Business and government 100 years ago

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  • #1
turbo
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In Maine in 1909 the Fernald Law was enacted that required hydroelectric power to be sold in-state only. My understanding is that damming rivers was considered a "taking" that hindered some interests (including the driving of whole logs), so the hydro-power had to be sold in-state to provide benefits for local businesses. In the late 1920's Central Maine Power Company was in the process of constructing a very large hydro-dam in my home town. Walter Scott Wyman (CEO) petitioned to have the Fernald Law waived so that his company could export the power generated by that dam. The waiver was denied by referendum in 1929, so CMP arranged for the construction of a pulp and paper mill in Bucksport to use the bulk of the power that the dam would produce. Maine was not very "electrified" back then, and could not have easily absorbed all the power that the dam could produce. The pulp mill construction was on-track for completion before the dam, so CMP bought a surplus WWI ship's hull and fitted it as a floating generator station, and positioned it in the Penobscot river next to the mill to provide power until the dam came on-line.

The Fernald Law would never have been enacted in today's business-dominated political climate, IMO, but it provided for a more rapid electrification of this rural state and produced lots of new well-paying jobs at the new pulp mill. The mill still exists, and I have been in it many times as a technical consultant. 100 years on, the obsolete Fernald Law is still providing good manufacturing jobs at that mill because of the value of the physical plant. It's an investment that is hard to walk away from. You can't easily move boilers, turbine generators, paper machines - it's more cost-effective to maintain and upgrade them and keep using them.

Would even the most ardent modern-day supporters of "states' rights" today allow the enactment of a law that protects and promotes the interests of the industries and inhabitants of that state, if it meant putting a targeted curb on interstate commerce for a particular type of business? CMP was certainly inconvenienced when it could not obtain a waiver of the Fernald Law, but the net result was wide-spread access to electrical power in a state in which the natural resources (timber was the big one) were being depleted, and new types of industries were needed to keep our citizens employed.

They hey-day of Maine as the lumber capitol of the US was long passed, along with the hey-day of wooden ships that made our huge pines so valuable. Laissez-faire capitalism would have trumped the Fernald Law, but somehow enlightened self-interest prevailed, and the electricity that could have competed so cheaply in the East Coast cities was instead reserved for the use of Maine businesses and individuals, prompting CMP to build a network of transmission and distribution systems. Today, the generating capacity of the old CMP is owned by Florida Power and Light, but CMP owns and operates all the distribution systems - a very profitable situation that is about 180 degrees away from Walter Wyman's vision.
 

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  • #2
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Do you think any of the projects you've mentioned would be possible today, given our regulatory "progression"?
 
  • #3
turbo
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Do you think any of the projects you've mentioned would be possible today, given our regulatory "progression"?
I don't know. I'm pretty sure that the deregulation that characterizes our regulatory systems today would not have permitted the enactment of the Fernald Law, nor the referendum that upheld it back in 1929. Without that bit of state-level protectionism, my state would still be a relatively undeveloped backwater. Energy-intensive businesses benefited from the Fernald Law, and provided jobs for many. These days, Maine has very profitable businesses in milling, fabrication, machining, and other manufacturing fields that could be moved away from rivers, etc, with the use of reliable electrical power. If I had a saw-mill that needed the force of a rushing stream to power my mill, I'd have to plan my inventory, production, etc, to stay in business, based on the vagaries of nature. If my mill ran on electricity and my supply of electricity was relatively constant, my business model was simplified and transformed.

Getting a relatively reliable and constant source of electrical power allows manufacturing concerns to be sited about anywhere that the electrical power can be delivered to. This seems like a little thing to us today. It was a revolutionary force 100 years ago.
 
  • #4
russ_watters
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In Maine in 1909 the Fernald Law was enacted that required hydroelectric power to be sold in-state only.

The Fernald Law would never have been enacted in today's business-dominated political climate, IMO...
I disagree. States are always strong-arming businesses over resources. The law is obsolete because the rural areas are electrified, but governments still do whatever they can to ensure they get as big a cut as possible of resources collected in their state.
Would even the most ardent modern-day supporters of "states' rights" today allow the enactment of a law that protects and promotes the interests of the industries and inhabitants of that state, if it meant putting a targeted curb on interstate commerce for a particular type of business?
Absolutely! The states want their cut of the profits and will get whatever they can. Especially when it comes to electric power. Power companies are very heavily regulated.

What's a bigger issue is when the resource is shared by/flows through more than one state. Even a states-rights advocate should see that the federal government has the responsibility to ensure adequate access to resources and mediate disputes between the states over those resources. From the Colorado river to the underground aquifiers of the southeast, this is a very active area of politics today.
 
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  • #5
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As a hard core libertarian, the state was in fact justified in regulating the dam's construction. Even if a person owns that portion of the river, or even the entire river, he likely does not own the entire tributary system (which in essence encompasses every creek and drain, essentially the entire land mass, in the river's watershed). Any damming of that river would have an affect on many other people in the area, possibly the entire state.

With that in mind, the state is responsible to ensure that those effects are mitigated. If in granting permission for construction of the dam, the state decided to put a clause in the contract, that's their prerogative.

