The institutions pointed out by this designation constitute a variety of money-banks, in general, and, to a certain extent, partake of the nature of the class.
Of money-banks, in general, the end is to afford to the owner of money two advantages; the first, safe custody for his money; the second, a profit by it, under the name of interest. Other advantages which banks afford, or are capable of being made to afford, it is not, for the present purpose, necessary to bring to view.
The circumstances of the poor man lay him under many disadvantages, as compared with the rich. In this case, we find a particular example. The money of the rich man, being in considerable quantity, easily finds individuals who will perform for it the functions of banking, because it yields an adequate profit.
The money of the poor man, being small in quantity, can find nobody to perform for it the functions of banking, because it is incapable of yielding an adequate profit.
Let us consider the natural tendency of this situation of the labouring man. He can make no profit by money retained. He also lies under many chances of being unable to preserve it. The coarse and imperfect means for shutting his house, or any receptacle which it may contain, exposes his little treasure to the hand even of a clumsy depredator. Accordingly, we find, that persons in the lower situation of life, who acquire a reputation for the possession of hoards, are almost always robbed. If they are disposed to lend the
* To make out this dividend, 194,238 francs were taken from the fund of undivided profit. † See Economica, or Statistical Manual for the United States of America, p. 159, 160. fruit of their industry and frugality, their limited experience of mankind makes them yield to the man who takes most pains to persuade them; and that is often the man who never means to pay them again, and who has, therefore, the strongest motives to take the measures necessary for gaining their confidence.
Money is for two purposes. It is either for present use, or future use; and wisdom directs that it should be employed for the one or the other, according as, in either case, it is calculated to contribute most to happiness upon the whole. But the poor man is thus deprived, in whole, or in part, of the means of applying his money to future use. To this extent, therefore, even wisdom itself would direct him to employ it for present use, in whatever way it is capable of adding most to his enjoyments. Parsimony in such a case is hardly a virtue.
The rich are commonly, we cannot say always, very severe observers of the conduct of the poor, and nearly as often unjust. How nearly universal among them are the exclamations against the improvidence of the poor! by which is meant the practice of devoting to present use the whole of their earnings, without reserving as great a portion of them as possible to future use. Amid these exclamations, the degree is totally forgot, in which the poor are deprived of the means of reserving money for future use, and the consequent propriety and prudence of devoting it wholly to present use.
If human happiness is prodigiously improved by reserving for future use a proportion of the command which, over and above the necessaries of life, a man may possess over the means of enjoyment, it is surely desirable that this great instrument of happiness should, in the greatest degree possible, be provided for the most numerous, and in the same degree in which the most numerous, the most important portion of the race. To place it in the power of this portion of the race to secure a share of the good things of life for future use, a system of banking, adapted to their circumstances, is evidently, in the present state of society, in the highest degree desirable. It is one of the means, without which, or something equivalent, the end cannot be obtained.
The question, respecting the utility of banks, adapted to the circumstances of the labouring branch of the population, being thus decided, it only remains, as should seem, to inquire, what is the sort of institution by which the advantages of a bank,—safe custody, and profit for money, can be most completely secured to this great class of the population. When this second question is resolved, the subject, it may be supposed, would be exhausted. The supposition, however, would be erroneous, and the exposition would still remain very imperfect, and even superficial.
When it is ascertained, that banks for the cash of the poor would be useful to the poor, we should act very carelessly, if we remained contented with a mere vague conception of utility in general. To complete the inquiry, we should trace the subject in its ramifications, and pursue them to the very point of termination. We should not be satisfied with a belief that banks will, to some degree, and in some way, we know not what, be useful to the poor. We should ascertain, with accuracy, in what way or ways, and in what degree, they will tend to increase the happiness of this principal branch of the population.
This is rendered more necessary, by the conduct of those who have chiefly undertaken the patronage of banks for this class of the population. They have been too lavish in their promise of beneficial effects from this desirable institution. They have stretched the vague idea of utility to any extent which suited their imaginations. There is nothing desirable for human beings which they have not described as the natural product of banks for the poor. Happiness and virtue are two things which they will be sure to produce in any quantity we please.
But when gentlemen treat us with these extraordinary promises of good from Savings Banks, they take not sufficient pains to show the connection. They neglect to inform us how the events are to come about. They do not show in what manner, if the one set of things precede, the other things which they so largely predict, must all of them follow. Now, this is not satisfactory. This is to assume and affirm, not to disclose. This is to beg the question, not to resolve it. This way of proceeding not only removes no uncertainty, it has a tendency to draw men upon false ground, and to recommend to them measures for practice founded upon mistaken notions of things, and therefore pregnant with the chances of evil.
The first part of a sound and rational inquiry into the subject of Savings Banks would thus undoubt- edly be, to define the utility which the institution is calculated to produce; to ascertain exactly the ingredients of which the composition is formed, and the quantity in which it may be expected to exist.
For this purpose, it may be remarked, that the effects calculated to arise from the institution of Savings Banks are of two sorts; 1st, the immediate; 2dly, the derived. The first result at once from the operations of the Bank. The second arise only from the first, and are, in reality, the effects of the effects.
1. The effects of the first stage,—the effects which immediately result from the operations of the Bank, are two,—safe custody for the money deposited, and interest upon it.
Of these effects no general exposition is required. They are known and familiar to every body.
2. The effects of these effects come next under review. They are more complicated, and far less easy to understand.
It is expected that safe custody for money, and a profit by it, in the shape of interest, will produce a disposition to accumulate. This is the second stage. From this, other effects, which may be called effects of the third stage, are expected.
The disposition to accumulate will produce industry and frugality, which implies temperance. This is the third stage, and these are effects of the third derivation.
Industry and frugality will produce a reserve of wealth. This is the effect of the fourth stage, or fourth derivation. This reserve of wealth will produce an effect of the fifth stage, namely, security against the miseries of want.
