SAVINGS BANKS AND BUILDING SOCIETIES.

New Zealand Spectator and Cook's Strait Guardian, Volume VIII, Issue 695, 31 March 1852, Page 4

SAVINGS BANKS AND BUILDING SOCIETIES.

[From Chambers's Payers for the People.] Among the working classes there is an earnest and sincere desire to improve their own condition. The great majority seek nothing but a fair field for their labour—a just share in the fruits of their industry ; few of them desire to eat the bread of idleness, or to receive charitable assistance except in the last extremity ; but they areall too prone to believe in those who tell them that they have been tyrannised over by class-legislators and robbed by rapacious capitalists, and are too eager, in defiance of repeated warnings and ever-reenrring examples, to engage in schemes that promise advantages it is impossible to realise, and hold out hopes that must inevitably be disappointed. If the history of the working classes of this country were faithfully written, it would throw more light on the measures necessary for the improvement of their condition than newspaper or government inquiries, or abstract speculations. We believe it would be found that at every period of (heir historv snnie norlint’S of them have been in as depressed a state as those whose ease has been so prominently made public. Poverty and destitution are old residents of this world ; and there were hard tusk masters, practising cruelty with impunity, long before the days of the sweaters and the slopsellers of London. We do not say that the existence of such a state of things in the past should render us indifferent to that which exists now, but it ought certainly to diminish our surprise, nnd prevent us from rushing to rash measures of refotm. For however wild and foolish many of the schemes proposed in the present day for the improvement of society may be, other schemes even more foolish and wilder have in days gone by been propose:! nnd tried with results that have ever since been deplored. We believe, further, that it would be found that the low and physical condition of the working classes could always be traced more to moral evils which they have the power to remedy than to want of employment and low wages ; and that, generally speaking, at no former period in the history of this country had they a greater command of tl e comforts and necessaries of life or greater facilities for providing against accident and misfortune, than at the present day. When a working-man casts even a hasty glance into the future, three great contingencies appear — want of employment, sickness, and death. He may escape the first and second, but he cannot avoid the third. He will at once see the necessity of providing against these, and the impossibility of doing so unless he lives within his income and invests bis savings in a profitable manner. There are doubtless exceptions to every rule, but few working men will be unable, by the help of thrifty and prudent wives, to save sufficient year by year as to make them look on the future with comparatively easy minds. The dangers into which he is liable to run are saving on the wrong items of expenditure, and making illadvised investments. A man had better not save at all than save by not sending his children to school, or by refusing to al low himself and his family a sufficiency of wholesome food. In the first case, he deprives his children of that knowledge which is “ better than riches,” and of a means of supporting themselves in the world, at least equal in imparlance to their physical labour ; while in the second case, his parsimony will sow the seeds of disease and decay, not to be counterbalanced by any investment. In this unwise neglect of the education of children lies the cause of much of the misery that we see around us. Go into any of our large towns, and you will find thousands of parents spending more money every week in indulgences which they would be far better without, or in subscriptions to clubs which end in disappointment and loss, while their children are growing up not only without the instruction and discipline of the school, but with the instruction and di'cipline of the streets, that are too well fitting them to tread the same improvident and intemperate path as their fathers. Even among the richer classes, a somewhat similar feeling prevails. When a necessity arises for retrenchment, the first item struck off is the expenditure on the education of the children, and they are either altogether removed from school or sent to one ol an inferior quality. Parents generally forget what kind of a possession a good education is, and overlook the fact that, unlike material property, when once gained it can never be lost, and that the longer it is used the stronger and more extended does it become.

But there is less danger to be apprehended from saving in the wrong way than from improvident investments. It is with savings as it is in trade and with capital of all kinds—the amount of profits is in the inverse ratio of the security. If a man is anxious to make money fast, be must go out of the field of legitima'e business and enter that of speculation, and while lie has the chance of great gains he incurs the risk of great losses. When this is practised to an excessive extent it becomes neither more nor less than gambling, and is inevitably followed by the same results. The gains, if any, are not the legitimate

interest on capital or the produce of labour, but simply represent the losses of others. There are many societies founded on a speculative basis, which hold out to working men the hope of high interest, combined with firm security, but such societies should receive no encouragement. Money, like everything else, has always its fair market price; and whenever any society offers a higher than the market price, the difference between the two is a gain of interest counterbalanced by the increased risk of the principal. Working men, therefore, should be especially careful in investing their money to prefer good security to high interest, or other great advantages. Great capitalists may with impunity embark in speculations, fortheir transactions can be so varied that losses in one way are made up in another ; but if the working man be uufortuutc in his investment, the loss is usually the loss of bis all. Assuming, then, that by a little self denial and prudent management savings could easily be made, let us now review the various modes of investment open to the working classes, and the extent to which these have been used. These may be classed under three heads: —1. Investments to accumulate property ; 2. Investments to provide against sickness and the consequences of death ; 3. Investments both of money and labour, so as to produce a better reward for the latter. Under the first bead we rank savings banks, building, land, and loan societies; under the second, friendly societies and mutual assurance companies; and under the third, co-operative stores, and industrial associations. Each of these we shall consider in detail.

