the
world. Their existence and reserves have become well known
through individual owners, financially interested companies or the
scientific departments of Governments. But a very large part of
the mineral, water power and soil resources of the world are actually
unknown.* "Nor is that all. Where they are known, often only
casual and quite superficial attention has so far been given to their
exploitation. Modern scientific methods and new facilities, like
modem machinery and communications, especially air transport,
might well make them easily available to the world economy as
well as to the country where they are found. The T.V.A. has shown
that, a really determined, persistent, intensive search can reveal
unsuspected values. Even if the resources so discovered could not
, be initially as productive as similar resources already on the market,
they might still be of more value than the present economic products of the people concerned : to take a purely hypothetical example, new timber occupations might at first be less productive than
the timber industries of other-regions already exploited, but though
the labour costs in the new occupations might be. higher until industrial techniques have been mastered and the economies of largeçcale production achieved, it is better to have those occupations
rather than the involuntary unemployment which the people of
the region would suffer, if they had no chance of migration on an
economic basis, and if the resources were not exploited.
. A geological power and soil survey for all countries which are
underdeveloped would form a "Domesday Book" of existing resources, and make available data on which decisions upon development and priority could be based. Such a world survey might be
undertaken by international action. But it is important that any prospecting authority like theT.VA. should not suggest the appearance
of the commercial prospector who has been rather too well-known
to countries in need of development. Since economic circumstances
and values are always in a state of change, any survey should be
continuous and should periodically re-alssess the resources of various
"

1

,

i

-

-,

Cf. Canadian House of CQmnions,Sp«Ml Committee on Refcongtruction and
Re-establtóhment, Interim Report, Minutes of Proceedings and, Evidence, No. 23,
pp. Üi-Vi

THB PROBLEM OF AN INTERNATIONAL T,V.A.

223

countries in relation to their own economic situation and that of the
world in general.
PROVISION OP UNIFISD DBVBLOPMBNT PLANS

An important lesson of the T.V.A. is that whatever the nature
of the development or planning agencies in the separate countries,
_any country seeking international assistance should first .furnish
a comprehensive scheme of development. On an international
scale such a plan would require to include developments {a point
not arising in the T.V.A.) which the borrowing country intends
to carry out from its own resources, as well as those for which it
asks international assistance. It would report the priority, magnitude and time-table of the various works envisaged, much as Congress in the United States required of the T.V.A. the report pn its
policy known as "Unified Development of the Tennessee River
System" J1 This plan would state how the recipient country pro*
posed to finance the various works, and,the sources (its own, private
foreign investment, or international lending) from which the funds
were to come, and what guarantees it would offer-to an international agency, so that the agency, in turn, might assure the contributing Governments that their' risk on behalf either of their
budget in general or their national private investors was justified.
The T.V.A, unified plan did not merely concern itself with the
financial provision required. Important as that was, its more significant purposp waS ito survey the economic and social problems to
be solved and the value of constructive proposals for a solution.
Furthermore, Congress, which passed the law and amended it from
time to tinte, and which decided how such a plan fitted into the
broad economic needs and evolution of the whole country, Tiad the
general plan in mind from the beginning, though not the unified
plan until 1936.
Development schemes could, of course, be prepared at the
request of the recipient Government by various technicians provided by the international lenders. Where the schemes were elaborated by the assisted Government's own experts, they might be
subject to examination by the engineers of the lending body. As has
been seen, the T.V.A. made very ample use of private consultants
and assessors and U.S. Government experts, and was glad to receive
the resultant encouragement or redirection. Indeed, the T.V.A.
was given authority actually to request the assistance of U.S.
Government ofiicials "to enable the corporation the better to carry
out its powers successfully", and the President of the United States
1

Cf. Chapter II.

"~

224

iraS T.V.A.: INTSRNATIOIIAI- APPLICATION

was given authority to direct officers to give such assistance if the
public interest, service or economy required it.1 Apiy scheme
would have to define the kind of administrative agency to be put
in charge of the work. It would thus become clear how much the
recipient country felt it necessary to rely on foreign experts ; whether
it had made, or could make, provision for training staff in its own
technical schools, olr whether an arrangement should be made for
sending capable candidates abroad for training (as the Bolivian
Development Corporation has done); or whether, indeed, with or
without international help, an institution for such training might
be attached to the development agency.
TBS FINANCING OF

BsvnuxrMmr

AOTHóKIWBS

In financing the T.V.A. the alternatives at hand were bond
issues to ike public or governmental grants, and, if the latter, then
either a block commit^nent for the whole project, or annual appropriations. Thejssues thus rahed have been explained in a previous
chapter.2 Although the T.V.A. was chiefly financed by annual
appropriations, dependent upon the; annually variable state of
mind of Congress and subject, therefore, to interruptions. Congressional default never obstructed it in the fulfilment bf its programme. But there were occasions for anxiety. If an international
agency should ever be established to sponsor development works
in various parts of the world, the danger of interruption tfould
have to be guarded against^
-. ..
Deí>endeñce on annual grants, either by Governments to an
international agency or by the agency for projects in recipient
countries, would be an uncertain basis on which to begin works of
magnitude and duration. International and national administrators would need some assurance that they could plan and proceed with long-term economies and with the technical, demands
of úe work itself in mind. Hiere are, of course, different kinds of
development works. Some can be executed in a year or two and a
grant could be made for the whole amountjonce and for all. But if
works were elaborate to plan and required a long tenrç for completion, there would have to be a general-commitment for the plan as
initially conceived and provision for a margin to cover underestimates and accidents. The troubled history of Hungarian responsibilities for improving the Iron Gates on the Danube,8 and of the
building of the Panama Canal from the de Lesseps Syndicate down
^Cf. Chapter ÏX.
^ Chapter XO.
•See BLOCISZBWSKI: "Le Régime du Danube", mRecueüdes Cours (Académie
de droit international, 1926), Vol. XI, pp. 306 «i seq.

' rm KBOBUSM OF AN INTJÎRNATtONAL T.V.A.

22S

to its construction by the United States Army Corps of Engineers,
under Col. G. W. Goethals1, shows tíie need for clear plans, thorough
engineering examination, adequate financing, and steady administrative supervision to see that the task is accomplished as planned.
In a, lesser degree, the failure of Congress to appropriate steadily
for the completion of Wilson Dam in the Tennessee Valley shows
how much waste may follow from interruption of the progress of
such works.8
Th»8r as with the T.V.A., there are various alternatives in
financing international development projects. The basic problem
to be solved is to provide certainty in the mind of the assisted country (and the international lending agency itself) that for the necessary period of development as technically determined the terquested funds will be available without hesitation. It may be added
that in the relationship between the U.S. Export-Import Bank
and the Development Corporations of Bolivia, Ecuador and Haiti,^
a substantial block loan is made on the books (to the Government
of the country, virtually to the corporations) but each project proposed by a corporation is the subject of its own specific contract
with the Export-Import Bank each time the appropriate sum is
released.
_
The T.V.A.'s financing by annual appropriations throws no
light on the problem how to accumulate the international funds
to be appropriated? the T.V.A.'s chief funds were derived from the
Federal Treasury of the U.S.A. But the T.V.A.'s principal
electricity distributing undertakings, the cities, by 30 June 1942,
needed for (construction and development nearly 107 million dollars. The cities sold bonds on their own credit and the predicted
profitability of the undertakings to obtain nearly 61 million dollars
and the T.V.A. issued some SO million ^dollars worth of bonds,
guaranteed b/ the United States Treasury.3 The problems of
international assistance would at the same time be more complex
and several alternative devices and combinations would be
available. For example, the Unifed States Treasury's scheme
for a United Nations Bank for Reconstruction and Development includes proposals' that the Bank may guarantee loans
made with private capital to any member| "Government, and
through the Government to any of its political subdivisions and to
business and industrial enterprises in the member country. The
1
Cf. Philippe BDNAU-VAMIXA: Panama (Sew York, 1914); Baraett SMWH:
Ferdinand de lussepí (Londoa, 1895); H. J. SCBABPIW):. Ferdinand de Lesseps
(London, 1937).
« Gf. Chapter I.
, .« Cf. Chapter XI.

226

THS T.V.A.: INTERNATIONAL APPLICATION

Bank may also participate in loans made with private capital or
make loans out of its own reèources, though, in the last case, only
when the borrower is unable to secure funds from private investment sources on reasonable terms. .
- '•
For the T.V.A. the problems of servicing the debt were relatively simple, oncç the U,S. Government decided to give its assistance.
This meant that the T.V.A. could borrow at a low rate1 and that
its repayments would not be subject to any fluctuation in the rate
of exchange. These problems would be more difficult in the case
of an international development authority and underdeveloped
counfries. The establishment of international currency stabilisation
arrangements, along the line of recent discussions, would remove
one ôf the difficulties in the way of international loans.2 The T.V.A. '
was moreover able to obtain' capital assistance actually without
obligation to repay to the United States Treasury (in the case of Its
appropriations, not of its bond issues) ; and again, it was not faced
with aa authority outside itself demanding repayment on pain of
sanctions. From these facts, an international investment authority
might conclude that as regards its teans to foreign countries, Yhere
is a case for a period of repayment ôf about 20 years, in order that
the charges on the budget of borrowing countries should not come
too early and too heavily for domestic economic and social readjustment,
CLBARLY DBFINBD SCOPE OF POWERS

Within its scope any international agency for the development
of resources would learn from the T.V-A/s experience the importance of operating with strict memoranda of understanding so drafted
as to minimise any possible anxieties and susceptibilities of recipient
States. The T.V.A. does not invade such sovereignty as still "belongs
to the States within the United States Constitution. Its General
Counsel and Legal Department has always been exceedingly careful
of any interpretation which might bring the T.VA. into conflict
with the rights of the States, and it may be added, into conflict with
1
In the early stages of greatest risk before the asèets and works of a developirient project begin to yield revenues, the question of the rate of interest,on a
loan is partÍGularly vexatious. The T,V.A. was able to obtain its capital from
the United States Government without interest charge. In its'accounts it attributed 3Jíí jter cent, interest on the funds thus supplied and this wasjregarded
as fair for such worksAnd such an agency as the T.V.A. (cf. Appendix III), but
the Minority Report of the Joint Congressional Investigating Committee
suggested that 12Sú per cent, might have been demanded if the T.V.A. had been
in the position of a. private firm going, to the open market for funda (see also
Appendix
III).
2
U.S. Treasury Department Preliminary Draft Outline of a Proposal for an
International Stabilization Fund of the United and Associated Nations (Washington, 10 July 1943). British Treasury Proposals for International Clearing Union
(London, 1943, Cmd. 6437), ,

THS PROBLBM OF AN INTERNATIONAL T.V.A.

227

the rights of business interests.1 In regard to research, demonstrations and planning for example, the T.V.A. Statute is extremely
cautious, to the point of requiring the Authority to report its wider
plans to the President, who then has to report to Congress, which
thereupon mayor may not pass legislation to add to the hitherto
defined powers of the T.V.A. In the years that have elapsed since
the Statute was first passed, the powers of the T.V.A, have been
shaped by interpretation and Congressional acceptance thereof
directly incidental to the execution of the powers entrusted to it
by the Statute. Its general power to undertake such action as is
necessary to implement its specific powers has been most cautiously
exploited.
Thus, the-T.V.A. discovered clay which could be used to make
earthenware and it also discovered that the processing could valuably be undertaken in its own designed electric kilns. Yet, it could
not proceed furtheriuUy to exploit its own discoveries and innovations by becoming an earthenware and porcelain manufacturer,
for the Statute did not give this power, and it was operating in an
environment in which strong emphasis was laid on private enterprise. Furthermore, its fertiliser operations are carefully watched
by private firms which fear competition from public enterprise.
Similar problems may arise in the international field.
Two things may be stressed regarding the definition of the
T.V.A.'s powers. The first is that the T.V.A, has drawn into
collaboration the State and municipal authorities in the region;
and it has co-operated with existing Federal departments whose
science and skill are of special value. Such collaboration would be
even more valuable, and, indeed, inevitable, for an international
authority. On the onehand, an international authority would need the
assistance of the sovereign national authorities, since its own powers
would be limited to its own purposes. It could not possibly displace
the national authorities, and even if it were permitted to do so foi
the better fulfilment of its purposes it would be restricted by conditions set by the recipient Government. On the other hand, its
purpose would be to stimulate self-development; and that implies
encouragement of the strength of local institutions.
Secondly, the T.V.A.'s powers have been developed to meet
specific necessities. The same kind of evolution might be found
even more desirable whfen an international authority has to deal
with a number of underdeveloped areas. In order to calm any
national sensitiveness, it would be necessary to draft a clear, defined
and soberly cpnstmcted range of power and activity and to commend its acceptance to all concerned; ánd tíien, as the need arose,,
1

See Chapter VII.

228

THS T.V.A,: INTERNATIONAL APPLÏCATI0N

to explore and arrange for further development by agreement and
discussion with the recipient nation. There could be no supranational agency endowed with unlimited powers and unœvenanted
rights of intervention. On the contrary, as the T.V.A. has continuously shown, it would be Vital to œnvey the impression of disinterested helpfulness, advisory character, defined purposes, and clearlystated procedures. These two basic factors, namely, co-operation
with and operation through local institutions, and authority restricted to, but commensurate with, the needs, are illustrated in the
development of the T.V.A. as regards health, housing and educational and workers' training functions and in its employee relationship policy.
DEVELOPMENT SCHEMES AND SOCIAL PROGRESS

To fulfil its mandate to promote the general social progress of
the region, thé T.V.A, must work through various social services.
But ,even the fulfilment of more direct economic works was impossible without certain social services instrumental to them. Its
direct object was not only the development of a river and the land,
but also thadevelopment of men and women: the first was a means
to sodal progress, the second is, in the long run, an element of the
first. So, also, the execution of development works in certain underdeveloped countries may be quite impossible without health provisions—housing, sanitary works, hospitals, doctors, nurses, inspectors, etc. Recent experience in Brazil, Ecuador, Bolivia and Haiti
emphatically confirms this point.
The T.V.A. has found education indispensable to the economic
and social development of the area for which it is responsible—not
only general education, but also education in public health and in
nutrition and diet. The T.V.A. rightly perceived, as the example of
Denmark's remarkable economic and social development in the last
half century conspicuously demonstrates, that tíie attainment of a
high standard of living depended on the education of the people
concerned.1 The plight of the Balkans is a negative demonstration
1
Cf. P. hàuxemm YATBS: "Factors- Affecting Peasant Prosperity", in
Report of the British Association for the Aêecmcement cf Science (1942), pp. 145
et seq. "The third great advantage of the Danes is the high general level of
education. And here I mean not education in agricultural subjects—their technical schools for farmers are not conspicuously better than similar ones in the
Netherlands and elsewhere. I refer to their education in general subjects that the
farming community has obtained chiefly at the Folk High Schools. Once an interest in knowledge has been aroused and young people are trained to absorb it,
then teaching of specifically agricultural subjects becomes possible and profit'
able."

tm PROBLSM OF AN INTERNATIONAL T.V.A.

229

of the same idea.1 It may be considered appropriate that those
who administer international financing should give attention to
such questions generally, and assist recipient Countries and their
development authorities by advice on general policy and programmes and technical advisers. It should be remembered that in education of the region, above all, the T.V.A. works in intimate dependence upon the ejdsting puhUc educational and civic agencies and
confines itself to inspiration, encouragement, financial assistance
and the furnishing of factual material. In no sense 'does it dictate
or dominate. Its dependence on the work of the agricultural extension agents, domestic economists and so forth, is to be noted. In
education, even more than in capital investment, there is a "multiplier" which operates cumulatively—for very soon a community
learns how to produce its own education in geometrical progression.
Two special kinds of training are desirable : workers' training andL
í
managerial trainingi For workers' training the TíV.A. seeks to
bring skills to'the Valley, to improve the capacity of the worker
on the job, to prepare him for more difficult tasks, and to increase
his ability to do other jobs when its own employment opportunity
has come to ancnd. The TVV.A.'s training system is on an entirely
voluntary basis, and depends upon, encourages and financially
assists the local agencies to meet their wider responsibilities. In an
international setting the objects and methods could be similar. '
the T.V.A.'f initial «cperience in managerial training was that
at the beginning of operations, some of its leading officers entered
the Valley as though to conduct a crusade, and thus aroused resentment and opposition. Through its personnel department theAuthority had to undertake a process of education among its construction
engineers, Who, although highly skilled technically, did not find
it easy, after their experience of other parts of the country or labour
relationships elsewhere, or in their direction of negro labour, to
reach the standard expected in the new area and in the employment of the united States Government. Now the colonial experience of many countries, at different times, and recent experience
in the relationship between tiie United Nations and some countries
to the development of whose military resources they made contributions, suggests that, not only are there hardly enough technicians
for the various development works required, but that there is also
a serious problem in selecting men who will quickly understand the
1
Cf. ANTONfer BASCH: The Danube Basin and tke German Economic Sphere
(Columbia University; 1943), especially p.. 241: "A well-organised system of cooperatives of all kinds-could be a great help, especially in furnishing a very badly
needed credit oreanisation. But only among an enlightened peasantry can there
be much hope of the kind of co-operative organisation that has become almost
essential for prosperous agriculture in Europe."

230

THB T.V.A.: INTERNATIONAL APPLICATION

culture, labour and business practices of the country to which they
are assigned, and coiiduct themselves so as to reduce friction to a
minimum. Business habits in various parts of the world are not
always exactly those that prevail in Birmingham, England, or
Birmingham, Alabama. Religious practices, "mañana", the "unpunctuality of the industrial worker who yesterday was a peasant
with no clock but the sun and his stomach", favouritism of various
kinds, all must be treated prudently. The present author has seen
all the workers in a Bulgarian cigarette factory reduced to collective
and uncontrolled weeping because one of their number had received
a reprimand for some trivial breach of factory procedure delivered
in a tone too peremptory for people fresh from the fields.
By its Statute the. T.V.A. was required^to pay all its workers
on the basis of "prevailing" rates, and the workers had a right of
appeal to the U.S. Department of Labor. Legally, it could not
undercut. In fact, it found its unit costs beneficially influenced
by à genuine, though not extravagant, interpretation of relatively
fair conditions. Collective bargaining, health provisions, good
"housing, education, training, recreation, commissariats, industrial
safety, workmen's compensation, annual leave, retirement plans,
employee grievance procedures, with access to the highest managerial authority, merit and efficiency in appointments and promotions: the cost of all these was recouped through greater productivity and improved efficiency.
SOMB PROKLBMS OF INTERNATIONAL ASSISTANCE

No international lending agency could have that close and
dominant relationship to development works in different regions
of tíie world that Congress and the President have in respect to the
T.V.A., that is, of a political authority and its subordinate creatures. The relationship would ie rather that between lender and
borrower. Necessarily there would be loan conditions or criteria
which would have to be administered internationally. Such criteria
would be different in kind from those applied by private investment in the past; they would be affected, on the one hand, by the
recognition of the benefit to the employment situation in the economy-of the highly-developed lending nations, and on the other hand,
by the purpose of raising the standard of living of underdeveloped
countries and making them stronger contributors to the world
economy.
Any international agency would be confronted by a number of
problems in the relationship between itself and borrowing countries comparable to the problems that emerged in the relationship
between the United States Government and the T.V.A., and, via

TŒS PROBLBM OF AN INTERNATIONAL T.V.A.,

231

the T.V.A., the seven States of the Valley. Loans would be granted
with due regard for the general character, policy and ambition of
the economy to be assisted. Not only would the economic advancement of the borrowing country be considered, but also the effect
of assistance to it upon the occupations and wealth of its neighbours, for whom, in some cases, the result might be^ adversity or
progress. Again, it would have to be considered whether the bookkeeping loss on a particular development enterprise might not be
justifiable because of the project's direct or indirect value to other
parts of the country's or region's economy. As has already been
suggested, the international agency would keep in mind the desirability of improving those social services for advancing the health,
welfare and technical skill of the working population which would
be indirectly instrumental in increasing the productivity of the project and the region concerned. Moreover, it would be necessary to
limit or prohibit extraordinary charges and taxes on the equipment
and personnel of the assisted projects which might otherwise hinder
the work of development.1 It would also be important to provide
that proper tax equivalents should be payable by the development
projects to, the Government or political subdivision normally
dependent on it.2
The expeatience of the T.V.A. discloses a dual problem: that of
the administrative relationship between the assisting and the assisted authority—that is, the United States Government and the
T.V.A.—^and the internal arrangements of the regional development agency itself. Similarly, in the case of international lenders,
there is the problem of tíie connection between them and the regional
and national development agency assisted, and then the internal
questions to be'faced by the latter. In the fiist, the special lesson
oí the T.V.A. is the freedom of responsibility of the regional or
national agency for the "grass roots" development of the area,
that is, the direct local concern for decisions and operations on the
spot. It happens further that the relationship with the United
States Government is direct; supervision and assistance by the
Government are distributed among Congress, the President, the
Federal Power Commission, the United States Treasury, the Comptroller General, etc. But there are alternatives to this directness.
of connection. For instance, some nations have special departments, like a Ministry of Planning or a Ministry of National Economy, or a Department of Public Works. Such departments are
usually responsible for making comprehensive surveys and plans
regarding practically all phases of economic development, for
i2 Cf. Cliapter IX.
Cf. ibid.