The utility consists in these latter effects, the industry and frugality, the provision against the miseries of want. These, then, are the ingredients of which the compound is formed. The question is, in what degree it may be expected to be produced: in other words, what power can the banks in question possess to produce among that class of the population industry, frugality, and a provision against the miseries of want? It is the resolution of this question which is required at the hands of every one by whom is undertaken an account of a system of banking adapted to the circumstances of the poor.
It is impossible to speak with any accuracy of the circumstances of the most numerous class of the people, without bearing in view the principle of population, or the law according to which the multiplication of the species takes place.
This law is by no means of recent discovery. It had long in political philosophy been regarded as an established fact, that a nation is always peopled up to its means of subsistence; that the only check to population is the want of food; that mankind, as Burke somewhat ingeniously expressed it, "propagate by the mouth;" and that the number of men, if food were not wanting, would double, as the example of America proved, every twenty or five and twenty years. But after establishing this doctrine, the world seemed a long time afraid to look it in the face, and glad to leave it in the situation into which it had been brought. At last, a period arose when men of a certain description began to talk intemperately about the opinion, that the human condition was progressive, and susceptible of indefinite improvement, and men of another description began to be alarmed at this doctrine.
In opposition to the persons who spoke with enthusiasm of this susceptibility of improvement, under the name of the perfectibility of the human mind, Mr Malthus brought forward the principle of population. It was not enough for his purpose to say, that population ascended to the level of food; because there was nothing in that relation inconsistent with improvement, or opposite to the principles of perfectibility. He went, therefore, a step farther, and said, that population rose beyond the level of food; a situation in which vice and misery must of necessity prevail, and unlimited progression was impossible.
Though no part of the doctrine of Mr Malthus has been left uncontroverted, it is now, among thinking men, pretty generally allowed, that, excepting certain favourable situations, as in new countries, where there is unoccupied land of sufficient productiveness, which may be placed under cultivation as fast as men are multiplied, a greater number of human beings is produced than there is food to support. This, it is understood, is the habitual condition of human nature. The disposition of mankind to marry, and the prolific power with which nature has endowed them, cause a greater number of human beings to be born than it is possible to feed; because the earth cannot be made to increase her produce so fast as the procreative power of the human constitution increases consumers.
This is the proposition which Mr Malthus added to the doctrine of population; and it is undoubtedly a proposition of extensive import, pregnant with consequences of the greatest moment, and materially changing our views of the measures necessary to be pursued for improving the condition of mankind.
It is perfectly evident, that, so long as men are produced in greater numbers than can be fed, there must be excessive misery. What is wanted then is, the means of preventing mankind from increasing so fast; from increasing faster than food can be increased to support them. To the discovery of these means, the resources of the human mind should be intensely applied. This is the foundation of all improvement. In the attainment of this important end, it is abundantly plain that there is nothing impracticable. There is nothing which offers any considerable difficulty, except the prejudices of mankind.
Of this doctrine, one of the facts which it is on the present occasion peculiarly necessary to carry in view, is the mode in which the misery in question, the misery arising from the existence of a greater number of human beings than there is food to maintain, diffuses itself.
For a share of the food which is brought into existence, the greater part of mankind have nothing to give but their labour. Of those who are endeavouring to purchase food by their labour, there is not enough for all; some must want. What is the consequence? Those who are in danger of being left out in the distribution, offer more labour for the same quantity of food; that is to say, they agree to work for less wages: by this competition, the wages of labour are reduced, and made so low that they are not sufficient to procure food for the families of all the labourers. The whole are placed in the lowest and most afflicting state of poverty; and of those whose wants are more than usually great, or supply more than usually small, a portion must die, from the want of a sufficiency of the necessaries of life. The state of wages is sufficient to afford the means of existence to as many as the food produced can barely preserve alive; the superabundance, who, by their competition, have rendered thus miserable the situation of the rest, must inevitably perish. Whatever the state of production in regard to food, the wages of the labourer are sufficient to enable the labourers, as a body, to raise a number of children sufficient to keep up the population to the level of the food. The labourer who has the number of children correspondent to that increase, has just enough to keep his family alive, and no more. Those who have a greater than this number, and not a greater than the usual means of procuring food, must partially starve.
This is the natural unavoidable condition of the greater part of mankind, so long as they continue to produce numbers greater than can be fed. The question then is, what are the effects which, in this situation of mankind, the institution of banks for the savings of the poor are calculated to produce?
Every thing, as we have already seen, is to be derived through the medium of the disposition to accumulate. But the disposition to accumulate, as far as men are wholly deprived of the means of accumulation, is out of the question; for either it is wholly incapable of existing, or exists to no manner of purpose.
Of the labouring people, however, who have families, all but those of whom the families are uncommonly small, or who possess uncommon advantages, are, according to the principle of population, either in a state of starvation, or upon the very brink of it, and have nothing to accumulate.
The unmarried part of the population, therefore, those who have no families, or those who have very small ones, are those alone to whom the institution of savings banks can present any motives whatsoever. The question is, what are the effects which will be produced upon society by the motives which it presents to this reduced part of the population?
That it will increase to a certain extent the disposition to accumulate, may naturally be expected. To how great an extent, general principles afford us no means of very accurately foreseeing. We must wait for experience to determine. In the meantime, we know that single persons are for the most part young; and that youth is not the season when the pleasures of the present moment are most easily vanquished by those of the future. The training of the human mind must be more skilful, and more moral to a vast degree, before this salutary power will belong to any considerable portion of the youth in any class of the population, especially in the least instructed of all.
Let us next inquire the tendency which it will possess, whatever the degree in which it may be expected to exist.
