We speak with Sandeep Vaheesan, legal director at the Open Markets Institute, about his forthcoming book, Democracy in Power: A History of Electrification in the United States (University of Chicago Press, 2024). Democracy in Power is a highly detailed work of political and institutional history that recounts the struggle over electric power generation in the United States. It is also an agile experiment in heterodox economic and legal theory, which treats both political and electric power as contestable and malleable public goods.
For Vaheesan, historical battles over electrification in the U.S. remind us that today’s green transition presents new opportunities for democratic participation and institution building. “Elected and other public officials in the United States who express a commitment to combating climate change … face a choice,” he writes, “decarbonize and maintain oligarchy or decarbonize and build democracy. Even as the net-zero pledge has become a rallying cry in the fight against climate change, it should raise concerns for those committed to democracy.”
During our conversation, Vaheesan lays bare the tragedy of “dirty power,” the concentration of inordinate powers to shape the global climate into increasingly fewer and usually unaccountable private hands. At the same time, he charts a clear and hopeful path for a just and democratic transition powered by clean and green energy.
What is vital for this project, Vaheesan insists, is to expressly politicize and reshape the present monetary order in a manner that serves democratic rather than oligarchic control and interests.
Please preorder Democracy in Power today through the University of Chicago Press website.
For more on this topic, see our previous interview with Vaheesan on the Superstructure podcast.
Visit our Patreon page here: https://www.patreon.com/MoLsuperstructure
Music by Nahneen Kula: www.nahneenkula.com
Transcript
Billy Saas: Sandeep Vaheesan welcome to Money on the Left.
Sandeep Vaheesan: Thanks so much for having me.
Billy Saas: Now, this is not your first time in our podcast feed. You were previously on Superstructure talking about some of your work with Scott Ferguson. But this is your first time on Money on the Left. And we’re excited to have you on the day of the publication of your piece in The New Republic, titled “The Best Way To Fight Heat Waves and Outages is to Green the Grid.” We’re here also to talk about your exciting book that is due out in December. But before we get into that, and I think this piece you have in The New Republic, today is a great way to get into that. Let’s contextualize our conversation. It’s probably the hottest summer on record. Thousands of people across the globe are dying as you outline and make so vivid in your piece for today. We need to green the grid. This piece that you have out today, what’s its argument and how did you come to write it?
Sandeep Vaheesan: Yeah, so as you say, we are living through the hottest summer on record, I believe, certainly in the northern hemisphere and 1000s have died around the world. Heat waves have rolled across the country. I feel like here in Washington, DC we’re in our third heatwave right now. It was 101 degrees yesterday, which even by our standards is very hot. This is a sign of global climate change. Heat waves aren’t new, but they’re certainly getting more frequent and more intense. It’s just a reminder that we need to take climate change seriously and view it as not just a threat but an existential threat to humanity everywhere. One critical front in the fight against climate change is decarbonizing the power sector, which in most countries around the world is either the biggest or second biggest emitter of greenhouse gasses. Because coal, natural gas, and oil are burned to generate electricity. That means a lot of carbon dioxide and other greenhouse gasses. Not only is the power sector contributing to the problem, it’s actually being hurt by the problem. If you look at what’s happened in the Gulf Coast, you have a very early arrival of hurricane Beryl. Usually we don’t see such storms until late this month, or August. That’s another sign of accelerating climate change. The power system in Houston was hit rather hard by the storm. There are a number of reasons to believe that the utility was underprepared despite ample warning that it wouldn’t be able to handle such a storm, which is certainly not a big storm by standards of the Gulf Coast, but nonetheless a powerful storm. Then if you look outside across the West, you have large reservoirs like Lake Mead that have lower water levels than they did 30 or 40 years ago because of warmer temperatures, less precipitation. So the power sector is contributing to the problem, and then also being hurt by it. Decarbonizing power is one of the most important things we have to do here in the United States and around the world. And we’re taking steps toward it. The Congress passed the inflation Reduction Act in 2022 that might ultimately result in about a trillion dollars in spending on clean energy and energy efficiency and system hardening projects. It’s a substantial outlay. But nonetheless an insufficient outlay. Careful modelers of the energy system have found that, yes, the IRA is better than the status quo, but it still will not get us to net zero, let alone carbon zero. So in my piece, I argue that we need to think more ambitiously, think more radically. Instead of trying to cajole and bribe the private sector, into building more wind, solar, and other zero carbon power, we should look to our historical past precedents, like public power, and actually just do it ourselves. Why not have our elected government build large scale clean energy projects, much like how it did in the 30s, 40s, and 50s by constructing hydroelectric dams on rivers like the Columbia, the Tennessee? The project had limitations, serious shortcomings, but it’s a template on which we can build.
Scott Ferguson: This is actually a great time to pivot to your book. But before we do so, maybe you can tell our listeners who are not familiar with you and your work a little bit about your professional background? What are your areas of training and expertise, and where are you currently working and things like that?
Sandeep Vaheesan: Yeah, so I’m the Legal Director at the Open Markets Institute, which is an anti-monopoly research and advocacy group based in Washington DC. As my title suggests, I’m a lawyer by training. Before coming to the Open Markets Institute, I worked at the Consumer Financial Protection Bureau, but most of my work has been focused on antitrust and public utility regulation. I use the term anti-monopoly and people wonder, well, what does that mean? I think it’s certainly more than just the latest rebrand of antitrust. It’s more than just progressive antitrust. It also encompasses fields like public utility regulation, consumer protection, and corporate governance. Certainly the aspiration of my colleagues and I and historical anti monopolists was to build a more fair and democratic economy where power is exercised by the multiracial many, rather than the overwhelmingly white and male few.
Scott Ferguson: Do you have an origin story of how you became specifically as an antitrust legal expert and lawyer, how you became specifically interested in questions of power?
