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> Rural electrification only happened with government intervention and farmer-owned collectives who sold the electricity to the rural areas. That's a bit of re

by rsj_hn 5y ago

> Rural electrification only happened with government intervention and farmer-owned collectives who sold the electricity to the rural areas. That's a bit of revisionist history. Putting things into perspective, in the great depression there was a general banking collapse, cutting off credit to all businesses. But especially hard-hit were businesses trying to bring electricity to rural areas. Whereas credit in the late 20s was quite cheap, the spigot had been cutoff by the 30s, when rural electrification was just getting started. One of the Roosevelt era projects was to extend government loans to support rural eletrification -- and this program was a great success. But the reason it was a success was not because "companies in the 30s refused to build electricity" but because banks were refusing to lend money to companies to building electricity infrastructure. And this was because the banks were extremely risk-averse after the banking crisis. Whereas the government could step in and make risk free loans (guaranteed with the full faith and credit of the taxpayer) to rural electrification. Moreover the reason there were farmers collectives was because these were required by the government in order to get the loan! So that's a pretty strong incentive. Therefore it's not that private businesses didn't want to service rural areas, but the banking system collapsed (in large part due to federal policies) and then the federal government stepped in and provided a lending program that locked out private businesses from participating in it. Fortunately by 1944, the requirement of only lending to cooperatives was lifted and that was when rural electrificaiton really took off. You can read the act here: https://www.rd.usda.gov/files/UEP_IP_100-1.pdf https://www.rd.usda.gov/files/UEP_IP_100-1.pdf

hardwaregeek 5y ago
> For two decades and more, in states all across the country, delegations of farmers...had come...to the paneled offices of utility-company executives to ask to be allowed to enter the age of electricity. They came in delegations...begging the “power company” in vain to extend electricity to [their] farm; an Arkansas rural leader, “Uncle John” Hobbs, would, even years later, begin to cry remembering the day “he pleaded with the Arkansas Power & Light Company in vain to build a line to his home, a short distance from one of their lines, when his wife was ill and desperately needed the help electricity could provide.” But in delegations or alone, the answer they received was almost invariably the same: that it was too expensive—as much as $5,000 per mile, the utilities said—to build lines to individual farms; that even if the lines were built, farmers would use little electricity because they couldn’t afford to buy electrical appliances; that farmers wouldn’t even be able to pay their monthly electricity bills, since, due to low usage, farm rates would have to be higher—more than two times higher, in fact—than rates in urban areas. > Studies had long disproved the utilities’ figures. A 1925 survey in Wisconsin found that the cost of lines would be not $5,000 but $1,225 per mile. The Path to Power: The Years of Lyndon Johnson I (pp. 714-715). Knopf Doubleday Publishing Group. Kindle Edition. I'll admit that Caro is not always right, but I'd love some proof to the contrary.
- rsj_hn 5y ago
  That existing utilities serving cities would not want to expand to rural areas does nothing to support the argument that no private business wanted to enter this market. After all, utilities are known to be very conservative as they are regulated monopolies. Trying to convince them to enter a risky new market is a tough sell. But those incumbent utilities themselves came into existence with some entrepeneur taking a risk, so the ability of the market to meet this type of need is there, but it requires credit for new entrants, not "asking" an incumbent monopoly to do it. But the reason entrepeneurs couldn't in the 1930s was that there was no financing available to do so, and the law allowing subsidized government lending only to cooperatives (shutting out private business) prevented them from doing it. In fact if no private business wanted to enter this market, why was there legislation to exclude them? Why not just lend to anyone who wanted to take on the project? Then if half the borrowers were coops and half were private business, so be it. Then we could look back on this, and if indeed most were coops, we could make the kind of affirmative statement you originally made. But as it stands, it's not a fair statement to make.
  - hardwaregeek 5y ago
    I'm confused about your claim that the REA bill shut out private business. That's not correct as far as I can tell. Caro^[1]: > The conflict over inclusion of the utilities was compromised by allowing them to be eligible for REA loans, but giving preference to non-profit bodies such as cooperatives. And the actual bill text^[2]: > The Secretary is authorized and empowered, from the sums hereinbefore authorized, to make loans for rural electrification to persons, corporations, States, Territories, and subdivisions and agencies thereof, municipalities, peoples' utility districts and cooperative, nonprofit, or limited-dividend associations, organized under the laws of any State or Territory of the United States, for the purpose of financing the construction and operation of generating plants, electric transmission and distribution lines or systems for the furnishing and improving of electric service to persons in rural areas... > Provided, That the Secretary, in making such loans, shall give preference to States, Territories, and subdivisions and agencies thereof, municipalities, peoples' utility districts, and cooperative, nonprofit, or limited-dividend associations, the projects of which comply with the requirements of this chapter. Yes, there is a clause stating a preference for cooperatives, but as Caro explains, making these cooperatives was not that easy for poor rural areas: > The REA Act required loans to be self-liquidating; before a farmers’ electrical cooperative could obtain a loan, therefore, the REA had to be satisfied that the cooperative would be able to repay it, together with annual interest of about 3 percent, within twenty-five years. The crucial criterion the REA established to ensure this was population density: the agency said it would make no loan in any area in which the electrical lines to be built would serve an average of less than three farms per mile. [1]: The Path to Power: The Years of Lyndon Johnson I (p. 721). Knopf Doubleday Publishing Group. Kindle Edition. [2]: https://uscode.house.gov/view.xhtml?path=/prelim@title7/chapter31&edition=prelim https://uscode.house.gov/view.xhtml?path=/prelim@title7/chap...
throwaway4220 5y ago
The banking system collapsed in large part due to federal policy?