In the first place, it will produce an abstinence from such hurtful pleasures as are attended with expense. Under this description is included the pleasure of intoxicating liquors, and no other possibly whatsoever. There is hardly any other indulgence on which any portion, worth regarding, of the earnings of the poor is bestowed, which can at all deserve the name of hurtful, or from which there would be any virtue in abstaining, if the means of obtaining it were enjoyed in sufficient abundance. To this, then, the moral effect of savings banks may be supposed to be very nearly confined. But assuredly this, if it can be produced in any considerable degree, must be regarded as an effect of no ordinary importance.
Passing from the moral effects, we come to the accumulation which it may be in the power of the unmarried part of the population to make. To this, and what may spring out of it, all the remaining effects of savings banks are evidently confined.
A part of the unmarried population will make accumulations, and undoubtedly they ought, if possible, to be provided with the means of doing so. Let us suppose that the greatest part of them profit by those means. What consequences are we able to foresee?
Of unmarried persons there are few who are not looking forward to the married state, and few by whom, sooner or later, it is not entered. As soon as persons of the lower class are married, or, at any rate, as soon as they have a certain number of children, their powers of accumulation cease. But there is a previous hoard: What becomes of it?
It is either wholly expended, at the time of marriage, upon the furnishing of a house; or it is not.
If it is wholly expended upon the furnishing of a house, it contributes to present enjoyment, like any other expence whatsoever; like that, for example, of a fine coat; and forms no longer a provision against a day of adversity and the evils of want.
Let us suppose that it is not wholly expended upon the furnishing of a house, but that a portion, at least, of it remains. This, it will be said, is reserved as a provision against want; and of this the beneficial effects may be reckoned sure. But abstracting from extraordinary cases of bad health, least common in the earliest stage of the married life, and other extraordinary accidents, the first pressure will arise from the increase of the family. After that number of children is born, which exhausts the earnings of the father, the birth of another child produces the miseries of want. If there is no fund remaining from former accumulations, hardship introduces death, and the amount of the population is thus, upon the whole, kept down to the level of the food. If there is a fund remaining from former accumulations, it will now of necessity be consumed; and by its consumption will enable the family to go on a little longer; to rear a child or two more. But the number of children reared was before as great as there was food to maintain. If a greater number is raised, there is an excess of population, who bid against one another for employment, and lower the wages of labour. Already, the great mass of the population were in a state of unavoidable misery from the lowness of wages. An increase of poverty is now brought upon them; and their situation is rendered more deplorable than it was before. It is impossible not to consider this as one of the effects, which a fund accumulated before marriage, by the laborious part of the community, has a tendency to produce. And this is a tendency altogether noxious.
The greater part of those who have talked and written about savings banks have left the principle of population altogether out of their view. They have, therefore, left out of their view that circumstance on which the condition of the most numerous class of mankind radically, and irremediably, and almost wholly depends. Of course, their observations and conclusions are of little importance.
Others, whose minds are philosophical enough to perceive the influence of the principle of population upon the condition of the great bulk of mankind, are of opinion, that savings banks will have a salutary effect upon the principle of population, and ameliorate the condition of mankind, by lessening the rapidity with which they multiply. This is a speculation of the deepest interest. If this be an effect of savings banks, they will, indeed, deserve the attention and patronage of the philanthropist and the sage.
The following is the mode in which the authors of this opinion believe that the happy effects which they anticipate will take place. The means of profiting by the reserve of a portion of their earnings, which savings banks will provide for the unmarried part of the labouring people, will give them, it is supposed, a taste for accumulation: Aware of the impossibility of accumulating after marriage, their desire of accumulation will make them defer the period of marriage: Of deferred marriages, the result will be a less numerous offspring: A smaller number of people in proportion to the food will be reared: The competition for food will be reduced; the competition for hands will be increased; wages will rise; and the cruel poverty of the mass of the population will be abated.
In this deduction, nothing is doubtful, unless the commencing step. If the desire created in young persons for accumulation is sufficiently strong to produce any considerable postponement of the period of marriage, all the other effects will necessarily follow; a reduced number of children; an increased reward of labour; and a correspondent amelioration in the condition of the greatest portion of the race. Savings banks will prove one of the most important inventions, to which the ingenuity of man has yet given existence.
It would be rash, however, to claim as an ascertained fact, that savings banks will have the effect of retarding the period of marriage. There are persons who hold the very opposite belief. They say, that what chiefly retards marriage at present among the better part of the labouring population, among those who have a regard to appearance, and a value for respectability, is the want of means to provide the furniture of a house; that savings banks will enable them to provide that furniture at an earlier period than at present; and that the institution will therefore accelerate the period of marriage, increase the number of those who cannot be fed, and thus add to the calamities of mankind. They ridicule the idea, that the love of saving will become, in the breast of young persons, a match for the passions which prompt them to marriage.
If we consider accurately what takes place among mankind, we shall probably conclude that both effects will be produced; that the love of saving will, no doubt, induce some persons to defer the period of marriage; but that the means of furnishing a house, placed at an earlier period within their reach, will produce the very opposite effect in regard to others.
The question is, which class is likely to be the most numerous? and this is plainly one of those questions to which no very certain answer can be given. But if we consider the strength of the passions which urge to marriage, we shall probably suspect that it will not be easy for the love of saving to acquire an equal force in the breast of any considerable portion of persons who are young, whose education has been very bad, and who hence have little power either of foresight or of self-command.
Such are the different views which may be taken of the effects which banks for the savings of the poor will produce. The exposition is useful to check the intemperate conclusions of enthusiastic patrons, and to show that much more than the mere institution of savings banks is necessary to produce any considerable amelioration, either in the physical or moral state of the poor. In conjunction with other causes, savings banks are not only desirable, but necessary. The noxious consequence will be, if those who have it in their power to do more, shall suppose that savings banks are sufficient to do all, and there should limit their exertions. Taken by themselves, it is at least a doubt whether savings banks may not produce as great a quantity of evil as good.
It now remains that we should give an account of the measures which have been taken for the establishment of savings banks, and endeavour, if we can, to ascertain the most useful form which they are capable of receiving.