Before the establishment of savings banks, the working classes had no place of security in which their savings could be deposited. Those who were careful and provident hoarded their money in secret and unsuspected places; wrapped it up in an old stocking, or put it under lock and key in a chest of drawers. It was not, perhaps, secure, nor did it reproduce itsell, but it was always at bend ready for any emergency. The amount thus hoarded up must have been very small when compared with the sums we now find accumulated in the savings banks. There are many people who, when they have money, cannot rest until they have spent it ; a shilling or a sovereign, to use their own phrase, “ burns a hole in the pocket ;” and unless it is put beyond their reach. — say in the savings bat k—they are sure to squander it away. Large sums were undoubtedly spent in this heedless manner before such banks were formed. The nature of a savings bank is well known. It meets the requirements of the workino rIaSSPR hv farilitMtinr* fho wpaltlv rlonntsit nf *-> j o j --r- — small sums, by paying a rate of interest a little higher than the ordinary banks, and by offering the security of the nation. The limitation of the amount received is merely to prevent the use of the bank by persons for whom it was not intended; and the rule requiting notice to be given before any money is withdrawn must prevent, in many cases, a reckless application of money. It would be difficult to imagine any bank simply of deposit better contrived for the wants of the working classes than the savings banks of this country. Neveitheless, the truth is, that the depositors belong in very few cases to the working classes, and that these classes look on the banks with' jealousy and distrust. The number of depositors on 20th November, 1849, the date to which the most recent returns have been made up, was 1,087,354, including 22,323 charitable institutions and friendly societies, and the total amount deposited, including interest, was £28,537,010. The class of the community who are the chief depositors in savings banks are domestic servants ; after them come cleiks, shopmen, and teachers ; but of actual working men the number is very small. The amount invested iu these banks has diminished considerably since 1 844. In that year it was more than £31,250,000; in 1847 it was 1,000,000 less, and in 1849 nearly £3,000,000 less than in 1844. To some extent this decrease may be explained by the state of trade and enq loyment, but it is perhaps more to be attributed to the increasing distrust of these banks on the part of the working classes. Nor is this distrust to be at all wondered at. During the last two or three years the cases of defalcation by the managers of savings banks have been painfully numerous, aggravated by the manner in which they have been performed, and ti e number of years over which they have been extended. The details of many of these cases have exhibited an amount of maladministration and culpable neglect on the part of the trustees, combined with an ingenuity of theft on the part of the actuary or manager, which bad it been described in a work of fiction, would have appeared incredible. The history of railways exhibits many deeds that will not bear the light of day, but they appear bright when compared with the cold, heartless, hypocritical villany that will for ever disgrace the history ol savings banks. But, when the frauds came to light, the depositors felt little alarm, trusting to the “ natioi al security;” but they found they had deceived themselves when they learned that the government was responsible only for the money it bad received, and that the money of which the depositors had been robbed bad never been received by the government at all. The reaction against the banks was natural, and we fear will continue for a long time to come, unless some law, which is evidently much required, should be passed, by which the national security should be given for all the money paid in. Besides this feeling of distrust other reasons are assigned for non-inves'ment in savings banks. It was stated before a committee of the House of Commons last year, that “one reason why the working man does not invest his money in the savings banks is, that the fact of bis being able to save money is used as a pretence for Ins wages being reduced, and he carefully excludes from the knowledge of his employer the fact that he is able to save.” In proof of this it was stated that working men in Clerkenwell did not invest in the savings bank there, but went to another at some distance, whete they were not known, and that people from a distance came to Clerkenwell for the same reason—to prevent its being “whispered about that So-and-so is a saving man, and may therefore work for less wages.” We hope for the sake of the employers of labour in this country that such cases are rare. The circumstance of a man saving out of his wages ought to make his master respect and value him the more. The rate of wages is determined by a totally different chain of circumstances ; but even if wages were to be affected by savings, it would be the interest of the master, as a general

rule, to pay his provident better than bis improvident workmen, inasmuch as he might gain in the greater economy of labour and material practised by the saving man much more than any diminution of his wages. Belore the same committee it was said, “Aery large sums of money are wasted in borrowing money even till the time arrives to get the money out of the savings bank. If a very poor person wants £3 immediately, be would give 25 percent, for it.” The rule requiring notice to be given before any money is withdrawn will doubtless be in some cases inconvenient, but it has its advantages. If a man with a deposit in the savings bank be so pressed for money as to be unable to wail till he can draw out his deposit, he will have no difficulty in outaining, if not a postponement of the claim on him, at least a loan on reasonable terms on his satisfactorily proving that he has money iu the bank.

