Editor's note: Every Sunday, Fortune publishes a favorite story from our magazine archives. This week, we turn to an October 1933 feature on the origins and goals of the Tennessee Valley Authority, the U.S. government's first major regional economic development and planning agency and a cornerstone of The New Deal era. President Obama's recently released budget package includes a proposal to conduct a strategic review of the TVA, raising the prospect that the government might sell all or part of the agency. Such a move would signal a meaningful shift in the ongoing debate over the proper role of the federal government within regional and state economies.
FORTUNE -- The Tennessee River system begins on the worn magnificent crests of the southern Appalachians, among the earth's older mountains, and the Tennessee River shapes its valley into the form of a boomerang, bowing it to its sweep through seven states. Near Knoxville, the streams still fresh from the mountains are linked and thence the master stream spreads the valley most richly southward, swims past Chattanooga and bends down into Alabama to roar like blown smoke through the floodgates laboratorof Wilson Dam, to slide becalmed along the crop-cleansed fields of Shiloh, to march due north across the high diminished plains of Tennessee and through Kentucky spreading marshes toward the valley's end where finally, at the toes of Paducah, in one wide glassy golden swarm the water stoops forward and continuously dies into the Ohio.
The watershed encompasses some 44,000 square miles, a valley about the size of England, and within a day's journey of all between Boston, Duluth, Key West, a valley whose climate is excellently mild (the mean annual temperature is 60˚), a valley which is the heart of the Southeast.
Within that valley are a number of things. Four cities: Asheville -- in the eastern mountainous land of summer resorts, a city which has never quite got over the shock of Mr. Thomas Wolfe's novel Look Homeward, Angel (he was a local boy and should have done more kindly by them). Knoxville -- at the head of the Tennessee, girdled with mines and quarries and timber, the first capital of the state of Tennessee, the seat of the University of Tennessee, the erstwhile (1931) twenty-eighth most murderous city, big or little, in the U.S. Chattanooga -- self-styled Dynamo of Dixie and great center for religious publications, whose 400 factories, more or less, and hospitable attitude toward Yankee industrialists and whose strategic location as a distributor do much to give point to the Dynamic epithet but hardly explain the more typically native boast of more churches per capita than any other city in the U.S. Paducah -- set among the western lands of Kentucky tobacco and among the great tobacco buyers (American Tobacco and Axton-Fisher have "interests" there).
There are also the towns up-and-coming like Bristol and Kingsport and Johnson City and the villages down-at-heel like Dayton of blessed memory and Jacksboro and Tracy City. And but for the fine soft slur of speech in the streets, and the still goodly number of Model T Fords, and the few deciduous southern mansions with their hitching posts, and the "niggertowns" with their clay beaten down by bare heels, and the whitewashed clapboard shacks, and the odd predilection of the valleyite for "lawing,"* these towns might as easily be in Massachusetts or Minnesota with Main Street much the same the country over.
And there's the Negro, too, who might be better off in Charleston or in Harlem. And here and there a Southern Gentleman of the old school, who still nuzzles "burbon" juleps and quotes Horace and talks "hosses" and loves his country as the greatest battleground of all the war, next to Virginia. And here and there a farmer prosperous enough to spend five to ten thousand a year on fertilizer alone. And the mountaineer, of whom more later. And the crops, which are varied as the map will show and which are often as not poor into the bargain. And many a mine and knitting mill and lumber camp in the valley and a smattering of the outposts of big companies like International Harvester at Chattanooga and Aluminum Co. of America near Knoxville -- all to remind you that in the past two generations men came in from the North and men came to in the South and a New South grew up and twisted its roots through the Old. These industries and these companies are of less significance to TVA by title and size and balance sheet than for what they have done for the valley. There are these things among many others and there is the open country itself by the millions of acres -- some of the loveliest and most somber and some of the cruelest and most haggard you will find in all America. There are also, all told, some 2,000,000 people.