We are not aware that the idea of an institution, answering in any degree the description of a savings bank, was in this country expressed in public before the year 1797, when a peculiar scheme for the management of paupers, or persons deprived of the means of maintaining themselves, was published by Mr Bentham in Young's Annals of Agriculture. It would require too long a digression to give an account of this plan of Mr Bentham, which embraces a great number of points, and would require an exposition of considerable complexity. Of that plan, one part consisted in the institution of what he distinguished by the name of a frugality bank.
The series of wants to which it was by him destined to operate as a remedy, were as follows:
1. Want of physical means of safe custody, such as lock-up places; thence, danger of depredation, and accidental loss. 2. Difficulty of opposing and never-yielding resistance to the temptations afforded by the instruments of sensual enjoyment, where the means of purchasing them are constantly at hand. 3. Want of the means of obtaining a profit by the savings of the poor, or the use of them in portions adapted to their peculiar exigencies. 4. Want of a set of instructions and mementos constantly at hand, presenting to view the several exigencies, or sources of demand for money in store, and the use of providing it.
He next proceeded to sketch the properties which appeared to him to be desirable in a system of frugality banks, commensurate to the whole population of the self-maintaining poor. These were,
1. Fund, solid and secure. 2. Plan of provision all-comprehensive. 3. Scale of dealing commensurate to the pecuniary faculties of each customer. 4. Terms of dealing sufficiently advantageous to the customer. 5. Places of transacting business suitable; viz. in point of vicinity, and other conveniences. 6. Mode of transacting business accommodating. 7. Mode of operation prompt. 8. Mode of book-keeping clear and satisfactory.
In the plan, however, of the bank which Mr Bentham contemplated for answering the purposes which he thus described, he did not direct his view to that simplest of all the forms of banking, the mere receipt of money, to be paid again with interest when demanded; the form to which the patrons of savings banks at present appear judiciously to confine their attention. Mr Bentham's proposal was to receive into the frugality banks the deposits of the poor, not for the mere purpose of yielding an interest, and being withdrawn when wanted, but to form or purchase an annuity for old age, when the power of earning would be either destroyed or impaired.
That the accumulation of the poor might not, however, be confined to one exigency, though that the greatest, he proposed that this superannuation annuity should be convertible, in the whole or in any part, into any other species of benefit, adapted to the exigencies of the owner. It might, for example, be converted into an annuity for an existing wife, in the event of widowhood. It might be converted into an annuity during the nonage of a certain number of children. It might serve as a pledge on which to borrow money. Part of it might be sold to raise a marriage fund, or it might be simply withdrawn.
Mr Bentham then proceeded to compare the effects of a system of frugality banks with those of friendly or benefit societies. To this comparison, however, we cannot with any advantage proceed, till that other species of institution is first described. We are, therefore, inclined to reserve it wholly to the article BENEFIT SOCIETIES, to which the reader is referred.
It is somewhat remarkable, that no allusion which we can perceive in any of the numerous pamphlets to which the subject of savings banks has lately given birth, is made to this early scheme of Mr Bentham; though the work in which it is contained not only appeared in a periodical and popular publication so long ago, but was laid upon the table of the committee of the House of Commons, appointed to inquire into the subject of Penitentiary Houses in 1811, and referred to in the appendix to their report; and was published separately in one 8vo volume, in 1812, under the title of Pauper Management improved.
As no attempt was made to carry Mr Bentham's plan of pauper management into practice, his scheme of a frugality bank, as a part of it, remained without effect.
The first attempt, as far as our researches have been able to discover, to give actual existence to the idea of a bank adapted to the exigencies of the poor, was owing wholly to a lady, to whom the public are indebted for several excellent productions of the pen, and who never took up her abode in any place, while health and strength remained, without endeavouring to perform something of importance for ameliorating the condition of those by whom she was surrounded. Mrs Priscilla Wakefield, the lady to whom we allude, residing, in the year 1803, at Tottenham, in Middlesex, a populous village, within a few miles of London, not only projected, but was the means of instituting, and the principal instrument in carrying on, a bank at that place for the savings of the poor. An account of this institution, drawn up by Mrs Wakefield, and dated the 24th of May 1804, was published in the fourth volume of the Reports of the Society for Bettering the Condition of the Poor. The account is so short, and so much to the purpose, that it may with advantage be inserted here.
"Extract from an Account of a Charitable Bank at Tottenham for the Savings of the Poor, by Mrs Wakefield.
"For the purpose of providing a safe and convenient place of deposit for the savings of labourers, servants, and other poor persons, a charitable establishment has been lately formed at Tottenham, in the county of Middlesex. It is guaranteed by six trustees, who are gentlemen of fortune and responsibility, most of them possessing considerable landed property. This renders it as safe and certain as institutions of this kind can be, and insures it from that fluctuation of value to which the public funds are liable. The books are kept by a lady, and never opened but on the first Monday in every month, either for receipts or payments. Any sum is received above one shilling; and five per cent. is given for every 20s. that lies 12 calendar months; every person so depositing money being at liberty to recall it, any day the books are opened; but no business is transacted at any other time.
"The money so collected is divided equally between the six trustees. For every additional L100, a new trustee is to be chosen; so that a trustee can only risk his proportion of L100. None but the labouring classes are admitted to this benefit; and there is no restriction as to place of residence."
"OBSERVATIONS.
"These few simple rules are all that have hitherto been found necessary for the establishment of this charity, the design of which is both original and useful. To those who have applied themselves to that branch of political economy which relates to increasing the comforts, and improving the morals of the inferior classes of society, it must be obvious that every endeavour to encourage and enable them to provide for their own wants, rather than to rely upon the gratuitous gifts of the rich, are of great advantage to the whole community.
