And relevant to the AI-buildout cost shifting we are currently seeing in the country's regulated utilities.
Our second visit to to Asterisk magazine this weekend:
In the 1930s, private utilities balked at the task of bringing electricity to rural America. A New Deal agency figured out how to do it more quickly and more cheaply than anyone expected.
In 1935, 90% of American farmers lacked electricity.
At the time, most urban Americans already enjoyed electric lights and indoor plumbing. Millions of their rural counterparts, meanwhile, effectively lived in the past. Lack of electricity affected more than just creature comforts. The U.S. Department of Agriculture estimated that farmers with electricity could triple their productivity. Electricity meant irrigation pumps, hullers, viners, wood-chippers, and other forms of relief from back-breaking manual labor. Electrically lighting hen houses resulted in a substantial uptick in egg production, and dairy farmers could benefit from refrigeration and milking machines.
In 1935, President Franklin D. Roosevelt signed an executive order establishing a Rural Electrification Administration to bring electricity to farmers — all of them. To most observers, the task seemed insurmountable. Power companies blamed economics. Utilities would only extend power lines if customers paid the full up front cost of their installation. Even before the Great Depression, the vast majority of farmers could not afford such down payments; afterwards, it was all but impossible. And even if neighboring municipalities wanted to help them—though, by and large, they didn’t — they were held back by state and local laws blocking their ability to extend power lines past city limits.
The skeptics were wrong. By 1945, nearly half of all farms had electricity. A decade later, in 1956, all but 4% were hooked up to the grid. None of this would have been possible without the REA, or the network of local farmers’ cooperatives that it unleashed.
As Ezra Klein and Derek Thompson show in their book Abundance, the federal government has historically had an impressive track record of rapidly addressing widespread public priorities in extraordinary circumstances. Sadly, those muscles have atrophied. Abundance is mostly about the procedural barriers which make it harder for the government to accomplish ambitious goals today. But barriers do not mean that failure is inevitable.
The REA also had to contend with red tape, legal challenges, and concentrated opposition from local interests. It overcame these obstacles because it had clarity of purpose and focused on outcomes over procedure, but also because it made its beneficiaries — the farmers — active partners in its success. Klein and Thompson argue persuasively that local opposition is a major reason why the government can no longer build. But the REA did not succeed by crushing local initiative: instead, it harnessed it to build something neither the federal government nor private citizens could accomplish on their own. As the Trump Administration continues to erode government capacity, this lesson bears repeating.
The birth of the REA
The first few decades of the 20th century saw a massive expansion of electricity in America — and with it, the consolidation of regional power monopolies. Economies of scale and the falling cost of long-distance transmission helped power companies integrate increasingly far-reaching electrical grids (and increasingly complex corporate structures).Meanwhile, a group of progressive politicians argued that power should be under public control. Throughout the 1920s, the National Electric Light Association waged a PR war against the public power movement, led by Pennsylvania Governor Gifford Pinchot, Montana Senator Thomas Walsh, and Nebraska Senator George Norris. Pinchot tried to establish a statewide public transmission system in Pennsylvania, while Norris authored a bill for a public power plant at the Alabama dam site Muscle Shoals. NELA countered with a massive multimedia blitz equating public power with socialism. Progressive politicians countered with an FTC investigation into the industry’s finances.
Most of the progressives’ efforts were unsuccessful — President Hoover vetoed Norris’s Muscle Shoals bill in 1928 — until the onset of the Great Depression changed the political landscape. The collapse of heavily consolidated electric holding companies like Middle West Utilities wiped out the life savings of hundreds of thousands shareholders. Private utilities became villains. (When a Federal Trade Commission investigation concluded in 1935, the resulting 63,000 page report described the industry’s practices as “evil.”)
Franklin Roosevelt supported public power initiatives as governor of New York State, and electrical industry reform became an important plank of his presidential campaign. Some of his first projects as president were public water and power works like the Tennessee Valley Authority (which included a hydroelectric dam at Muscle Shoals). Roosevelt considered rural electrification “one of the most promising vehicles for attaining a stronger, a happier, and a more prosperous America.” He established the REA via an executive order in 1935....
....MUCH MORE
October 10 from Asterisk:
"Scam Cities: Criminal networks throughout Southeast Asia are demonstrating the dangers of making 'the ultimate exit.'”
And some history of leveraged beta in an earlier infrastructure buildout: "From Insull to Injury: A Study in Financial Jugglery" |