This is the Tennessee Valley you might see as a visitor. It is more or less the valley you'd know if you lived there. It is the valley that is newly TVA's to have and to hold, for better, for worse. To TVA, there are things about the valley still more important and not so easily seen. The mountains are profoundly muscled with some forty of the minerals most useful to man. Coal and iron ore and limestone (which, properly handled, add up to spell "Ruhr") are there in huge quantities and are convenient to the river; there is much copper and zinc and marble and bauxite (the ore of aluminum) and lead; immense deposits of manganese scarcely touched (the natives condition their rutty roads with it) and phosphate rock in huge abundance and asphalt rock; even traces of silver and gold. Of chestnut oak and oak pine there are excellent stands, billions of board feet, and there are dense forests of the temperate trees. The soil is as varied as the stones under it. The river is a powerful and far-falling river constant in its course, and its bed of limestone and tough clay is in general a good bed for big dams. Indeed, nature set the stage for something of a Utopia. And if you believed only the Chambers of Commerce and the first signs you saw on every road you might believe that 2,000,000 people haven't done so badly. From the forests of the seven states which the valley involves, 7,000,000,000 board feet are cut each year. In sixty years, Tennessee has produced nearly a quarter of a billion tons of coal. The yearly value of natural resources (exclusive of timber) in Tennessee alone is $38,500,000. Fine figures, these. You could paint the whole valley with such figures. You might find business pretty bad but they'd be nice figures just the same, and the picture a good clear-cut picture of the sort it is nice to look at.
But here is the other side of the picture: careless fires and unregulated cutting have ruined and are ruining great stands of timber on watersheds where trees should have stood forever. Because natural resources, which should have sustained local industries indefinitely, have been shipped away in crude form and exhausted, whole communities have been and are being pauperized, abandoned. Where the forests are no more, where the farms are steep, where the land is light, where copper fumes wander, vast acreages of farmland are rapidly being totally laid waste by erosion. The waste land descends unimpeded into the river slowly but surely to choke the channels and to fill in great natural reservoirs that cannot be replaced. Scarcely under control and highly capricious in its flow, the Tennessee River floods the bottom lands and does an estimated $1,780,000 damage every year and adds its more than mite to the springtime disorders of the Mississippi. The river is poorly developed for navigation. Its power possibilities have scarcely been touched. Muscle Shoals was a try; it cost the government some $150,000,000 and, as everyone knows, is now a muscle-bound white elephant.
Of the 2,000,000 inhabitants, perhaps one in six lives in a large city. But more important to TVA are the small-towners, still more important are the farmers. Over half the people live on farms. Some of the soil is good. Some of the best is in danger of flood. Much more, thanks to erosion, is being slaked of its life. Still more is light and sandy and inherently unfit for cultivation. The farmer in the mountains who takes apart the long sick land between the tilted racks of stone calls eight bushels of wheat and ten of corn to the acre a right good crop.** The farmers are backward in their methods; machinery in these times even less used than ever; fertilizer is expensive; power is unavailable to the poorer people at reasonable prices, virtually unheard-of on many farms and for that matter in many communities; families are large; food is poor; pellagra and hookworm and dysentery are general among the mountain people. To these farms, from the factories of stricken midland cities, jobless prodigals have returned by the tens and scores of thousands in no hope of work but with some hope for mere existence.
There are, to be sure, prosperous men who till good lands but where TVA has looked it has found the typical valley farmer and his family getting along on $100 cash a year.
When the farmer lives up the shadowy coves and deep among the mountains on farms so steep that, in native parlance, a man "falls outen his own garden" and "swings in his back door on a grapevine," in country so wild that he "keeps possums for house cats," he is more and less than a farmer: he is a mountaineer. He is the strong backbone of the Tennessee Valley. His forefathers settled this country in the 1700's when the effete civilization east of the Alleghenies stuck in their craws. They whipped the Britishers and Loyalists at King's Mountain. They kept much to themselves and their great-grandsons do likewise and live in much the same way, while slowly the sawmills and the mines and the railways and the highways and now TVA burn seclusion from about them. Many of them are illiterate; many are lawless in the bad sense and the good of that word. They never heard of Margaret Sanger and they have little interest in Mazda bulbs and little respect for this century of progress. Homespun and feuds and "mountain dew" are not so rife among them as some dreamy souls would have you believe, but you would find them all if you looked around a bit. Their language is pidgin-Elizabethan and some of their songs are still of the sea and of England and strong in their blood is a species of rugged individualism which makes the Gary brand look more pallid than usual. In short, for all the cheap romancing the fact has had, they are of that incomparably pure American stock which produced such men as Lincoln and Chief Justice Marshall and, for that matter, Cordell Hull. TVA has a deep but realistic respect for what it calls the native culture of the valley and, far more directly than the citizen of Knoxville, the mountaineer is a part of TVA's plans.
