The conventional prescription for poor and backward nations or regions is “industrial development.” This seems a logical remedy for their plight since any economy that lacks industry must either go without manufactured goods or else, to an absurd degree, import almost everything its people require, paying with one or a few kinds of cash crops or resource exports. Such colonial-type economies, by definition, are not economically well rounded, cannot produce amply and diversely for their own people and producers as well as for others the way rich and more advanced economies do. They lack much range of opportunity, have no practical foundation for economic self-development, and are disastrously at the mercy of distant and often capricious markets for the few things they do produce. To wriggle out of their fix, it is true that they need industry.

In practice, however, the conventional prescription is reduced to two conventional strategies, used singly or in combination: attempts are made to attract transplanted factories from elsewhere; and ambitious programs are launched to build up major industrial facilities usually, except in the case of rich oil producers, financed by credits or grants. At first thought both strategies seem admirably to the point. What could be more straightforward? Unfortunately, in practice, they work miserably. Just such industrial programs and projects, for example, are largely responsible for the vast, unpayable debts with which Brazil and Mexico (and their foreign bankers) now struggle. They have helped to produce outright economic debacles in Uruguay, Turkey, Iran, Cuba, Ghana, and Tanzania, to mention a few varied examples. Countries or regions that have enjoyed far better than average success at attracting branch plants or other industrial transplants, like Ireland, Puerto Rico, the Canadian Maritime Provinces, or southern Italy, have been disappointed nevertheless. They expected the acquisitions to catalyze continued development, growth, and prosperity, and these haven’t materialized. We live in a distraught time of failed and failing industrial development schemes.

I am going to argue here that the cause of these failures goes deeper than poor planning, recessions, the price of oil, political miscalculations, corruption, greed, and so on. At their root is a terrible intellectual failure, for the prescribed strategies themselves are foredoomed to produce disappointment, futility, and debacles. The germane prescription is more roundabout. What backward, stunted economies lack is productive cities that can replace their imports—and enough such cities. This is the lack that makes such economies stunted in the first place. Overcoming it is the only effective cure for what ails them. This is so because productive cities, containing proliferations of diverse, symbiotic producers, are the only types of settlements capable of replacing wide ranges of their imports with local production in a practical, economical fashion. Hence cities are the only kinds of settlements that can generate the industry resulting from this vital economic process, and the further industry built upon it. The world abounds in evidence, both positive and negative, of these realities; if we only look, it tells us why the conventional strategies, their superficial logic notwithstanding, don’t work out as they are supposed to and never have.


An extreme instance of a stunted economy was poignantly depicted in 1889 by Henry Grady, editor of the Atlanta Constitution, who at the time was lecturing in Boston and New York with the purpose of attracting industries to the South. Grady described a funeral he said he had attended a few years previously in Pickens County, some eighty miles north of Atlanta:

The grave was dug through solid marble, but the marble headstone came from Vermont. It was in a pine wilderness but the pine coffin came from Cincinnati. An iron mountain overshadowed it but the coffin nails and the screws and the shovel came from Pittsburgh. With hard wood and metal abounding, the corpse was hauled on a wagon from South Bend, Indiana. A hickory grove grew near by, but the pick and shovel handles came from New York. The cotton shirt on the dead man came from Cincinnati, the coat and breeches from Chicago, the shoes from Boston; the folded hands were encased in white gloves from New York, and round the poor neck, which had worn all its living days the bondage of lost opportunity, was twisted a cheap cravat from Philadelphia.

That county, so rich in undeveloped resources, furnished nothing for the funeral except the corpse and the hole in the ground and would probably have imported both of those if it could have done so. And as the poor fellow was lowered to his rest, on coffin bands from Lowell, he carried nothing into the next world as a reminder of his home in this, save the halted blood in his veins, the chilled marrow in his bones, and the echo of the dull clods that fell on his coffin lid.

Of the fourteen items in Grady’s litany, eleven came from big cities of his time: the coffin and shirt from Cincinnati, the nails, screws, and shovel from Pittsburgh, the tool handles and white gloves from New York, the coat and breeches from Chicago, the shoes from Boston, the cravat from Philadelphia; while another, the wagon from South Bend, came from a small city. Only the marble from rural Vermont and the coffin bands from Lowell—a textile town whose factories had been established there by Boston industry—did not come from cities. What Grady might have asked himself was why none of Pickens County’s imports came from his own city, Atlanta. But he didn’t, because he wasn’t thinking of cities as germane. Thinking in seemingly grander regional and national terms, he himself apparently didn’t hear what he was saying.


