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An Exchange on TVA

In response to:

Why TVA Failed from the May 10, 1984 issue

To the Editors:

Despite the title, Jane Jacobs’ “Why TVA Failed” [NYR, May 10] was not really about the Tennessee Valley Authority. Ms. Jacobs uses TVA as a rhetorical prop to illustrate her theory about why some regions grow and others do not, but her description of TVA’s history, policies, and consequences is an inaccurate and distorted caricature. I don’t want to argue with Ms. Jacobs’ theory, but I do want to try to correct a few errors of fact or interpretation that may mislead your readers.

  1. The Tennessee Valley is a region without healthy cities.

Jacobs uses the TVA region as a counter example of her thesis that cities drive the development process. She claims the Tennessee Valley is without healthy cities. In fact, 6 of the 172 localities classified by the census as large metropolitan areas are located in the TVA service area—Memphis, the forty-second largest; Nashville, the forty-fourth largest; Knoxville, the eighty-third largest; Johnson City/Kingsport/Bristol, the ninetieth largest; Chattanooga, the ninety-second largest; and Huntsville, the one hundred twenty-fourth largest. Between 1970 and 1980, the population of metropolitan areas in the United States increased by 10.2 percent. Nashville grew about twice this fast, 21.6 percent, and three other areas grew about one and one-half times as fast—Knoxville, 16.4 percent; Johnson City/Kingsport/Bristol, 16.1 percent; and Chattanooga, 15 percent. Only two—Memphis, 9.5 percent, and Huntsville, 9.2 percent, grew more slowly. Proportionately, more of the population of the Tennessee Valley resides in rural areas than is the case nationally, but the region also has an array of healthy, progressive cities that are interesting, pleasant places to live and productive, stimulating places to work.

  1. The economy of the TVA region has not improved relative to the nation.

The Tennessee Valley was selected as the site for the TVA experiment, not as a neutral proving ground, but because it was so distressed relative to other parts of the United States. The per capita personal income in the Valley when TVA was created in 1933 was about 45 percent of the national average. In the intervening 50 years, there has been a general convergence of levels of per capita income in the United States between poor and rich regions of the country. As a part of that trend, per capita income in the Tennessee Valley increased to about 80 percent of the US average by the late 1970s. If differences in housing costs and taxes are included in the comparison, the Valley’s relative position would be improved to about 85 percent of the nation’s.

Despite this progress, there are still disproportionate numbers of poor people in the Tennessee Valley. In collaboration with other Federal agencies and state and local governments, TVA continues its economic development efforts with a variety of demostration programs designed to improve economic conditions and opportunities in the region, but Ms. Jacobs’ claim that the Valley is in the same relative position it was when TVA was organized in the 1930s clearly is not true.

  1. Since 1945 TVA has concentrated on producing electricity, and large electricity-using heavy industry underpins the region’s economy.

Electricity is important in the Tennessee Valley. More of it is consumed per customer than elsewhere. Firms in the chemical, aluminum, and paper industries grew in the area because of lower cost electricity—as well as plentiful water supplies, productive workers, good access to markets, and a pleasant environment. These industries provide some of the highest paying jobs in American industry. However, since at least the 1960s, it is simply not true that electric-intensive industry has been the driving force of the regional economy. Between 1960 and 1979, 372,000 new manufacturing jobs were created in the Tennessee Valley. Less than 10 percent of these were in the electric-intensive chemical and primary metal industries. TVA’s policy has been to price electricity to all its customers strictly on the cost of providing service to them. TVA’s power system has been completely self-financing since 1959, and capital investments made before then are being repaid to the US Treasury at current rates of interest. Moreover, in setting rates, all of TVA’s lower cost hydroelectric power is allocated to residential customers. As a consequence, TVA’s industrial rates are higher relative to its residential rates than other utilities. Thus, TVA’s policy is not, as Ms. Jacobs implies, to rely on subsidized rates to lure electric-using industry to the Tennessee Valley. The remarkable growth of the Tennessee Valley in the 1960s and 1970s was a consequence of the growth of general manufacturing. Between 1959 and 1979 manufacturing employment in the US increased at an annual rate of 1.2 percent per year. In the Tennessee Valley, manufacturing jobs grew at an annual rate almost three times as rapid—3.3 percent per year. For most of the firms that created these jobs, the relatively lower cost and adequate supply of electricity was only one of many advantages of the Tennessee Valley.

  1. TVA has sacrificed the protection of the region’s environmental amenities to keep electricity rates as low as possible.

TVA’s policy is to ensure that all the costs of producing and consuming electricity, including environmental effects, are included in its price. TVA has reduced emissions of air pollutants by 56 percent since 1977 and is in compliance with the Clean Air Act. Since 1977 TVA has spent $927 million on control equipment to reduce the principal air pollutants. Moreover, TVA was the only electric power system to testify before the Congress in support of legislation to control acid rain. TVA has taken the lead in developing atmospheric fluidized-bed combustion technology in order to burn high-sulfur coal cleanly and economically. At its own initiative, TVA has launched a program to improve dissolved oxygen levels at its own dams. TVA has been an advocate for strong State and Federal reclamation laws. Contrary to Ms. Jacobs’ understanding, between 1976 and 1980 in cooperation with the Valley States, TVA reclaimed 17,430 acres of orphaned strip mined land and is vigorous in the enforcement of reclamation provisions in contracts with its suppliers.

