How Co-Ops Electrified America

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 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. 

A year later, Congress expanded the REA’s resources through passage of the Rural Electrification Act. Its mandate: “To take electricity to as many farms as possible in the shortest possible time, and to have it used in quantities sufficient to affect rural life.”

To lead the REA, Roosevelt tapped a longtime ally, Morris Cooke. Cooke, an engineer by training, was also a friend and protege of Frederick W. Taylor, the father of “scientific management.” He first began to implement Taylor’s principles while serving as director of public works for the City of Philadelphia. His work was recognized by Gifford Pinchot, who commissioned Cooke to run a statewide power survey in the early 1920s. 

It was this report that sparked Cooke’s interest in rural electrification, a cause which would occupy him for the rest of his career. In 1930, then-Governor Roosevelt appointed Cooke to the New York State power authority; when Roosevelt was elected President, Cooke followed him to Washington in a series of influential posts. 

Behind the scenes, Cooke lobbied Roosevelt for a federal program to address rural electrification. He was a natural choice to lead the new REA. But one thing set Cooke apart from Roosevelt, Pinchot, and most of his New Deal colleagues: he was, by inclination, a free-marketer. The electric policy debates of the 1920s were about means: should power be supplied by state-owned public utilities or private ones? Cooke was more interested in ends: rural electrification, however possible. Still, to begin with, he preferred to work through existing private utilities. While he expected the federal government to provide oversight, his intention, as he stated in his Senate confirmation hearing, was “to give industry every possible opportunity to do this themselves.” ¹  

The executive order establishing the REA called for more than $410 million in loans to help finance new rural power lines over a 10-year period. Cooke wanted to offer these loans to private utilities at favorable interest rates. In exchange, the utilities would have to offer rates that would be affordable for farmers while still profitable, but private utilities balked at the offer. They believed that bringing power to poor farmers could not recoup enough profit to justify the high capital cost, regardless of the executive order’s loan terms. Utilities were convinced that wealthy, urban Americans were the only profitable market segment. Had nothing changed, they might have been right: Powering just a few rural homes could require as much wire as serving entire city blocks. They estimated building costs at $1,356 per mile, minimum — far beyond the means of more than a handful of households they might be serving. 

Cooke believed that with proper scientific management, electrification could be done much more cheaply. After months of negotiating, he gave up on the utilities plan. His next idea, working with state-owned municipal utility districts, also ran into barriers. In many cities, officials maintained laws that limited their ability to extend municipal power supplies to communities beyond city lines. In Illinois, for example, electric line extensions of less than half a mile outside city limits were allowed by custom, but building out any further required navigating a tangle of statutory requirements. (Local officials frequently discounted the fact that building out infrastructure would serve the interests of future residents.)  Even when cities tried to help nearby rural communities, their efforts were commonly rebuffed by state courts. A Washington state court, for instance, thwarted rural electric service unless the municipality was operating at a surplus. 

By late 1935, Cooke realized that neither private utilities nor municipalities could lead the effort to electrify rural America. He would have to work with the farmers themselves, and there was one logical unit of coordination that he could tap. Farmers had long formed cooperatives to further their collective interests. In 1935, there were over 10,700 unique co-ops, with membership exceeding three million. These co-ops were collectively owned by farmers, who were both customers and shareholders. Co-ops could harness farmers’ bargaining power when buying equipment, or defray the cost of marketing products like milk and eggs. A handful of them even did electrical work, like the Alcorn County Electric Power Cooperative in Mississippi, but before the REA, these were the exception.  

In 1936, Congress passed the Norris-Rayburn Act, establishing the REA as an independent agency. By then, they had a plan for vastly expanding the network of rural electrical cooperatives. Co-ops would apply to the REA for 20-year loans at 2.88%. The REA would make sure their plans were feasible, and connect successful applicants with contractors, engineers, and advisors. The REA stayed in touch with cooperatives at every stage — they reviewed construction plans, helped audit their books, and coordinated their purchases. They even ran correspondence accounting courses and management training programs to help farmers run their cooperatives more efficiently. But in the end, the heavy work would fall to the farmers. 

The average electrical co-op was small, about 800 members, and covered an area of approximately 300 square miles. Their core staff was also minimal: one manager, one bookkeeper, and a board of directors numbering no more than 15. Hardly any of them had prior experience in construction or electrical work. Armed with financial, technical, and legal assistance from the REA, co-ops still had to figure out how to help members struggling in the wake of the Great Depression make their payments. Like Cooke, they embraced a flexible, outcome-oriented approach. Often, cooperatives allowed members to pay dues in labor. Some groups bargained with local utilities, who furnished the necessary line construction in return for guaranteed minimum monthly bills. Others reversed that scheme, opting to construct the line themselves, and then sell it to the utility to operate. The right method was whatever worked. 

By 1936, just one year after the creation of the REA, farmers had installed more than 25,000 miles of rural lines. By mid-year, the REA had authorized 104 projects — 66 of which were operated by cooperatives. As Cooke anticipated, these lines were built at a much lower cost than the utilities had estimated. The REA’s cost-cutting measures showed Cooke’s Taylorite influence in action. While utilities built rural lines on a piecemeal basis, REA engineers standardized their designs, materials, and construction methods. They revised specifications for lines and pole spacing to better meet rural load requirements. They were able to innovate with materials, replacing copper and aluminum reinforcements with longer, stronger steel ones. As early as 1937, REA rural electrification projects came out to $850 per mile, just over half of what private utilities quoted a year or two prior. And costs only continued to fall. 