Sandeep Vaheesan: Ah, it’s been a long and often slow process of, I would say, steady radicalization. So I was in law school in 2008, when the Global Financial Crisis happened. The collapse of Lehman Brothers was September 15, 2008. I had just started my second year in law school, and I do view that fall as a kind of turning point in my intellectual and political trajectory. My law school assembled this group of experts to tell us curious, but mostly uninformed students what’s going on, what’s going to happen next. They brought together an economist, a business school professor, and a law professor to talk about why Lehman collapsed, why we were in the midst of this greatest crisis since the 1930s. I remember being struck at the time by how utterly out of his depth the economist was. The economist was at a loss for words. Like “I don’t understand what’s happening, this doesn’t really fit within any of my models. I don’t know what to say.” He kind of hand-waived at maybe irresponsible promotion of homeownership by the federal government, maybe people had tricked banks into giving them credit that they couldn’t afford to repay. The standard right wing explanation of the crisis. The Business School professor, by contrast, was somewhat more informed and did have a sense of the predation that had happened in the mortgage industry in the prior five years. The law professor had a clearer sense of why Lehman collapsed, and why we were in the midst of this great crisis, that we have this thing called mortgage backed securities, we have a system where banks want to originate and package and sell as many mortgages as possible, that produced a wave of speculative and irresponsible lending. People got mortgages that they couldn’t repay. And once you have a critical mass of homeowners who can’t repay their loans, you have a crisis. And so for me, that was very much a turning point where I realized the economics I had been taught as an undergrad actually had very little correspondence to how the world worked. It was a very sanitized and impoverished view of the world, really no engagement with the institutional details. As you’ve mentioned, no understanding or awareness of the idea that there is power in the world, that certain actors or individuals make important decisions, and, in a sense, make the rest of us objects of their wishes. So for me, 2008 was really a turning point. After that, I realized, as a lawyer, I’m actually equipped with some of the intellectual skills to understand the world because if you look at many lawyers, they have a deep intellectual inferiority complex. Especially with respect to economists. They feel like economists know math, they know how to crunch numbers. They seem really prestigious. lawyers aren’t that. But after 2008, I realized, okay, actually the lawyers have a better sense of what’s going on, because we actually, at least imperfectly, know the rules of the game, and their problems. I had the good fortune of having a few very good professors during my three years of law school who brought a critical perspective, a legal realist perspective. Today, we might call it an LPE perspective. They said very early on, law in large measure is politics by other means, and we shouldn’t lose sight of that.
Scott Ferguson: So you answered the question in terms of our understanding of power as in political power, which is totally legitimate. But I was actually asking how you got interested in electricity, right? Yeah, that’s great. I mean, because in your work, both, both understandings of power are always resonant in multiple ways. And one can’t think about the electric grid, for example, and its history and its contestation and its future without thinking about political power. So what turned you toward the electric grid, the history and politics of the electric grid?
Sandeep Vaheesan: Yeah, so sorry for that long winded answer to that distinct question.
Scott Ferguson: No, it’s great.
Sandeep Vaheesan: Yeah, I feel fortunate to have been exposed to the power industry and relevant regulatory and governance questions at a very young age. My first job out of college was working at an economic consulting firm here in DC that provided regulatory and litigation support to federal, state agencies, as well as some private corporations involved in antitrust litigation, involving rake cases, involved in mergers and acquisitions. I’ll be honest, sometimes this firm was on the right side of things. And other times we were helping further consolidate the power sector. But it was a very educational experience. Most of the work I did involved, this is going back way in time, the California electricity crisis in 2000 and 2001, where infamously Enron as well as a number of power companies, rigged the market, created an artificial shortage of electricity in California, that led to sky high rates and rolling blackouts across the state. That crisis spawned a series of regulatory proceedings before the Federal Energy Regulatory Commission to claw back some of that money that had been illegally obtained by Enron and firms like AES, Dynegy and Mirant. If you’re a power sector follower, those will be familiar names to you. And I realized this was a sector that was not only essential, can’t imagine modern life without reliable, affordable electricity, but it was also in the midst of great institutional restructuring. So traditionally, power has been a classic natural monopoly provided by a vertically integrated firm. Starting in the late 1970s, neoliberals thought, why don’t we try to make the power sector or at least portions of it competitive. And so I got to be involved in some of these matters up close and appreciate the changes that were happening. And that instilled in me, sort of lasting interest in the sector. How do we design the market or governance system in a way that we have reliable, affordable, and of course, clean power, and ever since then, I’ve had the good fortune of working on our industry questions off and on. Sometimes going a few years without touching it, but invariably coming back to it in some capacity or another. And I’m not an engineer, I have no background in engineering. And I realized this was an area where the debates are dominated by neoclassical economists and electrical engineers. It makes sense that the engineers are involved like this is a complex system. I still don’t fully understand the physics, but you want to have technicians involved in designing the power industry. The neoclassical economist’s role, that’s more debatable, arguably contributed some useful ideas, but they’ve also produced a lot of very questionable ideas that have been implemented to our collective detriment. After about five or 10 years, I think I had the intellectual sort of self confidence to understand that okay, maybe as a lawyer, I have something to add here. Yes. I don’t know physics as well as engineers do. I don’t know the models that economists do. But I do know, and I’m very curious about the institutional arrangements here. And that gives me a comparative advantage. I know how to interpret a statute or regulation and read legislative history. Those are things that most economists and engineers either don’t do or are not interested in doing.
Billy Saas: There are a bunch of places in the book, which we’ve had the pleasure of previewing. The name of that book, again, is Democracy in Power: A History of Electrification in the United States. But the power power, electricity and electrification, energy and, and political power overlap. There’s a metaphor of dirty power, right, the continued dominance of dirty power. I would like to get your meeting on that and see if that’s a playful place. So dirty power as in the power industry that we have today, the private utilities that prevail in the United States are notoriously committed to in most if not all cases, means of energy production that are harmful to the environment. They also come by this power in some not so straightforward ways that might be considered dirty. Is this dirty power that is enjoyed and continues to dominate by the majority of power companies, is this come by honestly, in your estimation, or is it a story of corruption?
Sandeep Vaheesan: Both, I would say. Something I should have mentioned at the outset is in the United States, we actually have extraordinary institutional diversity in the power sector. So most people in this country are served by what are called investor-owned utilities. So these are private power companies that distribute power, they own the power lines and the poles that run through our homes. In many cases, they also own and operate the high voltage transmission system. These are the tall steel pylons that you probably see on a fairly regular basis. And then going further back also, the power plants that generate power, whether using coal or zero carbon means like wind and solar. So these investor-owned utilities are, at least in part regulated by state and federal agencies. They are classic public utilities, they have to serve all comers. They have to offer just and reasonable rates, but in exchange, they’re granted either de jure or de facto exclusivity over a territory. There’s a recognition that the technical features of this industry favor scale. Conventional business competition is not going to protect the public, it actually won’t allow the businesses to persist as going concerns, so we’re going to have this basic bargain where the firms get a monopoly. In exchange, they have a duty to serve everyone in charge only just and reasonable rates. Most of us, about 70 to 75% of us, get our power from one of these companies, investor owned utilities or IOUs. The remaining 25% get their electricity from publicly owned utilities. So the city of Los Angeles is served by a public agency called the Los Angeles Department of Water and Power. There are 1000s of publicly owned utilities like LADWP. LADWP happens to be the largest one. They serve about 10% to 12% of the population and the remainder are served by rural electric cooperatives, which are nonprofit institutions that are owned and controlled by the customers that they serve. My book looks at how we get this type of institutional diversity? What is the origin story? Because I suspect most people don’t realize that public and corporate ownership models are so common. To the extent that the thing about public ownership, it’s often considered some foreign novelty. It’s like Scandinavia has some public ownership. Other parts of Western Europe have a little bit but, here in the capitalist United States, that’s not our thing. But actually, if you look at the power sector, public and cooperative ownership are really important. Getting to the question of dirty power. How did we get a grid that is still heavily dependent on fossil fuels? Some of it is through underhanded means. The power sector has been instrumental in sowing doubt about climate science, funding research that says, well, global warming is not the product of human activity, it’s part of the long climatic cycle where the earth cools for a period and warms for a period that has nothing to do with what we are collectively doing. So they’ve funded some of that research. They’ve bought regulatory and legislative attempts to restrict greenhouse gas emissions restrict the use of fossil fuels quite aggressively. Big oil gets a lot of the attention, but power companies have also been key players in sowing doubt about climate science, and then second, fighting public attempts to do anything about it. That’s the sort of dirty side of it. But if you look further back, much of the 20th century progressive project was about electrifying society, making electricity cheap, abundant, and reliable. Oftentimes, that meant public support for fossil fuel extraction and consumption. The view that, well, we have a lot of coal, we can burn it to produce cheap electricity that will help us make electricity truly universal. So some of it does involve classic corporate skullduggery, but a lot of it also reflects a public commitment to electrify living in the United States. For much of the 20th century, that meant not just building hydroelectric dams that produce electricity without generating greenhouse gasses, but also supporting fossil fuel generated power.