Such is the laboratory for a great experiment. Such are the raw materials good and ill from which TVA prepares to fashion a civilization which, in a certain important way, is new and is significant to all the U.S. That important way is well enough known: the past four years have filled the air with it in various forms. Most simply, it is this: the Tennessee Valley and the continent as a whole had many riches in common when, in 1492, those riches began to be suspected. And the development of the valley up to the present has had much in common with the development of the U.S., the opening up of any rich, new land in the westward course of empire. It has been praised as a pioneer development. Other salient characteristics are these: it has been consistently shortsighted, wasteful, uncoordinated. Far and wide the opinion -- sound, bad, and indifferent -- grows that we are approaching a turning point in civilization, that among other things an ancient human habit must be corrected. Man must learn to cooperate with his surroundings instead of disemboweling and trampling and hoping to discard them. On the crest of this wave of talk and overrapid action TVA is the first American attempt to tackle the problem specifically and bit by bit to build at the pace which scientific advancement requires. If TVA succeeds in its valley, it will be of significance not merely to the whole Southeast and not merely as a classic model for similar work in other valleys*** but ultimately of importance to all the U.S. At least that is the way the Authority looks at it.
Of TVA's experiment, these, briefly stated, are the prime ultimate objectives:
To regulate river flow. To develop navigation to a maximum. To eliminate flood. To develop and use electric power as a yardstick to gauge the practices of private power companies. To distribute as much power as possible as cheaply as possible to as many people as possible. To try to develop cheap fertilizers. To control soil erosion. To classify and improve the soil and put it to its best uses. To promote better farming methods. To conserve the forests. To develop all resources in the valley in good relation to one another.
These are the outward and visible signs of something else again. Apparently, it isn't quite possible to undertake such comprehensive responsibilities without a somewhat Utopian gleam in the eye: at any rate, TVA has it. The coordination TVA seeks is social as well as industrial. In other words, it involves human beings. The TVA vision runs something like this: the natural forces and resources in the valley will be developed with one eye on the long future and the other on the immediate welfare of the people. Farmers will till only the good and tillable soil. The rich resources of the valley will be developed by relatively small industrial groups; production will be governed more by local than by outside demand.
The factories will be not in the cities but in the open valley. The leaders, by preference, will be valley men -- the workers must be -- until unemployment is no more in the valley. Not only will farmers and villagers earn a prospering penny; people will move out from the cities and work the land and the machine as well. In short, a number of familiar phrases flow readily to mind: what TVA is after is a decentralization of industry, regional planning on a large scale, a well-wrought and well-controlled balance between the Jeffersonian dream of an agrarian democracy and the best characteristics of what so many people like to call the Power Age.
In this enormous machine the balance wheel is human. And here TVA becomes almost mystical in its earnestness and speaks of preserving and developing the native culture. For what that means, you must look again at the man and woman who sit on their front porch and our first page. These mountaineers must be raised and reconciled to such higher standards of living as obtain in more prosperous parts of the valley. They must also be taught responsibility to society. On the other hand, the more prosperous valleyites must be raised to that high standard of Americanism which is peculiarly the mountaineer's.
It is no easy task and it is not easily definable, but it is important to TVA and it is therefore to be considered. How seriously, if not indeed fanatically, TVA is taking these social issues its employment policies will serve to show. From the very first, the stand has been notably firm against political appointments, to the slight irritation of Postmaster General Jim Farley, and just as firm, though more kindly, against unemployed "outsiders." TVA's work is indeed to be of, by, for the valley people. As for the valleyite who applies for work, he is faced with a peculiarly searching questionnaire, is asked much in detail about his schooling and his relationship with spirituous liquors during the past outlawed decade. To gather such strange if valuable data requires, to say the least, tact if you wish an independent countryman to take your job rather than starve in protest. Evidently, TVA has tact, too, for men are taking jobs. The men who build Norris Dam will live in the carefully pioneer-style model town which will rise at Cove Creek. They will work only three days a week. (Three days' wages will go far in mountain families used to getting along on $100 and less a year -- and will go to twice as many families.) On the free days these workmen may, if they like, attend vocational school and learn plumbing and masonry and carpentry and other crafts. Not, as TVA points out, for the purpose of annoying the trades unions, but primarily to supply good handymen to remote neighborhoods which have had none before.