Other statements in Ms. Jacobs’ essay that are incorrect and might mislead the reader include:

—NASA is not TVA’s largest customer. I assume Ms. Jacobs meant to refer to the Department of Energy’s Uranium Enrichment facilities at Oak Ridge and Paducah.

—Proportionately less of the economic activity in the Tennessee Valley is defense-related than is the case nationally. None of TVA’s large, directly served industrial customers are primarily defense contractors.

—Appropriations are not used for capital projects for the power system. Capital investments financed by appropriated funds made prior to the 1959 self-financing amendments are being repaid to the US Treasury at current rates of interest. TVA receives congressional appropriations for its economic development, natural resource, fertilizer, and agricultural programs.

—Ducktown is in Tennessee, not Alabama. The smelter there began operations at the beginning of the century.

In summary, the picture Ms. Jacobs paints of a stagnant economy dependent on the illusion of cheap electricity for its survival is a gross distortion. The Tennessee Valley still has serious economic problems, but it has grown impressively since the 1930s. Its economy has diversified in the process, and we expect the Tennessee Valley to remain a productive place to work and a pleasant place to live. Ms. Jacobs should visit the Tennessee Valley so she can learn about it and TVA first hand.

Allan G. Pulsipher

Tennessee Valley Authority

Knoxville, Tennessee

Jane Jacobs replies:

Precisely because I was not using TVA as a rhetorical prop but rather as important and real experience of half a century’s duration from which it is possible to learn, I was at pains not to caricature it but rather to present its successes along with the failure in which it has been trapped by inadequate theory and erroneous expectations. I am sorry Mr. Pulsipher has chosen not to confront the substance of my argument and to fulminate instead. However, since that is his choice, let me deal with his list of complaints.

(1) What a hash! He has managed to misrepresent what I wrote, misrepresent the territory under discussion, drag in figures beside the point, and present this concoction as evidence of distortion on my part. In the first place, I used no such vague or subjective term as “healthy cities.” I said the Valley contained no import-replacing cities before TVA was instituted and still has none. The cities at issue here are Chattanooga and Knoxville, unless one also wants to include the towns of Huntsville, Johnson City, Kingsport, and Bristol, to which I have no objection since they are in the valley too; they were never import-replacing cities and still are not.

But to include Memphis and Nashville is another matter, since they are outside the Tennessee Valley—the region for which TVA was given its planning mandate and which, as I made absolutely clear, I was discussing. TVA exports electric power outside its own region, much as Ontario exports electric power into the state of New York, although TVA, unlike Ontario, also owns wholesale distribution lines in the region to which it is permitted to export power, an area that includes large parts of Tennessee, Kentucky, Virginia, North Carolina, Mississippi, and small portions of Alabama and Georgia, outside the TVA’s own territory. Among the places to which it exports power are Memphis and Nashville.

By including them, Mr. Pulsipher has attempted to pretend the TVA planning territory includes the TVA “service area”—or rather, an arbitrarily chosen piece of that area, rather skillfully chosen if it leads the unwary to suppose that TVA is synonymous with Tennessee. This sleight of hand has either been pulled off in bad faith, or else Mr. Pulsipher is afflicted with uncommonly poor reading comprehension. Finally, as any competent economist knows, neither population nor population-growth figures are reliable indicators of the size of a city’s economy, let alone that economy’s composition which is specifically what success or failure at import-replacing is all about.

(2) I did not compare improvement in the TVA region with that of the nation. Possibly Mr. Pulsipher has me confused with another writer, William U. Chandler, who says in The Myth of TVA* that until 1973 the TVA region experienced in percentage terms (starting of course from its very low base) a higher economic growth rate than the nation taken as a whole, but that between 1973 and 1982 its growth rate lagged behind the nation’s. In his general denunciation of my essay, as well, Mr. Pulsipher may be confusing me with Chandler, for while I leaned over backward—too far, I fear—in accepting TVA’s own claims regarding flood control, navigation, and agricultural benefits, Chandler’s economic analyses, which are persuasive, indicate that these claims are bloated at best, and conceal important instances of bad judgment and waste on the part of the authority that may in part be responsible for having held the region back relative to adjoining areas outside TVA jurisdiction, or even to have been outright destructive. Be that as it may, Mr. Pulsipher has invented for me a nonexistent statement and has the gall to label this invention a mistake on my part which requires his correction.