"It is not sufficient to stimulate the poor to industry, unless they can be persuaded to adopt habits of frugality. This is evinced amongst many different kinds of artisans and labourers, who earn large wages, but do not in general possess any better resources in the day of calamity than those who do not gain above half as much money. The season of plenty should then provide for the season of want, and the gains of summer be laid by for the rigours of winter. But it must be obvious how difficult it is for even the sober labourer to save up his money, when it is at hand to supply the wants that occur in his family. For those of intemperate habits, ready money is a very strong temptation to the indulgence of those pernicious propensities.
"Many would try to make a little hoard for sickness or old age, but they know not where to place it without danger or inconvenience. They do not understand how to put money in, or to take it out of the bank; nor will it answer for small sums, either in point of trouble or of loss of time. The same causes frequently occasion thoughtless servants to spend all their wages in youth, and in consequence to pass their old age in a workhouse,—a sad reverse from the indulgence of a gentleman's family, to which they have been habituated. Many instances indeed have occurred, that, for want of a place of security for their money, the poor have lost their hard earned savings, by lending it to some artful or distressed person, who has persuaded them it will be safe in his hands.
"The success of the little bank for children, connected with the Tottenham Female Benefit Club, mentioned in a former part of the reports, encouraged the present design; and it may be worth remarking, that the bank was opened by an orphan girl of fourteen, who placed L.2 in it, which she had earned in very small sums, and saved in the Benefit Club."
In 1805 and 1806, two pamphlets were published by Mr Bone, in the first of which he seems to have had it chiefly in view to point out the objects to which a scheme for preventing among the poor the miseries of want ought principally to be directed; in the second, to sketch the form of an institution by which those objects might be obtained. The scheme of Mr Bone is, however, nearly as comprehensive as that of Mr Bentham, and, therefore, extending far beyond the subject to which the present article is confined. The following are its principal objects:
1. To provide comfortable dwellings for all who require them. 2. Sums for their maintenance. 3. A provision for widows and children, education for the latter included. 4. Endowments to children at 21 years of age. 5. Temporary dwellings to destitute strangers. 6. To afford small loans. 7. Provision for persons who have belonged to the army or navy. 8. To grant annuities to persons to whom that mode of assistance is the best adapted. 9. To afford a provision for persons lame, or otherwise disabled. 10. To procure situations and employment for those deprived of them. 11. To nurse and educate children, as many as possible of the children of those who are themselves the least qualified for the task. 12. To provide baths and lavatories for the poor.
To the accomplishment of this scheme, banking, however, contributes a diminutive part. It is not proposed that all this should be accomplished by the funds of the poor themselves. The receipt, however, of the contributions of the poor, forms an essential article of the plan, and so far it involves in it the principle of a savings bank. It was proposed to receive the contributions of single persons, and return them with premiums at the period of marriage; to receive, farther, the contributions both of the single and the married, with a view to the future and ultimate provision; for though all persons would, according to this scheme, receive a provision, it would be a provision with more or less of excellence, according to the contributions of the individual.
In 1807, the minister of the parish of West Calder, in Scotland, founded a bank for the savings of the principal class of his parishioners; and in 1810, without any knowledge of what had been accomplished in West Calder, Mr Duncan, the minister of Ruthwell, another of the Scottish parishes, established one in his own, in nearly a similar form. Mr Duncan, in a well written pamphlet, in which he describes the form of his own institution, and explains the object which the system has in view, and the principles upon which it is founded, informs us, that his idea of an economical bank for the savings of the industrious, was accidentally suggested to him by a perusal of the pamphlet, entitled, Tranquillity, of Mr Bone, at a time when his mind was peculiarly excited to the consideration of the subject, by the circumstances of the poor in the town and vicinity of Dumfries, and by the threatened approach of what he deemed a national misfortune, the introduction of poor-rates.
The course pursued by Mr Duncan is in the highest degree instructive. It is founded upon an accurate knowledge of human nature, in which the men who step forth from elevated situations to ameliorate the condition of their fellow-creatures, are in general singularly deficient, and therefore most commonly reap nothing but the natural fruit of injudicious measures—disappointment. As a great effect was intended to be produced upon the minds of the people, Mr Duncan saw the necessity of carrying the minds of the people along with him, and of adopting the most powerful means for making them feel and take an interest in the concern. Unless the interest is felt, and powerfully felt, the operation of the machinery will be feeble, and its effects trifling. Novelty may give it some appearance of strength for a time, but this will gradually decay.
In the first place, it was necessary that every cause of obstruction should be removed. "The prejudices of the people should be carefully consulted; they should be treated even with delicacy; and the most unreasonable scruples of the ignorant and suspicious should, as far as possible, be obviated." It is not duly considered by the upper ranks of the population, how inseparable from human nature are the suspicions of those who are weak, toward those who are strong; the suspicions of those who are liable to be hurt, toward those who are capable of hurting them. And it is only the blindness of self-love, and our inattention to evils in which we are not called to participate, that leave us ignorant of the actual grounds in practice, whence, even in this country, the institutions of which are so much more favourable than those of most other countries to the poor, the weak have reason to dread the interference of the strong.
So much for removing the causes of dislike. More is necessary to create a positive, and still more to raise an ardent attachment. The springs of human nature must be skilfully touched. Mr Duncan knew where to find them, and he looked to the means which the circumstances of the case afforded for placing them in action. "It may be observed in general," he says, "that in all those situations, where it is practicable to assimilate the mode of management to the scheme of Friendly Societies, the advantage to be derived from such a circumstance ought not to be overlooked." If there were nothing in the case but the actual existence of these societies, and the favour with which the people regard them, the importance of this advice would still be more than considerable. But, says Mr Duncan, "On this subject, it may be proper to attend to the following
remarks: Those who are at all acquainted with the history of friendly societies, must be aware, that they owe much of their popularity to the interest excited among the lower orders, by the share to which each of the members is admitted in the management of the institution. The love of power is inherent in the human mind, and the constitution of friendly societies is calculated to gratify this natural feeling. The members find, in the exercise of their functions, a certain increase of personal consequence, which interests their self-love in the prosperity of the establishment. Besides, by thus having constantly before their eyes the operation of the scheme, in all its details, they are more forcibly reminded of its advantages; and not only induced to make greater efforts themselves for obtaining these advantages, but also to persuade others to follow their example. Hence it happens, that a great number of active and zealous supporters of the institution are always to be found amongst the members of a friendly society, who do more for the success of the establishment than can possibly be effected by the benevolent exertions of individuals in a higher station.
