JAMES H. HAMILTON[1]
Headworker of the University Settlement
"Everything speaks for and nothing against the post office savings bank," writes Professor J. Conrad of the University of Halle. This is strong testimony from a German economist who is a careful student in the field of social economics, and who lives in a country which has a splendid system of municipal savings banks. But if one looks beyond Prussia and Saxony into the province of Posen he sees great stretches of neglected territory. And in this country if one looks beyond Massachusetts, with its much praised trustee savings system, into New York and Pennsylvania he sees much to be desired,—and if he looks still further west he finds a sadder neglect than the neglect of free popular education in darkest Russia.
[1] Author of Savings and Savings Institutions; Macmillan, 1902. Pp. 436. Price $2.25. This book can be obtained at publisher's price through the offices of Charities and The Commons.
If we fully comprehend the fact that the savings bank is an educational, and not a commercial institution we will see at once that the law of supply and demand cannot properly regulate its growth. We will see on the contrary that if left to local initiative by either municipalities or trustees, the banks will likely appear where they are least needed and fail to appear where they are most needed, and the need of a general federal system, or a postal system, which will leave no neglected spots becomes perfectly clear. "Everything speaks for the post office savings bank."
Postmaster General Meyer, in his article in the August number of the North American Review, presents this country's need of a postal savings system in a very attractive and convincing way. I think, however, that the educational aspects merit more emphasis and more extended treatment. The public, I think, needs to recognize this institution not alone as the often successful rival of the saloon, the enemy of dissipating and destructive spending, but it needs also to recognize its relationship to the strong type of citizen, with resisting power against the petty immediate wants in the interest of greater economic security, the type that can save against the rainy day, the week of sickness, and the declining powers of the later years of life.
In my own judgment the highest function of the savings bank is to lead the workman back to the ownership of his tools, or since that is not literally possible, to a share in the ownership of the productive forces of society. The workman may not recognize in the share of stock, the bond, the equity in a title to real estate, the successor to the tools his forefather kept stored in his cottage. When he has been brought to see it and to make such ownership the goal of his ambition, his tribute of devotion to his wife and children, he will be a stronger and a better man in every respect, and the multiplication of this kind of citizen is as worthy an object of education as the spread of a rudimentary knowledge of letters. Universal proprietorship is no less desirable, from the social point of view, than universal education. The purpose of the savings bank is therefore not so much to instill the idea of hoarding for future spending, but of investing to increase the permanent income.
Having this in mind the provision of the English postal savings system for investing in government stocks for the depositor on his request is fully warranted, and even more so the French provision for investment of the excess of deposits over the legal maximum in government stocks without request. The deposit account itself represents investment,—by trustees on behalf of the depositors. But the depositor should eventually become a conscious owner on his own account. It would seem most proper that he be supplied with information which would enable him to form an independent judgment as to different securities, and the savings bank might very well act for him in making his first investment.
The one departure from precedent in Mr. Meyer's bill is in the investment of funds. It contemplates a system of loans to the local banks with a view to "keeping the money at home." The departure from the practice of investing in government securities may be good for the object intended, which relates to the incidents rather than the primary object of savings bank administration. It seems to me most unfortunate that Mr. Meyer should have selected a form of investment that would tend to defeat the primary object of savings banks in the necessarily low rate of interest. I think he must fail to fully realize that the savings bank is to educate the propertyless to become proprietors, to appreciate the need of supplementing the earnings of labor by income from accumulated capital, and not to serve as a mere place for hoarding. It is the interest rate that tickles this dormant sense into life. It seems to me a pity that he did not see in the example of the municipal savings banks in Germany and of our own trustee banks, which invest chiefly in real estate mortgages, a way of reaching the one object without injury to the other. This would be a departure from the general practice of postal savings systems which would at once "keep the money at home," and insure a higher rate of interest than the yield of government securities. Money thus invested would get back into the channels of trade as readily as if it were loaned to the local banks, and with much less objection, and the rate of interest would probably be about double. The yield should be four per cent against the two per cent proposed by the postmaster general's measure.
It is certainly most refreshing and encouraging to listen to the promise of legislation that extends its benefits immediately to the common people, which contains the hope of more social solidarity. A comparison of our policies with those of old world countries in this respect is not comforting to our patriotic pride. It seems time that we were less laggard and that we should have more courage to experiment. The promise made by all political parties of a postal savings bank is probably the most encouraging sign we have had. It would be much more encouraging if the measure that is promised contained more of the results of bold experiment in other countries and contained more of an original and experimental nature that promises a more pronounced application of the true principle of savings banks, and that fosters a clearer popular understanding of that principle. It is equally important that the principle be brought out in clear relief from the point of view of the administration and of the patrons. The administration needs clearly to understand that it is not conducting a banking business but giving education in thrift, and the youthful and other patrons need to understand that they are being led in the direction of economic independence.