The items Grady mentioned, although he was oblivious to this too, were products of the process unique to cities then, and still unique to them: the process of replacing very wide ranges of their former imports with new local production. None of the items Grady mentioned had been invented in the cities that sent them to Pickens County. Most were familiar in Western culture before cities in America had even formed. Enterprises in some of the colonial cities, especially Boston and Philadelphia, had taken to making such things locally instead of interminably importing them from English cities, and had then taken to exporting the items not only to their own environs, to each other, and to other little cities like New York, but also to still younger cities farther west, when these formed later. In turn, as cities like Chicago, Pittsburgh, and Cincinnati grew, and in the process laid their own foundations of versatility at production, they also repeatedly replaced wide ranges of the imports they were receiving from Eastern cities—and in their turn exported some of these items as well. That is the trail by which a shirt from Cincinnati and a shovel from Pittsburgh reached Pickens County.

Behind the items Grady was thinking about were many, many others to which he gave no thought, as far as one can tell, but which were necessary for versatile production. These were themselves items of city trade that, in many cases, had been replaced with local production—things like carpenters’ planes, lathes, punches, knives, dye vats, brass-smelting cauldrons, ladles, printing presses, book-keeping ledgers, button stampers, lights for work on dark days, tongs, sewing machines, telegraph keys, freight car axles.

The reason that the productive cities of Grady’s day could feasibly undertake import-replacing, and innovative and unprecedented work as well, was that they had managed to build up extraordinary numbers and kinds of small enterprises that symbiotically served one another. This was the asset Grady’s Atlanta lacked. Without that economic versatility and flexibility, Atlanta could not replace wide ranges of its current imports. It is the same with cities today. Those that replace wide ranges of imports repeatedly, and innovate as well, are cities that proliferate nests of symbiotic small enterprises.


In 1982, Charles F. Sabel, a social scientist at the Massachusetts Institute of Technology, described just such proliferations of “innumerable small firms” during the previous decade in a great cluster of small industrial cities between Bologna and Venice.1 He gave some examples of the kinds of improvisations and interactions that occur as an everyday matter. A small shop producing tractor transmissions for a large manufacturer modifies the design of the transmission to suit the need of a small manufacturer of high-quality seeders. In another little shop,

a conventional automatic packing machine is redesigned to fit the available space in a particular assembly line. A machine that injects one type of plastic into molds is modified to inject another cheaper plastic. A membrane pump used in automobiles is modified to suit agricultural machinery. A standard loom or cloth-cutting machine is adjusted to work efficiently with particularly fine threads.

Sabel was amazed at the small size of these firms, most of which “employ from 5 to 50 workers, a few as many as 100, and a very few 250 or more,” in the aggregate “specializing in virtually every phase of the production of textiles, automatic machines, machine tools, automobiles, buses, and agricultural equipment,” and he was impressed by the sophistication and quality of the work being done in the production of ceramics, shoes, plastic furniture, motorcycles, wood-cutting machinery, metal-cutting machinery, ceramics machinery. He reports the ease with which new enterprises have formed through breakaway of workers from older enterprises, and the amazing economies of scale that are obtained not, as has been conventionally assumed, through huge organizations but rather through large, symbiotic collections of little enterprises.

“The innovative capacity of this type of firm,” Sabel goes on, “depends on its flexible use of technology; its close relations with other, similarly innovative firms in the same and adjacent sectors; and above all on the close collaboration of workers with different kinds of expertise. These firms practice boldly and spontaneously the fusion of conception and execution, abstract and practical knowledge, that only a few exceptional giant firms…have so far been able to achieve on a grand scale.” It all suggests, he says, “radically new ways of organizing industrial society” in line with the first signs (such as the reindustrialization debate in the United States) “of an epochal redefinition of markets, technologies and industrial hierarchies.”


The strengths and wonders that Sabel observed in these tightly packed bunches of symbiotic enterprises, and that suggest to him epochal changes, have always been the strengths and wonders of cities that replace imports in a large way and generate streams of new exports as well. There is nothing new in this way “of organizing industrial society.” The huge collections of little firms, the symbiosis, the improvisations, the ease of breakaways, the flexibility, the economies, efficiencies, and adaptability—these are precisely the assets that, among other things, have always made successful and significant import-replacing specifically a city process and make it so still.