But doubtless there are other reasons more powerful still which prevent the working-classes from becoming depositors in savings banks. They are government institutions, and as such a large party consider it a duty to decry them. This perpetual suspicion of “ the government,” though right to a certain extent, is in this case utterly unjust. The government derives no advantage from the banks; the money is invested in the public funds, and the small difference in the interest paid and received is entirely absorbed in the expense of management. It the banks were either private or joint-stock concerns, and the depositors had a share in their management, they would find more favour, at least for a time, with many among the working classes. But it requires no prophet to foresee that from such a slate of things mismanagement and frauds would ensue, and the establishments share the fate of many other schemes founded on appeals to the prejudices, ignorance, and cupidity of the people. These banks are, however, simply banks of deposit ; the money accumulates at the usual rate of interest, and no indirect advantage results from then - . To obtain a higher rate of interest, combined with social or political advantages, building and land societies have been projected, offering a good investment, and at the same time the prospect of the possession of household or landed property, and its natural attendant —the right of voting in municipal and general elections. The principle of the building society may be thus stated : —The society consists of so many shares, usually about £l2O each. Each shareholder pays a certain weekly, fortnightly, or monthly sum —amounting to from £6 to £7 per annum —for each share of the above amount. When the accu mulcted T 'a v ’p?nts reech tb° vol no of one share, it is put up for sale among the members, and sold to the member offering the highest premium ; in fact, the money is advanced as a loan, on which interest has to be paid by the purchaser until the society comes to an end ; that is, until each member has received the value of the share. The money thus purchased by the member is invested by him in land, buildings, or other premises approved of by the society ; and on this property the society of course retains a claim until all the obligations of the member have been discharged. Each society is not expected to last more than ten years but the lime is necessarily shorter or longer according to the success or otherwise of its operations. Thus if each share is fixed at £l2O, and a member purchases cue at a premium of £2O, he will have to pay ss, each fotmight for his share, the same sum as interest on the money advanced, and a portion, say one-tenth (supposing the society to last for ten years), of the premium. These payments would be £l5 annually for ten years; but to meet these he has (he rents of the property purchased by the money advanced. Now it is obvious that the value of his investment will depend on the choice he has made on the property purchased ; it may brtng him in 10 per cent., or some years it may net bring him anything at all. The cases are extremely rare in which house property realises more than 10 per cent, per annum ; so that the utmost to be expected in the shape of rent would be £l2 per annum, leaving £3 to be pail out ol other savings for ten years. Virtually, then, at the end of ten years the member would have paid £3O for properly originally worth £l2O. But this is under the most favourable circumstances, and is quite irrespective of fines, repairs, deterioration of property, and casualties. Had the same sum—that is, £3 per annum —been invested in the savings bank, it would at the end of ten years have increased, at compound interest, to about £35. If on the other hand, the property returned only 5 per cent this would necessitate a payment of £9 per annum ; or, at the end of ten years, property originally costing £l2O would have been procured for £9O. The same yea ly sum paid into the savings bank would during the same time have accumulated to not much less than the same amount. In both the society and the bank the risk of loss by fraudulent management has to be encountered, but the risk is certainly much greater in the former than the latter. Viewed simply as an investment, it is difficult to say whether such societies ate preferable to savings banks, good management being pre-sup-posed. In the one case, a.certain yearly rate of interest is guaranteed—small certainly, but about equal to that received by holders of stock in the public funds, and greater than the dividends paid by many railway companies; while in the other, the returns from the property are liable to constant fluctuation from bad tenants, houses standing empty, and other causes. The bank investment does not deteriorate by time, but houses are constantly requiring repairs, and at the end of fifty or s’xty years many of those built to pay such high interests will be of no value. To superintend property and to collect the rents involves an expenditure of time if done personally, and of money if done by deputy, to neither of which the depositor in the savings bank is liable. But irrespective of the question of investment, there are indirect advantages connected with these building societies that greatly commend them to the favour of the people. They are self-govern-ed : each shareholder has a voice and a vote in the management, and at all meetings has a right to that “ honest liberty of free speech” so dear to every man in our island. The lessons in the management of public business given in these societies form in themselves a most important part of the education of the people. It is not in political clubs—where speculative questions are freely discussed, and the management ot’ public business commented on, but where no one has anything but his opinion at stake—that sound practical views of government can be acquired, but jt is rather in such societies as wo are now