Whether or not the clause "can only sell electricity within the state" was right or not is debatable, but regardless, they could have said in the contract "The owner must dance on his roof in red underwear for one hour on the evening of the 28th of every month", and they would have had to comply. Whether that would be good, I doubt, but you get the point...
 
  • #6
turbo
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As a hard core libertarian, the state was in fact justified in regulating the dam's construction.
That particular law was passed in 1909, 20 years before the power company requested the exemption. Lawmakers in this state were cognizant of the fact that we could not continue to site manufacturing facilities along rivers (for water-power) and that if our economy was to expand, we would need to have access to electricity so that power-intensive mills could be located anywhere that electricity could be distributed to.

The Fernald Law was a proactive measure, enacted to prevent power companies from buying up land, harnessing our rivers, and selling the power to out-of-state interests. It sure would be nice to have some forward-thinking lawmakers like that today. I don't see them.

For instance, Maine has abundant wind and tidal energy that could be harnessed. What if our legislators enacted a law requiring that any wind-turbine erected in Maine after 20xx must have been manufactured in-state? Right now, all the wind turbines that are going up in the state are manufactured in Europe, to the best of my knowledge. Maine has idle manufacturing facilities, and talented machinists and designers. There is no reason why we could not become a hub of renewable energy equipment. Think ahead, folks, not just to next quarter's profits.
 
  • #7
loseyourname
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I think it's fair to have some requirement that the inhabitants of a resource-rich region should benefit in some way from extraction and sale of the resource. We've seen at the extreme end Belgium rape the Congo of its rubber to fund empire building while brutalizing the local population and returning absolutely nothing. We clearly don't want that to happen again.

More often than legally mandating local reinvestment (which is heavily practiced by South American countries), though, US states will simply tax the extraction process. This is how Texas, for instance, avoids the need to levy a state income tax. Oil extracted there can be sold anywhere, but the state gets a cut, effectively exporting its tax burden to benefit the local population. I'm not sure if hydroelectric energy production gets taxed anywhere, though. That's kind of an interesting question.
 
  • #8
drankin
I think it's fair to have some requirement that the inhabitants of a resource-rich region should benefit in some way from extraction and sale of the resource. We've seen at the extreme end Belgium rape the Congo of its rubber to fund empire building while brutalizing the local population and returning absolutely nothing. We clearly don't want that to happen again.

More often than legally mandating local reinvestment (which is heavily practiced by South American countries), though, US states will simply tax the extraction process. This is how Texas, for instance, avoids the need to levy a state income tax. Oil extracted there can be sold anywhere, but the state gets a cut, effectively exporting its tax burden to benefit the local population. I'm not sure if hydroelectric energy production gets taxed anywhere, though. That's kind of an interesting question.
Just made me think of a good example. The Alaska Permanent Fund Dividend mandated by the state and funded by the oil industry therein.
 
  • #9
Al68
I'm pretty sure that the deregulation that characterizes our regulatory systems today would not have permitted the enactment of the Fernald Law, nor the referendum that upheld it back in 1929.
That doesn't make much sense. The "deregulation that characterizes our regulatory systems today" is about the kind of regulations that didn't exist 100 years ago, not a simple law banning interstate sales of a product obtained from a public resource.

As Barwick pointed out, there is nothing anti-libertarian about such a law, and isn't even slightly analogous to what we call regulation today. What we consider regulation today (over private economic matters) is something that simply didn't exist at all at that time in the U.S. At that time, that much government power over private economic matters only existed in the wildest fantasies of foreign dictators.
 
  • #10
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That particular law was passed in 1909, 20 years before the power company requested the exemption. Lawmakers in this state were cognizant of the fact that we could not continue to site manufacturing facilities along rivers (for water-power) and that if our economy was to expand, we would need to have access to electricity so that power-intensive mills could be located anywhere that electricity could be distributed to.

The Fernald Law was a proactive measure, enacted to prevent power companies from buying up land, harnessing our rivers, and selling the power to out-of-state interests. It sure would be nice to have some forward-thinking lawmakers like that today. I don't see them.

For instance, Maine has abundant wind and tidal energy that could be harnessed. What if our legislators enacted a law requiring that any wind-turbine erected in Maine after 20xx must have been manufactured in-state? Right now, all the wind turbines that are going up in the state are manufactured in Europe, to the best of my knowledge. Maine has idle manufacturing facilities, and talented machinists and designers. There is no reason why we could not become a hub of renewable energy equipment. Think ahead, folks, not just to next quarter's profits.
Right, the law was enacted because there was in fact justification. Just like I can't burn down a house filled with asbestos and let all that crap fly all over the neighborhood. In similar manner, I can't dam up a river and wreak havok for those up and down stream. A water wheel is one thing, a dam is another. Same with putting things like chemicals into the water.

Now, if they made that requirement you speak of, I think that would be a horrible idea for freedom, and also would handicap your State. There is an economic reason that most of those turbines are made in Europe, because that's where they can be produced most inexpensively. IF a company can produce them in Maine for less money, they will do so. But I'd be willing to bet that with the labor laws in Maine (heck, in the US) and the absurd regulations when it comes to businesses and employees, nobody will do so. I own a business, and let me tell you, it's a regulatory nightmare. If I wasn't services-based, I'd probably make things out of country too, rather than pay to line the pockets of the government bureaucracy.
 