Scott Ferguson: I’d like to give our listeners a little bit of a sense of the ambitious structure and scope of the book, at least as I’ve been tracking it and as I’ve been working through the preview copy that you made available to us, very generously. There’s three parts to this book that you’ve titled, “Past”, “Present”, and “Promise”. I like “promise” rather than “future”.
Sandeep Vaheesan: It’s alliterative.
Scott Ferguson: Yes, right. It’s alliterative. Before we started recording, I called your book a tour de force. I think it’s a tour de force for a number of reasons. But I think one of the reasons is because it’s very clearly written, it’s very straightforwardly written, very accessible, but you do switch between what we might think of as rhetorical genres, or even disciplinary modes of writing. So in the first part of your book, you’re really in the weeds and really telling us about the rise of electrification in the first half of the 20th century, really concentrating on the 20s and the 30s and the 40s, and really highlighting a lot of the contestation that starts in the 20s and really heats up, so to speak, during the New Deal. You take that on with painstaking detail, and I’d like to get into some of that. But then at the same time, this is also a work of legal theory, arguably political theory, also even monetary theory, and it’s a proposal. It’s a proposal for how do we move forward? And how do we structure our governance? How do we structure our infrastructures? How do we legally put together a regime that’s going to usher in a green transition that isn’t just private, for profit, and unjust but is actually serving democracy at the same time. So that’s my pitch for your whole book, and I think everybody should go out and buy it. Pre-order it now. But maybe we can, from that kind of larger macro picture. If you want to comment on that, if I’ve gotten something off, you can let me know. But maybe we can pivot from that macro picture into a little taste of the history that you outline in the first few chapters. What’s the state of the country in the teens and the 20s? And when it comes to electrification, what are the needs? What are some of the fault lines of contestation?
Sandeep Vaheesan: First, I should say that’s a very accurate and generous overview of the book. So the first third is traditional history, admittedly not written by a historian but a historically-curious lawyer. The middle third is really critique looking at the institutional arrangements we have right now, doing my best to honestly assess what works well, what doesn’t work so well. The last third is theory and construction; my attempt to build castles in the sky and say, this is what a small-d democratic and green power system should look like. So let’s start with the first third. So chapter one opens with life in the United States in the 1920s, especially life in the countryside. This might be new to many of your listeners, but at the time, the United States was approximately 50% urban 50% rural. I think the 1920 census was the first time that more Americans lived in cities than in rural areas. It was something like 53%-47%. So roughly split, which is very different from today, where I believe more than 85% or even 90% of people live in metropolitan areas, or other built up communities. At the time, there was a major economic, social, and technological divide between cities and rural areas. Maybe the single most visible manifestation of that was in cities, especially by the mid 1920s. Most people, not just wealthy people, had electricity in their homes. So they have lights, they have a radio, they might have had a few small appliances. They didn’t necessarily have the appliances we take for granted today. In the words of people like Ronald Toby and Jay Brigham, they had electrified homes they did not have electrically modernized homes. That’s an important distinction, which we can revisit in a bit. So there’s electricity in cities. The countryside, by contrast, most people did not have power. So in the mid 1920s, fewer than one in 10 farmers in the United States had electricity. So in many ways, life in the countryside was pre modern. No electricity meant no running water, no indoor plumbing, no toilets, no refrigerators, no washing machines, no electric lights. People relied on things like privies, washing clothes by hand, which was a backbreaking, laborious exercise done almost exclusively by women, and relied on kerosene lamps and candles for lighting. So there was a profound difference between life on a farm, or most farms, and working in middle class life in cities. This was a major political cause at the time. People were asking well, how do we bring electricity to the countryside? There was this Jeffersonian vision informing a lot of the politics, the idea that we needed a healthy countryside not just for instrumental reasons. We need abundant and affordable food, but there’s something noble and virtuous about farming and country life. So this was a, broadly speaking, bipartisan political concern both progressives, moderates and conservatives. I guess that three groups, not two, recognized this as a serious political problem and something had to be done about it. Part of making rural life attractive was extending electric service to everyone who lives in the countryside. There was a real fear that if this technological backwardness continued that everyone living in the countryside would move to the cities, and you’d see rapid depopulation of the countryside. That ultimately did happen, but for other reasons. There’s belief that to really maintain the American character we needed to ensure the vibrancy and dynamism of life in rural areas. So that brings me to the question of why weren’t these places being served by power companies? The reason shouldn’t come as a surprise. So compared to cities, rural areas tend to be fairly sparsely populated. So if a power company built a one mile distribution line in the city, they might be able to serve 400 or 500 customers. In a suburban area, they might be able to serve 30 or 40 customers. But if you go out into the countryside, they might be able to serve three or fewer customers. So rural electrification meant substantial upfront costs to serve fairly few people. Second, there was a deep skepticism that people living in rural areas would actually use electricity, there was a sense of elitism that rural Americans were just hopelessly backward. They wouldn’t actually use modern technologies. That’s not actually true. Cars were actually more common in the countryside than in cities for much of the 1920s. So there was a ready adoption of new technology on their terms. But when it came to electricity, power companies and their executives thought there’s just no demand for power. We’re not going to focus on them. Instead, we’re going to focus most of our efforts on the cities and especially on industrial customers. So a lot of industries are switching over from steam to electric power, because they feel electricity is cleaner, it doesn’t generate any smoke or pollution, where it’s consumed and offers a lot more operational flexibility than steam engines do. So what many people, including in Congress, are saying is that we actually need a greater system of public provisioning of power. Private power is motivated by profit considerations. They’re only going to serve customers in markets that are likely to offer near term payoffs. Capital is impatient, so to speak. We can talk a little bit more about this. At the time, the private power industry was dominated by these large holding companies that had been formed by various financiers and executives, and these holding companies were very much rooted in the idea that this system exists to make money, make lots of money very quickly, using the magic of debt and leverage. So this short term financial orientation was in clear conflict with a recognized public and social need to extend affordable universal power service to everyone.