For these reasons Mr Duncan held it expedient to give the contributors themselves a share in the management of the institution; and that share was well chosen. The contributors in a body were not fit to be the acting parties; but they were fit to choose those who should act for them. A general meeting is held once a-year, consisting of all the members who have made payments for six months, and whose deposits amount to L.1. By this meeting are chosen the court of directors, the committee, the treasurer, and the trustee, the functionaries to whom the executive operations are confined. And by this also are reviewed and controlled the transactions of the past year, with power to reverse the decisions of the committee and court of directors; to make new laws and regulations, or alter those already made; and, in other respects, to provide for the welfare of the institution.
The power of choice is somewhat limited by the qualifications required. The society consists of two sorts of members, the ordinary, and the extraordinary, and honorary. The general meetings have alone the power of electing honorary members; but the Bank Trustee, the Lord-Lieutenant and Vice-Lieutenant of the county, the Sheriff-depute and his substitute, the members of Parliament for the county and burgh, the ministers of the parish, with certain magistrates of the town, are honorary members ex officio; and there are certain regulated subscriptions or donations, of no great amount, which constitute the person paying them, ipso facto, an extraordinary or honorary member. Now, it is from this list of honorary and extraordinary members that the choice of functionaries by the general meeting is annually to be made, provided a sufficient number of them should be disposed to accept of the offices designed; if not, from such of the ordinary members as make deposits to the amount of not less than L.2, 12s. in the year.
It is not fitting here to enter into the details of the organization, or those of the executive arrangement. It is sufficient to state, that deposits are received in sums of 1s., bear interest at the amount of L.1; and are always payable, with compound interest, on a week's notice.
It seems not to have been till 1814 that the project of savings banks made any farther progress in Scotland. In that year, "the Edinburgh Bank for Savings was instituted," says Mr Duncan, "by a society of gentlemen, of the first influence and respectability; who, from their enlightened labours in the suppression of mendicity, and in the establishment of a permanent provision for the poor, had already acquired no trifling claim to the confidence and affection of the public, and particularly of the lower orders." In the constitution of this bank, the interference was rejected of the depositors themselves; who were simply required to confide their money in the hands of the gentlemen who undertook the management of the institution. "This circumstance," says Mr Duncan, "has operated as a powerful obstruction to the success of the plan. The truth of this will appear in a very striking point of view, if we contrast the progress of the scheme in Edinburgh with that of the Ruthwell parish bank, or of those institutions which are formed on a similar plan." And he then presents a statement of facts, which fully support the position, and strongly illustrate the importance of the principle on which the Ruthwell institution was founded.
Mr Duncan, from deference to the gentlemen who made the decision for the Edinburgh bank, seems willing to allow that a general meeting of all the contributors, and a reservation to that meeting of certain appropriate powers, useful and important as it is, may, in great cities, such as Edinburgh, be attended with inconveniences which outweigh its advantages. May not this, however, be a concession too easily made? It would, at least, be desirable to have good reasons presented for the sacrifice of so great an advantage, before we consent to its being made. There is an obvious inconvenience in assemblages of people, of any description, when too large. And if one bank were to serve for the whole of a great city, and the contributors should amount to any considerable part of the population, the assemblage would undoubtedly be too large. But this, under the circumstances in contemplation, would not be the case. To accommodate the customers, there ought to be a bank in every parish, or similar district. There would be no greater inconvenience in calling together the moderate number of contributors to such a bank in a city, than in the country. The fact is proved by the ample experience of friendly societies; the members of which do actually meet much oftener thanonce a-year, and devoid of many advantages which the mixture of persons of the upper classes would afford to the association of a savings bank. If any central, or general institution, to give unity and combination to the operations of the different banks of a great city, were found to be useful, it might be formed of delegates chosen by the committees of the several district or parochial banks; and thus, without any inconvenience that can be rationally contemplated, all that fervent interest which is the natural effect of giving the contributors themselves a part to act in the formation and conduct of savings banks, would be provided for and secured. In London itself, Banks for Savings.
there are various institutions, wholly dependent upon voluntary contributions, the subscribers to which, though extremely numerous, are annually called together for the election of committees and other managers. The society of Schools for All may be adduced as a conspicuous example. And where is the inconvenience that is ever found to result?
In the meantime, efforts were begun for the extension of the system in England. In the year 1813, a judicious and successful attempt was made by Dr Haygarth for the establishment of a bank for savings at Bath, where, sometime before, an institution, under the name of a servant's fund, had been formed on nearly similar principles, at the suggestion of Lady Isabella Douglas, sister of the Earl of Selkirk.
The circumstances of England were in several respects much less favourable to any plan founded upon the savings of the poor than those of Scotland. The disadvantages existing in England are justly enumerated by Mr Duncan, under four heads; 1st, The character and habits of the people; 2dly, The nature of the ecclesiastical establishment; 3dly, The system of poor laws; 4thly, The state of the banking business.
The first three are general, and the nature of the obstruction which they afford in some degree obvious. The illustration of these here may therefore be waved. The last, however, so intimately concerns the operations of the banks for the poor, that it requires a difference even in their constitution. It is the practice of the banks of Scotland to allow interest for the monies deposited with them; and so perfect is the foundation on which some of them are placed, that the security attached to the deposits they receive, is equal to that of the Bank of England itself. The operations of the economical bank are here, therefore, simple in the highest degree. It has only to open an account with one of these banks, and pay to the contributors the interest received, making such a deduction as the expences of the institution may require.