  • #11
turbo
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Now, if they made that requirement you speak of, I think that would be a horrible idea for freedom, and also would handicap your State. There is an economic reason that most of those turbines are made in Europe, because that's where they can be produced most inexpensively. IF a company can produce them in Maine for less money, they will do so. But I'd be willing to bet that with the labor laws in Maine (heck, in the US) and the absurd regulations when it comes to businesses and employees, nobody will do so. I own a business, and let me tell you, it's a regulatory nightmare. If I wasn't services-based, I'd probably make things out of country too, rather than pay to line the pockets of the government bureaucracy.
That's a common argument, but it flies in the face of the facts. Skilled labor in Europe is pretty expensive, and the EU countries have more restrictions on allowable work-hours than in the US, plus more generous retirement plans, PLUS shipping costs to get those turbines here. I think we can compete. Wages in Maine are pretty low, even for skilled workers, and thanks to MEMIC, if you get hurt on the job, you'll have one hell of a time to get any help with your medical bills AND you are forbidden to sue your employer. That's a more-than-level playing field for Maine manufacturers.
 
  • #12
Al68
That's a common argument, but it flies in the face of the facts. Skilled labor in Europe is pretty expensive, and the EU countries have more restrictions on allowable work-hours than in the US, plus more generous retirement plans, PLUS shipping costs to get those turbines here. I think we can compete.
Then the law would be irrelevant, since such a law would only be relevant to imports that are cheaper than local products.

Barwick's argument that you say "flies in the face of the facts" was referring to imports that are cheaper, not imports that no company would ever have any reason to buy anyway. :uhh:
 
  • #13
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That's a common argument, but it flies in the face of the facts. Skilled labor in Europe is pretty expensive, and the EU countries have more restrictions on allowable work-hours than in the US, plus more generous retirement plans, PLUS shipping costs to get those turbines here. I think we can compete. Wages in Maine are pretty low, even for skilled workers, and thanks to MEMIC, if you get hurt on the job, you'll have one hell of a time to get any help with your medical bills AND you are forbidden to sue your employer. That's a more-than-level playing field for Maine manufacturers.
Looks like you just became a multi-millionaire selling wind turbines made in Maine!

Honestly, if it's true, then do it, it's ripe for the taking.
 
  • #15
turbo
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Looks like you just became a multi-millionaire selling wind turbines made in Maine!

Honestly, if it's true, then do it, it's ripe for the taking.
It's all true, and it would be a perfect fit for Cianbro. Thanks to decades of profit-sharing, Cianbro has gone from being a privately-held construction company, to an entirely employee-owned enterprise. A few years ago, they bought the old Eastern Fine Paper mill in Brewer, refurbished the plant, and used it as a plant at which to build refinery modules. The modules are built in that plant, transferred to barges, and are towed to the customer's refinery site to be assembled.

Here's a story written when their refinery contract was active. Last I knew, they had hosted a prospective customer from Canada, and were hoping to land another multi-year contract for more refinery modules.

http://www.brewerme.org/Cianbro/cianbro_eastern_manufacturing_texas.htm [Broken]
 
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  • #16
Al68
Thanks to decades of profit-sharing, Cianbro has gone from being a privately-held construction company, to an entirely employee-owned enterprise.
This might sound nitpicky, but that's a strange sounding statement, since the company remained a "privately-held construction company". It's not like the government bought it.
 
  • #17
turbo
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This might sound nitpicky, but that's a strange sounding statement, since the company remained a "privately-held construction company". It's not like the government bought it.
It is privately-held, but it went from being a family partnership to an employee-owned entity. The nature of the company changed. The ownership is much diluted due to the profit-sharing, but there are no public offerings. I have in-laws that are lifers there, and they went from being employees to employee-owners, who are presumably a bit more diligent about protecting the profitability of the company than they might have been if they were simply wage-earners in a family-owned business.
 
  • #18
Al68
It is privately-held, but it went from being a family partnership to an employee-owned entity.
That's what I thought you meant.
...employee-owners, who are presumably a bit more diligent about protecting the profitability of the company than they might have been if they were simply wage-earners in a family-owned business.
That's something else we agree on. (that makes at least 3 things now. :smile:). Some companies do offer stock options, company stock as bonuses, discounts on stock bought by employees, etc., but many more would probably be better off if they did, too.

Of course it would be a disadvantage to employees to take it too far. They wouldn't want all of their net worth, retirement funds, savings, etc. to be in a single company, even if it is the one they work for. Even Bill Gates is smart enough to not keep all his eggs in the Microsoft basket.
 
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  • #19
mheslep
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It's all true, and it would be a perfect fit for Cianbro. Thanks to decades of profit-sharing, Cianbro has gone from being a privately-held construction company, to an entirely employee-owned enterprise.
Entirely employee-owned is still a case of privately-held. Perhaps you meant Cianbro transitioned from family-held, or closely-held. Edit: I see already addressed above.
 

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