Billy Saas: Really quickly right there, would it be fair to draw an analogy with contemporary efforts to bring broadband to rural communities? How much does that sort of movement or effort resemble what you’re talking about here? The recognition nationally, federally, that it’s important that we have reliable internet connection for folks in rural communities, but you also have the actors who are like, well, where’s the money in that? Is that a fair kind of comparison?
Sandeep Vaheesan: Yeah, I think the parallels are quite strong. At the time, electricity was becoming a necessity. It was hard to participate in modern life without electricity. I think we’re certainly at that stage with broadband today. But the relevant private actors, as you note, don’t view enough short term private potential to do the necessary work upfront. Extend fiber optic network into rural areas. Today, we built distribution lines into the countryside 100 years ago.
Billy Saas: And sometimes the bigger companies like Google will take on pet projects and abandon them mid-stream, right?
Sandeep Vaheesan: Right. That’s a good example. So you’ll see companies try to position themselves as more responsible by saying, oh, here’s Google Fiber, we’re extending it into this low income neighborhood or extending it into, I don’t know if they’ve actually done this, but extending it into more sparsely populated areas. Similarly, 100 years ago, you had some private power companies pursuing these model projects. They’ll extend electric service into a village or town and say, look at what we’re doing. We’re teaching farmers how to use power. We’ve undertaken all these demonstration projects. And to be honest, they did something. The rates of rural electrification did go up a little bit in the 1920s. Richard Hirsch wrote a book, I believe in 2022, about this. I think he overcorrects, I think he gives them too much credit for what they did. But there were some attempts to build power lines to serve farmers. But the progress was very modest, and there were estimates saying that if we continue at this trajectory, it might take another 50 or 100 years to serve even half the population of the countryside. So it was happening at a glacial pace. So a number of people, ordinary people, elected officials, ultimately, the President himself in Franklin D. Roosevelt said, we can’t trust private capital to build power systems to serve everyone. So we will need a system of aggressive public provisioning to make electricity affordable and universal. A lot of these fights actually started in the 1920s. We commonly see this tendency among even informed lawyers and scholars to treat the New Deal as happening on a blank slate. So Roosevelt’s elected in 1932, and they just go on this orgy of experimentation. There was a great deal of experimentation, to be sure, but a lot of ideas had been developed in previous decades. As bleak and conservative as the 1920s were, in many ways, supporters of public power did make important advances. For example, Congress authorized the construction of the Hoover Dam in 1927, which at the time was the largest hydroelectric project, and I believe the tallest dam in the world. This happened during the Coolidge administration, Calvin Coolidge famous for his commitment to fiscal austerity, a minimalist national government. In spite of that, he signed this bill into law in 1927. The federal government started building this giant dam on the Colorado River. So you had a number of precedents established already in the 1920s. So the New Dealers weren’t really building from scratch, but rather expanding and improving what had been done in prior decades.
Billy Saas: So it strikes me that there were ideas and proposals on hand in the 1920s that became, as you’re describing, became activated or empowered later. In your book, I want to do some more of this history. But I’m very excited about the promise portion. Specifically, we’re now in the 2020s. You have some ideas about how we might remedy things. Is the idea here to have some proposals on hand until such time that we’re ready to activate them? Or do you feel like you are intervening with this book into discourses and into a political scene where some of these actions could be taken, and maybe are already being taken now?
Sandeep Vaheesan: I’d say both. So part of this book is trying to sketch out a different and better view of organizing the power system, drawing on institutional models we already have in parts of the country. I don’t have any illusions about our present political moment. I can’t imagine anyone reading the last third of my book in Congress and just say, we’re going to make this law. I imagined there are a few people in Congress who would be interested and intrigued by it. But I can’t imagine this becoming national legislation in the near future. So there is a certain utopian aspect to what I’m saying. At the same time, public power is experiencing a bit of a renaissance. There is energy and excitement around public power. Last November, the state of Maine had a referendum on whether to take over its two investor owned utilities and operate them as consumer run utilities. The referendum failed. I think the final vote was something like 70% to 30% against a public takeover. But the fact that this even got on the ballot is a testament to discontent with the status quo and a real desire to do something very different. Maine isn’t an aberration. We’ve seen similar public power fights in cities across the country. Boulder, Colorado spent about 10 years trying to take over its investor owned utility. As in Maine, it wasn’t successful. Minneapolis had a similar fight. Not successful with that as well. So there’s interest and there are people on the ground organizing and fighting for public ownership and operation of power systems. All the fights haven’t been defeats. That’s one thing I should say. So in 2023, the New York legislature, as part of the budget deal, gave the state owned New York Power Authority the ability to build utility scale, renewable power projects. It’s called the Build Public Renewables Act or BPRA. The New York Power Authority has been in existence for almost 100 years. It was formed when FDR was governor of the state, but it didn’t have the power to build large wind farms or large solar arrays. Now it does have that, and that’s a significant advance. That’s a big win for public power. You have the state agency that has the power now to build large wind farms and help the state meet its climate goals. I think that’s something that could be replicated in other states. Texas and South Carolina also have similar publicly owned power generation companies. I’m less hopeful about BPRA in those two places, but that’s something that could happen in the next five or 10 years. The Inflation Reduction Act, which is very much a mixed bag, does have a pot of money for publicly owned and cooperative utilities. The BPRA partly succeeded because its sponsors in New York could tell their more skeptical or agnostic colleagues that they have a new pot of federal money available that is just sitting there waiting to be spent, and we can either take advantage of that, or we can continue to sit on our hands. So I think the IRA will actually help some of these public power fights going forward. We’re still in the very early stages. But I think we could be on the cusp of, by my estimate, the third big wave of public power in the United States.
Scott Ferguson: You also point out that some of these fights, even if they fail to municipalize or enact a full public takeover of these private plants, nevertheless, put a kind of pressure on the private industry. You’ve suggested that the franchise agreements that come out of some of these fights are shorter, and that there are more demands for public accountability that have arisen as a result of these contests.
