Later on, these cooperatives were denounced as “communist” by utilities, but they were anything but. Their work made possible the modernization of the American farm and farmhouse, which in turn made it possible for rural America to buy electrical goods from private companies. They also returned a modest profit to the RFC.
What’s more, once the REA demonstrated that rural America could be cheaply electrified, other entrepreneurs took notice. Rather than “crowding out” private initiative, government provided an example that worked. Most small businesses, then and now, are imitative rather than innovative. That is fine. Small business can replicate best practices rapidly through the economy, which is exactly what happened in rural America. Installment lenders stepped in to provide new services, and even the electrical utility companies began to string lines out into the country.
As late as 1935, 90 percent of rural homes had no electricity. By 1940, 40 percent of rural America had electricity—a rise of 30 percent in only a few years. Ten years later, in 1950, 90 percent had electricity.
Housing filled a social need, and rural electrification enabled country folk to buy electrical goods. But to really get the economy on a sounder footing, New Dealers would have to encourage investment in new industries, an imperative that dovetailed with the need to prepare for war with the Nazis.
While it is now conventional wisdom that World War II ended the Depression, amateur historians rarely consider the contrary example of World War I, which brought not prosperity but ruin. The aftermath of World War I was recession everywhere, and in rural America, the recession began in 1920 and did not end until after World War II. The disparity lies in the fact that, in World War I, firms invested their own capital to expand weaponry production, only to confront the collapse of demand a year and a half later with the armistice. Manufacturers were left with overflowing inventory and a demilitarized America.
In the run-up to World War II, private companies were not going to get suckered again. And banks couldn’t stomach investing the money necessary for war. The government, for its part, did not want to spend billions of dollars on state-owned weapons factories, which smacked of the fascism they sought to fight. Besides, they needed those billions to buy the guns and pay the soldiers.
Somehow, however, the country had to prepare itself, and to develop advances in aerospace in particular—still a new sector but of increasingly obvious utility for the war effort. So the RFC did for planes and other instruments of war what it had done for houses and electrification: It created channels for capital investment through the Defense Plant Corporation (DPC).
Like Jones, the people behind the DPC were not ideologues but practical men and women from both management and labor. William Knudsen, the president of General Motors, who had helped organize the first Ford production line, was there. The president of a major railroad, the Chicago, Burlington and Quincy Railroad, Ralph Budd was on the committee too, as well as a vice-president of Sears, Roebuck. Labor was represented by none other than Sidney Hillman, the famous unionist who helped draft the National Labor Relations Act. The DPC even had lifelong activist reformers, including Leon Henderson and Harriet Elliot. It was a committee that reflected an alliance of interests between labor, capital, and the state.