^

"

232

THE T.V.A. : INTERNATIONAL APPLICATION

marshalling the various demands made by the Specialised and
operative departments of government and for guiding ail tíiese
activities in harmony with each other in relationship to aie national
budget and in general co-relationship to some paramount national
need, for example, the lessening of unemployment or the production
of some commodity espedally needed for the acquisition of foreign
exchange. Below such comprehensive economic planning agencies,
so to speak, there are again certain special agencies for the development of particular branches of economic activity, as for example,
the Brazilian Coffee Department, the Argentine Cotton Board,
and the Corporación de Fomento (a multi-purpose organisation to be
found in Bolivia, Chile and Ecuador, with a parallel in Haiti)-.
In such devdbpment planning practices there is very wide room
for diversity. An agency like the-T.V.A. is but'one of many poesi»
bilities. What device is actually adopted must, of course, correspond to the needs and conditions of each country. Whether tíiere
shall be special agencies established as the T.V.A. is, on the basis
of responsibility for a region (e.g., the Amazon or the Central Valley.
Region of Bulgaria), or for a function (e.g., development of livestock for the whole of. a country) will properly depend upon local
circumstances and the balance of administrative advantage. Sud»
considerations would certainly be respected by international lenders, for rational decisions on matters of this kind would be one
guarantee of the effectiveness for its purpose of their loan.
PROBLEMS OF DEVELOPMENT SCHEMES WITHIN A SINGLE COUNTRY

Development schemes may fall wholly within a single country
or may cut across national boundaries. The conditions and problems óf effidency of management of the former are hardly more
'complex than those of the T.V.A., but where the economic basis
of a scheme requires a. region of development induding parts of
two or more sovereign States, there would besóme additional problems to solve.
As the T.V.A. shows, some óf the most difficult aspects of
schemes falling wholly within thé boundary of a single country are:
(1) the constitution of the board of directors; (2) the recruitment
of staff; (3) demarcation of the area; and (4) the submission wholly,
partly, or not at all, of the development agency to its own central
parliamentary or executive autibority.
(1) In the T.V.A. thé Board of Directors is composed of three
full-time members, appointed by the Federal Government. There
is some de fado concession to regional representation in the case
of one director appointed for his rather special knowledge of, and

rm PROBLEM OF AN ÏNTBRNATIONAL T.'V.A. "

233

interest in, southern agricultural problems. The room for experimentation and diversity in such mattera as the composition of the
managerial hoard is immense. It may attempt a representation
of geographic subdivisions, or^)tthe various economic groups, such
as labour, management, consumers, etc. It may, as the T.V.A.
does not,, allow labour a direct place in management; or, as the
T.V.A. does, some collaboration where the special interests of
labour are concerned. This problem of the collaboration of management and workers has become of more moment in the last two
decades in various forms of enterprise, for example, in the British
consumers* co-operative movement1; in the administration of
public utilities by municipalities2; and in the administration of
armaments factories during World War II.8 The concessions hitherto made to labour have been of minor significance, though in the
war factories the situation has compelled some considerable, but
still not decisive, concessions.
(2) In the matter of recruitment of officials, there will be the
problem, as the T.V.A. has clearly demonstrated, of recruiting
staff for merit and efficiency and of avoiding patronage, favourirism
and spoils. The experience of the T.V.A. is notable for its search
for the most competent personnel wherever it may be found,
whether ioside or outside the region. It would be difficult to make
a strong case for continued international financial assistance were
the meaning of this example misunderstood or neglected.
(3) The lessons of the T.V.A. regarding the problem of the
aïea of administration have already been amply discussed in
Chapter VII and on page 221 above.
(4) Finally, as with the T.V.A., it is essential to provide for
adequate business flexibility of the local development works management, and yet to secure its conformity to certain broad rules
devised in the interests of efficiency as judgeé by its own national
government and the ageacy of international assistance. The discussion of the situa,tion of the T.V.A. in this context, in Chapters
VIII, IX, and X, has shown what a complicated subject this is.
It cannot be summarised in a matter of a few lines. For, even the
T.V.A.'s relationship to its masters. Congress and the executive,
is only one example in a big class of such relationships in which fall
such diverse possibilities as the many other public ajrporatipns
in the United States and the British examples, like the British
Broadcasting Corporationj the Central ^Electricity Board, the
1

Cf. A. M. CARR-SAüNDBRS: Xtónsumers' Co-operative Movement.
Herman FIN^R: Municipal Trading (London, 1941).
Cf. INTERNATIONAL LABOUR OFFICE: British Joint Production Machinery,
Studies and Reports, Series A (Industrial Relations), No. 43 (Montreal, 1944).
2

3

234

THB T.V.A.: INTSRNATIONAL APPLICATION

London Passenger Transport Board, the Port of London Authority,
and others.1
DBVBíOPMBNT

SCHBMES CROSSING NATIONAL BOUNDARIES .

More difficult problems are likely to be raised where the area
to be developed includes parts of several countries. There are areas,
for example, like the valley of the Danube, and the Jordan^ and
others in the Polish-Czech and Alpine regions, where several
boundaries converge on the source of hydroelectric capacity, and
where the co-operation of two or more peoples would be necessary
for the exploitation of resources in the interests of all concerned.
In the T.V.A. such a difficulty was overcome, though seven States
trench upon the Valley, because the Constitution of the United
States gives to t|ie Federal Government full authority over certain
resources^ such as navigable rivers, and inter-State commerce.
Even so, powers were not available to the T.V.A. in the matter of
uniform action to preserve the scenic resources, and to make of
recreation an amenity saleable to people from outside the area.
It had to proceed by collaboration and persuasion, which were
not fully effective against the seven separate sovereignties. In the
cage of the Boulder Dam Project, dependeot on an inter-State pact
among seven States, and concerning the division of a vital and scarce
commodity—water—we have seen that a solution was mudh more
difficult. If there were areas of this kind whose maximum utilisation was possible only by collaboration of several countries, there
would have to be organised joint financing, a proportionate distribution of benefits, and an agreement upon collaboration in management and the proportion of employees to come from each district.
There would be the question of trade barriers between the national
districts, the easing up of' passport regulations and crossing permits, and precautions to prevent inferior health administration in
one area from causing sickness to those people who come to and
fro from other areas. With racial and religious tensions, in addition
to the national and political, difficulties of course would increase,
It might seem that where joint arrangements for inter-State development works were difficult to establish owing to obstacles of this
kind, the minimum solution would require joint management
elaborated to a fine degree of detail and fully accepted, after exhaustive discussion, by the collaborating countries and those granting international assistance. The borrowing countries might even
consider that the way out of the technical and psychological difficulties that offered the greatest relief from subsequent perplexity,
would be for them to devolve the management of the enterprisç
1

See Chapter VII.

THB PROBLBM OF AN INTBiRNATIONAL T.V.A.

235

on internationally appointed managers. In any case, in the light
of the T.V.A.'s experience with the seven States, careful arrangements would have to be made to secure the, ready collaboration
of the several national authorities where their services were necessarily the condition and background of efficient and amicable
operation of the inter-State development enterprise.
, INTBR-R^LATIONSHIP BBTWBBN REGIONAL AND WORLD
, ECONOMIC AGBNCIBS

The T.V.A. is primarily part of a single economy, that of the
united States of-America. Although there were grounds for special
assistance to the Tennessee Valley, that assistance raised problems
of the inter-relationship of the region with other interests and the
national economy at large.
(1) There wçre problems in connection with the United States
Government's policy on power in relationship to the other uses
of the rivers—irrigation, navigation, etc. ; the pricing of electricity
produced under diverse conditions in different parts of the U.S.A.;
v
and, given revenue and national income, the credits which are proper
for public works in general and for each project in particular.
An international development authority would be faced with
even more complex problems of the same nature. Hence it would
be essential for the development authority's activities and policy
to be closely correlated with all other international agencies having
an economic and social character. Problems of international relationships would be even more important. Since the economic power
of different countries may be diversely affected by an international
policy of assistance, the responsible agency must take wide and
intelligent views. There is also the special prciblem of the possible
diversion of an apparently innocent economic development scheme
to war purposes:
(2) As a department of the United States jSovernment, the
T.WA. was necessarily related to all the other departments of the
Government. The departmental arrangement of the whole scope
of United States governmental functions had reached a mature
condition by the time the T.V.A. was established, and, as frequently
noted, it had to be decided what place the T.V.A. should properly
occupy in this framework. Departments of world government,
regulation, or control, are today only in their incipient stage and
hence there must be vagueness on the place and the relationships that
a development authority should possess. For international develop^
ment4 the problems of the whole and its parts, which w^re fairly
simple for the T.V.A., are much more complex.

236

THE T.V.A.: INTBRNATIONAL APPLICATIOIT

The T.V.Àvalways tcK)k account of the work and jurisdiction
of other governmental agencies, whether local or federal, and was,
fully integrated with them. Quite apart from the legal existence^
and, therefore, the claims, of existing authorities, there was, as
there always is in government of aiiy order, a natural unity of-functions which demands á thorough co-ordination of the several special"
ised agencies responsible for the segments into which the work is
broken or by means of which it has grown.
The same general problem faces any international development
authority. A number of new international institutions with economic or financial functions may be established after the war. Any
international lending agency should be integrated inv and collaborate
with, otihier institutions. Decisions on investment would substantially affect decisions on such matters as labour standards and social
welfare, currency exchange, migration, transport, etc. For example,
an international migration commission might be confronted with
the problem of facilitating the movement of workers into areas of
•development, of establishing basic conditions for their work, future
settlement, or return to their homeland, and of assisting in establishing the basis of good relationships between migrants and the regular
residentsv Large schemes of this kind might involve international
financial assistance. Thus, the connection between the international
bodies working towards the same end would be essential to economy
and efficiency.
,
Again, it would be advisable if the international lending agency
and the recipient countries had expert counsel and assistance on
basic labour standards, the contribution which these might make
to the economic efficiency of the enterprise and social progress,
and the extent to which, at particular stages of ecpnomic advancement, the enterprise could afford them. The T.V.A.'s significance
is more than the specific services it has rendered;.its psychological,
economic and social impact amounts to something more than the
sum of its several.purposes. The various world economic and social
services are intimately related. International lending policies,
properly applied, would have a significance greater than any particular financial and economic services that they rendered.They could
aid in the building and expansion of a more unified and better
balanced world economy.

APPENDIX I
TABLES
I. T.V.A. LAND-USE AND FERTILISER PROGRAMME
1. LAND.OWNBR8HBP IN TBB TSJNNBSSSS VAU^tY1
(Prom data available Pebrmry 1943)
1

1
Sypeot
ownership

(

Number1
of units

Total
land area

Total
forest area
Acres

1
1
{
\

1

Pitblic :
tíS. Forçst Service
fennessœ Valley
AjittJiority
Ü.S.FÍ8hattdWüdlife Service
Natàônâl Park
S^viœ
Office Of Indian
Affairs
;
Fawn Security
Admiriistratxon
States
Municipalities
War Department '
Sub-total, public

! Water areas
Total Valley area
1

Per cent. "

Acres

1,567,000

1,567,000

1,559,000 1

20

412,000

286(000

284.000 |

3

17,000

15,000

15,000 |

7

477,000

456,000

1

44,000

40,000

2
25
12
9

36,000
114,000
30,000
113,000

23(000
106,000
30,000
65,000

87 > 2,810,000

2,588,000

18

5,419,000

5,419,000

39

6,030.000
11,248,000

6,030,000

43

22,697,000

11,449,000

40,000 1
23,000
94.000
30,000
65,000
2,110,000

653,000»
26,160,000 . 14(037,000

100

Public: Number of administrative «nits.
Karm-torest: Number of farms reporting woodland, 1940 census.
Non-fans forest: Number of owners of large tracts, 500 acres or larger, on record by T.V.A.
* All water, including T.V.A. reservoirs, except South Holston and Watauga.

* Cf. Chapter IV.

1

8

Prhate
Farp forest .
154,000
Private-aon-farm
forest
1,500
Non-forest
1 Sub-total, private

Proportion Timber pro-1
of total ducing forest I
forest
-area
|

1
1
t
j

238

THE T.V.A.: INTERNATIONAL APPLICATION

2. FERTILISER DISTRIBUTED BY THE T.V.A. IN TEST DEMONSTRATIONS1
(/» tons)
Superphosphate

Fiscal
year
1941

Grand
total

Cumulative
total to
1 July
1941

Calcium
metapbosphate

Fiscal
1941

Cumulative
total to

Fused rock
phosphate

Quenched slag

Fiscal

mi

Cumulative
total to

Fiscal

se

1941

Cumulative
total to

18,352.55 118,336.05 8,948.85 19,958.95 180.30 J,838.80 569.45 573.35

Inside
Valley
Outside
Valley

11,715.10
6,637.45

82,197.50 3,9^0.25

9,409.00 180.30 1,838.80 562.80 563.50
6.65

36,138.55 4,998.60 10.549.95

t9.8S

3. FARM DEMONSTRATION RESULTS2

Experience of Approximately 46 Representative Farms in Virginia,
1934 to 1939
1934

Average receipts per farm1
$2,989
Production of beef and dairy cattle
Average crop yield index
117
Acres of pasture per animal unit
Length of grazing season
1

1939.

$3^574
approx. 20 per cent, increase
158
approx. 25 per cent decrease
increase of 2 weeks in spring
and 2 weeks in fall

Price indices adjusted.

Agricultural Changes 1935-1940 per 1Q0 Acres of Tillable Land in
Tennessee
63 counties
(6,000 test demonstration
farms)

32 counties
(No test demonstration
farms)

4.95
0.62 /
0.00
40 dozen
27 gallons

Increase in hay and pasture acreage 7.23
Decrease in acreage of cotton
0.81
Decrease in acres of idle land
0.56
Increase in egg production
55 dozen
Increase in milk production
237 gallons

Milk Processing and Seed Harvesting in Alabama
Before 1938

Milk processing plants

None

Value of lespedeza seed, etc., harvested None (1934)
Milk market for 1,500 farms
None
1

Cf. Chapter 11.
» Cf. Chapter XIII.

193»-1941

5 cheese plants
1 butter plant
$418,000 (1941)
100,000 lbs. milk processed

APPENDICES

239

Some Test Farms in 13 Alabama Watershed Counties, 1935 and 1940

Improved pasture on farms (acres)
Winter legumes sown (acres)
Perennial legumes on farms (acres)
Lespedeza on farms (acres)
Winter legumes seed saved (lbs.)
Lespedeza seed saved (lbs.)
Basic slag (equivalent) used (tons)

One unit farm

Winter legumes
Open land sown
(percent.)
Seed saved (lbs.)

1936

1940

18
12.400

41
50,000

Percentage
increase

1935

1940

1,969
59,920
1,185
99,956
663,147
619,740
2,214

28.388
204,415
11,311
177,766
2,389,450
1,001,900
65,201

County

Community
1936

1,342
241
855
78
260
62
2,845

1936

1940

2.2
42,300

14
885.000

1940

8
42
12,400 206,000

Farm Management Data for 110 Farm-unit Test Demonstrations in
9 Tennessee Valley Counties of North Georgia in 1934 and 1939
1939

Increase or
decrease
percent.

Land-use, crop, and Urestock items

1934

Harvested acres
Other cropland
Open permanent pasture
Wood and pasture
Woodland, not pastured
Other land in farms

51.5
25.2
23.0
17.2
101.0
6.2

60.5
26.9
26.7
14.5
95.5
5.S

17.5
6.7
16.1
-15.7
- 5.4
-11.0

Total farm acreage

224.1

229.6

2.4

5.1
19.6
2.2
0.9
1.7
14.8
8.0
7.2

4.3
18.9
2.6
1.8
2.9
19.0
40.5
11.0

-15.7
-3.6
18.2
100.0
70.0
28.4
406.0
52.8

59.5

101.0

70.0

1

Crop inventory
Cotton
Com
Wheat
Oats
Rye
Hay
Annual legumes
Other crops
Total acres
Livestock inventor?
Cattle, all kinds
Work horses and mules
Other horses and mules
Sheep and goats
Hogs, all
Fowls, all
1

Average acres per farm.
Number of livestock per farm on 1 January.

13.6
2.7
0.3
1.3
4.1
64.1

14.5
2.6\
1.0
2.7
7.9
86.4

6.6
20.0
107.7
92.7
34.8

240

THE T.V.A.: INTBRNATIÔNAL APPLICATION

Yield of Non-phosphated and Phosphated Summer and Winter Legume
Crops, and Actual and Percentage Increase due to PKosphafes,
on Mississippi Farm-unit and Area Test Demonstration
Farms, 1935 to 1940

!

Numbei
of
field

Legume
crop
t

Lespedeza
Lespedeza
Cowpea
Cowpea
Soybean
Soybean
Vetch .
Austrian pea

Untreated Land treated with
land
triple supei phosphate
Yield
lbs. applied
per acre
per acre

45
113
170
80
143
90
877
116

2,383
2,578
2,244
1,815
2,049
2,370
1,986
2,623

100
200
50
100
50
100
100
100

Yield»

3,818
4,077
3,455
3,179
3,273
3,987
3,626
4,157

Increase from
phosphate3
lbs.

1,435
1,499
1,211
1,364
1,224
1,617
1,640
1,534

Per
cent.

60
58
54
70
60
70
82
58

' Pounds of cured hay per acre.
* The increased hay yield has an acre value of $7 to $9, at $12 per ton. The phosphate fertiliser
used would cost from $1 to $2 pet acre per year at commercial rates. Chemical analyses show that
the hay produced by phosphate or lime, or both, contains approximately 20 per cent, more protein
and minerals important to livestock production than hay from untreated areas.

Acreages of Different Crops on Farm-unit Test Demonstration Farms
in 15 Tennessee Valley Counties of North Carolina, in
1936 and 1939^
Average acreage

Row crops
Small grains
Winter legumes
Summer legumes

1936

1939

Per cent.

13.7
7
1.8
11.3

12.4
6
3.8
14.9

9.5
14.3
111
32

Average Annual Yield of Corn per Acre and Average Daily Production
of Mük per Cow on Farm-unit Test Demonstration Farms in
15 Tennessee Valley Counties of North Carolina, in
1936, 1939 and 1940
Average annual yield
of com per acre (bushels)

All farms

Average daily milk production
per cow (lbs.)