by rsj_hn 5y ago

hardwaregeek 5y ago

> For two decades and more, in states all across the country, delegations of farmers...had come...to the paneled offices of utility-company executives to ask to be allowed to enter the age of electricity. They came in delegations...begging the “power company” in vain to extend electricity to [their] farm; an Arkansas rural leader, “Uncle John” Hobbs, would, even years later, begin to cry remembering the day “he pleaded with the Arkansas Power & Light Company in vain to build a line to his home, a short distance from one of their lines, when his wife was ill and desperately needed the help electricity could provide.” But in delegations or alone, the answer they received was almost invariably the same: that it was too expensive—as much as $5,000 per mile, the utilities said—to build lines to individual farms; that even if the lines were built, farmers would use little electricity because they couldn’t afford to buy electrical appliances; that farmers wouldn’t even be able to pay their monthly electricity bills, since, due to low usage, farm rates would have to be higher—more than two times higher, in fact—than rates in urban areas. > Studies had long disproved the utilities’ figures. A 1925 survey in Wisconsin found that the cost of lines would be not $5,000 but $1,225 per mile. The Path to Power: The Years of Lyndon Johnson I (pp. 714-715). Knopf Doubleday Publishing Group. Kindle Edition. I'll admit that Caro is not always right, but I'd love some proof to the contrary.

rsj_hn 5y ago
That existing utilities serving cities would not want to expand to rural areas does nothing to support the argument that no private business wanted to enter this market. After all, utilities are known to be very conservative as they are regulated monopolies. Trying to convince them to enter a risky new market is a tough sell. But those incumbent utilities themselves came into existence with some entrepeneur taking a risk, so the ability of the market to meet this type of need is there, but it requires credit for new entrants, not "asking" an incumbent monopoly to do it. But the reason entrepeneurs couldn't in the 1930s was that there was no financing available to do so, and the law allowing subsidized government lending only to cooperatives (shutting out private business) prevented them from doing it. In fact if no private business wanted to enter this market, why was there legislation to exclude them? Why not just lend to anyone who wanted to take on the project? Then if half the borrowers were coops and half were private business, so be it. Then we could look back on this, and if indeed most were coops, we could make the kind of affirmative statement you originally made. But as it stands, it's not a fair statement to make.
- hardwaregeek 5y ago
  I'm confused about your claim that the REA bill shut out private business. That's not correct as far as I can tell. Caro^[1]: > The conflict over inclusion of the utilities was compromised by allowing them to be eligible for REA loans, but giving preference to non-profit bodies such as cooperatives. And the actual bill text^[2]: > The Secretary is authorized and empowered, from the sums hereinbefore authorized, to make loans for rural electrification to persons, corporations, States, Territories, and subdivisions and agencies thereof, municipalities, peoples' utility districts and cooperative, nonprofit, or limited-dividend associations, organized under the laws of any State or Territory of the United States, for the purpose of financing the construction and operation of generating plants, electric transmission and distribution lines or systems for the furnishing and improving of electric service to persons in rural areas... > Provided, That the Secretary, in making such loans, shall give preference to States, Territories, and subdivisions and agencies thereof, municipalities, peoples' utility districts, and cooperative, nonprofit, or limited-dividend associations, the projects of which comply with the requirements of this chapter. Yes, there is a clause stating a preference for cooperatives, but as Caro explains, making these cooperatives was not that easy for poor rural areas: > The REA Act required loans to be self-liquidating; before a farmers’ electrical cooperative could obtain a loan, therefore, the REA had to be satisfied that the cooperative would be able to repay it, together with annual interest of about 3 percent, within twenty-five years. The crucial criterion the REA established to ensure this was population density: the agency said it would make no loan in any area in which the electrical lines to be built would serve an average of less than three farms per mile. [1]: The Path to Power: The Years of Lyndon Johnson I (p. 721). Knopf Doubleday Publishing Group. Kindle Edition. [2]: https://uscode.house.gov/view.xhtml?path=/prelim@title7/chapter31&edition=prelim https://uscode.house.gov/view.xhtml?path=/prelim@title7/chap...

throwaway4220 5y ago

The banking system collapsed in large part due to federal policy?