In England it is not customary for banks to allow interest on the deposits which are made with them. And where possibly interest might be obtained, the security would not always be good. The savings banks have no source whence interest can be derived with the due measure of security, except the public funds. But, with respect to them, a great inconvenience arises from the fluctuation of prices. What is desirable, above all things, is such a degree of simplicity and plainness in the transactions, that the reasons of every thing may be visible to the uninstructed minds of the people with whom the institution has to deal. But this fluctuation in the price of stock is an unavoidable source of complication and obscurity. The money of one man produces more, that of another less, according to the price of stock, at the time when his deposit is made. When it is withdrawn, a sum is received, greater or less than that which was put in, according as the price of stock has risen or declined.
The plan upon which Dr Haygarth proceeded, in the bank which his strenuous exertions were the means of setting on foot in Bath, was to make every depositer, to the value of one or more pounds of stock, a proprietor of stock to that amount, and entitled him to receive his dividends every six months, the same as those paid at the Bank of England, one sixth being deducted for the expences of the institution. In the constitution of this bank, no part of the management, and no control over it, were given to the depositers. Certain trustees and managers were constituted, with powers of supplying vacancies; and the money of the depositers was vested in the funds in the names of a certain portion of the trustees.
In the month of November 1815, a bank was projected for the town and vicinity of Southampton, to which the zeal and influence of the Right Honourable George Rose in a great degree contributed. In the formation of this institution, the model of the Edinburgh bank was principally followed. It was composed of a certain number of noblemen and gentlemen, who formed themselves into an association for banking the money of the poor; excluding entirely the intervention of the depositers. It differed from the bank established at Bath, which gave the depositers a proportion of the dividends, and left them to the chance of gain or loss by the fluctuation of the stock which their money had purchased; the Southampton bank, though it vested the money in government securities, undertook to pay a fixed invariable interest of 4 per cent. on each sum of 12s. 6d.; and to repay the deposit when demanded, without addition or diminution. The chance of any rise or fall in the price of the funds, the bank, in this way, took upon itself. The Southampton, like the Edinburgh bank, limited the amount of deposits which it would receive from any one individual; and fixed the sum at L. 25.
Some attempts were also made in London. A bank was instituted, under the influence of Barber Beaumont, Esq. in the parish of Covent-Garden. A committee of the inhabitants of the parish, rated at L. 50 and upwards, together with the members of the vestry, form one committee, and twenty-four of the depositers, chosen by themselves, form another committee, who jointly choose their agents, and conduct the business. The want of security in this plan is an obvious objection; the money remaining in the hands of certain individuals, in the character of treasurers, allowing interest at 5 per cent.
A bank was opened in Clerkenwell, another parish in the metropolis, on the 29th of January 1816, chiefly through the instrumentality of Charles Taylor, Esq., on a plan by which the depositers appoint their directors, their committees of accounts, their superintendents, &c. from their own number, and thus conduct the business of the institution wholly for themselves. The treasurer is allowed to retain to the amount of only L. 200, for which he gives security, and allows interest at 5 per cent. for the sum in his hands. The other funds are invested in government securities. The great defect in this otherwise admirably constituted institution, seems to be the limiting the choice of managers and functionaries to the depositers themselves. Why should the depositers deprive themselves of the advantage of choosing a person who would be eminently useful as a manager, though not of a rank of life to require the institution for his own use? If the depositers have the power of choosing, for the management, whom they please, depositers or not, they will have all that share of action which is necessary to establish their confidence and animate their zeal; while, at the same time, men of superior education and influence may be joined with them, and prevent, by their wisdom and authority, any error to which the business might be otherwise exposed. As often as men of superior education and fortune showed a disposition to render themselves useful in the conduct of the institution, daily and universal experience prove how certainly and gladly they would be chosen. In the meantime, the prosperity of the Clerkenwell bank is a complete proof of the safety with which that co-operation of the contributors, the utility of which is so well demonstrated by Mr Duncan, may be employed in the greatest cities. Clerkenwell is a parish, a great part of which is inhabited by some of the poorest people in the metropolis; the establishment of the bank was attended with nothing which was calculated to excite any attention; with advertisement scantily sufficient to make it known in the district; yet on the 22d of April, less than three months after the time of its institution, it had 157 depositers, and had received L. 269, 11s. 6d.
These local and confined attempts in the metropolis were followed by others on a larger scale. The Society for Bettering the Condition of the Poor took measures for interesting a sufficient number of noblemen and gentlemen to establish a grand Savings Bank, or Provident Institution, which was deemed a preferable name, for the whole of the western half of the metropolis. Several meetings of persons of high rank and others were held during the month of March 1816. The plan of the bank of Southampton, to pay a certain fixed rate of interest, and return the neat deposit on demand, was first proposed. This, with regard to the facility of giving satisfaction to the contributors, and avoiding all misconception on their part, injurious to the prosperity of the institution, was highly desirable. But, after a due consideration of the danger to which the institution would, on this plan, be exposed, in the event of any great depression of the price of stock, it was resolved to follow the example of Bath; to render each depositer a stockholder, and consequently himself liable to either the profit or the loss which the fluctuation of stock might occasion. This institution was composed of the noblemen and gentlemen by whom it was promoted, who formed themselves into an association, consisting of a president, vice-president, trustees, and managers; wholly excluding the co-operation of the depositers, and all intervention or control on their part. This institution was opened in Panton Street, Hay Market, on the 15th of April following; and another, promoted by the principal gentlemen in the city, and founded on similar principles, was soon afterwards opened in Bishopsgate Street, for the eastern half of the metropolis.
Of the bank for the western division of the metropolis, a particular account has been published by Joseph Hume, Esq. one of the managers, which deserves attention, as containing a valuable set of practical rules for the detail of the business, according to the principles on which that institution is founded; and, above all, as containing the description of a system of Book-keeping, admirably adapted to the purpose of savings banks in general, and of which that gentleman himself was the principal contriver.