All of which is very fine. It has an epic quality -- and a quality more easily put in words than in deeds. Who are the men who are to translate it? They are more important to the plan than their titles suggest, for like many another Rooseveltian conception, the Tennessee Valley Authority can be visualized only in terms of the men he chose to administer it.
The TVA is a corporation created by the Tennessee Valley Authority Act, which in turn was created by warlike little Senator Norris of Nebraska and by a President who saw more in it than "putting the Government into the power business" (which had brought two prompt Republican vetoes) and by careful study of the legal set-up of Port of New York Authority and -- like any great and farsighted idea -- by a number of men who also ran. To the extent of having a corporate name and seal, the right to sue and be sued, to make contracts, to adopt bylaws, to purchase or lease property, it is an independent corporation. It is under no government department but it is entitled to the help and advice of any federal office, including the Patent Office. It is armed with the right of eminent domain. Fifty million dollars of the President's $3,300,000,000 recovery program is at its disposal to begin with, and there are possibilities of additional income from the sale of power and fertilizer. For future work the Board is authorized to issue, on the credit of the U.S., $50,000,000 in 3.5 per cent bonds having a fifty-year maturity. (So far as power is concerned, there will be no subsidy. TVA must sell its power at a rate which will not only return all operating costs but will also, over a term of years, retire the capital invested.) The task has no deadline; TVA has only to submit an annual report to the President and to Congress. From time to time the President may recommend additional legislation. He it is who appoints and may at any time remove the Directors.
The Directors are three: two elderly college presidents named Morgan and a very lively young lawyer named Lilienthal.
As Chairman of the Board, Roosevelt promptly appointed Dr. Arthur Ernest Morgan, self-taught President of Antioch (Work-and-Study) College, which in ten years he has built up from an obscure experiment. His first official act was to submit a careful inventory of his personal properties, a thing no U.S. public officer had ever thought of doing before. Dr. Morgan is as well known among hydraulic engineers as among educators. It was he who put the wild Miami River in its place after the Dayton (Ohio) flood in 1913; it was he who lent an authoritative hand to the drafting of the drainage codes of half a dozen states. President Roosevelt was impressed by something more when he first read Dr. Morgan's Antioch Notes. Dr. Morgan's friends know him as a man of considerable human wisdom, of breadth and integrity, and originality of mind.
The other Morgan is a college president, too. He is Dr. Harcourt Alexander (no kin to Dr. A. E.) Morgan, who leaves behind fourteen years' service as President of the University of Tennessee. He is an authority on artichokes, bugs, cats, dogs, eggs, fish, geraniums, hay, iguanas, jam, and so down the alphabet. He is also, by dint of years of study, an authority on agriculture and industry in his valley. To balance industry and agriculture is his assigned task.
David E. Lilienthal, Director and General Counsel, is more the "wonder boy" type. He has a brilliant past at thirty-four, especially as legal authority on public utilities. At Harvard Law, he was (like a few other headliners today) one of Felix Frankfurter's star pupils. Later, he became the friend and associate of Donald Richberg, was Special Counsel for the city of Chicago in the telephone-rate controversy which Chicagoans will well remember. At thirty-two, he left Chicago to help Wisconsin's Governor Philip LaFollette reorganize the State Railroad Commission. His revision of the public-utility statutes of Wisconsin has already served as a model for several other states.
The Directors serve nine-year terms (staggered to begin with at nine, six, and three) at a $10,000-a-year salary -- less, for the time being, the government's 15 per cent cut in basic salaries. Each is entitled to one of the numerous empty government houses on the Muscle Shoals reservation where, by requirement of the creative act, official TVA headquarters must be. They also get traveling expenses.
Preliminaries are, if anything, harder than the job itself. It takes time to learn just where such a corporation stands in relation to the statutory framework of seven states and many municipalities.† It takes time to make your own definitive studies geological, social, and industrial; time to know all there is to know about every square mile of a great valley.