1936

1939

1940

1936

1939

1940

30.7

44.0

36.9

15.4

18.8

15.9

1

241

APPBNDICBS

Average Numbers of Milk Cows and Poultry Kept per Farm on Farm• unit Test Demonstration Farms in the 15 Tennessee VaHey
Counties of North Carolina, in 1936,1939 and 1940
Milk cows
Poultry

1936

1939

1940

4.0
57.3

4.8
73.8

4.2
65.8

Form Management Pato for 964 Farm-unit Test Demonstration
Farms in 55 Counties in the Tennessee River Drainage Area of
Tennessee and for all Farms in the Same Districts,
1935 to 1939
1935-100'
On 964

unit farms

On all farms In
same district

193S

1939

1935

100
100
100
100
100
100

67
99
87
89
80
129

4

4

100
100
100
100
100

96
95
94
95
155

100
100
100
100

112
98
231
176

*
100
100
100

101
196
109

100
100
100
100

118
103
128
116

100
100
100
100

100
94
132
102

100
100

125
123

100
100

102
103

Animal numbers1
Cows
Productive animal units

100
100

103
101

4

4

100

99

Fertiliser bougkP

100

194

100

4

100

100

100

121

Land use, acreages
Idle and waste land
All crops
Row crops
Com
Cotton
Tobacco
Pasture and hay crops
Open pasture
All hay crops
Alfalfa
Red clover
Acre yields and total production
Row crops
Corn, yields per acre
Com, total production
Cotton, yields per acre
Tobacco, yields per acre
Hay crops
Hay, yields per acre
Hay, total production

Total receipts»

-

1939

4

i The data on total production of hay during the 5-year period indicate that the farmers could
not be sure of the permanence of this increase until the 1938 and 1939 crops had been harvested.
Increase in most classes of livestock, especially cattle and horses, is a relatively slow matter. Cattle
constitute approximately 60 per cent, of the total number of animal units on these farms. Additional probable reasons why adjustments in livestock, and especially cattle, have not been made
on these test demonstration farms are the uncertain or unfavourable outlook for cattle prices in
1939, the low prices received tor dairy products in 1938 and 1939, and the decline in farm incomes
Jn the
same two years.
1
Data are for the entire State,, instead of only for the districts containing the 964 farms.
• Broadly speaking, the farms not following T.V.A. practices have kept the farmer exploiting
methods, with row crops for cash purposes. This has resulted in larger "total receipts" to the latter
in the period studied. But when the livestock increases as a result of better feed, cash as welt as
conservation results may be expected on the demonstration farms.
* District data not available.

to

1. T.V.A. POW^l BSVSNTXSS AND SX^NSSS1

Resmues
{iniottarii

I"

1938

1 Po&er sales
j Outadê sales:
1 MuoidpâHties and co-operatives '
| Electric utilities
'ifidustiM estabH^oents
Rural ÊitstanëTs (retail)
Total outside sales
iaterdepaftmcntal sales
Total power sales
Rmts and other revenues
Outside sources '
Interdepartmental rçnts
Total fevënues
i Cf. Chapter XIIL

1939

1940

1911

'<

1942

<
545,690.12
196,767.48
918,565.20
154,154.56

1,516,403.82
561,315.80
2,507^30.75
347,923.69

7,514,456.43
2,183,900.59
4,422,533.33
396,057.72

9,932,982.87
2,360,615.68
7,780,631.14
179,757.99

1,815,177.36
490^699.49

4,933,074.06
512,123.8^

14,516,948.07
693,096.76

20,253,987.68
798,459.24

24,307,860.72
906,340.50

2,305,876.85

5,445,197.91

15,210,044.83

21,052,446.92

25,214,201.22

43,504.33
5,890.45

59,138.23
2,741.03

73,494.46
1,534.25

62,225.94
22,698.40

2,355,271.63

5,507,077.17

15,285,073.54

21,137,371.26

11,144,456.8Í
2,739,427.93
Q
10,265,451.24
158,524.74 |

%

•

69,260.93
46,492.25 |
25,329,954.40

I

I

Expenses

^-ôductioâ
Transmission
Distribution
Payfilénts tû States (1941 and 1942 to
counties also)
Customers' accounting
Sales promotion
Undistributed power «cpense
General and administrative
Miscellaneous income deductioa?
Amortisation of electric plant acquiátion
adjustménlB
Total expense

1,212.432.63
874,553.26
56,572.60

1,553,138.88
1,283.448.47
122.522.67

6,082,517.72
2,667,928.86
101,783.31

7.479,441.21
3,343,083.76
59,471.41

13,578,675.64
3,605,262.11
51,815.36

93,246.69
16,621.51
98,377.33
.. »
313.639.26

243.056.14
39,021.20
76,997.96

527,592.63
,53,098.16
95,983.69

1,499,394.37
35,692.76
100,294.98

746,011.59

1,168,453.01

1,243,036.11
50,374.19

1,859,438.01
44,608.41
88,806.54
113,353.59
1,257,742.38
450,000.00

2,665,443.28

Net income from power progtasmne befwe
interest
Difference between interest from munidpâl,
etc., obligations and interest paid on bonds
by the Authority
Deficit (—) or profit (+)

i

— 310,171,65

4.064.196.91

10,697,357.38

13,810.788.79

21.049,702.04

1.442,^80.26

4,587,716.16

7,326,582.47

4,280,252.36

35.474.55

-288,486.73

335,804.27

-€06,899.86

+ 1,478,354.81

+ 4,299.229.43

+ 6,99O.77S.20

+ 3,673,352,50

'

O*

244

TH« T.V.A.: INTBRNATIONAL APPLICATION

Extent to which Net Income of Power Programme Covers Navigation
and Flood-control Expenditure
(in dollars)
Total navigation Total flood-conprogramme
trol programme
expense
expense

656,453.58
855,850.45
993,115.26
1,075,707.96

Total expense

Net income of
power
programme

Net income from
operation of watercontrol
programme

1,079,239.29
1,300,427.06
1,587,424.80
1,709,128.35

1,478,354.81
4,299,229.43
6,990,778.20
3,673,352.50

399,115.52
2,998,802.37
5,403,353.40
1,964,224.15

422,785.71
444,576.61
594,309.54
633,420.39

2. GROWTH OP T.V.A. POWBR OPERATIONS1

Â. Capacity, Generation, and Sales
Fiscal year

1934
1935
1936
1937
1938
1939
1940
1941
1942
1

Kilowatt-hours (thousands)

Installed
capacity,
30 June

184,180
1«4,180
184,180
347,780
383,780
421,600
742,800
1,063,905
1,372,980

Generated

Sold

406,868
122,370»
437,450
731,588
699,094
1,733,459
4,043,377
5,556,000
6,025,147

395,854
100,680»
407,205
675,677
625,207
1,618,287
3,629,676
4,974,057
5,983,369

Private utilities in this year had sufficient water to generate power for their own needs.

B. Number of Retail Customers, Distributors, and Miles of Transmission Lines Operated by the T.V.A. and Rural Lines Operated
by Distributors
Fiscal year
(end)

1934
1935
1936
1937
1938
1939
1940
1941
1942

Total miles of rural line

Retail
customers

Municipalities

Distributing
co-operatives

Transmission '
mileage1

6,507
11,641
17,097
30,381
41,911
128,536
391,543
449,267
498,335

3
7
10
17
21
40
74
76
85

1
3
7
15
19
22
32
38
43

130
237
540
1,110
1,422
2,150
4,691
5,016
5,505

•

Constructed Operated by
T.V.A. and
byT.VJi..
distributors»

a
200
729
2,322
4,179
4,891
5,166
5,171
5,171

1,115
2,905
. 4,693
6,854
14,621
19,213
20,447*

* Lines of 12 kv. or over operated by Authority.
* Includes lines constructed by the T.V.A.
4* Data not available.
Estimate for 31 December 1941. More recent data not available pending completion of survey.

» Cf. Chapter III.

"~

245

AFPBNDICBS
OBSTINATION OF TBNNSSSBB VAMJSY AUTHORITY
SYSMÍM OUTPUT1

Millions of kilowatt-hours
per month
Estimated,
Actual,
Sept. 1941
Sept. 1943

Destination

Industrial:
Aluminium
Phosphorus
Ferro-alloys, iron and steel
Munitions (including ammonia, nitrates)
Textiles
Cement
Foods
Rubber
Copper and zinc mining
Coa mining
Miscellaneous industrial
Total industrial
Other:
Agriculture (cotton gins, etc.)
Transportation
Communication and miscellaneous utilities
Governmental (including miscellaneous, T.V.A.)
Large commercial
Small commercial
Residential
x
Other electric utility systems
Distribution losses
Transmission losses and unaccounted

15S.7
62.3
41.6
.5
18.3
7.5
9.5
7.2
7.7
3.4
22.6

330.0
90.0
80.0
50.0
25.0
10.0
15.0
5.0
10.0
5.0
30.0

336.3

650.0

3.2
4.8
5.1
9.3
21.8
25.5
47.7
68.4
18.2
51.0

Total system output

\

5.0
15.0
15.0
30.0
35.0
65.0
55.0
25.0
90.0
985.00

591.3

4. COMPARISON OV RBSIDBNTIAIv RATBS AND CONSUMPTION2

u.a

Alabama Birming- Georgia Kentucky Louisville Tennessee
Power ham ElecValley
Power
Utilities Gas ElecCo.
tric Co.
Co.
Co.
tric Co. Authority»
Average rate per kilowatt-hour
(in eeats)

year

entire
industry

1933
1937
1938
1939
1940
1941

5.49
4.39
4.14
4.00
3.84
3.73

4.62
2.97
2.85
2.76
2.70
2.73

1933
1937
1938
1939
1940
1941

595
793
853
897
952
986

793
1,289
1,362
1,413
1,466
1,440

5.92
3.74
3.45
3.23
2.77
2.75

5.16
3.04
2.93
2.84
2.74
2.74

6.251
5.05
5.01
4.92
4.64
4.41

5.68
3.77
3.71
3.54
3.28
3.10

—
1.83
1.95
2.16»
2.06
2.05

580
739
822
849
892
945

—
1,427
1,359
1,262
1,425
1,475

Average annual consumption
No. of kilowatt-hours per customer

493
760
820
881
956
1,011

805
1,313
1,399
1,446
1,527
1,527

S6&
666'
693
734
781
841

> Data for 1935.
* The variation in average rate and average use from year to year results from the acquisition
of a large number of private utility customers. These figures are not comparable with those of the
private utilities, since the latter serve mainly the same customers each year.
> Large additions to the number of T.V.A. customers meant that initial purchases were still
on a rather low level, as when supplied by the utilities, so that purchases came chiefly within the
higher price brackets of the scale of rates. In 1942 the average use per consumer was 1,543 kwh.
and the average rate 2.00 cents per kwh. At the end of March 1943, 12 months' average use per
customer had risen to 1,563 kwh. at 1.99 pet kwh.

»Cf. Chapter III.

"Cf. Chapter III.

Main river
projects
Kentucky
¡Pickwick Landing
Wilson
Wheeler
Guntersville
Hales Bar5
Chickamauga
Watts Bar
Ford Loudoun

River
Tennessee
Tennessee
Tennessee
Tennessee
Tennessee
Tennessee
Tennessee
Tennessee
Tennessee

Maximum length
beigbt (feet)
(feet)
166
113
137
72
94
83
129
97
122

8,420
7,715
4,862
6,342
3,979
2,315
5,794
2,940
3,870

Useful
storage1
(acre-feet)
4,570,000
418,400
43,000
429,000
282,000
377,000
433,000
138,500

length
lake
(miles)

Power installation'
Area of
lake
(acres)

184.3 256,000
50.1 46,800
15.5 15,500
74.1 68,300
82.1 70,700
5,760
39.9
58.9 39,400
72.4 41,600
55.0 15,500

Authorised S£
ULOawatts)
128,000 160,000
144,000 216,000
288,000 444,000
129,600 259,200
72,900
97,200
50,483
50,483
81,000 108,000
90,000 150,000
64,000
96,000

Tributary ¿orage
trvjects
Norris
Hiwássee
Cherokee
Apalachia
Notteiy
Ocoee No. 3
Chatuge
Fontana
Watauga
South Holston
Douglas
Ocoee No. I7
Ocoee No. 2»
Blue Ridge7
Great Falls7

Clinch
Hiwássee
Holston
Hiwássee
Notteiy
Oçœe
Hiwássee
Little Tenn.
Watauga
S. Holston
French Broad
Ocoee
Ocoee
Toccoa
Caney Fork

265
307.5
175
150
190
110
140
460
318
285
161
135
30
167
92

1,860
1,287
6,760
1,250
2,305
610
2,850
2,330
860
1,530
1,682
840
450
1,000
800

2,281,000
365,000
1,473,100
36,700
189,200
9,090
226,500
1,160,000
627,000
660,000
1,330,000
33,100

72-56»
22.0
58.5
9.8
23.2
7.0
11.8
29.0
16.7
24.5
43.1
7.5

40,200
6,280
31,100
1,093
4,430
518
7,000
10,800
7,100
9,100
31,600
1,910

183,000
49,600

10.0
22.0

3,290
2,280

> Useful storage is the volume between the lowest operating level of the
reservoirs and the top of the spillway or spillway gates.
9 Power generating facilities provided m all but two projects, Notteiy and
Chatuge. The T.V-A. total system installed capacity, including steam plants,
was 1,493,440 few. on 16 Nov. 1942.
« Construction completed means first unit on line.

100,800
57,600
90,000
75,000
None
27,00)
None
200,000
60,000
50,000
(100,000)»
18,000
18,800
20,000
29,370

100,800
115,200
120,000
75,000
Future
27,000
Future
200,000
60,000
75,000
(lOO.OOO)8
18,000
28,200
20,000
29,370

Construction
started

Construction
qpmpleted3

Cost»
{Dollars)

July
Mar.
Apr.
Nov.
Dec.
Oct
Jan.
July
July

1938
1935
1918
1933
1935
1905
1936
1939
1940

June
Sept.
Nov.
Aug.
Apr.
Mar.
Feb.

1938
1925
1936
1939
1914
1940
1942

105,000,000
38,900,000
40,700,000
39,900,000
34,200,000
37,600,000
35,900,000
38,500,000

M4

H

Oct. 1933
July 1936
Aug. 1940
uly 1941
July 1941
July 1941
July 1941
an. 1942
Feb. 1942
Feb. 1942
Feb. 1942
Aug. 1910
May 1912
Nov. 1925
1915

1

July 1936
May 1940
Apr. 1942
Jan. 1942
Feb. 1942

Jan. 1912
Oct. 1913
July 1931
1916

30,900,000
19,500,000
31,500,000
22,200,000
5,300,000
8,500,000
6,900,000
62,000,000
23,800,000
25,500,000
36,500,000

1
Cost includes presently authorised units but is exclusive of switchyards,
the total cost of which is estimated to be $36,211,000 for all plants.
» 72 miles on Clinch River; 56 miles on Powell River.
• Estimate; no official figure released.
' Purchased with other electric properties from the Tennessee Electric
Power Company.

S H
ti <
o >
M

fe
H

fe

£
<B

M

247

APPENDICES

IV. EXPENSE TABLES, OTHER T.V.A. ACTIVITIES, 1933-1942
1. NAVIGATIOK PROGRAMME 1933-19421
(i» dollars)
1933-1938

Studies and
development
Operations
Maintenance
Depreciation
Administration
Total

1939

1940

1941 •

19,771 50,191 89,922 82,137
449,932 170,349 198,585 263,343
18,116
9,326
18,997 20,411
845,967 343,724 461,965 550,222
71,778 87,262 88,087

1942

Total

92,149 334,170
304,562 1,386,771
14,221
81,071
593,701 2,795,579
71,075 318,202

1,334,667 656,453 855,850 993,115 1,075,708 4,915,793
2. FWOD CONTS.OI, PROGRAMME 1933-422
(in dollars)
1933-1938

1940

1941

1942

Total

180,834 24,517
10,141 11,952 227,444
483,152» 163,719 193,672 258,497 299,624 1,398,664
52,384
13,569 13,607
9,236
9,755
6,217
480,388 165,801 178,709 253,931 259,373 1,338,202
55,141
62,441
65,524 53,235 236,341

Studies
Operations
Maintenance
Depreciation
Administration
Total

1939

1,157,943 422,785 444,577 594,310 633,420 3,253,035

> Includes emergency flood relief of $213,654 in 1937.

3. FERmiSBR PROGRAMME, NET EXPENSE, 1933-428
{in dollars)
1933-1938

1939

1940

1941

1942

Total

:
Experimental largescale production,
sold toA.A.A.,and
used in farm demonstration, etc.' 2,057,325 2,250,406 2,879,478 3,088,632 2,207,786 12,483,627
Mantifacturingcost1,
bapfing, shipping,
disintegration, administrative and
other costs
4,570,132 2,207,264 2,794,503 2,982,604 2,297,727 14,852,230
Net income (—) or
89,941
expense
2,512,807 -43,142 -84,975 -106,028
Tests and demonstrations and related activities
2,054,429 1,374,963 1,716,219 1,701,528 1,946,899
Research and development of fertiliser production
1,799,673
Profit on sale of land
Net expense

870,397

995,021
-152,788

654,718

550,373

2,368,603
8,794,038

4,870,182

-3,055 - 155,843

6,366,909 2,202,218 2,473,477 2,250,218 2,584,158 15,876.980

«Manufacturing cost (4,200,888) (1,962,416) (2,209,951) (2,939,392) (2,305,656) (13,618,303).
1

Cf. Chapter II.

« Cf. Chapter II.

» Cf. Chapter IV.

248

THB T.V.A.: INTERNATIONAL APPLICATION
4. DBVBLOPHBNT ACTIVITIBS
(JVi^ expense in dollars, year ended 30 June1)

1933-1938

Mapping
2,442,891
Forestry development and erosion
control
1,102,077
Mineral resources
development
770,265
Public health
403,809
Agricultural industries
965,555
Transportation studies
119,728
General studies
507,622
Recreational studies
regional
106,653
Administration
Total

1939

1941

1940

Total

1942

256419

298,300

246,974

203.944

3,448,228

220,172

239,185

266,988

307,886

2,136,308

96,383
123,572

89,422
128,374

181,620
127,492

525,398
108,091

1,663,088
891,338

188,590

218,313

176,834

164,676

1,713,968

6,376
132,636

8,357
119,425

12,602
100,195

118,171

147,063
978,049

291,293

307,334

285.741

296,116

106,653
1,180,484

6,418,600 1,315,141 1,408,710 1,398,446 1,724.282 12,265,179

5. RBLATBD PROPBRTY OPERATIONS2
{Net expense in dollars)

1933-1938

Operation, reservoir lands
Design, grounds and
buildings
Recreational facilities, development
Recreational facilities,
operation, net expense
Reafforestation and erosion control
Fish and game
conservation
Village operations
National defence
properties
Administration
Total

1

Cf. Chapter V.
» Cf. Chapter V.

1939

1940

1941

1942

Total

207,373

63.513

85,112

184,491

21,941

34,173

760

12,866

16,107

32

63,938

298,618

66,463

61,090

58,702

61,905

546,778

47,628

462,446

45,097

45,097

94,836 201,316 130,805

633,389

201,960 193.332 93.246
812.717 219.676 161,525
446,686

58,820

61,514 59,223 609,275
164,723 139,059 1,497,700

48,082
3,399 24,548 18,902 541,617
349,971 335,123 367,221 295,520 1,347,835

2,186.018 963,738 847,197 952,951

798,171 5.748.075

APPBNDICBS

249

6. CONGRBSSIONAI, APPROPRIATIONS TO T.V.A.1
(in dollars)
Kscalyear

Appropriation*

1934
1935
1936
1937
1938
1939
1940
1941
1942
1943

50,000^000
25,000,000
36,000,000
39,900,000
40,166,270
40,000,000
39,003,000
40,000,000 .
79,800,000
136,100,000
Supplementary appropriation2

25,000,000
40,000,000
47,000,000
30,000,000

1941'
1942
1942
1942
Total
1

667,969,270

In 1934 and 1935 the amounts were allotted by the President from large funds voted by Congress to meet the economic emergency. In 1936 and 1937 the appropriations were voted by Congress under the technical form of Deficiency Appropriation Bills ; from 1938 to the present they have
been voted as a part of the Independent OfSees Appropriations Bills, as it was arranged that many
United States departments similar to the T.V.A. (e.g., the National Housing Agency, the Federal
Power Commission, the Maritime Commission) should be considered by a single Congressional
Committee.
2
Four supplementary appropriations amounting to $142,000,000 were voted in 1941-42 for the
additional works and operations imposed by the war. In addition, to 1 July 1942, the Authority
had made cash expenditures of approximately $10,000,000 out of funds advanced to it by other
Federal agencies (e,g., for the War Department, for Defence Housing, etc.].

i Cf. Chapter XII.