Grady was a forerunner of the host of “development” officials today who, quite as oblivious as he, seek to solve the problems of poor, passive regions (and of stagnant cities, too) by luring in the branch plants of multinational corporations or other enterprises up for grabs. As part of his hard sell of what he called the New South, Grady followed up the grim description of the funeral with a jubilant account of progress. He had made, he said, a more recent visit to the old grave site, and only a few miles distant from it observed the operations of the largest marble works in the entire world, which had moved into the region. The iron hills had been slashed as well, and were swarming with workmen and loud with the din of machinery. Probably—although he didn’t say—the ore was destined for the branch plant steel-making complex established in Birmingham, Alabama, in the 1870s by Pittsburgh industrialists.

Forty cotton mills in a near radius of the grave, he continued, were now “weaving infinite cloth that neighboring shops make into countless shirts.” Somewhat airily, not specifying locations, he spoke of shoe, nail, carriage, and pick and shovel factories. Here, one suspects, he was elevating possibilities into accomplished facts or else touching on examples of Northern industries that had landed in other parts of the South. However, he became specific again about four coffin factories forty miles from the grave, doing such exquisite work “as to tempt the world to die.” Summing up, he reported, “That country can now get up as nice a funeral, native and home-made, as you would wish to have.”

Alas for Grady’s hopes. To be sure, transplanted industries from distant cities did keep flowing to northern Georgia, drawn primarily by cheap labor; but anything produced for local needs was minor, coincidental, and very narrow in range. Later, military installations arrived, drawn by the political power of Georgia’s senators. Eventually, along came Lockheed Aircraft among others, a Los Angeles company that built a factory to produce military aircraft in the town of Marietta, at just about the same distance from the old grave as the factories producing the exquisite coffins of Grady’s day. Lockheed’s Marietta works may not be the largest thing of its kind in the world, like the transplanted marble works when they arrived a century before, but it is one of the largest, the biggest manufacturing installation in the entire Southeast.

The reason Lockheed was able to transplant a factory from Los Angeles into distant north Georgia was that the company had become well-established and large enough to maintain relatively self-sufficient factories. The Marietta works can supply for itself many of its everyday production needs, services, and skills, and both Marietta and its parent offices are practiced and experienced at commanding what the operation needs from outsiders, no matter where they may be. Lockheed’s Marietta plant has no need for city symbiosis. Those strings have been cut. If they hadn’t been, the factory couldn’t have been established in Marietta.

It had been the same with the other transplanted industries, right back to Grady’s time. The marble works, the mining company, the textile mills, and the shirt and coffin factories had at one time needed the Boston or New York economies in the same way that Lockheed, when it was young, had needed Los Angeles. Furthermore, having already become successful exporters from their former cities, they no longer depended overwhelmingly upon any one locality for their sales. Thus their moves into northern Georgia meant neither that they were concerned with producing for local needs nor that they got tools, machines, or designs there. Insofar as they didn’t provide for themselves, they bought what they needed from sources throughout the US.

Since the mid-1970s, northern Georgia’s textile mills have been leaving the region in favor of cheaper foreign labor, and greater freedom from safety regulations and the costs of equipment that the regulations mandate. As they go, they leave behind no nests of symbiotic producers generating alternate kinds of export work. When Lockheed eventually closes down in Marietta (nothing is permanent), the results will be the same; in its wake it can leave only an economic vacuum.

What Grady had so hopefully envisioned—without understanding it—was the kind of economic pattern to be found in regions surrounding cities that replace imports prolifically, and generate new industries and other enterprises dependent on one another for appreciable shares of their markets and their needs. When such enterprises move out of a city into the surrounding region, they balance their aims of escaping the costs of city space, and the congestion or other disadvantages of the city, against their conflicting needs to stay close to their suppliers and customers. The balances they strike are reflected in the physical pattern of a city-region’s industrialization. The transplanted industries typically cluster most thickly just beyond the city and its suburbs, thinning out with distance, here and there forming clots within the region but eventually petering out as the city-region’s current borders are reached. In short, many enterprises that a creative city generates can move, but they can’t move far because they are tethered to relationships with other producers or customers or both. This is why the industries of regions that have vigorous cities as their nuclei produce amply and diversely for the region’s own people and producers as well as for others, and why city-regions are the only types of regional economies that do this.