Sandeep Vaheesan: That’s right. So even unsuccessful public takeovers can put the fear of God in some of these utilities and pressure them to do better on reliability rates and decarbonisation. That’s what we saw in Boulder. So the investor owned utility there, just called Xcel Energy, won the fight. They defeated the 10-year campaign for public power. But their new franchise agreement has far more conditions around decarbonisation than their old franchise agreement did and gives the city the authority to launch another public takeover attempt if they fail to meet these conditions. That’s a really critical aspect. Even unsuccessful public takeovers can have real social value and this goes back to an interesting historical point. Two months before he was elected in November of 1932, FDR made a campaign stop in Portland, Oregon to talk about his approach to the power sector. He had, in his characteristic style, been somewhat non committal on what he would do in general, but including on the power sector. He had done some nice things when he was governor, but his allies wanted him to make some firm commitments. Like what are you actually going to do if you become president? He talked about the value of yardstick competition where we have institutional rivalry between public and private and where public actors are constantly pressuring private actors to do better. At a bare minimum minimum, there’s a sort of publicity function where people who live in a community served by an investor owned utility might look at a neighboring town served by a municipal power agency and say, hey, the muni seems to be offering lower rates, better service and a greater commitment to energy efficiency and conservation. Why can we do that? So that publicity alone might spur the investor owned utility to do better. But FDR, to his credit, said pure publicity may not be enough in all cases. Some of these IOUs might just be so short sighted and arrogant, that no level of naming and shaming will get them to do better. He said, “under those circumstances, what we need is,” in his words, “a birch rod in the cupboard”, he used this old metaphor of corporal punishment to say that, yeah, some of these utilities are just so beyond redemption that the only thing we can do is to take them over and run them as public agencies. Having a credible threat is really an important part of regulating private power companies. They should always be looking over their shoulder and ask themselves, are we doing good enough to avoid a public takeover? If not, what do we need to do better in the coming year to mitigate that threat?
Billy Saas: In your book, you say Congress should make the birch rod an effective option for communities across the nation. I’m picturing, you know, local elected councils with sticks chasing utility barons around the streets. I’m interested because it seems like another key thread of the history of your book is, like any good legal scholar, you tarry in definition, right, and travel in some good definitions. I think the definition and the history of the corporation and private property is salient in the story that you’re telling. I’m thinking about the birch rod, the public utility or the municipal utility competing against a private utility, and how much that is so much performance of a division that isn’t really real or isn’t really there between public and private utilities and corporations. I’m getting at specifically, what I think one of the things that your book does really well is raise the veil a bit on what a corporation is, and has been, and could be, again. The idea that originally, early on, corporations were sort of delegated by the state to perform certain functions. Over time that public mandate or publicity of the corporation disappeared and was suppressed. It seems to me like in those municipal private contests, that’s part of the performance and sustaining of that sort of Kabuki performance of private-public.
Sandeep Vaheesan: Right.
Billy Saas: So I’m just really, I guess, appreciating what you’re doing here and want to wind up in sort of asking you Do you think that the kind of franchise agreements that places like Boulder Colorado have ultimately arrived at and settled on after years of throwing money at the corporations who are in bad faith just stalling, stalling, stalling? The franchise agreement, is it sort of an end run back into getting charters back in the center of the corporate form of the investor owned utilities?
Sandeep Vaheesan: Yeah, so I think the franchise is one of those powerful, latent regulatory instruments that’s the setting out there waiting to be picked up and used and used well. It’s related but somewhat distinct from the corporate charter question. The franchise is something any operator of social infrastructure needs. The power company digs up and buries power lines, or runs power lines along our public roads and highways. Without a franchise, that’s a large-scale trespass. They cannot do that without authority from the relevant local government. So they got these franchises that say, okay, you’re paying for rights of way to build and operate this infrastructure there. They’re getting an important privilege here, ordinary corporations can’t do that. Which should raise the question, Well, okay, we’re giving them a public privilege of great value, what are we getting forward in return? If you look at the early history of power service in the United States, you saw cities and towns trying to use the franchise as a regulatory instrument. They’ll say, Okay, we’re giving you a franchise, you can build power lines, operate power lines on our roads and sidewalks for the next 15 years, but in exchange for that, you can only charge Y cents per kilowatt hour, and you have to meet certain reliability measures. If you don’t do that, we can take legal action against you, including revoking the franchise and awarding it to someone else or revoking the franchise and converting the existing physical assets into public assets. One thing you learn quickly by studying the history of the power industry, it’s very hard to remain a believer in fictions like private versus public, economics versus political, market versus states. They’re just hopelessly intertwined. So in my book, I hope in the first four chapters, the reader comes away thinking, okay, the Econ 101 view of the world where there’s a clear separation between public and private, state and market doesn’t actually make any sense. The power industry shatters those fictions. Just to be safe, I have a whole chapter explaining why it’s really state construction all the way down. There is no such thing as private property without the state, maintaining the land record system, telling someone, you own the plot of land, and we’re ready to enforce your entitlement to that plot of land through coercive force. We will send the police to evict someone who’s trespassing. Same story with respect to contracts: there are no binding contracts without a court system that stands ready to enforce contractual promises. The corporation is its own special creation, given all these unique powers that were historically paired with public responsibilities and duties. But since the late 19th century, the privileges have remained, but they’ve been stripped of the duties of the responsibilities. This is a book in which I drew on the work of so many legal scholars, historians, political theorists, and I should shout out David Ciepley’s excellent work on the corporation, and how we need to rediscover the traditional understanding of the corporation because all those privileges are still there. The privatization of the corporation has succeeded as a rhetorical and political matter, but as a legal matter, corporations have important public benefits, and it’s critical to pair those with public duties and responsibilities again. Despite the law and econ takeover of this field, Ciepley has been saying no, no, no, we need to think about the corporation as an institution that is wholly dependent on state action. So I cite him, my work was very much enriched by his scholarship.
Billy Saas: You talk about William Roy and the privatization of the corporate.
Sandeep Vaheesan: Yes, William Roy was another influential scholar, in shaping my thinking and ultimately, this book. For listeners who aren’t familiar with it, Roy traces the history of the corporation from around the late 18th century until the early 20th century. He examines how corporations went from quasi-public instruments that were chartered for very particular ends, building a bridge or building a road. That was the dominant understanding till about the 1850s-1860s. But thanks to Andrew Jackson, in part, thanks to clever corporate lawyers, the corporation became perceived as a private institution existing apart from the state. It’s also a function of our Federalist system where states compete against each other to attract corporations. So everyone knows about Delaware today being home to an insanely large fraction of fortune 500 corporations. But if you go back 100 years, New Jersey was the original Delaware. They unleashed this race to the bottom where states competed to attract corporations to charter there. So, for example, New Jersey persuaded the Standard Oil Company to give up its relatively restrictive Ohio charter and reincorporate in New Jersey under a more liberal charter, liberal from the perspective of the shareholders of the managers. At the time, corporate charters were actually an important source of revenue for state governments, so they had short term fiscal reasons for engaging in this ruinous competition. Which maybe will get us to another topic of shared interests, which is money.
Billy Saas: Yeah!