APPENDIX II
MINERALS FOUND IN THE TENNESSEE VALLEY1
The most important minerals found in the Tennessee Valley
and adjacent regions from the standpoint of value, tonnage, and
men employed in their production, are as follows: coal, iron (hematite and limonite), sand and gravel, limestone and dolomite, clay
(brick, refractory, filler, and miscellaneous), phosphate, pyrite
(sulphuric acid). Of these minerals, the first five have a wide distribution in the Valley area. Phosphate occurs in Middle Tennessee, while pyrite and other sulphide minerals used for the production of sulphuric acid occur in the Copperhill-Ducktown district
of Tennessee.
The minerals which probably rank next in importance are. feldspar, fluorite, mica and zinc (concentrates). Some of these, such as
fluorite and mica, are important because they do not occur plentifully in other parts of the United States. Feldspar and mica are
produced in western North Carolina; fluorite in the KentuckyIllinois fields in the vicinity of Rosiclare, Illinois; zinc in east
Tennessee near Knoxville.
The following minerals are in active, sustained production, and
while their value in the aggregate is ver^ large, individually they
are not as important as those mentioned in the two classes above:
asphalt rock, ball clay, barite, copper (limited), sulphide ores,
granite, kaolin, kyanite, marble, quartz pebbles, sandstone, talc,
vermicuEte.
The Tennessee Valley area produces a substantial part of the
country's ball clay, and much of the best marble. Use of North
Carolina kaolin is increasing rapidly as a result of new processes
improving its quality and of difficulty in obtaining supplies from
England, formerly the chief source. Vermiculite from North Carolina is a comparatively new mineral that is in increasing demand
as a lightweight insulation material for construction and insulation
uses. The only other commercial vermiculite field is in Montana.
Copper is produced in limited quantity at the Copperhill-Ducktown
field, where the by-products of the mining operations are used to
produce sulphuric acid.
The following minerals are produced in small amounts, or intermittently: bauxite (limited), bentonite, fullers earth, garnet, gold,
lead concentrates (limited), manganese (limited), ochre, oil and gas
(limited), olivine, pyrophyllite, quartz, quartzite, salt and gypsum,
shale, slate, soapstone, titanium (rutile and ilmenite), tripoli,
spodumene.
The following minerals, although occurring in this area, are not
in production: asbestos (short fibre), chromite, corundum and
emery, graphite (amorphous), nickel.
1

Cf. Chapter I.

APPENDIX III
THE ALLOCATION OF T.V.A. POWER COSTS,
THE PROFITABILITY OF T.V.A. POWER OPERATIONS,
AND THE "YARDSTICK"
The Statute required that the T.V.A. should make a valuation
of the first dam (Wilson Dam) which came into its possession, and
the power from which was the first available for sale, and thereafter that other plant and other dams should be similarly valued
and the valuation allocated between their several uses. But through
a series of accidents and difficulties, and some differences within
the Board itself as to the theory of allocation, the valuation of
Wilson Dam was not actually made until January 1937. Even
then, it was concluded and reported to the President under thé
stimulus of a peremptory amendment passed when Congress reconsidered the Statute in 1935 and discovered that the Authority had
not yet produced a valuation.
But the Authority had electric power to sell from the moment
it took over Wilson Dam, and it could not wait until a valuation
and allocation were made before beginning to make contracts. In
other words, it had to set up a rate-schedule before it had made the
final and minute mathematical analysis which the Statute demanded of it, and its valuation had therefore to be made on the
basis of estimates. This was done by September 1933, in consultation with a number of the most distinguished utility economists
in the United States. It was by no means an easy task. Wilson
Dam had cost about $46 million to build, but the building operations had not been continuous, a fact which had added to the expense, and they had been carried out at a time of abnormally high
prices; furthermore, the dam was already some seven years old
when the Authority received it. The Authority therefore made
calculations, as the Statute required, of its "present value". On
the basis of that valuation—some $30 million—a rough allocation
was made of the proportions due to navigation, and to power operations, and the Authority then proceeded on well-known bases of
promotional electricity rating to set schedules of prices for its power.
It appears that the final allocation, arrived at after years of expert
• analysis, very closely coincided with this first business appraisal.
Six theories competed for acceptance as the basis of allocation
in the total investment as the new dams were constructed. The
first was the "no-allocation theory", advanced by Mr. C. W.
Kellog, President of the Edison Electric Institute, which required
the whole cost of the dams to be attributed to the single purpose
of power production. This theory the majority report of the Joint
Committee Investigating the T.V.A. regarded as being not ¿onsistent, and not objective, but largely controlled by the desire of
its sponsors to show that the yardstick was unfair and based on

252

TBS T.V.A.: INTBSNAtlONAL APPLICATION

too small an allocation to power.1 Moreover, this theory seemed
directly contrary to the Statute, which directs that the dams and
reservoirs shall be operated primarily for navigation and flood
control (Section 9 (a)).
A second, which was advanced by the first chairman of the
T.V.A., may be called the "proportionate benefit" theory. The
fundamental notion here was that the direct costs clearly attributable to each programme—for example, power or power turbines—
should at once be allocated to that programme. Beyond that, each
of the programmes—navigation, flood control and power, fertiliser
and defence—enjoyed a benefit in the common use of the dams and
other works. If the benefit receivable in terms of money by each
of these programmes separately could be computed, or rather
guessed, and then added together, the proportion of the benefit
accruing to each to the total obtained by all would then be the
proportion of known capital costs which should be allocated to
each. Ingenious as this theory was, its great difficulty was the
highly hypothetical, imaginary result of the attempt to evaluate
benefits.
Thirdly, there were people who said that the basis must be
arbitrary; let direct costs be specifically attributed, but an equal
one third share of common costs should be borne by the three
great programmes. This solution would have satisfied nobody.
Fourthly, there was the "incremental power-investment"
theory, advanced by Dean Moreland2 when a witness for the Commonwealth and Southern Corporation. Here again, the allocation
principle referred to the common costs; power was to be charged
with the balance of total investment, after deducting the estimated
cost of the most economical alternative plan for accomplishing the
other purposes. The difficulty here was to assign a cost to each
purpose subsequently where this had not been done originally,
although three or more purposes were taken into account in the
original design, construction and total cost. This necessarily
involves hypothesis, and the hypothesis can differ very widely,
according to the type of navigation or flood control systems that
might have been built; so that under this particular method of
allocation the costs and valuation might vary enormously even as
between different witnesses who accepted it. Furthermore, this
method took as its starting point alternative navigation and flood
control systems that would not have accomplished the purposes
specified in the T.V.A. Statute.3
Fifthly, it appears that while this was never considered as a
practical solution of the problem, counsel for the Authority contended that the theory most consistent with the Statute would be
to charge directly to power only the cost of the power plant and to
allocate to navigation and fiood control the common costs of the
dams excluding the power-house section. This is referred to as the
"by-product" theory, power being considered as nothing more than
a by-product of the dams which were built to satisfy the general
1
2
3

Op. cit., p. 156.
Dean Edward L. Moreland, of the Massachusetts Institute of Technology.
Cf. Findings of District Court in Tennessee Electric Power Co. et cà. v. Tennessee Valley Authority.

APPBNDICBS

253

public benefit by navigation and flood control, as directed in the
Statute.
THB ALTERNATS JUSTIMABI^ EXPBNDITUSS THBORY

The T.V.A., working through an expert committee of public
utility economists, rejected all these methods as unworkable in
practice, and used as the principal guide to its final decision the
"alternate justifiable expenditure" theory. The briefest and most
authoritative explanation is given in the Report of the Joint Investigating Committee1; it refers to a 10-dam cost system, and runs
as follows:
The total cost of the 10 dams, with an installed electric capacity of 1,401,500
kilowatts, is estimated at #407,809,864.
1. The direct costs of navigation, flood control, and power were computed
separately, as being the amount that could be saved by eliminating that function
from the multiple-purpose programme.
By eliminating navigation $44,880,800 could be saved; or by eliminating flood
control $33,763,000 could be saved; or by eliminating power $108,884,965 could
be saved.
Taken all together, these direct costs leave $220,281,099 of the total multipurpose costs still unallocated. This remainder represents common costs and
may be considered as the cost of combining the three uses into one project and'
is allocated by the following process.
2. For comparison with the direct costs as found in the multiple system,
the separate cost of alternative one-use systems were computed.
A system built for navigation alone, based mainly on the "18-dam plan"
suggested by the Army Engineers, would have cost $163,519,900.
A system built only for flood control would have cost $140,826,000.
A system built only for power production would have cost $250,096,000.
(These are, of course, on Tennessee Valley Authority estimates.)
3. The next step was to determine the sum of the alternative single purpose
costs remaining after deducting the direct costs identified in the multi-purpose
costs, in order to compare the remaining alternative costs with the correspondingcosts of the multi-purpose system.
The direct cost for navigation in the combined system is $118,639,100 less
than the cost of a system for navigation alone.
The direct cost for flood control in the combined system is $107,063,000 less
than the cost of a system for flood control alone.
The direct cost for power in the combined system is $141,211,035 less than
the cost of a system for power alone.
The sum of these differences is therefore $366,913,135; the common cost of
bringing them into combination, as given in (1) is $220,281,099, called in the
report "remaining multiple use costs".
4. The remaining costs, $220,281,099, are allocated to the three purposes
in the ratios of the respective single purpose remaining alternative costs (3) to
the sum of those alternative costs.

Applying this principle, the Authority made the following
allocation, embodied first in a report to the President in 1938, and
covering the three-dam system of Wilson, Norris and Wheeler:
1

Op. cit., pp. 157-158.

254

THB T.V.A.: INTSRNATKMAL APPLICATION
Allocation
(«» <to«ors)

Navigation
Flood control
Power

Per cent, of total cost

26,294Í000
18,470,000
49,360,000

28
20
52

94,124,000

100

A further report was submitted, as required by the Statute, in
November 1940, based upon the same principles as the original
one, "but now applied to seven dams as a single system—Wilson,
Norris, Wheeler, Pickwick, Guntersville, Chickamauga and Hiwassee. The Authority said : "The seven dams are so interrelated and
interdependent in their operation that any significant assignment
of costs to their several uses can be made only by considering them
as a single system, rather than as separate projects". The amount
invested in the seven-plant system, subject to allocation, was
$210,279,469. Of this total, facilities installed exclusively for each
special purpose were as follows;
(»» dollars)

Navigation
Flood control
Power

17,177,896
4,871,000
56,368,996

The remainder of the total investment, equal to $131,861,577,
represented joint investment or common expenditure for the three
purposes, and was allocated thus: navigation, 36 per cent.; flood
control, 24 per cent.; power, 40 per cent.; nothing to national
defence, and nothing to fertiliser. The Authority observed that
these percentages could not be regarded as fixed with respect to
future allocations; these must depend on varying circumstances
relating to the additional multi-purpose structures, and wide differences in the circumstances raised the probability of difference in
the allocations. When the direct facilities for the single purposes
are added to the jsercentages stated above, that is, single purpose
investment plus joint investment, the result is:
Per cent, of total investment

Navigation
Flood control
Power

21.8
12.4
65.8

Until the time of the T.V.A.'s allocation there had never been more
than a two purpose project, namely, navigation and power, requiring
allocation.
PKOPITABIUTY OP SAUSS

Since the profitability of the T.V.A.'s power policy has been
the subject of public controversy, involving the conflicting judgment of the most creditable experts, it is reasonable for the observer
to follow the opinion of the majority report of the Joint Committee
on the Investigation of the T.V.A. The Committee employed a
number of engineering experts to guide it on this subject, headed
by Mr. Tom Panter, chief of the Los Angeles Power System.

APPBNDICBS

-253

The majority believed that it was, necessary to hold fast the
principle that the Authority is a river control project, to which
power generation is incidental. Under this assumption, in order
to justify the cost of generating hydroelectric power it was necessary
only to show that the added cost of power generation and transmission would be repaid by the revenues from power. It was thought
that the estimates actually presented by the T.V,A. showed additibnal revenues far in excess of this necessary minimum.
In trying to answer the question whether the taxpayers of the
nation were contributing to costs which should be borne by the
consumers of the Authority's power, the Committee analysed the
various elements of cost, constantly bearing in mind a comparison
with all the items of cost met by any private utility. These items
are:
1. Cost of dams as allocated to power;
2. Interest during construction;
3. Depreciation and amortisation ;
4. Taxes and insurance;
5. Operation and maintenance.
1. Cost of Dams as Allocated to Power
This aspect of the matter has already been discussed.1 The
Engineer's Report for the Committee of Investigation increased
the T.V.A.'s figure only a little, on account of the total cost, but
thought that the percentage of allocation was sound.
2. Interest during Construction
Here, the T.V.A. allows for a rate of 3 per cent., basing this
figure upon an estimate of the rate of interest for long-term money
as reported by the Treasury for the years 1933 to 1937. The Committee's engineers, in order to take a conservative view, used the
figure of 3J4 per cent. The minority of the Committee, hostile to
the T.V.A., ignored the guidance of the Committee's engineers,
and argued that the T.V.A. would be on a like basis with utility
companies only if it paid 6 per cent., which on the minority's
estimate of power-investment costs would total nearly $17 million.
But in fact a Government agency whose credit stands high quite
properly passes on the benefits of this credit to the power consumer
or the general taxpayers. Knoxville City bonds readily sold at
3.39 per cent.
3. Dépréciation
In the matter of depreciation. Dean Moreland, making estimates for evidence on behalf of the utilities, reckoned on a 30-year
life for the equipment and SO years for the dams. This, on a sinkingfund basis, gave a rate of l.S per cent., comparing rather unfavourably with such systems as the Ontario Hydro-electric and the great
utilities operating in the Tennessee Valley. The T.V.A. made a
more particular calculation, specifying the depreciation on the
1

Cf. Chapter.III.

256

THB T.V.A.: INTERNATIONAL APPLICATION

expected service lives for the various items of depreciable property.
Thus, machinery and equipment were assumed to have an average
life of 3S years; dams and mass concrete structures, 85 years;
superstructures and buildings, 75 years; transmission facilities, in
six classifications, ranging from 15 to 50 years. The Committee's
engineers followed Dean Moreland's rate, even adding a little.
They worked on the 50-year basis, and further calculated amortisation on a 50-year basis at 3}4 per cent, interest, which, in their
judgment, adequately provided1 for obsolescence by returning the
total investment in this period. Thus, they allowed for both depreciation and amortisation, although privately owned utilities are
not required to amortise their investments, and some have not even
been required to provide for full depreciation. Actually, the T.V.A.
does not use the sinking-fund basis for meeting depreciation, but
the much more conservative "straight-line" method whereby investment is spread as uniformly as possible over expected useful life;
this has the effect of penalising the early years x)f the power development.
4. Taxes and Insurance
The T.V.A., being a Government agency, was by general constitutional law not subject to taxation, but the Statute provided
that the T.V.A. should pay to the States in which it operated 5 per
cent, of its gross revenues.2 This figure was smaller than the amount
in taxes generally paid by utilities, and had been violently criticised
on the ground that because they did not include the full tax amount
as an item of cost, the Authority's accounts of true net profit were
unfairly contrasted with those of the utilities. The Committee's
engineers therefore investigated the amounts paid in total taxes
by the privately owned utilities; and considered that 1234 per cent,
on the Authority's wholesale revenues would be a fair allowance.
It was also observed that since the net receipts over cash payments
are returned to the Federal Treasury, the fact that they are not
returned in the form and under the name of taxes is immaterial.
The Authority, in fact, took the figure of 12J^ per cent, into account
when fixing its wholesale rates.
There was also computed by the Committee an amount of
insurance equivalent to that paid by private companies.
5. Operation and Maintenance
On this item, the various parties in dispute found no occasion
to differ seriously in their estimates. The only items upon which
there was controversy were a number of elements which the Authority obtained free of charge or at less than the price asked of private
firms, such as real estate taxes, gasoline taxes, postage and special
freight rates from the land grant railroads, and workmen's compen1
The T.V.A. made allowance for amortisation oroly for that part of its property that was non-depreciable and had an indefinite life, such as reservoir lands
and rights which it proposed to amortise in 85 years; but even computing this
item on the terms of the Committee's engineers the difference to costs is not
important.
2
Since 1940 these payments have been substantially raised. Cf. Chapter IX.

APPBNDiass

257

sation payments.1 The amount for franked envelopes was found
to be very small; and the amount saved by special freights on land
grant railroads was practically negligible, being equivalent to one
seventieth of a mill per kilowatt hour. On the other hand, the
Committee thought that because the T.V.A. operated under
Government regulation it was coiripelled to meet a number of
expenses which tended to increase its costs; for instance, in purchase and inspection requirements, auditing, personnel policies,
and public health1. The engineers thought that the net effect was
negligible.?
Having included these various items of cost, the Committee's
engineers then made an estimate of power revenues for a ten-dam
system with a 60 per cent, load factor. The result showed a substantial profit, though a little less than the expectations entertained by the T.V.A. The minority report of the investigating
committee naturally took a different view of the estimates of revenue, considering that the calculations of the Authority and the
Committee's engineers were unduly optimistic and that the T.V.A.
was producing an amount of electricity for which it could never
fijad a market.
It would seem on a reasonable survey of the facts that the
estimates of the Committee's majority report were well founded,
especially if it is taken into consideration that the Authority's
interconnections with surrounding utility systems having a large
steam generating capacity make possible the transformation of
much of the Authority's secondary and dump power into firstgrade continuous current. Referring to a ten-dam system, the
Committee thought that the T.V.A. would have an annual surplus
over costs of about $3.8 million, if it remained an independent hydrosystem; about $6.3 million if its secondary capacity were supported
by interconnection; and about $7 million if this, again, were supported by supplementary steam generation.
The Committee pointed out that the T.V.A- had been losing
money'during its period of development, which came to an end in
1938. It estimated the losses to 30 June 1939 as $11,310,000, which,
with interest accruing at 3^ per cent., amounted to a maximum of
$13,000,000. The surplus on a seven-dam system would liquidate
this in nine years; on a ten-dam system in five years; on a ten-dam
system interconnected, in something like two years. The net conclusion was that for a ten-dam system with all charges paid, 3)^
per qent. interest amortisation and replacement, and a full taxequivalent to the Treasury, the existing wholesale rates provided
a balance of some $7 million a year, which could be applied to the
maintenance and liquidation of the other Authority programmes.
Such a power surplus would cover the annual expenses of navigation and flood control, and return the total investment in these
programmes in less than 50 years. Thus, as hoped, hydroelectric
power would be the -'paying partner".
1
T.V.A. employees come under the United States Federal Employees' Compensation
system, and the compensation is paid by the Federal Government.
2
The T.V.A. and the distributors who buy its power also have certain minor
accountancy obligations to the Federal Power Commission, which has established
forms of account for suppliers of electricity.