considering, whete men have real business to manage and actual ptoperty at stake. Again these societies give great facilities lor the acquis’ iliun of properly tn its most attractive form of houses and lands, and of that much-coveted privilege—the right of voting. A man who has risen by his own industrial savings to be a house-owner a landed proprietor, and a free and independent elector, has more importance in the community than the man wi o has merely a deposit iti the savings bank ; and no man rises to such a position without at the same time rising in bis general character and in the respect of those by whom be is surrounded. Some of the best citizens of the community are found among these men ; for their actual experience of public business has trained them to form just opinions of public affairs, and their love of country is tendered all the more intense because some portion, however small, of that country belongs to them. On the other hand, it cannot be disguised that these societies have in many instances given encouragement to that system of building what are called “jerry-houses,” by which the poor have been the greatest sufferers. in large towns in Scotland such houses appear to be unknown, for stone is plentiful and cheap, and the people live in “ flats,” so that there is little inducement to build houses otherwise than of strong materials and of large dimensions. But in England the case is very different: britks take tha place of stone ; even the mechanic and the labourer will not dwell in other than “self-contained” houses ; and the consequence is, that in the suburbs of such large towns as Liverpool and Manchester there are miles upon miles of what is called “ cottage ptoperty,”—consisting of houses erected usually with reference to nothing save a large per centage. A man with no capital gets money from a building society ; he may be a builder himself, or he contracts with some builder for the erection of houses in a rapidly-in-creasing neighbourhood. The bouses are run up in a few weeks by inferior and badly-paid workmen, who use bud and cheap materials ; they are soon tenanted; the speculation pays; but the tenants pay high rents for bad accommodation, and the houses will perhaps be in ruins before the death of the builder or proprietor. A Liverpool architect thus described the system : — “ Not long ago I made a valuation for a building society of five cottages, each consisting ol two rooms and a kitchen. They were miserable places : the rooms were less than twelve Let square, with a staircase leading directly from the kitchen, or lower room, to the rooms above. They had no back windows. There was but n P? privy .or the fi* e colleges. The jniner s work was of the most inferior and rude kind, and the timber was of the worst and commonest sort. These houses and the land on which they stood cost £4OO, and each house let for £8 per annum —thus yielding an interest of 10 per cent. They were seldom or never unlet, and the rents were collected weekly. 1 have known instances —not two or three, but I may say scores of instances — in which 15 per cent, has been cleared for cottage property of this inferior class. Even if such houses drop to pieces in twenty years, it is a firstrate investment. It is lite poor who pay the highest prices for everything—houses not excepted. Middle-c' ass houses are ‘•scamped’* in the same way. The walls are so thin that you cao bear in one house the conversation < f people in the next. The joists are not sufficiently thick cr strong —the wood is “ green and instead of sound Baltic or red American pine, which ought to be employed for the bearing timber, the jerry builders invariably use the cheap, common yellow pine, which is not fit for the purpose. The workminsbip is not quite so much scamped as in the houses of the poorer classes, but it is very far from being what it ought to- be. I hese rows of nice new houses and bran-new streets may look pretty enough outside and in, but it is all show and no substance. Slop-woik never lasts, and such houses will be old and ricketty long before they have stood 60 years. To secure comfort in a house—to have a house honestly built-—it ought to last for 200 years, with ordinary repairs from time to time. Very few such houses are built now for private occupation.”

If a man’s chief motive for entering a building society were to obtain a house as a dwelling for himself, such erections would not be tolerated ; but this seldom appears to be the case, The greater portion of the members of the societies belong to a class who inhabit much better dwellings than those in which they invest their money. . I hey look on the transaction generally as a mere business speculation; their interest is to get cheap houses and high rents, and all other questions, sanitary and the like, are made quite secondary. It is true that in many places the mode in which land is sold encourages such a state of things. In Liverpool, for example, a very large portion of the land on which the town is built belongs to the corporation, who sell it only on leases of seventy-five years, and no tran has therefore an interest in erecting buildings calculated to last longer than that time. The immediate effect of such influences is, that the poorer part of the population live in houses with comparatively fewer comforts and comparatively higher rents than their richer neighbours. 1 his is a point from which building societies have seldom been considered ; and the inattention to it is strikingly illustrative of the direction hitherto taken by the associative principle in this country, It is admitted on all hands that the dwellings of the working classes, especially in our large towns, require improvement, and that they have been in too many instances constructed with little regard to the laws of health ; while in these very towns we find societies framed specially to give working men facilities for becoming houseowners which are actually increasing the number of such dwellings, instead of erecting them on improved principles, calculated co give additional comfort, and to secure better health to their inmates. At the same time there exist other societies, the members of which do not belong to the working classes, whose chief object is the erection of improved dwellings, and who look less to any interest for their money than to the improvement of the houses of the popr. These things should be well Considered by the wordy advocates of co-operation and the denouncers of class oppression and capitalist tyranny.