Scott Ferguson: I think one of the deep implications of this analysis in your book that you that I think is there, implicitly, but I’d like to tease out and kind of hear what your response is, you know, I’m always interested in the ways that Modern Monetary Theory can not only help us get over our zero sum thinking about federal spending, and open up our imagination for public provisioning, all the things that we all really like about it. But I’m also interested in what Modern Monetary Theory can do in terms of systemic analysis, systemic analysis of history, and historical crises. I think the way that you lay out, leaning on other people, but the way you lay out the history of the rise of both the actuality but more of the ideology of the private hierarchical corporation is actually a great case study for MMT because, as you point out, the US Constitution de-democratizes money creation, and enforces austerity, at the sub federal level, at the level of states and municipalities, because the Constitution forbids those sub-federal entities from creating money, it makes them reliant on revenue. That becomes the underlying motivation and condition for wanting to lure corporations to franchise anew under less restrictive rules in one state, right? So if you just take for granted that well, all entities need to earn revenue in order to spend and so well, it’s just too bad. Once the law made it possible, too bad. There’s a race to the bottom and we can lament it. But I think the way you lay out all the pieces of this puzzle, it helps us to see the ways that a constitutional structure of de-democratization and austerity for some federal governance incentivizes the rise of the modern private corporation and its inordinate powers, which it constantly abuses.
Sandeep Vaheesan: That’s right. Yeah, so in the late 19th century, you had states struggling to collect enough revenue to engage in social spending, public investment, and as you mentioned, they cannot issue their own money so they ultimately have to engage in taxation, borrowing or other revenue generating activity. And one easy and fairly straightforward way of raising money at the time was issuing corporate charters. You grant a firm a charter with the sort of privileges. They, in exchange, pay either an upfront or recurring fee to hold that charter. With the growth of regional and ultimately national companies, you saw businesses starting to play states off against each other and signal quite explicitly: we don’t need to be incorporated in Ohio, you have all these restrictive conditions on what we can do. Today, we take limited liability for granted but many states didn’t allow for limited liability at the time. Shareholders could be on the hook for a corporation’s debts above and beyond their initial investment. Some savvy, you could call them savvy states, like New Jersey recognized an untapped revenue potential. They said, we can actually offer you a much more liberal charter, you’ll get limited liability, you won’t have any regulatory restrictions in the charter. So for example, the charter in the 19th century was often used as a quasi antitrust instrument. Businesses couldn’t engage in certain types of competitive activity without running afoul of their charter. New Jersey said: forget that, you’ll have a broad permissive charter. Come re-incorporate in New Jersey, pay us a lump sum, and escape the regulatory obligations that you’re facing in Ohio, or Pennsylvania or somewhere else. So you’re right, this is very much a condition of monetary scarcity at the state level. States aren’t monetary sovereigns, so they had to figure out other ways of raising money. This meant sometimes undertaking very socially destructive activities and the state rivalry kind of set the stage for the modern corporation, where states have this very attractive bundle of privileges without any corresponding responsibilities.
Scott Ferguson: I think from here, I’d like to circle back to the history that you outline, and have you talk a little bit more about what happens in the New Deal. I mean, one of the things that I guess I shouldn’t have been surprised, but I guess I was slightly surprised by, is how intense the contestation was around power and the public provisioning of power, throughout the New Deal. I mean, at no point in your story, is it “Ah, we did it, and this was a good idea,” right? I mean, for some people, right? But I mean, the skullduggery continues, and you actually have some pretty amazing stories about campaigns of the private power industry, moving into schools and community centers and producing all kinds of propaganda and fake telegrams, staging some kind of totally false populist support of private power. But anyway, if you can just take us into some of the major events that happen around the New Deal, that’d be really helpful.
Sandeep Vaheesan: Yeah, so I should start by saying, in the 1920s, private power was fairly close to hegemonic power, probably the single most powerful industry in the United States. But they were aware of the threats. They were aware of the threats of stronger public regulation, of greater public ownership, and really pulled out all the stops to prevent the growth of the Public Power Movement. The FTC did a great study that looked at some of the propaganda campaigns and tricks that they undertook and concluded that there had never been a propaganda campaign, outside of governments in wartime on par with what private power undertook in the 1920s. That was a paraphrase not a verbatim quote, but yeah, it was a full court press to contain and ultimately defeat public power. But they were successful, in part because the crash happened in 1929. And the United States entered the Great Depression. And these over leveraged holding companies that dominated the power industry, many of them collapsed. Debt’s great during boom times, but becomes a profound source of vulnerability when things go south. So a number of these holding companies went bankrupt. Famously, Samuel Insull’s holding company group, Middle West Utilities, went under. So the crisis created this new opening. Private power, in a sense, had been dethroned. The men who are the top of American industry were now in disgrace, and Roosevelt ran in part on reforming the power sector. He gave this nice, rather scholarly speech in Portland in September of 1932. He took office in March of 1933, and immediately started reforming the power sector. So one of the laws passed during his 100 days was the Tennessee Valley Authority Act, which creates a federal corporation to build and operate multipurpose dams on the Tennessee River and its tributaries. By multipurpose dams, I mean dams that were built to do multiple things, including control floods, support navigation, and then, of course, generate electricity. So the TVA is set up in the first 100 days, not just to build dams, but is also given the power to really serve as a regional development agency. So at that time, the Tennessee Valley was one of the poorest parts of the country. So there’s a real belief that absent strong federal investment and federal reform, this backwardness would persist over time. Ultimately, the TVA was much more of a power company than a Regional Development Agency, but there were these competing visions for the TVA from its inception. The government replicates this in one form or another across most of the country. Dams are built in the Pacific Northwest, Congress funds the construction of the Bonneville Dam near Portland, and then the much larger Grand Coulee Dam in eastern Washington, you see similar dams on the Sacramento River. The government undertook a dam construction program that probably hasn’t been matched anywhere else, maybe in China in recent times. But it really was an extraordinary program of public investment. One of the aims was to generate large quantities of low cost electricity that would serve both cities and then also people living in the countryside. That was really the first pillar of the New Deal Power Program. The second pillar was rural electrification. As we discussed earlier, only about one in ten farmers had electricity in the early 1930s. This was seen as a social, political and economic problem. By the 30s, there was a recognition that unless the government steps in and either directly builds lines to serve farmers or funds the construction of lines to serve farmers, this isn’t going to happen. Private capital is moving too slowly. We can’t wait another 50 years, 100 years to electrify the countryside. The New Dealers set up an agency called a Rural Electrification Administration to serve as a lending agency. They were given the power to offer low cost, long term loans to rural electrification projects. So that’s the second component. The third component is reforming the holding companies. This was probably one of the fiercest fights of the 1930s. So in early 1935, the Public Utility Holding Company Act was introduced in Congress, and this bill proposes to regulate and break up the holding companies that dominated the industry at the time. So we should think of holding companies really as creatures of the financial sector, devices meant to concentrate control in the hands of a few well connected financiers and promoters. Congress set about reforming these corporate behemoths, breaking them up, making them more conducive to state and local regulation. FDR was determined to break up the holding companies. He actually talked about it in the State of the Union address in 1935. But the fight wasn’t easy. It took almost six months to get this law through. Ultimately, it wasn’t quite what he or the biggest opponents of the holding companies wanted, but they passed PUHCA, Public Utility Holding Company Act, in August of 1935, charged the SEC with both breaking up these holding companies. Some of these holding companies, from a strictly operational perspective, made absolutely no sense. They would have a few utility systems in New England, a few in Florida, a few on the West Coast. There was no engineering rationale for this system of organizations. So Congress told the SEC, break up these non-integrated systems and tightly regulate them going forward to prevent some of the financial chicanery that had happened in the 1920s. So it’s really a three part program of public provisioning, low cost credit for rural electrification, and much tighter and stronger regulation of private power. The New Dealers, they didn’t really go all in on public power, but they expanded it qualitatively with respect to where it was previously.