258

THB T.V.A.: INTERNATIONAL APPLICATION

An analysis of the prices and the operations of the municipalities and co-operatives buying wholesale electricity from the T.V.A.
showed that, of fourteen municipalities, twelve had a net profit
and two a net loss, and of the co-operatives, six had a net profit
and seven a net loss. (The Engineers' Report analysed only those
distributors in service for eighteen months or more before 30 June
1938.) The results appear to show that after 18 months' service
most of the municipalities could cover all fixed charges including
a return of more than 6 per cent, on plant investments. But cooperatives, largely operating rural lines, need a longer period in
which to attain profitability; some four or five years would be
required to build up the necessary load.1 It still remains to be seen,
however, whether the rates at which the T.V.A. requires the rural
co-operatives to resell the electricity can be generally applied
without requiring supplementary contributions to capital account
from the members of the co-operative.
"THE YAROSTICK"

A further question is whether the Authority's methods of operas
tion may be regarded aé providing a yardstick of equitable rates
for comparison with private industry, in order to show in particular
that a reduction of rates was possible from the standpoint of costs,
and desirable for the stimulation of consumption. The Committee
thought that it was not necessary to exhibit the Authority's internal
costs and wholesale prices as the standard by which to challenge
private utilities; it was enough to show that'the T.V.A.'s own
wholesale rates did not, in fact, undercut the costs charged by
private utilities for wholesale power. (The cost of distribution of
power, of course, is so large compared with wholesale costs, that the
former is the crucial figure for analysis.) This was a simple task
because it merely meant a comparison of the actual wholesale
charges made by private utilities and the T.V.A. Such an analysis
showed that the T.V.A. was not underselling the market by more
than a mill or two per kilowatt hour, if at all. Therefore, the yardstick was not in the Authority, but in the distributing operations
performed by the municipalities and co-operatives. On the one side
there was the Authority with its internal costs, selling prices, and
profit or loss. These were important to the Authority and to the
general public which pays the bill, and, as already shown, the rates
were more than sufficient to cover the Authority's power costs.
They did not, however, affect the "retail yardstick", which became
valid from the moment the municipalities and co-operatives began
their operations with the purchase of wholesale power from the
T.V.A. at rates which did not undersell the market.
These retail operations were a sound yardstick, because the
only criticisms raised against them were fallacious or immaterial.
Thus, for example, it was argued that the benefits of various pro1
The accounts of the T.V.A. since this analysis was made tend to bear out
the conclusions of the Committee's engineers. Thus, in the fiscal year 1941, of 34
co-operatives, 19 showed net losses for the year, due largely to heavy amortisation
collections. Cf. Report from Comptroller, ¡T. K.4.; Financial Statements, Municipalities and Co-operatives, Year ended June 30, 1941.

2S9

AÍPINDICSS

raaotional costs incurred by the T.V.A., such as advertising the uses
of electiicity, redounded cost free and unaccounted for to the distributors; but evidence showed that adequate ^accounts of these
had been kept in the T.V.A. There had also been a proper charge
to legal, en^neering, accounting, and organisation costs. The advertising provided by the E.H.F.A. had been paid for by the
Govemment, was not concealed, and had offered advantages to
private utilities as well as to the T.V.A., for the result was an
increase of electric sales generally and the benefits had spread over
the whole area.
B8TIMATBS Ot POWBR KBVBNUÍBS BBÏORB THE
JOINT CONGBieSSIOÍíAI, GOMMITTBM

(in dollars)
Items

Moreland

T.V.A.

1 Total œst of
11 dams

321,854,373

486,669,540

-Navigation
ana flood

1?2,942,600

230,892,384

>

Fower

348,911,773 ; 255,777,156

Congressional Committee

(10 dams)

281,710,000

ANNCAI^ COSIS

(in douars)
Items

.Interest
1 Depredation

11 dams

11 dams

10 <1fwnft

12,212,000
7,673,315 (3M per cent.) 9,155,575 1
(3.S per cent.] (3 per cent.)
4,300,000
2,304,000

Amortisation
Renewals and
replacements
Operations and
maintenance
Taxes (S per cent.)

1,193,000

1,198,400

Power generation
Transmission
General equipment
Development
Administration

17,633,000
7,341,000
858,000
150,000
1,000,000

11,805,315
5,195,260
205,000
120.000
820,000

Total
Estimated revenues

28,175,000
24,136,000

19,343,975
23,968,750

20,S47;233
24,330,000

- 4,039,0002 + 4,624,77S2

+ 3,782,7671

Profit or loss

(0.82Spercent.) 2,324,108
(0.95 per cent.) 2,653,000
3,130,000
(insurance
3,284,550
13.5 per cent.)

-

1
If all primary power were sold for general service and not put into special contracts, revenue
•would be 522,925,000, and with slightly less annual cost surplus would be $2,822,000.
2 Compare this estimate with T.V.A. actual results, 1938-1942, as given on pp. 242-3.

260

THB T.V.A.: INTERNATIONAL APPLICATION
MINORITY REPORT BSTIMATB ON 10 DAMS
(in dollars)

Total cost of projects, including transmission, all charged to power 494,092,864
Annual costs (as they should be):
Interest at 6 per cent, on total cost
29,646,000
Taxes equal to those paid by utilities
7,506,000
Total
Actual annual costs:
T.V.A. interest at 3JÍ

37,152,000

^vT'taxes at 5
> Total
per cent.
Difference
T.V.A. deficit

/Profits
\Difference
Loss

10 Í82 921

'

-

26,369^079
1,737,479 on 10 dams on T.V.A. basis.
26,369,079
24,631,600

APPENDIX IV
INTERSTATE COMPACTS
The United States Congress, being convinced of the value of
unified development of the Tennessee River, was able to establish
an agency and give it the requisite continuing powers because it
had the authority to act under the 1Constitution, in virtue of its
powers2 to provide for national defence and its powers over navigable
rivers. There was an alternative constitutional route by which a
local agency for unified development might have been set up,
namely the "Compact Clause", (Article 1, Section 10 of the Constitution), which reads: "No State shall, without the consent of
Congress . . . enter into any Agreement or Compact with another
State, or with a foreign Power". Although this looks like a prohibition, it is an authorisation with Congressional consent.
In the many decades before Congress acted the seven Valley
States could have made a compact or contract among themselves
to accomplish the aims that were ultimately embodied in the T.V.A.
Statute. It is true that there might have been reluctance on the
part of these States to make-financial provision for navigation and
flood control which would benefit other States-^-for instance,
Louisiana and Arkansas—or the whole country as an economic
unit, without a contribution from them, and this would doubtless
have obstructed the plan. However, a careful search of the historical
records shows that the compact method was never even contemplated. It may be surmised that, from the standpoint of each
separate State, unity of administration of the Valley was desirable
but not desperately necessary, since each had alternative methods
of dealing with its own needs. There was plenty of water for all,
and so no occasion for a compact to determine its distribution as
in the Colorado River Compact. Floods were dealt with by local
works, or, as on the Mississippi, with the aid of the United States
Government through the Army Engineers. Thus the States saw
no reason for a compact. What was needed for the common good
was perceived more clearly by the national Government, which
also foresaw the future, than by the local communities.
Far otherwise was it in the case of the Colorado Compact.8
1

Imçlied by Article 1, Section 8, clause 11, "To declare war . . . ".
Article 1, Section 8, clause 3; "To regulate Commerce . . . among the
several
States .
8
Cf. NATIONAL RSSOURCBS COMMITTSB: Regional Factors in National Plannmg (Dec. 1935), Part HI, especially Chapter 7; also F. FRANKFDRTBR and J. M.
LANEIS: "The Compact Clause of the Constitution", in Yale Law Journal, May
1925, pp. 685 et sep and A. W. MACMAHON: "Interstate Compacts", in Encyclopaedia of the Social Sciences, Vol. II.
2

262

THB T.V.A.: INTSRNATIONAL APPLICATION

Here seven States—Arizona, Utah, Colorado, New Mexico, Wyoming, Nevada, and California, in order of their part in the area of
240,000 square miles drained by the river—were gravely concerned
in the uses of the Colorado River, especially for irrigation, on which
their agricultural economies depended. It was seen also that mining
activity in these States would be assisted, and an electrochemical
industry opened up, if the problems of water supply and hydroelectric potentialities, which were enormous, could be solved by
planned use over the whole area. Since 1902 the United States
Bureau of Reclamation had built many dams and canals in the river
system, and the United States Government had conducted surveys.
After the world war of 1914-1918, reclamation projects and plans
for the use of the water by the States in the lower basin of the River
(with Arizona, California and New Mexico chiefly concerned)
caused the States in the upper basin (with Wyoming, Utah, and
Colorado chiefly concerned), as well as the former, to see the urgent
need for agreement. Meetings of representatives of the States
resulted, in 1920, in a suggestion that the apportionment of the
waters might be accomplished by interstate compact. The several
States passed a Bill authorising a State commissioner to formulate
the compact, and required a representative of the Federal Government to participate in the formulation. Prolonged and anxious
proceedings resulted in a compact signed in November 1922, based
upon the principle of v assigning the water, not between several
States, but between the upper and the lower basin. Article 1 of the
compact reads:
The major purposes of this compact are to provide for the equitable division
and apportionment of the use of the waters of the Colorado River System; to
establish the relative importance of different beneficial uses of water; to promote
interstate comity; to remove causes of present and future controversies; and to
secure the expeditious agricultural and industrial development of the Colorado
River Basin, the storage of it^ waters, and the protection of life and property
from floods. To these ends the Colorado River Basin is divided into two basins,
and an apportionment of the use of part of the water of the Colorado River System
is made to each of t£em with the provision that a further apportionment may be
made.
Thus the problem of the rights of the individual States was put
off till a later date. The upper basin States were to allow so many
acre feet to flow through a given point which was held to connect
the two basins.1 The States ratified the compact (with the exception
of Arizona, which anticipated being placed at a disadvantage in
relation to California), and it was finally accepted by an Act of
Congress—the Boulder Dam Act of December 1928—on the basis
of the adherence of six States. >
It appears that the compact method has by no means fully
solved the problem, which was the division of the supply of water
not merely in accordance with present needs, but with concern for
future development. The settlement of future difficulties was left
to ad hoc conferences of commissioners appointed for the purpose
by each State. No authority was set up to consider all the needs
» Ratified in Apr. 1944.

APPRNDICSS

263

in relation to the supply and the changing economy of the United
States as a whole, and jrivalry between the States was intensified.
It should be noted that the construction of Boulder Dam or any
other dams on the Colorado system does not depend on a compact
among the States, but derives directly from the power of the Federal
authority to regulate navigable rivers, arising out of its power
"to regulate commerce . . . among the several States".
The States of New Jersey and New York were also able to make
a compact (1921) which enabled the New York Port Authority1
to come into existence to administer the affairs of that great port.
Up to that time, each State had sought to exploit fçr itself the
fruits of the commerce passing into and out of the harbour. Neither
alone could fully plan the terminals, the transport and other facilities required, or offer to all users the economies available from
amalgamated government. The agreement ended a series of controversies and quarrels which began in the early nineteenth century
and remained quiescent for some decades, but which flared up again
when, from the turn of the century onwards, the remarkable growth
in commerce produced an intolerable congestion. From 1911
onwards, there were many conferences and investigations, and
strong public controls over the harbours were later established by
each State; but such controls did not lessen competitive hostility,
which was, indeed, promoted by discriminatory railroad rates and
facilities to the rival parties of the harbour. The controversy over
the discrimination in rates came before the Interstate Commerce
Commission in 1917 at the instance of New Jersey. The proceedings
showed clearly that New York Harbour was one, and should be
governed as a unit; and the Interstate Commerce Commission
reprimanded the private interests, the railroads, and others which
had supported and fomented the hostility by their individual quests
for their own convenience and profit. As a result of this open analysis, and after prolonged studies and plans, a compact was entered
into, making it possible to set up a body corporate and politic,
consisting of six commissioners, three from each State to be chosen
as each State should determine, to govern a port district with boundaries roughly 20 miles from the lower end of Manhattan Island.
The method of treaty-making between the nations of Europe
regarding European transport by railway, road, waterways, and
air, and the exploitation of hydro and other electricity resources
follows generally the United 2States interstate compact method
rather than the T.V.A. method , and in consequence there are grave
shortcomings in the conduct of those utilities from a European
point of view. The larger the number of States which are parties to
a common problem, the greater would seem to be the need for the
establishment of a continuing agency through whose good offices
the development of the sector of economic or social life in question
might be promoted. Generally speaking, bi-partite compacts are
easier to negotiate than multi-partite, but the bi-partite pact may
throw burdens on those not included in it and may not solve the
problem.
i2 Cf. E. W. BARD: TU Port of New York Authority (New York, 1942).
Cf. for a comparative study, H. A. SMITH: The Economic Uses of International Rivers (London, 1931).

APPENDIX V
THE TENNESSEE VALLEY AUTHORITY ACT
[PüBWC—No.

17—73D CONGRBSS, 1ST SBSSION]
[H. R. 5081]

18 May 1933, 48 Stat. 58, as amended to 21 November 1941
AN ACT
«

To improve the navigability and to provide for the flood control
of the Tennessee River; to provide for reforestation and the
proper use of marginal lands in the Tennessee Valley; to provide
for the agricultural and industrial development of said valley;
to provide for the national defense by the creation of a corporation for the operation of Government properties at and near
Muscle Shoals in the State of Alabama, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled. That for the purpose
of maintaining and operating the properties now owned by the
United States in the vicinity of Muscle Shoals, Alabama, in the
interest of the national defense and for agricultural and industrial
development, and to improve navigation in the Tennessee River
and to control the destructive flood waters in the Tennessee River
and Mississippi River "Basins, there is hereby created a body corporate by the name of the "Tennessee Valley Authority" (hereinafter referred to as the "Corporation"). The board of directors
first appointed shall be deemed the incorporators, and the incorporation shall be held to have been effected from the date of the first
meeting of the board. This Act may be cited as the "Tennessee
Valley Authority Act of 1933." [48 Stat. 58-59.] *
Sec. 2. (o) The board of directors of the" Corporation (hereinafter referred to as the "board") shall be composed of three members, to be appointed by the President, by and with the advice and
*—For the purpose of identifying the sections which appeared in the original
act of 1933 and those which have been brought into the act by amendment,
•references have been placed at the end of tibe sections. For example, the reference
At the end of section 1, 48 Stat. S8-S9, indicates that this section will be found
in volume 48 of the Statutes at Large on pages 58 to 59. All sections will be found
in volumes 48, 49, S3, and 54 of the Statutes at Large as indicated, with the
exception of sections 4 (é) and 9 (b) Which at the time of this printing were not
available.

APPENDICES

265

consent of the Senate. In appointing the members of the board,
the President shall designate the chairman. All other officials,
agents, and employees shall be designated and selected by the board.
(6) The terms of office of the members first taking office after
the approval of this Act shall expire as designated by the President
at the time of nomination, one at the end of the third year, one
at the end of the sixth year, and one at the end of the ninth year,
after the date of approval of this Act, A successor to a member of
the board shall be appointed in the same manner as the original
members and shall have a term of office expiring nine years from
the date of the expiration of the terra for which his predecessor'
was appointed.
(c) Any member appointed to fill a vacancy in the board occurring prior to the expiration of the term for which his predecessor
was appointed shall be appointed for the remainder of such term,
(d) Vacancies in the board so long as there shall be two members in office shall not impair the powers of the board to execute
the functions of the Corporation, and two of the members in office
shall constitute a quorum for the transaction of the business of the
board.
(e) Each of the members of the board shall be a citizen of the.
United States, and shall receive a salary at the rate of $10,000 a
year, to be paid by the Corporations as current expenses. Each
member of the board, in addition to his salary, shall be permitted
to occupy as his residence one of the dwelling houses owned by the
Qovernment in the vicinity of Muscle Shoals, Alabama, the same
to be designated by the President of the United States. Members
of the board shall be reiipbursed by the Corporation for actual
expenses (including travelling and subsistence excenses) incurred
by them in the performance of the duties vested in the board by
this Act. No member of said board shall, during his continuance
in office, be engaged in any other business, but each member shall
devote himself to the work of the Corporation.
(/) No director shall have financial interest in any public
utility corporation engaged in the business of distributing and
selling power to the pubHc nor in any corporation engaged in the
manufacture, selling, or distribution of fixed nitrogen or fertilizer,
or any ingredients thereof, nor shall any member have any interest
in any business that may be adversely affected by the success of the
Corporation as a producer of concentrated fertilizers or as a producer of electric power.
~ (g) The board shall direct the exercise of all the powers of the
Corporation.
(h) All members of the board shall be persons who profess a
belief in the feasibility and wisdom of this Act. [48 Stat. 59.]
SEC. 3. The board shall without regard to the provisions of
Civil Service laws applicable to officers and employees of the United
States, appoint such managers, assistant managers, officers, employees, attorneys, and agents, as are necessary for the transaction
of its business, fix their compensation, define their duties, require
bonds of such of them as the board may designate, and provide a
system of organisation to'fix responsibility and promote efficiency.
Any appointee of the board may be removed in the discretion of the

266

"

THE T.V.A.: INT1RNATIONAL APPLICATION

board. No regular officer or employee of the Corporation shall
receive a salary in excess of that received by the members of the
board.
All contracts to which the Corporation is a party and which
require the employment of laborers and mechanics in the construction, alteration, maintenance, or repair of buildings, dams, locks,
or other projects shall contain a provision that not less than the
prevailing rate of wages for work of a similar nature prevailing in
the vicinity shall be paid to such laborers or mechanics.
In the event any dispute arises as to what are the prevailing
rates of wages, the question shall be referred to the Secretary of
Labor for determination, and his decision shall be final. In the
determination of such prevailing rate or rates, due regard shall be
given to those rates which have been secured through collective
agreement by representatives of employers and employees.
Where such work as is described in the two preceding para1
graphs is done directly by the Corporation the prevailing rate of
wages shall be paid in the same manner as though such work had
been let by contract.
Insofar as applicable, the benefits of the Act entitled "An Act
to provide compensation for employees of the United States suffering injuries while in the performance of their duties, and for other
purposes", approved September 7, 1916, as amended, shall extend
to persons given employment under the provisions of this Act.
[48 Stat. 59-60.]
See. 4. Except as otherwise specifically provided in this Act,
the Corporation—
(a) Shall have succession in its corporate name.
(&) May sue and be sued in its corporate name.
(c) May adopt and use a corporate seal, which shall be judicially
noticed.
(d) May make contracts, as herein authorised.
(e) May adopt, amend, and repeal bylaws.
(/) May purchase or lease and hold such real and personal
property as it deems necessary or convenient in the transaction
of its business, and may dispose of any such personal property
held by it.
The board shall select a treasurer and as many assistant treasurers as it deems proper, which treasurer and assistant treasurers
shall give such bonds for the safe-keeping of the securities and
moneys of the said Corporation as the board may require: Provided,
That any member of said board may be removed from office at
any time by a concurrent resolution of the Senate and the House
of Representatives.
. (g) Shall have such powers as may be necessary or appropriate
for the exercise of the powers herein specifically conferred upon the
Corporation.
(h) Shall have power in the name of the United States of America to exercise the right of eminent domain, and in the purchase
of any real estate or the acquisition qf real estate by condemnation
proceedings, the title to such real estate shall be taken in the name
of the United States of America, and thereupon all such real estate