Grady was of course not the first person to whom it had occurred that ready-made industries were a ready-made solution for what ails moribund economies. Catherine the Great, for instance, had this to say almost two centuries ago:

Most of our factories are in Moscow, probably the least advantageous spot in all Russia. It is dreadfully over-populated and the workers become lazy and dissolute…. On the other hand, hundreds of small towns are crumbling in ruins. Why not transport a factory to each of them, according to the produce of the district and the quality of the water? The workmen would be more industrious and the towns would flourish.

As was perhaps natural, since Catherine was a monarch, she was thinking of an economy much as if it were an army. If you have a territory and an army, you can deploy the troops where you judge they are needed, never mind that they might rather hang about the glitter and fleshpots of the city. Catherine was royally untroubled by the hard questions: What if there are too few factories for all those crumbling towns? What happens when the transported factories depart or fail or grow obsolete, what do they leave behind in their company towns? What if the sources of those factories run dry, and new sources don’t spring up?

Although the markets of distant cities, and their transplanted industries, their technology, and their capital, can easily shape and reshape passive and economically stunted regions, those same distant cities are powerless to grant economically passive regions well-rounded or self-generating economies. Only an import-replacing city or cities of its own, right there, can do that service for a region. Ibn Khaldun, the fourteenth-century Tunisian scholar and historian, remarked that the Bedouins of the desert who sold animal products and grain to urban people of the time were economically dependent on the cities and would remain so “as long as they live in the desert and have not acquired…control of the cities.” True up to a point, but he might have added, “Or as long as they do not create a city of their own.” Historically, creative, import-replacing cities have usually originated as depots in regions serving rapidly growing, distant city markets for regional goods, but have managed to transcend that limited function. Singapore and Hong Kong are recent examples.


Almost never, it seems, have creative, import-replacing cities arisen upon a foundation of transplanted industries. However, the experience of Taiwan suggests that this is not impossible. The events behind Taiwan’s unusual, perhaps even unique, achievement go back to 1956 when the government there introduced a program called Land to the Tiller. Its purpose, not in itself unusual, was to transfer agricultural soil from the ownership of feudal-like landlords to the peasants who worked the land. The government attached a string to its payments to expropriated landlords, a string that tended to convert them into city capitalists. In part, the land payments were to be invested in light industry. The question of what kinds and where the industries were to be was left up to the former landlords, as long as the investments were in Taiwan. The place most investors chose was Taipei, the capital and largest city—a sensible choice since it contained both the largest concentration of people and the largest concentrations (not many to begin with) of producers’ goods and services.

At this time, Taiwan was receiving light-industry transplants, such as factories making toys, radios, clothing, and kitchen utensils, from distant places, mostly from America, its big attraction for these being its cheap labor. Taiwan continued receiving transplants, but in the meantime something very different was happening. Taiwanese who had gotten jobs in transplanted industries had learned from that experience how the enterprises were set up and run. In Taipei, these experiences and skills were now being combined with indigenous capital and ownership as people who had first gained experience in transplants were hired to manage new workshops and small factories—assembling radios, making blouses, sandals, tea kettles, kaleidoscopes, flashlights, custom jewelry, and the like.

Some of the young enterprises took on subcontract work for exporters in Hong Kong. Others went into competition with foreign transplants, but since they were anything but self-sufficient, they improvised by getting outsiders—local workshops—to help them out. In this way the new enterprises not only stimulated more work for already existing local shops, but caused the formation of new ones which ramified and multiplied. And in this way, as fast as new economic niches opened up, Taipei was developing a real foundation for symbiotic and versatile production. The nests of interacting enterprises became capable not only of supplying one another, and exporters as well, but also of replacing sewing machines, plastics, molds and dies, industrial cutlery, glue, electric motors, lathes, printing equipment, and many other kinds of producer goods being imported, as well as various consumer goods.

As a significant import-replacing city, which Taipei had become by the early 1970s, the city boomed. Like any import-replacing city, it had begun generating a city region of its own, and like any successful import-replacing city it was also generating new capital at a great rate. The city’s economic development was paying for itself as it proceeded, and was generating a surplus as well. Some of that capital helped to finance new industry in a second city, Kao-hsiung, which has also taken to replacing imports with its own production, particularly iron and steel, which were not previously produced in Taiwan, along with many imports such as furniture, housewares, and clothing. These had earlier all been imported from Taipei.

All this development and expansion gradually made Taiwan an unsatisfactory locale for transplanted factories from distant cities. “We had a lovely little operation running there for over a decade,” an American toy manufacturer complained to a Canadian newspaper correspondent in 1979, “but we had to close it down last year because we couldn’t get anyone to work for us. The place has become too damn industrialized and they want too much money.”