Scott Ferguson: Can you talk about the rise of cooperatives during this time?
Sandeep Vaheesan: Sure. So Congress creates the Rural Electrification Administration, and the REA, at first, doesn’t know how to go about electrifying the countryside. They’re actually quite open to the idea of giving low cost credit to private power to build rural distribution systems. But they quickly realize, okay, there’s no appetite here. They’re going to borrow a lot of money to provide service to relatively few people. Then they turn to public agencies, they look at municipal utilities and talk with them and gauge their interest and realize, okay, they want to serve their cities, and in many cases don’t actually have the legal power to build rural lines. So they have charters saying you will only serve the city of Los Angeles, for example. And so they’re forced to look to this new, relatively new institutional form, the Rural Electric Cooperative. At the time, the mid 1930s, there might have been 10 or 20 Rural Electric Cooperatives in the entire country. So this was a largely untested form of business enterprise. The REA realized, though, we can either look to the cooperative, fund cooperatives, or electrification is not going to happen. There’s a lot of skepticism at first about Rural Electric Cooperatives. Yes, cooperatives have a long history in the United States, especially in the Midwest and the South. You have a lot of food and agricultural cooperatives that do things like collectively market livestock, collectively, market grains, in some cases, even engage in collective manufacturing. Some of the familiar brands at the grocery store like Land O’Lakes and Sunkist, they’re actually cooperatives. Agricultural cooperatives were a thing, but electric cooperatives were largely unknown and unproven. You had people asking themselves, can we actually trust a group of farmers to build and operate power systems? This requires real skill to construct, real skill and knowledge to maintain. This seems questionable, how are we going to get it done? So what ends up happening is the REA, which was originally set up to be a lending agency, becomes not just a lender, but a technical assistant. They realize they actually have to supply a lot of the technical engineering know how if these electric cooperatives are going to be successful. So they went about providing really essential service for these early electric cooperatives. I’ll highlight two things they did. This goes back to the money question. Congress, in setting up the REA, explicitly said it will not award grants. The REA could only award loans to quote unquote “self-liquidating projects”. By self-liquidating I mean projects that will generate enough revenue over time to repay the REA on the original terms. Rural electrification would have to be done in the sense on a profitable basis. There would need to be enough money to repay principal and interest to the REA. So the REA has this public mandate to help electrify the countryside, but then also has, in a sense, a banker mandate to only extend credit that can be repaid. So the REA realizes, okay, we can’t just indiscriminately extend credit because a lot of these projects are not going to be successful. Congress has charged us with only funding self-liquidating projects, that limits our latitude. But in a sense, it forced them to be creative. So they do two things. First, they identify uses of electricity in country homes and in farms. They figured out ways that farming operations can be electrified, they identify new uses of power and farm homes, and they actually organize a traveling tour to show farmers and their families how they can use electricity. It was called a “big tent”, it traveled throughout the South and the Midwest demonstrating use of power. This is was very much with an eye toward selling enough power to repay the loans. It was motivated by conventional financial considerations. So that’s one thing they did. Second, they also realized power systems are costly to build. Building lines, at the time private power had said we’ll have to spend anywhere from $1000 to $2,000 per mile of line extension. From their view, the numbers just didn’t work. They would spend a lot of money up front and over time not sell enough power to make the undertaking worthwhile. REA recognizes okay, there are probably ways we can make line construction and line designs more effective. So they actually work with manufacturers to figure out ways to reduce the cost of line construction. For instance, they said okay, if we use certain materials for wires and poles, we don’t have to place the pole so closely together, we can save money on wooden poles. Secondly, they determined that the line designs used by private power were often too ornate and complicated. So they develop simpler line designs that would save money. By the late 1930s, REA funded projects were building lines in some places for as little as $400 a mile. So substantially less than what private power had said just a few years earlier. The REA funds, and helps set up these rural electric cooperatives, ultimately sets up close to 1000 electric cooperatives, principally in the Midwest and the South. If you look at a map in 1935, I mentioned about one in ten farmers had electricity, but there’s a lot of regional variation. On the west coast in California and Washington, about one and two farmers had electricity. By contrast, in the South and Mississippi, I think the number was something like one and fifty or one in one hundred. So the role of the need for electrification was a lot more acute in the South and to a lesser degree the Midwest than it was in the northeast and the west coast. A lot of money through the REA is flowing into the Midwest and the South. It’s really this development project, if you step back from it, a lot of low cost credit going into these areas. By the mid 1950s, you had rural electrification rates of 9 in 10. Nationally, even in places like Mississippi are up to about 85%. It’s worth remembering this whole project was interrupted by World War Two. Starting in 1941, the government put a hold on most civilian investment projects to divert resources into directly fighting the war, and then also supporting the war effort of the allies. Between ’41 and ’45, there’s not a lot of rural electrification going on. The project is put on hold, and then really picks up after the war. Within about 10 years, from 1945 to 1955, we went from 50% to 90% of farmers having electricity. It’s a really dramatic change. Not only getting power, but there’s a substantial improvement in their living standards. They now have indoor plumbing, they have indoor toilets, they have refrigerators. Life in the American countryside was transformed. Having grown up in a period of what I think of as neoliberal stagnation, it’s really hard to imagine both the depth and the breadth of change that happened in the United States. There was also a similar, if not quite as significant change in cities with electric modernization, and we can talk a little bit more about that.
Billy Saas: So what will it take? It’s hard to fathom… Yeah, I agree. The scale of action and the kind of sense of determination that you just outlined there. But you’d have some ideas in the “Promise” portion of the book toward the end. Yeah, what do you think needs to happen? What are the conditions you think need to be in place? Are they in place? And then where do you find the most promise moving forward for a green transition, a just green transition and a democratic green transition?