Granting all these points, eyebrows have yet been raised at the record of the Authority's first months in its valley. TVA's reluctance to issue detailed statements, its practice of giving such items as employment figures in round and sometimes conflicting numbers (even when asked to specify), the fact that not until August 10 did TVA allocate specific duties to its three Directors to execute preliminary projects ''with the least possible delay" -- at such small straws in a large wind, no few people have looked askance, have suggested that two elderly academicians, however at home with round phrase and round idea, have limitations when confronted with a mass of cold hard detail demanding stern organization. They have, at any rate, been less specific than gentlemen handling the public's money usually are. By the end of the summer, TVA had begun to assert itself as we shall presently see. But with much theory still to be translated into practice, it is perhaps as well to bear these criticisms in mind.
The critics, however, mislead if they imply that valley workers are idle, have no immediate plans. Many a valley venture hums. On September 1, after 200 men had spent the summer taking inventory, TVA inherited Muscle Shoals and sixty (sometimes called eighty) Shoals men from the War Department (and in all is absorbing between 400 and 6oo men from the war and other departments). The Authority will arrive at its own valuation of this property through "an appraisal by disinterested engineers." What will be done with the Shoals nitrate plants is yet to be decided. As they stand, they're pretty useless and outdated. But TVA, experimenting in cooperation with agricultural colleges and farmers' organizations, hopes in time to learn how to make fertilizers which will sell at about a third their present cost. Perhaps on the "four-county " plan -- a central plant to each four counties, each to serve the needs of its limited territory. TVA doesn't know yet. In the mountains northwest and southeast of Knoxville, two CCC [Civilian Conservation Corps] camps and 400 men are beginning the great task of reforestation and erosion control which in time, Dr. Morgan estimates, will absorb 5,000 workers at the very least. In a secluded laboratory a onetime Alabama Rhodes Scholar is developing a new method of transmitting power over long distances -- a method which may make today's transmission as obsolete as a wooden plow. What the method and who the man are TVA's secrets. In Knoxville's Sprankle Building, in 106 offices, TVA draftsmen are busied over plans; in the wild country twenty miles above Knoxville, where Cove Creek steps into the Clinch River, more men on the TVA payroll explore the countryside. In these last two activities center TVA's most immediate, most important present undertaking: the Norris Dam.
The wild honeycomb of caves upstream has been found safe against reservoir leakage, and now TVA's men are laying out highway and railway connections, clearing the three miles of land where a model and permanent town will rise to house the workers. An able body of able-minded men is going over the plans for Norris Dam, among them Colonel George R. Spalding (St. Louis office of the War Department), Mr. S. M. Woodward of the University of Iowa (whom Chairman Morgan describes as "one of the ablest men the United States ever produced in hydraulics"), Mr. J. L. Savage (designer of the Boulder and Madden dams), and Mr. Savage's colleagues in the Denver office of the Reclamation Bureau. Who will boss the job of building, TVA can't tell. Some other government agency snitched from under the TVA's nose the able gentleman chosen (his name is withheld), and all the Authority can say is that Norris Dam will not be built by public contract.
However that may be, construction will start early in 1934. The 250-foot Norris Dam and the powerhouse will take four years to build and, together with the transmission line that will link the development with Muscle Shoals, will cost nearly $45,000,000. The deep tangle of valleys above the dam will brim with a ragged lake of some eighty-three square miles, impounding 140,000,000,000 cubic feet of water.‡
The average March-October flowage ratio of the Tennessee River at Muscle Shoals has been estimated at ten to one (peak divergence was fifty-three to one). The Norris Dam, with its immense storage, will go far toward bringing this flow into balance. Which will mean:
For navigation: At present, navigation is governed by the seasons, and the channels are poor. Every year 2,000,000 tons of cargo ply the river below and the river above Muscle Shoals, but only 12,000 tons use its locks. Water storage and the clearing of a nine-foot, 650-mile channel will give this tonnage free passage from Knoxville to Paducah. In time to come, the valley's raw materials will have cheap passage by water, and cheaply by water valley products may reach any port on earth.
Flood: Norris Dam will greatly reduce; subsequent dams will eliminate.
Power: At present, Muscle Shoals can count on only about 120,000 horsepower of "firm" (constant, year-round) waterpower -- and only firm power is worth talking about. The powerhouse at Norris Dam will generate 220,000; balancing the flow of the Tennessee is sure to raise Muscle Shoals well toward its ultimate capacity of 610,000 horsepower. Subsequent dams not yet scheduled will do still more. The ultimate horsepower possible to wrench out of the river is estimated at 3,000,000.