As for the peasants whose needs for land of their own started this train of events, they now have the benefit of two large and solvent city markets for rural produce, as well as the option of city jobs. “People from all over Taiwan pour into Kao-hsiung looking for the good life—jobs, housing, services, department stores, education, hospitals and more—all these things are in good supply by Asian standards,” a Canadian correspondent has reported. To his eyes, Kaohsiung was a chaotic city, unhistoric and unattractive, but “a place of possibilities and upward mobility, a place where the children of peasants can make a break from the millennia-old curse of being tied to the land.”

Instead of paying off the expropriated landlords, the government could, of course, have used equivalent funds to set up light industries itself. But had it done so, these could not conceivably have been as improvisational, symbiotic, flexible, and diverse as those that actually were set up, nor could they likely have given rise to the schools of breakaway firms they have spawned by the thousands, as employees, gaining experience, have discovered more niches in the economy, and more customers, suppliers, and investors for enterprises of their own.

Taiwan’s experience may or may not be possible to reproduce elsewhere. One wonders, for example, what Puerto Ricans might have accomplished if their government had followed early successes at attracting labor-intensive transplants, much like those Taiwan received later (some as re-transplants from Puerto Rico), by contriving to get capital into the hands of Puerto Ricans themselves, instead of interminably providing inducements to attract still more transplants. As it is, perhaps in another generation Puerto Rico will be begging for industries generated in Taipei and Kao-hsiung that can be transplanted.

At best, however, opportunities for doing what Taiwan did are very limited elsewhere, for the hard reason that transplants are not very plentiful. This situation is growing worse as even stagnant northern American cities have taken to competing desperately at attracting readymade industry. Demand for transplants far outruns their supply. To put it another way, passive or moribund economies are all too abundant and vigorous, import-replacing cities too scant.

This is ominous, because no substitutes in economic life for such cities exist, even though the most elaborate and expensive efforts have been made to overcome regional poverty and passivity without them. Those alternative approaches don’t work.


Consider, in this light, the history of the TVA, perhaps the most famous project for regional development undertaken in modern times. The effects of the TVA are now sufficiently old—half a century—so that we can see what its planning and financing were capable of accomplishing, and what they could not do.

The region presided over by TVA, the watershed of the Tennessee River, embraces parts of Tennessee, Kentucky, Virginia, North Carolina, Georgia, Alabama, and Mississippi. Nature was generous here, much as Grady observed that nature had been generous to Pickens County, which, as it happens, lies along the region’s Georgia fringe. Resources abounded: the magnificent waterways, a warm temperate climate with a long growing season, ample rainfall, naturally fertile soil, timber, minerals, extraordinary natural beauty, and diversity of landscape. Nor, as such things go, had the region been handicapped socially or politically. People were not under the thumbs of great landlords. The proportion of rural families who owned their own land varied from part to part but in most places it was high because historically this had not been a locale of plantations worked by slaves. Even the farmers in the corner of Mississippi that lies in the region were small freeholders and always had been.

For the most part, the people of the region had a tradition of self-reliance and hard work, and prided themselves on being neighborly, hospitable, and descendants of pioneers. They also prided themselves on being political. Democratic representative government was much alive here; the policies and personalities of candidates for office, who emerged from the population itself, were taken to be everybody’s business and were perennially absorbing topics even in the remote hamlets tucked into the folds of hills at the headwaters. All in all, it would seem that both nature and culture had set the scene for a solid and prosperous economic life.

But in fact the economy was wretched and growing steadily worse. In 1930, one could have attended a funeral in any number of places throughout the region and mourned in the same terms Henry Grady had invoked long before in Pickens County. By every statistical measure of economic well-being—infant mortality rates, disease and chronic disability rates, nutrition, housing conditions, literacy, incomes—the region as a whole was at the bottom of the American economy.

The land itself was in the process of being destroyed. Crop yields had grown poorer because soil fertility had been leached by unremitting cultivation with little or no fertilization. Hills were scarred with the deep, raw gullies of erosion. Farmers, desperate for fresh crop land, but possessing no tradition of terracing, simply deforested slopes and plowed them; in the foothills and mountains of the headwaters they sometimes girdled trees and planted between the leafless trunks. Aptly, they called these makeshift fields “deadenings.” Because of practices like these, floods in the valley were growing worse. The scant industry was remarkably destructive as well. The worst example was a transplanted copper smelter in an Alabama hamlet called Ducktown, where fumes had killed every trace of vegetation over thousands of acres.