The REA also provided legal support. Many states placed significant limitations on how cooperatives could be organized, what purposes they could serve, and how they could distribute their money. As a federal agency, the REA had limited power to change state-level  procedural hurdles. The answer: model legislation. The REA’s model Electric Cooperative Corporation Act provided states with a template for permitting electric co-ops and shaping their governance. States were quick to adopt legislation based on the REA’s template, starting with Alabama, Mississippi, Indiana, Virginia, North Carolina, and Tennessee. Though details varied slightly between states, the resulting laws shared the same essential features. Electrical cooperatives were to be nonprofits with an elected board of directors. Unlike other cooperatives, they had the right of eminent domain. Otherwise, they shared the same rights as private corporations.  

Other states passed their own Rural Electrification Authority Acts. These acts created public corporations tasked with “encourag[ing] and prompt[ing] the fullest possible use of electric energy by all the inhabitants of the state by rendering services to said inhabitants, to whom energy is not available or, in the opinion of the board, is not available at reasonable rates.” Public power corporations also received extensive authority from their respective state legislatures to operate with minimal red tape. Unlike municipal corporations, for example, they did not have to comply with constitutional restrictions on indebtedness. State legislatures designed these public corporations to exercise the flexibility of a private corporation as well as the power of the state.

Another front in the war over public powers opened as a result of the REA’s early success. Private utilities organized to block competition from the new cooperatives. Through lobbying arms like the National Tax Equality Association, they pushed for congress and state legislatures to adopt prohibitively high taxes on co-ops. ²  

Another technique was known as “cream skimming.” In most states, regulations blocked co-ops from operating in areas where private utilities already supplied power. Utilities would therefore try to cut off co-ops by extending “spite lines” to individual wealthy farmers who could afford them, rendering the territory off-limits.  

The most comprehensive weapon available to the utilities was propaganda. Here, they could pick up techniques already developed by NELA and other industry associations in the public power fights of the 1920s. The argument: government involvement in power was socialism, and in any case full rural electrification was impossible. Utilities bought newspaper advertisements, circulated letters to farmers, hired door-to-door salesmen, and even sponsored college professors to address farmers on the impracticability of the cooperative model. 

REA officials responded with their own comprehensive media push: the “REA circus.” The circus served two purposes. It helped to shore up co-ops and respond to industry opposition, but it also played an essential role in generating demand for electricity. Higher demand allowed co-ops to take advantage of economies of scale, lowering costs for their members. As described in the June 23, 1940 edition of The New York Times, “The ‘electrical circus’ is a non-profit enterprise designed chiefly to acquaint the rural dwellers with the new facilities at their disposal [via the REA], but also to bring in all the available customers so that the repayment of the government loan and the keeping down of current prices can be better assured.” 

This “circus” was far from the only diffusion initiative adopted by the REA. It also sponsored advertisements, radio broadcasts, presentations at agricultural meetings, and travelling electricity shows demonstrating the benefits of new appliances. Colleges leaned into the effort, often playing host to the circus. Private electric appliance providers joined the show as well. There were educational pamphlets and even a publication — the Rural Electrification News. Home economists visited farms to help them learn about new appliances and how best to put them to good use. Like their industry opponents, the REA tended toward propaganda. The 1940 REA-funded film Power and the Land was advertised as a documentary. In reality, it was a scripted drama written by Pulitzer Prize-winning writer Stephen Vincent Benét (who beat out John Steinbeck for the job).

All of this material emphasized the benefits of electricity and the tenacity and resilience of the farmers who could bring it to their communities. But more than any particular message, the REA tried to make itself impossible to ignore. The strongest answer to public skepticism and opposition from private utilities was the simple fact that the co-ops existed, and they worked. Wherever possible, the REA made itself its own advertisement. The REA logo was prominently featured on buildings, vehicles, fences, and billboards, wherever its co-ops existed. 

REA efforts to spark demand took other forms. They offered low-interest loans to individual farm households to finance homestead electrification, and extended lines of credit for farmers to purchase electrical appliances to increase their productivity. REA engineers even invented new appliances of their own, from cheaper transformers and current meters adapted for rural use to highly specialized farm equipment, including, for instance, an “electric cranberry bouncer” to help cranberry farmers automatically sort their produce. ³

The ultimate goal of the REA was not just to extend power to rural Americans — it was to ensure that they could enjoy all its benefits. That’s what they did. Within five years of FDR’s REA executive order, the number of electrified farm homes in the United States doubled, bringing electricity to more rural households than the previous 53 years combined. Because almost every cooperative paid back their loans in full and on time, the program had minimal cost to taxpayers. And the benefits of rural electrification are still felt: counties that electrified early with REA assistance were richer, more populous, and enjoyed higher employment than their late-electrifying neighbors as late as the year 2000. ⁴  

The REA was more than just a lending operation. Its efforts to educate rural Americans about electricity increased demand, which justified further investment in supply — creating a virtuous cycle that proved the REA’s theory of change. That theory, however, was grounded in local efforts as well as direct federal intervention. REA experts and templates lowered barriers to rural electrification, but it was rural Americans themselves who made living in the light a possibility. The success of the REA demonstrates what government can achieve when it treats citizens not just as customers, but as partners by giving them the tools, resources, and information to improve their own lives.

The tools the REA used can help remedy the supply constraints that have tarnished America’s reputation as a nation that builds. The people who made the REA work, from FDR to Cooke and his successors to the members of hundreds of electrical co-ops all across America, were focused and flexible, willing to try many different approaches until they hit on one that worked. This explosion of local energy was only possible because REA planners worked relentlessly to make sure that farmers understood the benefits of electrification and exactly how they could achieve them. 

They did not take faith in government for granted: they built it, through constant communication and careful attention to what their constituents really wanted and needed. And we can build it again. The lights would have remained off in rural America were it not for “visionary dreamers” and “impractical idealists.” Now, again, is the time for dreamers, idealists, and, especially, doers.