What TVA could do with this power is what scared Presidents Coolidge and Hoover into vetitive spasms. Nine power companies under two great holding corporations, Commonwealth & Southern and Electric Bond & Share, now serve 550,000-odd valley customers with power at an average production and transmission cost estimated at nine mills per kilowatt hour.§ Wholesale power to other utilities and to manufacturers is generally cheap, but it is alleged that domestic users and small municipalities have been known to pay six to eighteen times the average production cost.
These private companies, combined, are equipped to supply 33 per cent more power than the valley is using.
Within a very few years, thanks to TVA, excess production will jump to 66 per cent. And TVA hopes to sell its power at a uniform switchboard rate considerably lower (how much, nobody can be sure) than rates have a habit of being. How on earth the valley is to absorb all this excess power and what on earth it will mean to the power companies and a $400,000,000 investment in private power (the figure is Wendell L. Willkie's, President of Commonwealth & Southern), powermen would like very much to know.
Many an interested party was trying to find out during the summer months, while TVA issued broad missionary statements and while TVA's Mr. Llewellyn Evans investigated power rates in the valley and while, on every issue significant to powermen, TVA's Directors kept dumb and looked wise. Not even yet, not for years to come, may powermen or TVA or any human agency know all it wants to know about TVA's power problems, yet when, on August 25, the Authority put its cards on the table, powermen recognized a New Deal and a strong hand indeed.
Lawyer David Lilienthal, in charge of TVA's electric power, will act on these basic policies: "Private and public interests in the business of power are of a different kind and quality and should not be confused. The right of a community to own and operate its own electric plant is undeniable ... 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. The fact that [TVA] action ... may have an adverse economic effect upon a privately owned utility ... a matter for the serious consideration of the Board in framing and executing its power program ... 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." (Power is indeed the lifeblood of TVA's social-industrial-agrarian scheme; of the local industries and of the well-run farms TVA hopes to foster. And already more than fifty towns have applied for power service.)
"To provide a workable and economic basis for operations," TVA plans first "to serve certain definite regions" (those in the vicinity of Muscle Shoals and Norris Dam, and the belt of land that will lie near the transmission line connecting these dams) "and to develop its program in those areas before going outside." Later, the development will include the whole Tennessee Valley and "to make the area a workable one and a fair measure of public ownership ... several cities of substantial size (such as Chattanooga and Knoxville) and ultimately, at least one city of more than a quarter million ... such as Birmingham, Memphis, Atlanta, or Louisville."
Although TVA's present intention is to develop its power program in the valley before thinking of going outside, it may go outside "if there are substantial changes in general conditions ... governmental policy ... " or if the private companies "do not cooperate in the working out of the program."
And, possibly more sinister still to powermen, since conceivably it foreshadows a great buying-over campaign: "Every effort will be made ... to avoid the construction of duplicate physical facilities, or wasteful competitive practices. Accordingly, where existing [transmission] lines of privately owned utilities are required to accomplish the Authority's objectives ... a genuine effort will be made to purchase such facilities ... on an equitable basis."
Accounting will show "detail of costs, and will permit of comparison of operations with privately owned plants, to supply a 'yardstick' and an incentive to both private and public managers." TVA's power accounts and power records "will always be open to inspection by the public."
Powermen bitterly recall that day in War-time when Alabama Power forked over the site of Muscle Shoals -- on which it had already spent some $500,000 -- to its government. All that for $1. They remember, too, what happened later when, for publicity purposes, Alabama Power reproduced that $1 check: Alabama Power was fined $500 for reproducing a government document. Nowadays even louder and funnier things are afoot. Tossing reminiscence aside, the same gentlemen bitterly observe that (through a 3 per cent tax on the gross revenue from sales of energy both commercial and domestic, through the $1 tax on every $1,000 in capital stock which, as NRA boys, they must hand over) they, along with thousands of investors in private power and along with U.S. citizens by the million the country over, are forced to pay for TVA's program. Bitterly, they agree with Professor Richard J. Smith, legal authority on utilities (who, in the Yale Law Journal, June, 1933, points out that municipal control and state regulation of private power have often as not been merely negative in properly directing the expansion of the industry), and again bitterly they expand upon his observations, cry that if the government must take the utilities in hand, there's a sounder, wiser way of doing it than by TVA's proposed policy of serving isolated municipalities, or breaking down the great transmission systems whereby the load may be balanced and the rates may be kept down. That wiser way, say the powermen, is by out-and-out, comprehensive acquisition of such systems. And as for that, Wendell L. Willkie recalls the offer he made before a House Committee last April when TVA was imminent: to absorb all power TVA might generate and to sell it over his own lines at rates congruent with such savings as TVA might effect. Not a move was made about that, but Mr. Willkie's offer still stands.