The region contained an ample sprinkling of poor market and service towns and a few more impressive places, which were known as cities but which were little more than administrative, educational, or transportation and distribution centers, producing little. Neither the poverty of the economy nor its backwardness is actually surprising when we recognize that the entire region lacked an import-replacing city and never had had one.


Starting in 1933, the TVA began—or so it seemed—with everything at once, rapidly, energetically, and efficiently. At the heart of its planning was, of course, construction of its magnificent dams for controlling floods, improving river navigation, producing electricity, and, as a bonus from the reservoirs, providing waterfronts for recreational use and for drawing tourists and their money into the region. The electricity was to be used, among other things, for manufacturing fertilizer and to supply farms with power. Taken together, fertilizer and power were intended to increase farm yields, which, in their turn, would improve nutrition, earn cash, and permit marginal crop land to be withdrawn from cultivation and reforested. The electricity was also intended to attract transplantable industries and so redress the region’s lack of balance between manufacturing and agriculture. All this was calculated to produce not only a well-rounded, but a self-generating economy.

Far from marching in like grand poohbahs and ordering people about, the TVA administrators and experts worked sensitively and respectfully. For instance, the agricultural experts sought out farmers who were willing to chance unfamiliar soil-building crops such as alfalfa, and to risk investment of their labor in contour plowing and other soil-saving techniques, and who would agree that if they were given free fertilizer they would use it as recommended and then, when their neighbors saw the results, teach them how to use it. Cooperative self-help of all sorts was emphasized and depended upon. As soon as the first electricity became available, rural electric cooperatives were formed to buy power and distribute it. People were helped to form school improvement committees, nutrition and home canning classes, and handicraft cooperatives; they participated in running sanitation and health campaigns.

Remarkably swiftly the fertility of leached, eroded, and misused farmland was restored, barren hillsides reforested, floods brought under control, roads built, hookworm and malaria eradicated, new schools built and transportation to them provided, public parks created for camping, fishing, boating, and swimming, model housing tracts constructed, and water supply and sanitation systems built. The industrial strategy worked brilliantly too, for as fast as electricity became available, TVA sought out and found industrial transplants. Voracious users of power led the way, notably aluminum refineries and fertilizer and other chemical plants; upon the outbreak of World War II factories to produce armaments and explosives multiplied, and before the war had ended the model town of Oak Ridge, Tennessee, was built to produce atomic bombs. Employment—on construction work, in transplanted industries, and in administrative and public service jobs—combined with increased farm prosperity and benefited the market towns and stagnant little cities.

Although so much had been accomplished in the first decade while the region was being remade, much poverty remained. This had not seemed too serious at first. Given the fact that so much had improved so swiftly, much else was excused on grounds that the scheme was still young. It was more or less taken for granted that economic diversification and expansion, already so evident, would continue further under its own momentum. But this didn’t happen, owing to the absence of a vigorous city or cities, right there in the region. At the hub of it all was merely the sleepy little city of Knoxville, Tennessee, site of the University of Tennessee as well as headquarters of TVA, which made it, in effect, capital of the region. Knoxville remained innocent of ramifying nests of symbiotic city enterprises, and so did all the other settlements. Plenty of imports were coming into the region, huge quantities and varieties of them, but few indeed were being replaced with local production.

No significant numbers and kinds of new city jobs were therefore turning up in the region. How could they, in the absence of even a single export-generating and import-replacing city? Far from producing amply and diversely for its own people and producers as well as for others, the region continued to depend on importing almost everything or else going without. How could it be otherwise? Since new industries weren’t locally generated in significant numbers or varieties, industries had to continue being attracted from distant places. Where else could they come from? Streams of new kinds of regional export work weren’t being generated, other than the work brought in by transplants or by military producers. And nearly everything continued to be financed with capital generated elsewhere.

All these economic omissions meant that, by default, the region had to depend ever more heavily upon the one great asset it did possess, the capacity to produce electric power. That wasn’t enough. The lack of city jobs, and of production for local use, told. By 1964, people in the still dismally poor little settlements in Knoxville’s immediate hinterland had become sufficiently badly off for President Johnson to make a special trip there to tell people he recognized their persistent poverty, sympathized with it, and was having the locality officially designated a depressed area so it would be eligible for extra transfer payments to alleviate poverty, and for other special grants. (Astonishingly, only a year later, Johnson was euphorically announcing that when the United States had won the war in Vietnam it would reconstruct that country’s economy by means of TVA-type planning, and he followed up by sending the former chairman of TVA, David Lilienthal, to Vietnam to start devising a preliminary plan.)