Sandeep Vaheesan: There’s a lot that needs to happen. I think there’s at least one half of the political spectrum, a recognition that climate change is a serious problem that requires national and preferably international action. But, the United States is still the second largest contributor to annual greenhouse gas emissions. If you look at greenhouse gas emissions since 1850, the United States is the largest contributor to that stock of gasses in the atmosphere. The US can do a lot. But should ideally do it in concert with other countries. I think that’s the good news. I think the bad news is, there’s still a common assumption, you see it a lot in kind of centrist central left climate spaces, that this is just a technical problem. We need to improve the efficiency of wind turbines, we need to develop new energy storage technologies. I certainly don’t mean to minimize any of those challenges. They’re important. We’ve made a lot of progress, but there’s a lot of progress that remains. But I think simply reducing it to a techno-scientific question doesn’t do justice to the problem, because it’s also a political economic problem of who’s causing it or who’s disproportionately causing it? Who’s bearing the burdens within the United States, then, of course, around the world? Who’s making the decisions? There are many potential paths to a zero carbon future, some of which are much more just and equitable than others. Who is making those choices? Right now, the bulk of those choices are made by executives at utilities, executives in oil and gas companies, of course, Wall Street.
Billy Saas: So those executives have to refer to their investors in their fiduciary responsibility, and there’s this perverse… Ultimately, accountability is just completely displaced.
Sandeep Vaheesan: It’s completely displaced, right. We can have a green transition that’s very oligarchic. So far, I think that’s the path we’re on. I mean, look at the tech companies. They have positioned themselves to lead the transition. Google, Amazon, Facebook, use a lot of energy, have data centers scattered across the country, and they’ve gone to renewable energy developers, Amazon’s now talking to nuclear power developers, as well, and saying, we’re willing to purchase this power using long term power purchase agreements. It certainly has benefits, they’re helping decarbonize, but they are doing this in a way that’s best for them. They are not consulting the public. They are not doing this based on some broader social or public imperative. They’re doing this based on their private considerations. So as of now, I think we are on a trajectory of both insufficient decarbonisation. The IRA is not going to get us to where we need to be. And then a transition that’s fundamentally unjust. In some ways, even if we’re successful, even if the energy modelers understated the benefits of the IRA, we’re going to be in a place where our oligarchic arrangements are still largely intact, which should alarm everyone. We don’t want to perpetuate poverty, precarity, and inequality and then simply just strip out the carbon. Yes, decarbonisation is necessary, but it’s not sufficient. So we need to be thinking about the political economic aspect of our power system and really our broader society. My book is just focused on power, but we could have similar discussions around housing and transportation, just to name a few other examples. To qualify that pessimism a little bit, I think there are some early signs that people are starting to recognize that we need to pick a different path with the fact that the Green New Deal drew so much attention is positive. There are organizers and advocates on the ground across the country doing really critical community outreach, developing ideas, plans based on small-d democratic input. But that local energy and activism, in my view, needs to be paired with a national program. That the federal government is not just a monetary sovereign, it is kind of the singular monetary sovereign in the entire world. We need to be putting that special power to use, instead of using the monetary privilege to fund the military industrial complex, we should be using it to decarbonize and build a democratic economy.
Scott Ferguson: One of the rhetorical tropes that disgusts me so much that comes out of this kind of oligarchic transition language is, as you suggested, it’s really a technical problem. We need R&D in order to solve the technical problem. What the technical problem will do is bring down costs, right? It’ll make it more affordable, right? But this takes so much for granted. Right? From a public, endogenous, MMT point of view, that’s and that’s a nonsense justification. I guess, before we go, I’d like to have you stipulate some of the details that you outline in your book for moving forward. You have all kinds of ideas about board representation and composition, grants rather than relying on the kind of punitive loan structure that hindered rural electrification during the New Deal. Can you walk us through some of the nitty gritty of how you imagine a democratic just transition?
Billy Saas: We can leave some mystery. What do you feel are the most critical components of your solution?
Sandeep Vaheesan: Yeah, so as a lawyer, I’m probably inclined to overstate the importance of law, but institutional details matter. New Deal public and cooperative power has often fallen short because they got institutional details wrong, or they simply didn’t consider the institutional details.
Scott Ferguson: Or they were racists.
Sandeep Vaheesan: Or they were racists. Yeah, that’s another important reason. So if we want democratic power, good governance has to be in a sense hard coded. We need to establish a certain baseline around regular elections, on public participation in utility decision making, limits on boards and managers discretion. We don’t want public power to have the freedom to invest in coal power. So the institutional details matter a lot. To offer a partial defense of the New Dealers, I do think they were doing this all very quickly under a great deal of stress and opposition from not just private power, but just reactionary interests in general. That, I think, explains, in part, some of the institutional neglect that happened. For example, why are electrification laws in this country so sparse? Why don’t they require, for example, annual elections? Why is that left up to the board’s discretion? My view is they were just trying to get these institutions up and running, they didn’t necessarily think about long term governance. They wanted to get electricity to the countryside, and they wanted to do it fast enough that private power couldn’t crush the Rural Electric Cooperative babies in the cradle. Not an entire defense, but a partial dependence. But now we’ve learned. We have almost 100 years of experience. We have to think more about the legal architecture this time around. That’s critical. Second, returning to the topic of monetary sovereignty. The New Deal Power Program reflected the monetary conservatism of Roosevelt and many of his allies. Jakob Feinig has an excellent book about this very topic, Moral Economies of Money. That austerity mindset is one of the legacies of the New Deal. It has some good legacies, but also has other bad legacies. Obviously racism, but then also the notion of austerity, the idea that money is scarce for a monetary sovereign like the federal government. We have to overcome that. Especially in recent years, debt has really impeded both autonomy and democratic governance in many of these Rural Electric Cooperatives. They have substantial loans that they have to repay to the federal government, so their boards and managers are always just thinking about how do we sell more power, we have debt to service. Maybe we should try to attract a Google data center to our service territory. That’ll increase our revenue 10% annually going forward. That’s a function of debt financing. This time around, we should unabashedly, proudly embrace grant financing. If we have the technical means to do something, we can afford it. I don’t know who said that. But I often think about that line. So money is not the constraint here.
Billy Saas: Keynes.
Sandeep Vaheesan: Was it? Keynes, okay. The master himself. And you see that logic at work. There’s never a lack of money for defense spending. Nobody ever talks about deficits when it comes to the annual defense budget. But when it comes to spending on good things, it’s like, well, what about the deficit? We need to confidently reject that and those of us on the left should be willing to energetically make the case for public spending for the public good.
Billy Saas: I think it’s a great place to end it. Sandeep Vaheesan, thank you so much for joining us on Money on the Left.
Sandeep Vaheesan: It’s been my pleasure. Great time chatting with you both.
* Thanks to the Money on the Left production team: William Saas (audio editor), Mike Lewis (transcription), & Robert Rusch (graphic art)
