is competition with our citizens.”68
Hoover’s opponent in 1932, Franklin Roosevelt, was well acquainted with the concept of public enterprise from his days in the Navy Department. In 1929, as governor of New York, Roosevelt called for public power projects at Muscle Shoals, Boulder Dam, and along the Saint Lawrence River. During the 1932 campaign, in a major speech in Portland, Oregon, he added a Columbia River project to this list. As Roosevelt explained it in 1932, among the benefits of these public power projects was their function as yardsticks with which the public could evaluate the claims of private utility companies about costs and proper rates to the public. They also served as “birch rods”—evidence that government could, in effect, punish the private sector if it failed to work in the public interest, by entering directly into the industrial field.69
After Roosevelt won the election, Norris’s dreams were realized. The TVA was launched in early 1933, along with the rest of the early New Deal. According to Roosevelt, this was “the widest experiment ever conducted by a government.”70 Using the dam at Muscle Shoals as its foundation, the TVA would create a major government-owned, government-operated electric power enterprise.
This experiment was not welcomed by the private utilities. Nor did it please the leading national business associations, which had spent the past fifteen years fighting to keep government out of industrial operations. The creation of the TVA, as one of its leading historians once put it, precipitated “a battle between government and business as intense as any in American history.”71
To the dismay of many businessmen, the TVA empowered a new generation of enthusiasts for public enterprise, including David Lilienthal, who would lead the agency. Lilienthal and his allies were most worrisome to private electric-utility executives in the South, where the TVA promised to compete directly with for-profit utilities. Many of those were controlled by the Commonwealth & Southern Corporation, led by Wendell Willkie. In the mid-1930s, Willkie became a prominent spokesman against what he and others regarded as the unfair use of federal authority to subsidize public power. After federal courts refused to find the TVA unconstitutional, Willkie was forced to compromise. In August 1939, he agreed to sell the Tennessee Electric & Power Company, one of the largest pieces of Commonwealth & Southern, to the TVA (along with a group of municipal governments) for about $80 million. This meant that at the end of the 1930s, just as World War II broke out in Europe, the TVA had established itself not only as a big hydropower producer but also as a major distributor of electricity.72 (During World War II, the TVA would provide about 10 percent of all the power consumed by the nation’s war effort. This included most of the electricity consumed by the uranium enrichment complex in Oak Ridge, Tennessee, which fed the atomic bomb program, as well as a large fraction of the power used to create the aluminum for tens of thousands of military aircraft.)73
Although the TVA represented a significant threat, the bigger issue, for many American business leaders, was whether it might represent the beginning of an all-out nationalization of one of the country’s biggest industries. Although Roosevelt did not end up pursuing this extreme solution, his suggestion in November 1934 that the TVA model should be replicated in other regions was regarded by the private utilities as most unwelcome. So, too, was the Wheeler-Rayburn bill, which occupied Congress for much of 1935. Designed to break up the large holding companies, Wheeler-Rayburn included a “death sentence” provision, which required the dissolution within five years of any such entity that failed to prove that its large size was an economic necessity.74 The private utilities responded to this bill with one of the most expensive and aggressive public-relations efforts in American history up to that time. “Government in business has been a failure for 100 years,” they declared in paid advertisements placed in newspapers across the country; if enacted, the bill would push the country “into the morasses of state Socialism and Communism.”75 This effort failed to sway the Democrat-controlled Congress, which, after passing a modified version of the bill, allowed Senator Hugo Black (D-AL) to pursue a major investigation of the sometimes sordid details of the utilities’ lobbying campaign.76
As the controversy over the Wheeler-Rayburn bill suggested, the Muscle Shoals fight had become part of a massive national political struggle over public enterprise. In the 1930s, a decade and a half after the end of Great War, progressive Democrats in Washington—now under the banner of the New Deal—were again making major intrusions into private industry. There were all sorts of public works and construction projects, built by several of the new “alphabet soup” of agencies. The largest of these, including the Civil Works Administration (CWA), the Public Works Administration (PWA), and the Works Progress Administration (WPA), each spent several billion dollars on construction. The PWA, which mostly paid private contractors to do the work, financed many big projects, including giant hydroelectric dams on the Columbia River in the Pacific Northwest. These operations were not entirely offensive, from the point of view of some businessmen, because they relied on private contractors. But the New Deal building agencies, like TVA, could also act as threatening rivals. The PWA actually worked hand in hand with the public power movement, by funding municipally owned electric utilities, some of which would buy electricity from the TVA or other public authorities.77 Even worse, from the point of view of private construction firms, was the use of “force account” projects, in which the government served as contractor and employer. This was the method often used by the CWA, and later by its successor, the WPA, which directly employed more than two million people at once. Both agencies were the subject of complaints about government competition, especially from private firms in the construction industry.78
The TVA, PWA, WPA, and other public enterprises were among the most powerful manifestations of the larger New Deal, which transformed the economic role of the national state. By the end of the 1930s, national government spending amounted to nearly 10 percent of GDP, almost triple what it had been in 1929. There were now one million civilian federal employees (leaving aside those employed temporarily by WPA), nearly double the number in 1930.79 The crisis of the Great Depression had helped usher in a more powerful, and more entrepreneurial, national state.
For conservatives, the New Deal—and the rise of public enterprise, more specifically—qualified as an abomination. Among the first to recognize this were conservative Republican politicians. Congressman James M. Beck (R-PA), who had been criticizing the growth of federal “bureaucracy” even before Roosevelt entered the White House, was against the New Deal from the first. “We are marching toward Moscow,” Beck said in 1933.80 Additional early warnings were provided by ex-president Hoover. Before the end of 1934, Hoover had published a book-length critique, The Challenge to Liberty, which devoted chapters and sections to the problems of “National Regimentation” and “Government in Competitive Business.” The early New Deal programs such as TVA, Hoover wrote, amounted to “blows pounding in the wedge of Socialism as part of regimenting the people into a bureaucracy.”81 In the community of conservative politicians, this rhetoric spread. Senator Arthur H. Vandenberg (R-MI), a leading figure in the Republican Party, complained in February 1934 that Americans were “living under political dictatorship”; two years later, he warned of “a vampire of bureaucracy in Washington.”82 Some conservative Democrats, including Albert C. Ritchie, governor of Maryland, agreed. In 1935, Ritchie claimed that American freedoms were being degraded “by a counter spirit of bureaucratic centralization and by a regimented and nationalized economy.”83
Many American business leaders shared this reaction to the New Deal. Naturally, this generalization does not apply universally. A few executives, including Owen D. Young of General Electric and the department-store magnate Edward A. Filene, maintained positive relations with the New Dealers, as did some leaders of firms whose fortunes most benefited from the new regime, such as construction contractor Henry J. Kaiser. But these individuals were uncommon.84 For the majority of business leaders, the honeymoon with Roosevelt, to the extent that there was any, lasted only about a year. In 1933–34, some executives had held out hope that the National Recovery Administration (NRA) might offer a business-friendly version of price and wage regulation,