In 1970, a US government medical survey identified the portion of Mississippi that lies in TVA territory as the worst place in the country with respect to family incomes and severe public health and medical care deficiencies. In 1976, when General Motors built a new automobile factory in Decatur, Alabama, the site of many industries transplanted into the TVA region, some forty thousand people applied for the fourteen hundred jobs available. In 1978, an environmental battle involving a dam twenty-five miles from Knoxville—the famous snail-darter dam—brought to light the fact that people in this still badly depressed area favored the dam, no matter how damaging, because they saw it as their last and only hope for employment.


Because of realities such as these, and because the region has not been generating other kinds of export work and yet must import heavily or go without, the TVA has had no other choice than to concentrate on producing and selling electricity. Directly and indirectly, this asset under-pinned the entire region and its standard of living. Therefore, from 1945 on, the authority concentrated on production of electricity to hold poverty at bay as best it could. During the decade between 1945 and 1955, production of electric power doubled. It doubled again in the next. The plan for 1975–1985 called for another doubling still, but this would not be possible. In sum, once the region had attained its early illusory look of a well-rounded economy, with every passing decade it became economically more and more unbalanced.

The expansion of power production soon outran the capacities of the dams. So the authority added immense coal-fired generators; by 1970, 80 percent of the total electric power was being generated by coal. For reasons I shall touch on in a moment, this expansion could not continue indefinitely at feasible cost and so the authority turned to generating nuclear power. By 1979 it had seven nuclear plants either operating or under construction, sufficient to make it one of the largest producers of nuclear power in the country, in addition to being the largest producer of water-generated electricity, as well as of coal-generated electricity. Customers of this stupendous output consisted of 50 rural electric cooperatives, 110 municipal systems (those within the region servicing many transplanted factories as well as residential users), and 50 special users. The special users are the customers for which TVA has kept doubling output; they are extraordinary users of power but are therefore limited in numbers and kinds. The largest is NASA, followed by Alcoa. Among the others, military production looms large.

Unlike sugar cane or nickel, electricity can be produced one way or another almost anywhere. Therefore TVA’s one great asset has not been electricity per se, but cheap electricity. Cost is central. In the beginning, when the power was being produced by the rivers only, the cost of TVA electricity was only half that prevailing in the country generally, and less than half the cost in the most urbanized parts of the country. This was the saving that brought transplants to the region as fast as dams were ready to serve them. Most of the expenses for acquiring land for the dams and their reservoirs and for engineering and constructing them were not charged against power production, but against costs of flood control, navigation improvement, soil conservation, and recreation, and so were many of the costs of maintaining and operating the dams. For those purposes, various grants were available. The electricity was regarded as a byproduct and it could be sold cheaply because of this arrangement in cost accounting.

But the advantageous accounting did not apply to electric plants for which no case could be made that electricity was merely a byproduct. Therefore, by the time coal-fired, steam-generating electric plants loomed large in the region’s total power output, TVA could offer customers only a 30-percent advantage, the pooled margin from both coal and hydroelectric generators. Nuclear power turned out to be anything but cheap. It was so expensive, in fact, that its costs, together with static markets for power, have now impelled TVA to cancel or indefinitely defer an additional eight nuclear plants it had planned, of which at least three were under construction.

When its marginal cost advantage began to shrink, the authority sought ways of evading the facts. For one thing, it proceeded to plan and construct more dams and to get the customary other-purpose grants for them, even though in reality the dams lacked other purposes and—worse yet—were destroying prime farmland, timber, and scenic beauty to no purpose other than producing power. To get away with this, the authority—as its general manager admitted in court on one occasion—had to falsify reports on the purposes and environmental effects of the projects.

The coal the authority bought came principally from suppliers who strip mined in the mountains of Kentucky and West Virginia. The scale and ruthlessness of the strip mining were fully in keeping with the prodigious power production the coal fed. Topsoil and forests were ravaged, valleys choked with debris. The authority’s coal suppliers were accomplishing, even more thoroughly, a type of ruin which it had taken poor farmers more than a century to achieve. For as long as it could, the authority resisted legislation, regulations, court actions, and public pressure aimed at requiring its suppliers to repair their depredations; reclamation would raise the price of coal, hence the price of electricity TVA could offer transplanted industries.