APPENDICES

267'

shall be entrusted to the Corporation as the agent of the United
States to accomplish the purposes of this Act.
(¿) Shall have power to acquire real estate for the construction
of dams, reservoirs, transmission lines, power houses, and other
structures, and navigation projects at any point along the Tennessee Riyer, or any of its tributaries, and in the event that the
owner or owners of such property shall fail and refuse to sell to the
Corporation at a price deemed fair and reasonable by the board,
then the Corporation may proceed to exercise the right of eminent
domain, and to condemn all property that it deems necessary for
carrying out the purposes of this Act, and all such condemnation
proceedings shall be had pursuant to the provisions and requirements hereinafter specified, with reference to any and all condemnation proceedings [48 Stat. 60-61] : Provided, That nothing contained
herein or elsewhere in this Act shall be construed to deprive the
Corporation of the rights conferred by the Act of February 26, 1931
(46 Stat. 1422, ch. 307, sees. 1 to 5, inclusive), as now compiled in
section 2S8a to 258è, inclusive, of Title 40 of the United States Code.
[49 Stat. 1075.]
(J) Shall have power to construct such dams, and reservoirs,
in the Tenaessee River and its tributaries, as in conjunction with
Wilson Dam, and Morris, Wheeler, and Pickwick Landing Dams,
now under construction, will provide a nine-foot channel in the
said river and maintain a water supply for the same, from Knoxville to its mouth, and will best serve to promote navigation on the
Tennessee River and its tributaries and control destructive flood
waters in the Tennessee and Mississippi River drainage basins?
and shall have power to acquire or construct power houses, power
structures, transmission lines, navigation projects, and incidental
works in the Tennessee River and its tributaries, and to unite the
various power installations into one or more systems by transmission lines. The directors of the Authority are hereby directed to
report .to Congress their recommendations not later than April 1,
1936, for the unified development of the Tennessee River system,
[48 Stat. 61, as amended by 49 Stat. 1075.]
(fe) Shall have power in the name of the United States—
(a) to convey by deed, lease, or otherwise, any real property in the possession of or under the control of the
Corporation to any person or persons, for the purpose
of recreation or use as a summer residence, or for the
operation on sudh premises of pleasure resorts for
boating, fishing, bathing, or any similar purpose;
(jb) to convey by deed, lease, or otherwise, the possession
and control of any such real property to any corporation, partnership, person, or persons for the purpose
of erecting thereon docks and buildings, for shipping
purposes or the manufacture or storage thereon of
products for the purpose of trading or shipping in
transportation: Provided, That no transfer authorized
herein in (&) shall be made without the approval of
Congress: And provided further. That said Corporation,

268

THB T.V.A.: INTBRNATIONAL APPLICATION

without further action of Congress, shall have power
to convey by deed, lease^ or otherwise, to the Ingalls
Shipbuilding Corporation, a tract or tracts/ of land
at or near Decatur, Alabama, and to the Commercial
Barge Lines, Inc., a tract or tracts of land at or near
Guntersville, Alabama ;
(c) to transfer any part of the possession and control of
the real estate now in possession of and under the control of said Corporation to any other department,
agency, or instrumentality of the United States:
Provided, however, That no land shall be conveyed,
leased, or transferred, upon which there is located
any permanent dam, hydroelectric power plant, or
munitions plant heretofore or hereafter built by or
for the United States or for the Authority, except
that this prohibition shall not apply to the transfer
of Nitrate Plant Numbered 1, at' Muscle Shoals,
Alabama, or to Waco Quarry: And provided further,
That no transfer authorized herein in (a) or (c), except
leases for terms of less than twenty years, shall be
made without the approval of the President of the
United States, if the property to be conveyed exceeds
$500 in value; and
(d) to convey by warranty deed, or otherwise, lands,
easements, and rights-of-way to States, counties,
municipalities, school districts, railroad companies,
telephone, telegraph, water, and power companies,
where any such conveyance is necessary in order to
replace any such lands, easements, or rights-of-way
to be flooded or destroyed as the result of the construction of any dam or reservoir now under construction by the Corporation, or subsequently authorized
by Congress, and easements and rights-of-way upon
which are located transmission or distribution lines.
The Corporation shall also have power to convey or
lease Nitrate Plant Numbered 1, at Musde Shoals,
Alabama, and Waco Quarry, with the approval of the
War Department and the President. [49 Stat. 1076,
as amended by Public, No. 184, 77th Cong., 1st sess.,
H. R. 2097.]
(I) Shall have power to advise and cooperate in the readjustment of the population displaced by-the construction of dams, the
acquisition of reservoir areas, the protection of watersheds, the
acquisition of rights-of»wayi and other necessary acquisitions of
land, in order to effectuate the purposes of the Act; and may cooperate with Federal, State, and local agencies to that end. [49 Stat.
1080.]
S. The board is hereby authorized—
(o) To contract with commercial producers for the production
ofjsuch fertilizers or fertilizer materials as may be needed in the
Government's program of development and introduction in excess
SBC.

APP8NDICBS

2^9

of that produced by Govejmment plants. 'Such contracts may provide either for outright purchase of materials by the board or only
for the payment of carrying charges on special materials manufactured at the board's request for its program.
- (b) To arrange with fanners and iarm organizations for largescale practical use of the new forms of fertilizers undçr conditions
permitting an accurate measure of the economic return they produce. [48 Stat. 61.]
(c) To cooperate with National, State, district, or county
experimental stations or demonstration farms,with farmers, landowners, and associations of farmers or landowners, for the use of
new forms of fertilizer or fertilizer practices during the initial or
experimental period of their introduction, and for promoting the
prevention of soil erosion by the use of fertilizers and otherwise.
[48 Stat. 61, as amended by 49 Stat. 1076.]
id) The board in order to improve' and cheapen the production
of fertilizer is authorized to manufacture and sell fixed nitrogen,
fertilizer, and fertilizer ingredients at Muscle Shoals by the employment of existing facilities, by modernizing existing plants, or by
any other process or processes that in its judgment shall appear
wise and profitable for the fixation of atmospheric nitrogen or the
cheapening of the production of fertilizer.
(e) Under the authority of this Act the board may make donations or sales of the product of the plant or plants operated by it
to be fairly and equitably distributed through the agency of county
demonstration agents, agricultural colleges, or otherwise as the
board may direct, for experimentation, education, and introduction
of the use of such products in cooperation with practical farmers
so as to obtain information as to the value, effect, and best methods
of their use.
(f) The board is authorized to make alterations, modifications,
or improvements in existing plants and facilities, and to construct •
new plants.
(g) In the event it is not used for the fixation of nitrogen for
agricultural purposes or leased, then the board shall maintain in
stand-by condition nitrate plant numbered 2, or its equivalent,
for the fixation of atmospheric nitrogen, for the production of explosives in the event of war or a national emergency, until the
Congress shall by joint resolution release the board from this obligation, and if any part thereof be used by the board for the manufacture of phosphoric add or potash, the balance of nitrate plant
numbered 2 shall be kept in stand-by óondition.
(h) To establish, maintain, and operate laboratories and experimental plants, ajad to undertake exfœriments for the purpose of
enabling the Corporation to furnish nitrogen^ products for military
purposes, and nitrogen and other fertilizer products for agricultural
purposes in the most economical manner and at the highest standard of efiiciency.
,
(i) To request the assistance and advice of any officer, agent,
or employee of any executive department or of any independent
office of the United States» to enable the Corporation the better
to carry out its powers successfully, and as far as practicable shall
utilize the services of such officers, agents, and^employees, and the

270

THB T.V.A.: INTBRNATIONAL APPLICATION

President shall, if in his opinion, the public interest, service, or
economy so require, direct that such assistance, advice, and service be rendered to the Corporation, and any individual that may
be by the President directed to render such assistance, advice, and
service shall be thereafter subject to the orders, rules, and regulations of the board : Provided, That any invention or discovery made
by virtue of and incidental to puch service by an employee of the
Government of the United States serving under this section, or
by any employee of the Corporation, together with any patents
which may be granted thereon, shall be the sole and exclusive property of the Corporation, which is hereby authorized to grant such
licenses thereunder as shall be authorized by the board : Promded
further. That the board may pay to such inventor such sum from
the income from sale of licenses as it may deem proper.
(J) Upon the requisition of the Secretary of War or the Secretary of the Navy to manufacture for and sell at cost to the United
States explosives or their nitrogenous content. (Jk) Upon the requisition of the Secretary of War the Corporation shall allot and deliver without charge to the War Department
so-much power as shall be necessary in the judgment of said Departinent for use in operation of aU locks, lifts, or other facilities in aid
of navigation. - ;
\
(J) To produce, distribute, and sell electric power, as herein
particularly specified. •
(JM) No products of the Corporation shall be sold for use outside
of the United States, its Territories and possessions, except to the
United States Government for the use of its Army and Navy, or
to its allies in case of war.
(») The President is authorized, within twelve months after
the passage of this Act, to lease to any responsible farm organization or to any corporation organized by it nitrate plant numbered
2 and ^Waco Quarry, together with the railroad connecting said
quarry with nitrate plant numbered 2, for a term not exceeding
fifty years at a rental of not less than $1 per year, but such authority
shall be subject to the express condition that the lessee shall use
said property during the term of said lease exclusively for the manufacture of fertilizer and fertilizer ingredients to be used only in the
manufacture of fertilizer by said lessee and sold for use as fertilizer.
The said lessee shall covenant to keep said prépertyin first-slass
condition, but the lessee shall be authorized tá modernize said plant
numbered 2 by the installation of such machinery as may be necessary, and is authorized to amortize the cost of said machinery and
improvements over the term of said lease or any part thereof. Said
lease shall also provide that the board shall sell to the lessee power
for the operation of said plant at the same schedule of prices that
it charges all other customers for power of the same class and quantity. Said tease shall also provide that, if thé said lessee does not
desire to buy power of the publicly owned plant, it shali have the
right to purchase its power for the operation of said plant' of the
Alabama Power Company or any other publicly or privately owned
corporation engaged in the generation and sale of electric power,
and in such case the lease shall provide further that the said lessee
shall have a free right of way to build a transmission line over

APPÜNDICSS

271

Government property to said plant paying the actual expenses
and damages, if any, incurred oy the Corporation on account of
sijich line. Said lease shall also pro-Hde that the said lessee shall
covenant that during the term of said lease the said lessee shall
not enter into any illegal monopoly, combination, or trust with
any privately owned corporation engaged in the manufacture, production, and sale of fertilizer with the object or effect of increasing'
the price of fertilizer to the farmer. [48 Stat. 61-63.]
Sac. 6. In the appointment of officials and the selection of
employees for said Corporation^ and in the promotion of any such
employees or officials, no political test or qualification shall be
permitted or given consideration, but all such appointments and
promotions shall be'given and made oit the basis of merit and efficiency. 'Any member of said board who is found by the President
of the United States to be guilty of & Violation of this section shall
be removed from office by the President of the United States, and
any appointee of said board who is fpund by the board to be guilty
of a violation of this section shall be removed from office by said
board. [48 Stat. 63.]
. .
_
- •
Sac. 7. In order t* enable the Corporation to exercise the
powers and duties vested in it by this Act—
(a) The exclusive use, possession, and control of the United
States nitrate plants numbered 1 and 2, including steam plants,
located, respectively, at Sheffield, Alabama, and Muscle Shoals,.
Alabama, together with all real estate and buildings connected
therewith, all tools and machinery, equipment, accessories, and
materials belonging thereto, and all laboratories and plants used
as auxiliaries thereto; the fixed-nitrogen research laboratory, the
Waco limestone quarry, in Alabama, and Dam Numbered 2, .
located at Muscle Shoals, its power house, and all hydroekctric
and operating appurtenances (except the locks), and all machinery,
lands, and buildings in connection therewith, and all appurtenances
thereof, and ail other property to be acquired by the Corporation
in its own name or in the name of the United States of America, '
are hereby intrusted to the Corporation for the purposes of this Act.
(6) The President of the United States is authorized to provide
for the transfer to the Corporation of the use, possession, and control of such other real or personal property erf ^;he United States
as hp may from time to time deem necessary and proper for the
purposes of the Corporation as herein stated. [48 Stat. 63.]
Sac. 8. (a) The Corporation shall maintain its principal office
in the immediate vicinity qf Muscle Shoals, Alabama. The Corporation shall be held to be an' inhabitant and resident of the northern
judicial district of Alabama within the meaning of the laws of the
United States relating to the venue of civil suits.
(&) The Corporation shall at all times maintain complete and
accurate books of accounts.
(c) Each member of the board, before entering upon the duties
of his office, shall subscribe to an oath (or affirmation) to support
the Constitution of the United States and to faithfully and impartially perform the duties imposed upon him by this Act. [48 Stat. 63.]
Sac. 9. (a) The board shall file with the President and- with
the Congress, in December of each year, a financial statement and

272

THB T.V.A.: INTERNATIONAL APPLICATION

a complete report as to the business of-the Corporation covering
the preceding governmental fiscal year. This report shall include
an itemized statement of the cost of power at each power station,
the total number of employees and the names, salaries, and duties
of those receiving compensation at the rate of more than $1,500 a
year. [48 Stat. 63.]
_
>
(&) AH purchases and contracts for supplies or services, except
for personal services, made by the Corporation, shall be made after
advertising, in such manner and at such times sufficiently in advance of opening bids, as the board shall determiné to be adequate
to insure notice and opportunity for competition: Provided, That
advertisement shall not be required when, (1) an emergency requires immediate delivery of the supplies or performance of the
services; or (2) repair parts, accessories, supplemental equipment,
or services are required for supplies or services previously furnished
or contracted for; or (3) the aggregate aihount involved in any purchase of supplies or procurement of services does not exceed $500;
in which cases such purchases of supplies or procurement of services
may be made in the open market in the manner common among
businessmen: Provided further, That in comparing bids and in
making awards the board may consider such factors as relative
quality and adaptability jsf supplies or services, the bidder's financial responsibility, skill, experience, record of integrity in dealing,
ability to furnish repairs and maintenance services, the time of
delivery or performance offered, and whether the bidder has complied with the specifications.
The Comptroller General of the United States shall audit the
transactions of the Corporation at such times as he shall determine,
but not less frequently than once each governmental fiscal year,
with personnel of his selection. In such, connection he and his
representatives shall have free and open access to all papers, books,
records, files, accounts, plants, warehouses, offices, and all other
things, property, and places belonging to or under the control of
or used or employed by the Corporation, and shall be afforded full
facilities for counting all cash and verifying transactions with and
balances in depositaries. He shall make report of each such audit
in quadruplicate, one copy for the President of the United States,
one for the chairman of the board, one for public inspection at the
principal office of the Corporation, and the other to be retained by
him for the uses of the Congress: Provided, That such report shall
not be made until thé Corporation shall have had reasonable oppor-^
tunity to examine the exceptions and criticisms of the Comptroller
General or the General Accounting Office, to pointput errors therein,
explain or answer the same, and to file a statement which shall be
submitted by the Comptroller General with his report. The expenses for each such audit shall be paid from any appropriation or
appropriations for Tlie General Accounting Office, and such part of
such expenses as may be allocated to the, cost of generating, transmitting, and distributing electric energy shall be reimbursed
promptly by the Corporation aé filled by the Comptroller General.
The Comptroller General shall make special report to the President
of the United States and to the Congress of any transaction or
condition found by him tó be in conflict with the powers or duties

APPSNDICBS

273

entrusted to the Corporation by law. [48 Stat. 63-64, as amended
by 49 Stat. 1080-1081.}
Nothing in this Act shall be construed to relieve the Treasurer
or.otitier accountable officers or eniployees of the Corporation from
compliance with the provisions of existing law requiring the rendition of accounts for adjustment and settlement pursuant to section
236, Revised Statutes, as amended by section 30S of the Budget
and Accounting Act, 1921 (42 Stat-. 24), and accounts for all receipts and disbursements by or for the Corporatiçnn shall be rendered
accordingly: Provided, That, subject only to the provisions of the
Tennessee Valley Authority Act of 1933, as amended, the Corporation is authorized to make such expenditures and to enter into such
contracts, agreements, and arrangements, upon such terms and.
conditions and in such manner as it may deem necessary, including
the final settlement of all claims and litigation by or against the
Corporation; and, notwithstanding the provisions of any other law
governing the expenditure of public funds, the General-Accounting
Office, in the settlement of the accounts of the Treasurer or other
accountable officer or employee of the Corporation, shall not disallow credit for, nor withhold funds because of, any expenditure
which the board shall determine to haVe been necessary to carry
out the provisions of said Act.
The Corporation shall determine its own system of administrative accounts and the forms and contents of its contracts and
other business documents except as otherwise provided in the
Tennessee Valley Authority Act of 1933, as amended. [Public,
No. 306, 77th Cong., 1st sess., H. R. 4961.]
Ssc. 9a. The board is hereby directed in the operation of any
dam or reservoir in its possession and control to regulate the stream
flow primarily for the purposes of promoting navigation and controlling floods. So far as may be consistent with such purposes, the
board is authorized to provide and operate fatalities for the generation of electric energy at any'such dam for the use of the Corporation and for the use of the ühited States of any agency thereof,
and the board is further authorized, whenever an opportunity is
afforded, to provide and operate facilities for the generation of
electric energy in-order to avoid the waste of water power, to transmit and market such power as in this act provided, and thereby,
so far as may be practicable, to assist in liquidating the cost or aid
in the maintenance of the projects of the Authority. [49 Stat. 1076.]
SBC. 10. The board is hereby empowered and authorized to
sell tíie surplus power not used in its operations, and for operation
of locks and other works generated by it, to States, counties, municipalities, corporations, partnerships, or individuals, according to
the policies hereinafter set forth; and to carry out said authority,
the board is authorized to enter into contracts for such sale for a
term not exceeding twenty years, and in tibe sate of .such current
by the board it shall give preference to States, counties, municipalities, and cooperative oirganizations of citizens or farmers, not
organized or doing business for profit, but primarily for the purpose of-supplying electricity to its own citizens or members: Provided, That all contracts made with private companies or individuals for the sate of power, which power is to be resold for a profit,

2T4

THB T.V.A.: INTERNATIONAL_ APPLICATION

shall contain a provision authorizing the board to cancel said, contract upon five years' notice in writing, if the board needs said
power to supply the demands of States, counties, or municipalities.
In order to promote and encourage the fullest possible use of elec*
trie light and power on farms within reasonable distance of any
of its trafismission lines the board in its discretion shall liave power
to construct transmission lines to farms and small villages that are
not otherwise supplied with electricity at reasonable rates, and to
make such rules and regulations governing such sale and distribution of such electjric power as in its judgment may be just and equitable: Provided further, That the board is hereby authorized and
directed to make studies, experiments, and determinations to promote the wider and better use of electric power for agricultural and
domestic use, or for small or local industries, and it may cooperate
with State governments, or their subdivisions or agencies, with
educational or research institutions, and with cooperatives or other
organizations, in the application of electric power to the fuller and
better balanced development of the resources of the region [48 Sta.t.
64] : Provided further, That the Board is authorized to include in
any contract for the sale of power such terms and conditions,
including' resale rate schedules, and to provide for such rules and
regulations as in its judgment,may be necessary or desirable for
carrying out the purposes, of this Act, and in case the purchaser
shall fail to comply with any such terms and conditions, or violate
any such rules and regulations, said contract may provide that it
shall be voidable at the election of the board : Provided further,
That in order to supply farms and small villages with electric power
directly as contemplated by this section, the board in its discretion
shall have power lo acquire existing electric facilities used in serving
such farms and small vijlages: And provided further. That the terms
"States," "counties", and "municipalities" as used in this Act shall
be construed to include the public agencies of any of them unless
the context requires a different construction. [49 Stat. 1076.]
SBC. 11. It is hereby declared to be the policy of the Góvernmeijt so far as practical to distribute'and sell the surplus power
generated at Muscle Shoals equitably among the States, counties,
and municipalities within transmission distance. This policy is
further declared to be that the projects herein provided for shall be
considered primarily as for the benefit of the people of the section
as a whole and particularly the domestic and rural consumers to
whom ^he power cpn economieally be made available, and accordingly that sale to and use by industry shall be a secondary purpose,
to be utilized principally to secure a sufficiently high load factor
and revenue returns which will permit domestic and rural use at the
lowest possible rates and in such manner as to encourage increased
domestic and rural use of electricity. It is further hereby declared
to be the policy of the Government "to .utilize the Muscle Shoáls
properties so far as may be necessary to improve, increase, and
cheapen the production of fertilizer and fertilizer ingredients by
carrying out the provisions of this Act. [48 Stat. 64-65..]
Ssc, 12. In order to place the boar^ upon'a fair basis for
making such contracts -and for receiving bids for the sale of such
power» it is hereby expressly authorized, either from appropriations

APPBNDICBS

275

made by Congress or from funds secured from the sale of such
power, ór from funds secured by the sale of bonds hereafter provided for, to construct, lease, purchase, or authorize the construction of transmission Knes within transmission distance from the
place where generated, and to interconnect with other, systems.
The board is also authorized to lease to any person, persons, or corporation the use of any transmission line owned by the Government
and operated by the board, but no such lease shall be made that in
any way interferes with the use of such transmission line by the
board : Promâed, That if any State, county, municipality, or other
public or cooperative ' organization of citizens or farmers, not
organized or doing business for profit, but primarily for the pur-,
pose of supplying electricity to its own citizens or members, or any
two or more of, such municipalities or organizations, shall construct
or agree to construct and maintain a properly designed and built
transmission line to the Government reservation upon which is
located a Government generating plant, or to a main transmission
line owned by the Government or leased by the board and under
the control df the board, the board is hereby authorized and directed
to contract with such State, county, municipality^or other organization, or two or more of them, for the sale of electricity for a term
not exceeding thirty years; and in any such ease the board shall
giv« to such State, county, municipality, or other organization
ample time to fully comply with any local law now in existence or
hereafter enacted providing for the necessary legal authority for
such State, county, munfeipality, or other organization to contract
with the board for such power; Provided further, That all contracts
entered into between the Corporation and any municipality or
other political subdivision or cooperative organization shall provide that.the electric power shall be sold and distributed to the
ultimate consumer without discrimination as between consumers
of the sanpe class, and such Contract shall be voidable at the election of the board if a discriminatory rate, rebate,, or other special
concession is made or given to any consumer or user by the municipality or other political subdivision or cooperative organization:
And provided further. That as to any surplus power not. so sold as
above provided to ¡States, counties, municipalities, or other said
organizations, before the board shall sell the same to any person or
corporation engaged in the distribution and resale of electricity for
profit, it shall require' said person or corporation to agree that any
résale of such electric power by said person or corporation shall
TDC made to the ultimate consumer of such .electric power at prices
that shall not exceed a schedule fixed by the board from time to
time as reasonable, just, and fair; and in case of any such sale, if
an amount is charged the ultimate consumer which is in excess
of the price so deemed to be just, reasonable, and fair by the board,
the contract for such sale between the board and such distributor
of electricity shall be voidable at the election of the board: And
provided further, That the board is hereby authorized to enter into
contracts with other power systems for the mutual exchange of
unused excess power upon suitable ^terms, for the consefvation of
stored water, and as afl emergency or break-down relief. 148 Stat.
-6S-66.]