As for what can be done about it, powermen will remind you of certain rights which are theirs according to the Fourteenth Amendment. And will observe that TVA cannot enter into direct competition without nullifying the franchise which grants a utility exclusive right to operate within its given territory. And will remark that even in these dizzy times there are courts where, perhaps, such matters will be granted a fair hearing.
In fact, TVA has swung a bold foot through a beehive of problems both practical and ethical, of significance not merely in themselves but as they apply to the whole theory of relationships between private and public interests. These are problems and this is a theory which have yet to be solved and defined. Meanwhile, one corner is quite clear of doubt: the U.S. government is "in the power business."
Such is the program of the Tennessee Valley Authority. (And be it observed that power, important though it is, is to be the mere spine of the whole living animal.) Such are the mere first inklings of the action which must, through years to come, carry it out. And such are a few of the problems yet to be solved by the men who have committed themselves by oath to a belief in "the feasibility and wisdom" of TVA's program. Meanwhile, nothing is built and all is planning and a ruffling of blueprints. Not until 1938, when Norris Dam stands tall and solid to the memory of the men who fought for it, when the great hive-shaped dynamos down the river begin to whine their hearts out, will TVA begin to realize returns. Not until then will the world be qualified to begin to judge the men now busy with beginnings.
*Valley vernacular for hanging about the courthouse on one's own -- or others' -- legal business. No dispute is too small to "go to law over." Of the valleyman's indoor sports, "lawing" is among the most popular.
**Between 1918 and 1927, Iowa farmers averaged a yield of 39.8 bushels of corn to the acre; the average yield of Kansas wheat was thirteen bushels. Averages for Tennessee for the same period were: for corn, twenty-four bushels; for wheat, 10.6 bushels.
***The valleys of the great Columbia and Missouri rivers have been mentioned as eligible for similar treatment. And last August California's Governor Rolph signed legislation establishing a state waterproject Authority which will have charge of a $170,000,000 development to which, it is expected, the federal government will contribute $48,000,000. Chief objectives: to build Kennett Dam (as great in bulk as Boulder Dam); to impound the flood waters of the Sacramento; to pump excess water into dryish San joaquin Valley; to develop and sell electric power.
†Late in August a situation arose which will force a definition of TVA's position and powers. Southern Industries & Utilities, Inc. applied to the Federal Power Commission for a fifty-year permit, against the issue of which Counsel Lilienthal, in the name of TVA, made formal protest. S. I. & U.'s proposed development: a dam and powerhouse at Aurora (near Paducah), an immense valley-gulfing reservoir 167 miles long. Grounds for protest: Congress granted TVA exclusive jurisdiction in all developments on the Tennessee. The matter is to be settled at a public hearing.
‡From ninety-two cemeteries to drier territory, tactful TVA will transfer the occupants of 4,260 historic graves, "with signal honor to the dead and with due deference to the living."
§This, as applied to all nine companies, is the merest estimate-derived-from-an-estimate. Carl D. Thompson's "Confessions of the Power Trust" contains, among much else, a study of Alabama Power Co. (subsidiary of Commonwealth & Southern) as a representative company, and Alabama Power's average production cost is therein estimated at .882 cents a kilowatt hour.
Editor's note: Every Sunday, Fortune publishes a favorite story from our magazine archives. This week, as congressional leaders and the Obama Administration continue with fiscal cliff negotiations, we turn to a feature from December 1934 on the ballooning federal budget during the New Deal era.The $14,000,000,000 that the President has been given to spend, the national debtthat will shortly be $32,000,000,000, and our present two-year predicted deficit of $9,295,000,000. Should we worry?
FORTUNE MOREDec 16, 2012 9:30 AM ET
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