By Mr Hume and Dr Haygarth, we see that the term Provident Institution is applied as the name of those associations which have it for their object to enable the poor to place their money in the stocks. The term Bank, whether called a Savings Bank or a Frugality Bank, they would confine to these institutions which pay a fixed interest, and return the neat deposit. The term Bank, however, is equally applicable to both, and the best denomination they can receive. Some adjunct is wanted to distinguish this from other species of banks, and no good one has yet been found. Neither Frugality nor Savings is distinctive; every bank is a frugality bank. Poor's Bank would be the best, but for one conclusive objection, that it is humiliating, and in common acceptation disparaging.
As government securities afford in England the only expedient, attended with safety, for employing the deposits of the poor; but as these securities are, at the same time, attended with the great inconvenience of fluctuation, and require the transmission of the money to and from the metropolis, of which the inconvenience would often be considerable; Mr Hume is of opinion, that the powers of government should be employed for the removal of these two inconveniences, which would merely afford to banks for the poor in England those advantages which they already enjoy in Scotland, from the admirable state of the banking business. The effects might be accomplished by the payment of the money to the receiver of each county, and by the receipt from him of the proper returns. This would no otherwise change the nature of the transaction, than that the money would thus be lent to government in a way extremely convenient to the poor, while, by purchase into the public stocks, it is still lent to government, but in a way far from convenient to that class of the people.
There may be, and there are, solid objections to the rendering any great portion of the people the creditors of government, as being unfavourable to that independence of the people on the government, on which all security for good government depends; but if the people are to be rendered the creditors of government, there can be no objection to them being rendered so in a way convenient to themselves, rather than in a way which is the contrary. And if there is no other security but that of government to which the banks for the poor can have recourse, we are reduced to the alternative of either having no banks for the poor at all, or lending the money to government. It will occur to some persons, that it might be lent to the parishes on the security of the poor-rate. But to those who contemplate the abolition of the poor-rate, this will not appear desirable as a permanent expedient. If counties were managed according to their ancient constitution, the best plan might be, to lend it to the counties, on the security of the county rate. But even in this case, it could not be lent without admitting a prodigious evil, the principle of county debts.
No mention has been made of the plan of Mr Baron Mazeres, in the account which has been ren- dered of the successive steps by which the business of savings banks has been brought to its present state; because it was not conceived that this plan corresponded to the idea of a savings bank. It is, however, necessary to be described, because it is not impossible that some of the ideas realized in savings banks may have been derived from it. The plan of Baron Mazeres was a proposal for establishing life-annuities in parishes, for the benefit of the industrious poor. It was published in 1772, accompanied with the suggestion of certain alterations by the celebrated Dr Price. It was recommended to the nation to obtain a law, for enabling the parish officers in England to grant, upon purchase, to the labouring inhabitants life-annuities, to be paid out of the parish rates. The measure met with support from some of the most distinguished characters of the time, and a bill was brought into the House of Commons by Mr Dowdswell, under the auspices of Mr Burke, Sir G. Savile, Lord John Cavendish, Mr Dunning, Mr Thomas Townshend, and others, for carrying it into effect. The plan received the sanction of the Commons, the bill was passed, and carried to the House of Lords. Here it was not equally fortunate; it was not even permitted to come to a second reading. One cannot conceive any very good reason for throwing it out; because, if it produced any effects, they could not be evil. The defect of the project appears to consist in this, that it was not calculated to produce effects at all; it involved in itself an obstruction fatal to its operations. To purchase these annuities a sum of money, large to the purchaser, was demanded all at once. How was he to possess it? Whence was he to obtain it? The means were almost universally wanting, and likely to continue so.
It is worth while to mention, that a savings bank, entitled Le Bureau d'Economie, was established by law at Paris, in one of the first years of the French revolution, and it was in existence till a late period, perhaps is to the present. The account of it which we have seen, is in the Archives of Useful Knowledge, published in Philadelphia, where a bank of industry was lately established. Mr Bentham's plan of a frugality bank, added to this scheme two important amendments, which at once brought it within the range of practicability, and enlarged the bounds of its usefulness. He proposed that the people should purchase life-annuities, by sums deposited gradually; and that these annuities should be convertible into other forms of benefit, suitable to the exigencies of each individual.
With regard to the best model of a savings bank, there is nothing of much importance which remains to be said. The great difficulty consisted in the original idea. When that was fully framed, every thing else suggested itself, without the smallest difficulty. Two things were immediately seen to be fundamental: In the first place, security for the funds: In the second place, the zeal of the people. The best general instruction which can be given to those who have institutions to form, is to set these two objects before them, as the ends which they have to pursue; and to adopt the means, which, in the peculiar circumstances of each case, promise to be most effectual in attaining them. 1. With regard to security, the course appears to be abundantly plain. There is perfect security with many other advantages in the great banks in Scotland, which of course should be universally employed. In England, there is no resource but government security, to which, as at present existing, several inconveniences are attached. 2. With regard to the excitation of that degree of fervent interest among the people, which is necessary for the production of any considerable effects, all persons will not have their minds equally open to conviction. Yet the means appear to be abundantly certain and clear; let the contributors, in annual meetings, choose their own office-bearers, not limiting the choice to their own body; and let the people of weight and character in the district, not only show their readiness, but their desire to be chosen. This is the general idea; it may be modified into a variety of forms, according to the circumstances of different places; circumstances to which matters of detail ought as much as possible to conform. It is an appendage to this principle, that the numbers, hence the district, should not be large, which a single bank is destined to serve. This appears to be expedient, or rather indispensable, on other accounts; to facilitate access to the customer; to prevent loss of time by attendance, if numbers should be liable to repair to the same office at the same time; and to render practicable, by division, the otherwise impracticable amount of labour, which, if the great majority of the people should bring deposits, the management of them will create.