276

THB t.V.A.: INTBRNATIONAI. APpUCATION

Ssc. 12a. In order (1) to facilitate the disposition of the surplus jjower of the Corporation according to the policies set forth
m this Act; (2) to give effect to the priority herein accorded to
States, counties, municipalities, and< nonprofit organizations in
the purchase of such power by enaWing them to acquire facilities
for the distribution of such power; and (3) at the same time to
preserve existing distribution facilities as going concerns and avoid
duplication of such facilities, the board is authorized to advise and
cooperate with and assist, by extending credit for a period of not
exceeding five years to. States, counties, municipalities and nonprofit organizations situated within transmission distance from an^y
dam where such power is generated by the Corporation in acquiring,
improving, and operating (s) existing distribution facilities and
incidental works, including generating plants; and (6) interconnecting transmission lines; or in acquiring any interest in such facilities»
incidental works, and lines. [49 Stat. 1076-1077.]
Sec. 13. In order to render financial assistance to those States
and local governments in which the power operations of the Corporation are carried on and in which the Corporation has acquired
properties previously subject to State and local taxation, the board
is authorized and directed to pay to said States, and the counties
therein, for each fiscal year¿ beginning July 1, 1940, the following
percentages of the gross proceeds derived from the sale of power
by the Corporation for the preceding fiscal year as hereinafter
provided, together with such additional amounts as may be payable pursuant to the provisions hereinafter set forth, said payments
to constitute a charge against the power operations of the Corporation: For the fiscal year (beginning July 1) 1940, 10 per centum;
1941, 9 per centutn; 1942, <S per centum; 1943, 7H per centum;
1944, 7 per centum; 1945,6J4^per centum; 1946,6 per centum;d947,
5% per centum; 1948 and each fiscal year thereafter, S per .centum.
"Gross proceeds", as used in this section, is defined as the total
gross proceeds derived hy the Corporation from the sale of power •
for the preceding fisfcal year, excluding power used by the Corporation or sold or delivered to any other department or agency of the
Government of thé United States for any purpose other than the
resale thereof. The payments hereiii authorized are in lieu of taxation, and the Corporation, its property, franchise and income, are
hereby expressly exempted from taxation in any manner or form
by any State, county, municipaíity, or any subdivision or district
thereof.
The payment for each fiscal year shall be apportioned among
said States in the following manner: One-half of said payment shall
be apportioned by paying to each State the percentage thereof
which the gross proceeds of the power sales by the Corporation
within said State during the preceding fiscal year bears to the
total gross proceeds from all power sales by the Corporation during
the preceding fiscal year; the remaining one-half of said payment
shall be apportioned by paying to each State the percentage mereof
iwhich the book value of the power property held by the Gorpqratiote within said State at the end of the preceding fiscal year bears
to the total book value of all such property held by the Corporation
on the same date. The book value of power property shall include

APPBNDICBS

27?

that portion of thé investment allocated or estimated to be allocable
to pdwer: Provided, That thé minimum annual payment to each
State (including payments to counties therein) shall not be less than
an amount equal to the two-year {average of the State and local ad
valorem property taxes levied against cower property purchased,
and operated by the Corporation in said State and against that
portion of reservoir land? related to dams constructed by or on
: behalf of the United States Government and held or operated by
the Corporation and allocated or estimated to be allocable to power.
The said two-year average shall be calculated for the last two tax
years during which said property was privately owned and operated
or said land was privately owned: Provided further, That the minimum annual payment to each State in which the Corporation owns
and operates power property (including payments to counties
therein) shall not be less than $10,000 in any case: Provided further.
That the corporation shall pay directly to the respective counties
the two-year average of county ad valorem property taxes (including
taxes levied by taxing districts within the respective counties) upon
power property and reservoir lands allocable to power, determined
as above provided, and all payments to any such'county within a
State shall be deducted from the payment otherwise due to such
State under the provisions of this section. The determination of the
board of the amounts due hereunder to the respective States and
counties shall be final.
The payments above provided shall ïn each case be made to the
State or county in equal monthly installments beginning not later
than July 31,1940.
Nothing herein shall be construed to limit the authority of the
Corporation in its contracts for the sale of power to municipalities,
to permit or provide for the resale of power at rates which may
include an amount to cover tax-equivalent payments to the municipalîty in lieu of State, county, and municipal taxes upon any dis^ tribution system or property owned by the municipality or any
agency thereof, conditioned upon a proper distribution by the municipality of any amounts collected by it in lieu of State or county,
taxes upon any suda distribution system or property; it being the
intention of Confess that either the municipality or the State in
which the municipality is situated shall provide for the proi>er distribution to the State and county of any portion of tax equivalent
so collected by thç municipality in lieu of State or county taxes
upon any such distribution system or property.
The Corporation shall, not later than January 1, 1945, submit
to the Congress a report on the operation of the provisions of this
section, including a statement of the distribution to the Various
States, and counties hereunder; the effect of the operation of the
provisions of this section on State and local finances ; an appraisal
of the benefits pf ike program of the Corporation, to the States and
counties receiving payments hereunder, and the effect of such benefits in increasing taxable values within such States and counties;
and such other data, information, and recommendations as may
be pertinent to future legislation. [48 Stat. 66, as amended by S4
Stat. 626-627.]
SEC. 14. The board shall make a thorough investigation as to

278

THB T.V.A.: INTBRNATIONAL APPLICATION

the present value of Dam Numbered 2, and the steam plants at
nitrate plant numbered 1, and nitrate plant numbered 2, and as
to the cost of Cove Creek Dam, for the purpose of ascertaining how
much of the value or the cost of said properties shall be allocated
and charged up to (1) flood control, (2) navigation, (3) fertilizer,
(4) national defense, and (5) the development of power. The findings thus made by the board,'when approved by the President of
the United States, shall be final, and such findings shall thereafter
be used in all allocation of value for the purpose of keeping the book
value of said properties. In like manner, the cost and book value of
any dams, steam plants, or other similar improvements hereafter
constructed and turned over to said board for the purpose of control and management shall be ascertained and allocated. [48 Stat.
66.]
The board shall, on or before January 1,1937, file with Congress
a statement of its allocation of the value of all such properties
turned over to said board, and which have been completed prior
to the end of the preceding fiscal year, and shall thereafter in its
annual report to Congress file a statement of its allocation of the
value of such properties as have been completed during the preceding fiscal year.
For the purpose of accumulating data useful to the Congress
in the formulation of legislative policy in matters relating to the
generation,, transmission, and distribution of electric energy and
the production of chemicals necessary to national defense ahd useful
in agriculture, and to the Federal Power Commission and other
Federal and S^ate agencies, and to the public, the board shall keep
complete accounts of its costs of generation, transmission, and
distribution of electric energy and shall keep a complete account
of the total cost of generating and transmission facilities constructed
or otherwise acquired by the Corporation, and of producing such
chemicals, and a description of the jnajor components of such
costs according to such uniform system of accounting for public
utilities as the Federal Power Commission has, and if it have none,
then it is hereby empowered and directed to prescribe such uniform
system of accounting, together with records of such other physipal
data and operating statistics of the Authority as may be helpful
in determining the actual cost and value of services, and the practices, methods, facilities, equipment, appliances, and standards and
sizes, types, location, and geographical and economic integration
of plants and systems best suited to promote the public interest,
efficiency, and the wider and more economical use of electric energy.
Such data shall be reported to the Congress by the board frorrt time
to time with appropriate analyses and recommendations, and, so
far as practicable, shall be made available to the Federal Power
Commission and other Federal and State agencies which may be
eoncemed with the administration of legislation relating to the
generation, transmission, or distribution of electric energy and
chemicals useful to agriculture. It is hereby declared to bé the
policy of ,this Act that, in order, as soon as practicable, to make
the power projects self-supporting and self-liquidating, the surplus
power shall be «old at rates which, in the opinion of .the board, when
applied to thé normal capacity of the Authority's power faciities,'

-

APPBNiaass

279

will produce gross revenues in excess of the cost of production of
said power and in addition to the statement of thetx)st of power at
each power station as required by section 9 (0) of the "Tennessee
Valley Act of 1933", the board shall file with each annual report,
a statement of the total cost of all power generated by it at all
power stations during each year, the average cost of such power
per kilowatt-hour, the rates at which sold, and to whom sold,.and
copies of all contracts for the sale of power. [49 Stat. 1077.]
SBC. IS. In the construction of any future dam, steam plant,
or other facility, to be used in whole or in part for the generation
or transmission of electrie power the board is hereby authorized
and empowered to issue on the credit of the United States and to
sell serial bonds not exceeding $50,000,000 in amount, having a
maturity not more than fifty years from tíie date of issue thereof,
and bearing interest not exceeding 3^ per centum per annum.
Said bonds shall be issued and sold in amounts and prices approved
by the Secretary of the Treasury, but all such bonds as may be so
issued and sold shall have equal rank. None of said bonds shall be
sold below par, and no fee, commission, or compensation whatever
shall be paid to any person, firm, or corporation for handling,
negotiating the sale, or selling thé said bonds. All of siich bonds so
issued and sold shall have all the rights and privileges accorded by
law to Panama Canal bonds, authorized by section 8 of the Act
of Jane 28,1902, chapter 1302, as amended by the Act of December
21, 1905 (ch. 3, sec. 1, 34 Stat. S), as now compiled in section 743
of title 31 of. the united States Gode. AU funds derived from the
sale of such bonds shall be paid over to the Corporation. [48 Stat.
66-67.]
'
Sse. ISa. With the approval of the Secretary of the Treasury,
tne Corporation is authorized to issue bonds not to exceed in the
aggregate $50,000,000 outstanding at, any one time, which bonds
may be sold by the Corporation to obtain funds to carry out the
provisions of section 12a of this Act. Suchbonds shall be in such
forrfts and denominations, shall mature within such periods not
more than fifty years from the date of their issue, may be redeemable
at title option oï the Corporation before maturity in such manner
as may be stipulated therein, shall bear such rates of interest
not exceeding .3J^ per centum per annum, shall be subject to
such terms and conditions, shall be issued in such manner and
amount, and sold at such prices, as may be prescribed by the
Corporation, with the approval of the Secretary of the Treasury:
Framàeà, That such bonds shall not be sold at such prices or on such
terms as to, afford an investment yield to the holders in excess of
"¡tyi per centum per annum. Such bonds shall be fully and unoonditionaUy guaranteed both as to interest and principal by the United
States, and such guaranty shall be expressed on the face thereof,
and such bonds shall be lawful investments, and may be accepted
as security,Jor all fiduciary, trust, and,public funds, the investment
or deposit of which shall be under the authority or contrcil of the
United States or any officer or officers thereof. In the event that the
Corporation should not pay upon demand, when due, the principal
of, or interest on, such bonds, the Secretary of the Treasury shall
pay to the holder the amount thereof, which is hereby authorized

280

THB T.V.A.: INTBKNATIONAI. APPLICATION

to be appropriated out of any moneys in the Treasury not otherwise appropriated, and thereupon to the extent of the amount so
paid the Secretary of the Treasury shall succeed to all the rights
of the holders of such bonds. The Secretary of the Treasury, in his
discretion, is authorized to purchase any bonds issued hereunder,
and for such purpose the Secretary of the Treasury is authorized
to use as a public-debt tranëaction the proceeds from the sale of imy
securities hereafter issued under the Second Liberty Bond Act, as
amended, and the purposes for which securities may be issued under
such Act, as amended, are extended to include any purchases of
, the Corporation's bonds hereunder. The Secretary of the Treasury
may, at any time, sell any of the bonds of the Corporation acquired
by him under this section. All redemptions, purchases, and sales
by the Secretary of the Treasury of the bonds of the Corporation
shall be treated as public-debt transactions^of the United States.
With the approval of the Secretary of the Treasury, the Corpora^
tion shall have power to purchase such bonds in the .open market
at any time and at any price. No bonds shall be issued hereunder
to provide funds or bonds necessary for the performance of any proposed contract negotiated by the Corporation under the authority
of section 12a of this Act until the proposed contract shall have been
submitted to and approved by the Federal Power Commission.
When any such proposed contract shall have been submitted to the
said
Commission, the matter shall be given precedence ^aid shall
be1 in every way expedited and the Commission's determination
of the matter shall be final. The authority of the Corporation to
issue'bonds hereunder shall expire at the end of five years from the
date when this section as amended herein becomes law, except that
such bonds may be issued at any time after the expiration of said
peribd to provide bonds or funds necessary for the, performance
of any contract entered into by the Corporation, prior to the expiration of said period, under the authority of section 12a of this Act.
[49 Stat. 1078.]
SBC. ISb. No bonds shall be issued by the Corporation after
the date of enactment of this section under sectionals or section 15a.
'. Ssc. 15c. With the approval of the Secretary of the Treasury
the Corporation is authorized, after the date of enactment of this
section, to issue bonds not to exceed in the aggregate f61,500¿000.
Such bonds may be sold by the Corporation to obtain funds which
iriày be used for the following purposes only:

s

(1) Not to exceed $46,000,000 may be used for the purchase
of electric utility properties of the Tennessee Electric Power
Company and Southern Tennessee Power Company, as con-»
templated in the contract between the Corporation and the
Commonwealth and Southern Corporation and others, dated
as of May 12,1939,
>
,
(2) Not to exceed $6,500,000 may be used for the purchase
and rehabilitation of electric utility properties of the Alabama
Power Company and Mississippi Power Company in the following named counties in northern Alabama and northern Mississippi: The counties of Jackson,. Madison, Limestone, Lauder, dale, Colbert, Lawrence, Moigan, Marshall, De Kalb, Cherokee,

APFSNDIC^S

281

Cullman, Winston, Franldin, Marion,,and Lamar in northern
Alabama, and the counties of Calhoun, Chickasaw, Monroe,
, Clay, Lowndes, Oktibbeha, Choctaw, Webster, Noxubee,
Winston, Neshoba, and Kemper in northern Mississippi.
(3) Not to exceeda $3,500,000 may be used for rebuilding,
replacing, and repairing electric- utility properties purchased
by the Corporation in accordance with the foregoing provisions of this section.
(4) Not to exceed, $3,500,000 may be used for constructing electric transmission lines, substations, and, other electrical
facilities necessary to connect the' electric utility properties
purchased by the Corporation in accordance with the foregoing
provisions of this section with the electric power system of the
Corporation.
(5) Not to exceed $2,000,000 may be used for making loans
under section 12a to States, counties, municipalities, and «onprofit organizations to enable them to purchase any electric
utility properties referred to in the contract between the Corporation and the Commonwealth and Southern Corporation
and others, dated as of May 12, 1939* or any electric utility
properties of the Al.abama Power Compaiiy or Mississippi
Power Company in any of the counties in northern Alabama
or northefn Mississippi named, in paragraph (2).
The Corporation shall file with the President ^nd with the Congress
in December of each year a financial statement and complete report
as to the expenditure of funds derived from the sale of bonds under
this section covering the period not covered by any such previous
statement or report. Such bonds shall be in such forms and denominations, shall mature within such periods not more than fifty years
from the date of their issue, may be redeemable at the option of
the Corporation before maturity in such manner as may be stipulated therein, shall bear such rates of interest not exceeding 3 J^ per
centum per annum, shall be subject to such terntó and conditions,
shall be tssuedin such manner andamount, and sold at such prices,
as may be prescribed by the Corporation with the approval of the
Secretary of the Treasury: Promded, That such,bonds shall not be^
sold at such prices or on such terms as to afford an investment
yield to the holders in excess'of 334 per centum per annum. Such
bonds shall be fully and unconditionally guaranteed both as to
interest and principal by the United States, and suèh guaranty shall
be expressed on ike face thereof, and such bonds shall be lawful
investments, and may be accepted as security, for all fiduciary,
trust, and public funds, the investment or deposit of which shall
be under the authority or control of the United States or any officer
or officers thereof.- In the event that the Corporation should not
pay upon demand when due, the principal of, or interest on, such
bonds, the Secretary,of the Treasury shall pay to the holdei" the
amount thereof, which is hereby anihorized to be appropriated
out of any moneys in the Treasury not otherwise appropriated, and
thereupon to the extent of the amount so paid the Secretary of the
Treasury shall succeed to all the riglits of the holders of such bonds.
The Secretary of the Treasury, in his discretion, is authorized to