Finally, after battles lasting years, environmentalists forced the authority to set reclamation standards for its coal suppliers. Then the authority failed to enforce the standards. More court battles followed. When the federal government mandated scrubbers (costing about $1 million each) to diminish air pollutants from smokestacks, the authority resisted complying, again because to do so would raise the costs of power and make winning new transplants harder. Although one can’t be sure, it now seems environmentalists have won the battles of scrubbers for the stacks and reclamation for the strip mines.

But as for the region’s own grotesque economy, nothing has been corrected. It is reaching the end of the line with respect to what can be done by specializing in an outstanding asset. The next stage in its history will most likely be the usual stagnation and gradually deepening poverty of a region that has gone as far as it can go economically with a passive and stunted economy, although the authority now sees a future for its own employees in serving backward countries. Its experts have already advised Brazil, Turkey, and Bangladesh on their development, and in 1982 the authority signed an agreement with the US Agency for International Development (AID) to assist the Philippines, Indonesia, Egypt, the Sudan, and various countries of Latin America.

During the 1970s, when criticism of TVA was reaching one of its crescendos, the chairman happened to be a man who had taken part in the enterprise from the beginning, having been one of the TVA’s first employees in that legendary first decade. Confronted with evidence of the environmental damage TVA was causing, he replied, “I wouldn’t say we’re doing things that aren’t wrong, but if we are we’re not doing it willingly.”

There spoke a man caught in an economic trap. His mandate from the beginning had been to help to overcome a region’s poverty. He had been working as best he could with what the region had, and lacking an import-replacing, export-generating city, it had surprisingly little. The only dismal alternative to the dismal course the authority did take would have been to preside over a region that workers abandoned in enormous numbers for distant city jobs—if they could find them.

People who remember the early TVA and then observe what it has become may think of the scheme as having been betrayed in some fashion. But the legendary TVA and the later TVA are one and the same. The results were ordained by the lack of an import-replacing city. Nothing else whatsoever could make up for that lack.


Since 1950 the Italian government has poured loans, grants, and subsidies into the southern part of that country to build roads, power plants, schools, and housing, to subsidize agriculture and to attract industries. The aim was to close the economic gap between the poor south and the prosperous urbanized north with its great symbiotic nests of city industries in Milan and in smaller cities like those described by Sabel. Luigi Barzini summed up the profoundly disappointing results in his book From Caesar to the Mafia.2 He wrote, on the one hand, of the astonishing “science fiction air” imparted by all the new facilities, and on the other hand of the equally astonishing superficiality of these changes: “The ancient desperate poverty still remains. In many villages only old people and children live—and wretchedly at that…the countryside is empty.” Furthermore, even though the construction and other work involved in the effort provided employment, and even though the industries brought into the region do provide jobs, the economic gap between the rich north—which financed the changes—and the poor south has not narrowed, he reported, but widened. “If the hopes are borne in mind,” Barzini wrote, “the policy must be called a re-sounding, expensive failure…and, what is worse, an historical opportunity lost forever.” Just as in the case of the TVA, there was the early, wonderfully hopeful period of change, followed by anti-climax. Everyone, Barzini said, including those who made the plans, is in agreement that something went wrong, but no one is sure what, while blame revolves around details of the planning and spending.

In America, in Italy, or anywhere else in the world, change without the change wrought by import-replacing cities produces only deep continued dependency and stunted economies in passive regions, not self-generating development. This is the miserable denouement the Algerian revolutionary leader, Ahmed Ben Bella, was describing when he bitterly summed up, in 1981, the experience of the third world with a quarter of a century’s development loans, grants, subsidies, and transplants. “The north imposes its patterns and standards on us. We are importing more factories and more tools, but also more wheat and food products, and are becoming increasingly more dependent.” He is right, but this has been no cynical or uncaring plot on the part of “the north.” The results are much the same in poor regions of rich countries as they are in poor countries.

Both the dispensers of development expertise and aid, and the recipients, in both rich countries and poor, continue to be hampered by the same misconceptions and obtuseness as Henry Grady and Catherine the Great, and even lag behind Ibn Khaldun’s partial insight of six centuries ago. That curious intellectual inertia is, if anything, even more astonishing than the economic inertia it helps to perpetuate and ordain.

This Issue

May 10, 1984