(3) I don’t understand how Mr. Pulsipher can claim it is an error, distortion, or misinter-pretation to say that since 1945 TVA has concentrated on producing electricity. That is exactly what it has done—to the point that by 1981, according to Chandler’s searching analysis of its finances, 93 percent of the authority’s budget was allocated to power, and in 1983, 97 percent. Had I seen Chandler’s analysis before writing my essay, I would likely have quoted his figures to supplement my own analysis.

As for subsidies, before 1959 TVA power was blatantly subsidized, largely owing to the cost-accounting arrangements I described. In 1959 Congress forced TVA to become self-financing with respect to power production but even so TVA still enjoys at least one hidden subsidy, its access to below-market interest rates for its bonds through the Federal Financing Bank. The pre-1959 power-production capital costs traceable to appropriations, which TVA was ordered to repay over the course of time, are also subsidized in the sense that extraordinarily delayed repayments, some incurred as far back as the Depression years, are made with inflated dollars.

The general manufacturing jobs the valley has acquired are overwhelmingly in transplanted industries—that is, industries not generated in the valley but elsewhere, and attracted into the valley. As even Mr. Pulsipher admits, one advantage drawing them, which TVA has not been so modest in touting as his remarks might lead one to believe, has been low-cost electricity. If abundant and relatively cheap electric power does not underpin the TVA region’s entire economy and standard of living, it is hard to understand why the authority has continued to concentrate on producing and selling power as its principal business.

(4) As I wrote, TVA has indeed had to accept compliance with the Clean Air Act and with land reclamation standards. The courts forced it to do so. The years of legal battles with environmentalists which finally, in 1977, gave TVA no alternative but to start obeying the law, and the terrible damage wreaked in the meantime by TVA’s own smokestacks and by the mining practices of its coal suppliers, are matters of public record. If I implied, as I did, that it would be well for environmentalists to maintain their vigilance, surveillance is only prudent in light of this ugly history. As for fluidized-bed combustion technology, in which TVA has indeed taken a lead, and the disastrous oxygen levels in its reservoirs, Mr. Pulsipher again seems to have me confused with Chandler, since these are subjects on which he touches but I did not.

Among the last four complaints, unnumbered, we finally arrive at two mistakes I did make, for which I apologize. NASA is not, as I erroneously wrote, the biggest customer of TVA; the Department of Energy uranium enrichment program has that honor. And instead of writing “an Alabama hamlet called Ducktown,” I should have written “a Tennessee hamlet called Ducktown.” Why Mr. Pulsipher has thrown in the added information about Ducktown I don’t know unless he wished to imply more error still; but as I explained, the Ducktown smelter and the damage it wrought predated TVA.

With the other two unnumbered points, we are back to Mr. Pulsipher’s proclivity for unfounded complaints.

His point on appropriations for capital projects merely repeats information I acknowledged and explained at some length, and reiterates material under (3). His passing reference to interest rates is disingenuous. As I have already commented, “current” rates of interest for TVA are not market rates of interest, as the unwary might be lead to suppose.

I made no comparison between proportions of production for military purposes in the TVA region and the nation taken as a whole, for the good reason that I don’t know what the proportions are. (I would be very much surprised if they were as high for TVA as for the state of Georgia.) I said that among the largest users of TVA electricity, military production looms large. Mr. Pulsipher claims this is not so on grounds that none are “primarily” defense contractors.

What does this qualification mean? Does it eliminate, for example, the largest customer, to which Mr. Pulsipher has drawn our attention? The DOE’s uranium enrichment program produces uranium for both civilian and military uses because it produces both low and high enrichment uranium, a logical combination of responsibilities since both products require the same type of treatment, the chief difference being that for high enrichment the uranium is run through the membranes more times and uses more electric power in the process.

Low-enrichment uranium goes to nuclear power plants, a nonmilitary use. The portion that is further enriched is all for military use, apart from a minuscule amount for research reactors. Since stockpiles have outrun warhead requirements, the DOE’s current production of highly enriched uranium is for atomic submarine fuel, which is subsequently recycled to produce plutonium and tritium for warheads. TVA also supplies power to the Oak Ridge Y 12 plant of DOE where thermonuclear components of hydrogen bombs are produced. That a TVA electricity customer produces material for nuclear weapons is a fact that looms large in US military production, I would think, regardless of the quantity of the customer’s nonmilitary work. The same of course applies to other enterprises, such as chemical plants, with important military contracts or subcontracts.

Mr. Pulsipher’s insinuation, made in the guise of his patronizing invitation, that I lack first-hand acquaintance with the Valley is as much off the track as most of his letter. During a period of fifty years, between 1934 and a visit I made this past spring, I visited in the valley numerous times, on one occasion at the invitation of the University of Tennessee in Knoxville.

What disheartens me about Mr. Pulsipher’s letter is not so much his foolish eagerness to make specious debating points as his complacency. If his attitude is representative of the authority’s, then the valley’s prospects are even poorer than I had supposed—and heaven help the third world economies for which the authority’s experts now prescribe!

  1. *

    Published in May by Ballinger.

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