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TH» T.V.A. :, INTERNATIONAL ..APPLICATION

purchase any bonds issued hereunder, and for such purpose tlie
Secretary of the Treasury is authorized to use as a public-debt
transaction the proceeds from the sale of any securities hereafter
issued under the Second Liberty Bond Act, as amended, and the
purposes for which securities may be issued ujider such Act, as
amended, are extended to include any purchases sd the Corporation's bonds hereunden The Secretary of the Treasury may, at
any time, sell any of the bonds of the Corporation acquired.by him
under this section. All redemptions, purchases, and sales by the
Secretary of the Treasury of the bonds of the Corporation shall be
treated as public-debt transactions of the United States. With the
approval of the Secretary of the Treasury, the Corporation shall
have power to purchase such bonds in the open market at afiy time
and at any price. None of the proceeds of the bonds shall be used
for the performance of any proposed contract negotiated by the
Corporation under the authority of section 12a of this Act uiitil
the proposed contract shall have been submitted to and approved
by the Federal Power Commission. When any sutíh proposed contract shall have been submitted to the-saîd Commission, the matter
shall be given precedence and shall be in every way expedited and
tiie Commission's determination of the matter shall be final. The
authority of the Corporation to issue bonds under this section shall
expire January 1, 1941, except that if at the time such authority
expires the amount of bonds issued by the Corporation under this
section is less than 161,500,000, the Corporation may, subject to
the foregoing provisions of this section, issue, after the expiration of
such period, bonds in an amount not in excess of the amount by
which the bonds so issued prior to the expiration of such period is
less than $61,500,000, for refunding purposes, or, subject to' the
provisions of paragraph (5) of this section.(limiting the purposes
for which loans under section 12a of funds derived from bond proceeds may be made) to provide funds found necessary in the performance of any contract entered into by the Corporation prior
to the expiration of such period, under the authority of section 12a.
[53 Stat. 1083-1085.]
>
SBC. 16. The board, whenever the President deems it advisable, is hereby empowered and directed to complete Dam Numbered 2 at Muscle Shoals, Alabama, and the steam plant at nitrate
pjant numbered 2, in the vicinity of Muscle Shoals, by installing
in Dam Numbered 2 the additional power units according to the
plans and specifications of said dam, and the additional power unit
in the steam plant at nitrate plant numbered 2. [48 Stat. 67.]
SBC. 17. The Secretary of War, or the Secretary of the Interior,
is hereby authorized to construct, either directly or by contract
to the lowest responsible bidder, after due advertisement, a dam
in and across Clinch River in the State of Tennessee, which has
by long custom become known and designated as the Cove Creek
Dam, together with a transmission line from Muscle Shoâls, according to -the latest and most approved designs, including power
house and hydroelectric installations and equipment for the generation of power, in order that the waters of the said Clinch River may
be impounded and stored above said dam for the purpose of increasing and regulating the flow of the Clinch River and the Ten-

APPBNDICeS

283

nessee River below, so that the maximum amount of-primary
power may be developed at Dam Numbered^ and at arty and all
other dams below the said Cove Creek Dam: Provided, howeoer.
That the President is hereby authorized by appropriate order to
direct the employment by the Secretary of War, or by the Secretary of the Interior, of such engineer or engineers as he may designate, to perform such duties and obligations as he may deem proper,
either m the drawing jof plans and specifications for said dam, or
to perform any other work in the buildiiig or constructionof the
aamev The President may, by such order, place the control of the
construction of said dam in the hands of such engineer or engineers
taken from private life as he may desire: And promded further.
That the President is hereby expressly authorized, without regard
to the restriction or limitation of any other statute, "to select attorneys and assistants for the purpose of making any investigation
he may43eem proper to ascertain whether,, in the control and management of Dam Numbered 2, or any other dam or property owned
by the Government in the Tennessee River Basin, or in the authorization of any improvement therein, there has been any undue or
unfair advantage given to private persons, partnerships, or corpoçations, by any officials or employees of the Government, or whether
in any such matters the Government has been injured or unjustly ,
deprived of any of its rights. [48 Stat. 67.]
Ssc. 18. In order to enable and empower the Secretary of War,
the Secretary of the Interior, or the board to carry out the authority
hereby conferred, in the most economical and efficient manner,
he or it is hereby authorized and empowered in the exercise of the
powers of national defense in aid of navigation, and in the control
of the flood waters of the Tennessee and Mississippi Rivers, constituting channels of interstate commerce, to exercise the right
of eminent domain for all purposes of this Act, and to condemn
all, lands, easements, rights of way, and other area necessary in
order to obtain a site for said Cove Creek Dam, and the flowage
rights for the reservoir of water above said dam, and tô negotiate
and conclude contracts with States, counties, municipalities, and
all State agencies and with railroads, railroad corporations, common carriers, and all public utility commissions and any other
person, firm, or corporation, for the relocation of railroad tracks,
highways, highway bridges, mills, feme's, electric-light plants,
and any and all other properties, enterprises, and projects whose
removal may be necessary in order to carry out the provisions of
this Act. When said Cove-Creek Dam, transmission line, and
power house shall have been completed, the possession, use, and
control thereof shall be entrusted to the Corporation for use and
operation in connection with the general Tennessee Valley project,
and to promote flood control and navigation in the Tennessee River.
[48 Stat. 67-68.1
Sec. 19. The Corporation, as an instrumentality and agency
of the Government of the united States for the purpose of executing
its constitutional powers, shall have access to the Patent Office
of theUnited States for the purpose of studying, ascertaining, and
copying all methods, formulae, and scientific information (not
i®cluding aefcess to pending applicatioas for patents) necessary to

284

TKB T.V.A.: INTSRNATIOÑAL APPLICATION

enable the Corporation to use and employ the most efficacious and
economical process for the production of fixed nitrogen, or any
essential ingredient qi fertilizer, or any method of improving and
cheapening the production of hydroelectric power, and^ any owner
of a patent whose patent rights may have been thus in any way
copied, used, infringed, or employed by the exercise of this authority
by tlie Corporation shall have as the exclusive remedy-a cause of
action against the Corporation to be instituted and prosecuted on
the equity side of the appropriate district court of the United States,
for the recovery of reasonable compensation for such infringement.
The Commissioner of Patents shall furnish to the Corporation, at
its request and without payment of fees, copies of documents on
file in his office: Provided, That the benefits of this section shall not
apply to any ^rt, machine, method of manufacture, or composition
of matter, discovered or invented by such employee during the time
of his employment or service with the Corporation or with the
Government of the United States. [48 Stat. 68.|
Ssc. 20. The Government of the United States hereby reserves
the right, in case of war or national emergency declared by Congress, to take possession of all or any part of the property described
or referred to ii> this Act for the purpose of manufacturing explosives or for other war purposes; but, if this right is exercised by the
Government, it shall pay the reasonable and fair damages that may
be suffered by any party whose contract for the purchase of electric
power or fixed nitrogen or fertilizer ingredients is hereby violated,
after the amount of the damages has been fixed by the United
States Court of Claims in proceedings instituted and conducted
for that purpose under rules prescribed by the court. [48 Stat. 68.]
Ssc. 21. (a) All general penal statutes relating to the larceny,
embezzlement, conversion, or to the improper handling,, retention,
use, or disposal of public moneys or property of the United States,
shall apply to the moneys and property of the Corporation and to
moneys and properties of the United States entrusted to the Corporation.
(b) Any person who, with intent to defraud the Corporation,
or to deceive any director, officer, or employee of the Corporation
or any officer or employee of the United States (1) makes any false
entry in any book of the Corporation, or (2) makes any false report
or statement for the Corporation, shall, upon conviction thereof,
be fined not more than $10,000 or imprisoned not more than five
years, or both.
(c) Any person who shall receive any compensation, rebate,
or reward, or shall enter into any conspiracy, collusion, or agree?
ment, express or implied, with intent to defraud the Corporation
or wrongfully and unlawfully to defeat its purposes, shall, on conviction thereof, be fined not more than $5 ¿000 or imprisoned not
more than "five years, or both. [48 Stat. 68-69.1
Sue. 22. To aid further the proper use, conservation, and
development of the natural resoufces of the Tennessee Klver drainage basin and of such adjoining territory as may be related to or
materially affected by the development conséquent to this Act,
and to provide for the general welfare of the citizens of said areas,
the President is hereby authorized, by such means or methods as

AFFENDICBS

285

he may deem proper within the limits of appropriations made therefor by Congress, to make such surveys of and general plans for said
Tennessee basin and adjoining territory as may be useful to the
Congress and to the several States in guiding and controlling the
extent, sequence, and nature of development ¿hat may be equitably
and economically advanced through the expenditure of public
funds, or through the guidance or control of public authority, all
for the general, purpose of fostering an orderly and proper physical,
economic, and social development of said areas; and the President
is further authorized in making said surveys and plans to cooperate
with the States affected thereby, or subdivisions or agencies of such
States, or with cooperative or other organizations, and to make
such studies, experiments, or demonstrations as may be necessary
and suitable to that end. [48 Stat. 69.]
Sec. 23. The President shall, from time to time, as the work
provided for in the preceding section progresses, recommend to
Congress such legislation as he deems proper ^to carry out the
general purposes stated'in said section^and for the especial purpose
of bringing about in said Tennessee drainage basin and adjoining
territory in conformity with said general purposes (1) the maximum
a.mount of flood control; (2) the maximum development of said
Tennessee Ôiver for navigation purposes; (3) the maximum generation of electric power consistent with flood control and navigation;
(4) the proper use of margmal lands; (5) the proper method of reforestation of all lands in said drainage basin suitable for reforestation; and (6) the economic and social well-being of the people living
in said river basin. [48 Stat. 69.]
S»c. 24. For the purpose of securing any rights of flowage, or
obtaining title to or possession of any, property, real or personal,
that may be necessary or may become necessary, in the carrying
out of any of the provisions of this Act, the President of the United
States for a period of three years frotó the date of the enactment
<jf this Act, is hereby authorized to acquire title in the name of the
United States to such rights or such property, and to provide for
the payment for same by directing the board to contract to deliver
power generated at aiiy of the plants now owned or hereafter owned
or constructed by the Government or by said Corporation, such
future delivery of power to continue for a period not exceeding
thirty years. Likewise, for one year after the enactment of this
Act, thé President is further authorized to sell or lease any parcel
or part of any vacant real estate now owned by the Government
in said Tennessee River Basin, to persons, firms, or corporations
who shall contract to erect thereon factories or manufacturing establishments, and who shall contract to purchase of said Corporation
electric power for the operation of any such factory or manufac&iring
establishment. No contract shall be made by the President for the
sale of any of such real estate as may be necessary for present or
future use on the part of the Government for any of the purposes of
this Act. Any such contract made.by the President of the united
States shall be carried out by thé board: Pr&sidei, That no such
«©ntract shall be made that will in any way abridge or take away
the preference right to purchase power given in this Act to States,
eounties, municipalities, or farm organizatipns: Premdei further.

286

nm T.V.A.: INTBSNATIONàL APPLICATION

That no lease shall be for a term to exceed Mty yeaxs: Promded
furthé, That any sale shall be'on condition that said land shall be
used for industrial purposes only. [48 Stat. ,69-70.]
> SBC. 25. The Corporation may cause proceedings to be instituted for the acquisition by condemnation of any lands, easements, or rights of way which, in the opinion of the Gorpofation,
are necessary to.carry out the provisions of this Aet._ The proceedings shall be instituted in the United States district court for the
district in which the land, easement, right of way, or other interest,
or any part thereof, is located, and such court shall have full jurisdiction to divest the complete title to the property sought to be
acquired out of all persons or claimants and vest the same in the
^United States in fee simple, and to enter a decree quieting the title
thereto in the -United States of America.
Upon the filing of a petition for condemnation and for the
purpose of ascertaining the value of the property to be acquired,
and assessing tlie compensation to be paid, the courtf shall appoint
three commissioners who shall be disinterested persons and who
shall take and subscribe an oath that they do not own any lands,
or interest or easement in any lands, which it may be desirable for
the United States to acquire in the furtherance of said project,
and such commissioners shall not be selected from the locality
' wherein the land sought to be condemned lies. Such commissfoners
shall receive a per diem of not to exceed $15 for their services,
together with an additional amount of f S per day for subsistence
for time actually spent in performing their duties as commissioners.
It shall be the duty of such commissioners to exajnine into the
value of the lands sought to be condemned, to conduct hearings
and receive evidence, and generally to take such appropriate steps
as may be proper for the determination of the value of the said lands
sought to be condemned, and for such purpose the commissioners
are authorized to administer oaths and subpoena witnesses, which
said witnesses shall receive the same fees as are provided for witnesses in the Federal courts. The said commissioners shMl thereupon file a report setting forth their conclusions as to the value
of the said property,sought to be condemned, making a separate
award and valuation in the premises with respect to each separate
parcel involved. Upon the filing of such award in court the clerk of
said court-shall give notice of the filing of such award to the parties
to said proceeding, in manner and form as directed by the judge
of said court.
Either or both parties may file exceptions to the award of said
commissioners within twenty days from the date of the filing of
said award in court. Exceptions filed to such award shall be heard
before three Federal district judges unless the parties, in writing,
in person, or by their attorneys, stipulate that the exceptions may
be heard before a lesser number of judges. On such hearing such
judges shall pass de nevo upon the proceedings had before the commissioners, may view the property, and may take additional evidence. Upon such hearings the said judges shall file their own
award, fixing therein the value of the property sought to be condemned, regardless of the award previously made by the'said commissioners.

J

APP^NDICSS

287

At any time within thirty days from the filing of the decision
of the district judges upon the hearing on exceptions to the award
made by the commissioners, either party may appeal from such
decision of the said judges to the circuit court of appeals, and the
said circuit court of appeals shall upon the hearing on said appeal
dispose of the same upon the record, without regard to the awards
or findings theretofore made by the commissioners or the district
judges, and such circuit court of appeals shall thereupon fix the
"Value of the said property sought to be condemned.
Upon acceptance of an award by the owner of any property
herein provided ta be appropriated, and the payment of the money
awarded or upon the failure of either party to file exceptions to the
award of the commissioners within the time specified, or upoirihe
award of the commissioners, and the paymentof the money by the
United States pursuant thereto, or the payment of the money
awarded into the registry of the court by the Corporation, the
title to said property and the right to the possession thereof shall
pass to the United States, and thé United States shall be entitled
to a writ in the same proceeding to dispossess the former owner of
said property, and all lessees, agents, and attorneys of such former
owner, and to put the Unitfed States, by its corporate creature and
agent, the Corporation, into possessionof said property..
In the event of any property owned in whole or in part by
minors, or insane persons, or incompetent persons, or estates of
deceased persons, then the legal representatives of such minors,
insane persons, incompetent persons, \)r estates shall have power,
by and with the consent and approval of the trial judge in whose
court said matter is for determination, to consent to or reject the
awards of the commissioners herein provided for, and in the event
that there be no legal representatives, of that the legaj representatives for such minors, insane persons, or incompetent persons shall
fail or declme to act, then such trial judge may, upon motion,
appoint a guardian aà Utem to act for such minors, insane persons,
or incompetent persons, and such guardian ad Utem shall act to the
full extent and to th& same purpose and effect as his ward could
act, if competent, and such guardian ad Uiem shall be deemed to"
have full power and authority to respond, to conduct, or to maintain
any proceeding herein provided for affecting his said ward. [48
Stat. 70-71.]
SBC 26. Commencing July 1, 1936, tjfeie proceeds for each fiscal
year derived by the board from the sale of power or any other produets manufactured by the Corporation, and from any other aetivities of the Corporation including the disposition of any real or per-,
sonal property, shall be paid into the Treasury of the United States
at the end of each calendar year, save and except such part of such
proceeds as in the opinion of the board shall be necessary for the
Corporation in the operation of dams and reservoirs, in conducting
its business in generating, transmitting, and distributing electric
energy and iff manufacturing, selling, and distributing fertilizer and
fertilizer ingredients. A continuing fund of $1,000,000 is also
excepted from the requirements of this section and may be withheld
by the board to defray emergency expenses and to insure continuous
operation: Provided, That nothing in this section shall be construed

288

THB T.V.A.: INTERNATIONAL APPLICATION

to prevent the use by the board, after June 30, 1936, of proceeds
' accruing prior to July 1, 1936, for the payment of obligations lawfully incurred prior to'such latter date. [48 Stat. 71, as amended
by 49 Stat. 10790
Ssc. 26a. The unified development and regulation of the
Tennessee River system requires that no dam, appurtenant works,
or other obstruction, affecting navigation, flood control, or public,
lands or reservations shall be constructed, and thereafter operated
or maintained across, along, pr in the said river or any of its tributaries until plans for such construction, operation, and maintenance
shall have been submitted to and approved by the board; and the
construction, commencement of construction, operation, or maintenance of such structures without such approval is hereby prohibited.
When such plans shall have been approved, deviation therefrom
either before or after completion of such structures is prohibited
unless the modification of such plans has previously been submitted to and approved by the board.
In the event the board shall, within sixty days after their formal
submission to the board, fail to approve any plans or modifications,
as the case may be, for construction, operation, or maintenance of
any such structures on the Little Tennessee River, the above requirerrients shall be deemed satisfied, if upon application to the
Secretary of War, with due notice to the Corporation, and hearing
thereon, such plans or modifications are approved by the said Secretary of War as reasonably adequate and effective for the unified
development and regulation of the Tennessee River system.
Such construction, commencement of construction, operation,
or maintenance of any structures or parts thereof in violation of the
provisions of this section may be prevented, and the removal or
discontinuation thereof required by the injunction or order of any
district «ourt exercising jurisdiction in any district in whictrsuch
structures or parts thereof may be situated,"and the Corporation is
hereby authorized to bring appropriate proceedings to this end.
- The requirements of this section shall not be construed to be a
substitute for the requirements of any other law of the United
States or of any State, now in effect or hereafter enacted, but shall'
be in addition thereto, so that any approval, license, permit, or
other sanction now or hereafter required by the provisions of any
such law for the construction, operation, or maintenance of any
structures whatever, except such as may be constructed, operated,
or maintained by the Corporation,'shall be required, notwithstanding the provisions of this section. [49 Stat. 1079,]
SBG. 27. AH appropriations necessary to carry out the provisions of this Act are hereby authorised. [48 Stat. 71.]
SBC. 28. That all Acts or parts of Acts in conflict herewith are
hereby repealed, so far as they affect the operations contemjplated
by this Act. [48 Stat. 71.1
: Ssc. 29. The right to alter, amend, or repeal this Act is hereby
expressly declared and reserved, but no such amendment or repeal
shall operate-to impair the obligation of any contract made by said
Corporation under any power conferred by this Act. [48 Stat. 72,|
SBC. 30. That the sections of this Act are hereby declared to be
separable, and in the event of any one or more sections of tiiis Act,

APPeNDICSS

289

or parts thereof, be held to be unconstitutional, such holding shall
not affect the validity of other sections or parts of this Act. [48 Stat.
72, as amended by 49 Stat. 1081.] #
Sac. 31. This Act shall be liberally construed to carry out the
purposes of Congress to provide for the, disposition of-and make
needful rules and regulations respecting Government properties
entrusted to the Authority, provide for the national defense, im-^
prove navigation, control destructive floods, and promote interstate
commerce and the general welfare, but no real estate shall be held
except what is necessary in the opinion of the boarcTto carry out
plans and projects actually decided upon requiring the use of such
land: Promded, That any land purchased by the Authority and not
necessary to carry out plans and projects actually decided upon
shall be sold by the Authority as agent of the United States, after
1
due advertisement, at public auction to the highest bidder, or at.
private sale as provided in section 4 (k) of this Act. [49 Stat. 1080.]

Publications of the l.LO.
The Displacement of Population
in Europe
by
Eugene M.

KUMSCHBR

Population movements Gomparable to those set in motion by
the present war havte not been witnessed îor many centuries. Millions of people have fled from their homes; millions more have been
forcibly transplanted; millions of others have been taken prisoners
or recruited as workers and sent away from their countries.
This study makes a general survey of the position and a ten-tative estimate of the magnitude oi the problems involved in the
post-war settlement and redistribution of these scattered populations. It is illustrated by three maps and a chart.
CONTENTS
CHAPTER

1.

.

MIGRATION MOVEMENTS OE THE. GERMAN PEOPLE.

Transfer and Resettlement of Germans from Abroad
—Distribution and Areas of Resettlement-—Movements of Germans from the Reich.
CHAPTER

II.

MOVEMENTS OP NON-GERMAN POPüULTIONS.

Pre-War Refugee Movements—Movements of Peoples other than Jews: Czechoslovakia, Poland, Finland, The Baltic Countries, Denmark and Norway,
Netherlands, Luxemburg, Belgium, France, SouthEastern Europe, U.S.S.R.—The Expulsion and
Deportation of Jews.
CHAPTER

HI.

MOBILISATION OP "FOREIGN LABOUR BY GERMANY.

ImmigratiOii of Foreign Labour before the WarGeneral Survey of Foreign Labour Mobilisation
during the War.
CONCLUSION

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chance to succeed should read and ponder.*'—The Annals. ..
" . . .one of the most important contributions so far made to post-war
preparations."—Christian Science Monitor,
*
*
. '
September 1943. 171pp.
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