RLF III SB 37 SflD Soci Success _. " A most interesting account of the history and constitution of Co-operative Banks." National Review. "Mr Wolff writes lucidly and suggestively. It is to be hoped that his volume will give a stimulus to the practical inquiry and the practical initiative which the subject suggests." Speaker. "This is an excellent book in every way, and thoroughly deserves the careful attention of all who are concerned for the welfare of the people." Economic Review. a [t] "It is impossible in the space at our disposal to do justice to Mr Henry W. Wolffs 'People's Banks.' Mr Wolff has carefully studied the subject, and writes about it so admirably that his volume should be in the hands of every one interested in the study of methods by which the lot of those who labour may be improved." Observer. "The book is of much value ; it brings before the public in an emphatic way the important subject of successful co-operation." Annals of the American Academy. " Valuable in the literature on this subject." Political Science Quarterly (Boston^ Mass.}. " An excellent work." Report of the Chief Registrar of Friendly Societies. 11 M. Wolff, a 1'ouvrage duquel nous rendons hommage." Revue des Deux Mondes. " Lavoro di gran polso, stampato con grandissima cura. . . . Fermi- amoci non senza aver reso omaggio alia bonta del lavoro del Signer Wolff." Credito e Cooperazione (Rome}. "Their various constitutions are well described." Economic Journal. " Mr Wolff deserves credit for calling attention to a very unobtrusive but very important development of economic enterprise, and we trust that his book may meet with such success as to induce him to continue his studies, and to give us some further information." Nation (New York}. "The advantages of promoting thrift and self-dependence among the lower classes would be beyond all estimation." Spectator. " Un livre excellent." DEconomiste Francais. " L'Autore dimostra di avere veramente approfondito il suo tema." 1} Economista (Florence}. " An important subject . . . the book will be found valuable." Times. " By far the most complete account of the subject in the English language." Standard. " Discusses a subject which deserves to be studied with attention. "- Daily Telegraph. " We recommend Mr Wolff's book to the close attention of all students of social and industrial reforms." Daily Chronicle. "Will be not unacceptable to English readers." Morning- Post. " L'ouvrage est fort instructif et remplit parfaitement le but que poursuivait son auteur: vulgariser en Angleterre 1'iclee du credit populaire." Revue Sod ale et Politique (Brussels}. [ 3 ] " Une remarquable etude." La Meuse (Littge). " His intensely interesting account of the triumphs of popular effort on the Continent. . . . We most heartily commend this book to the clergy and laity. " Church Times. "Cannot be read by any thoughtful person without deep interest." Record. " The absurdity of the belief in the efficacy of State-help for the solution of social problems has never been more forcibly demonstrated than in the pages of this welcome book ; and the beneficence of the principles of self-help and private enterprise has never received a more striking illustration." Liberty Review. " Interesting and exhaustive." Church of England Year Book. " A book of books for agriculturists . . . most interesting and instructive/" Land Agents' Record. "The story of the foundation and extension of what has now become a great system of co-operative credit has never before been as well and fully told in the English language." Agricultural Gazette. "We cordially commend the work. 3 ' North British Economist. "Son livre est de ceux qu'on consulte avec fruit." Revue d* Economic Politique. " Mr Wolff has written a very able and a very useful book. He has taken infinite pains to get at the facts. He writes lucidly, arranges his matter well. and covers the whole field. His monograph deserves to be widely read, and to be thought over with some deliberation." Newcastle Chronicle. " He writes with the pen of a master. There is probably no treatise upon the question which so minutely traces its history and more lucidly explains its present condition." Hereford Times. " An excellent book, profoundly interesting." Leeds Mercury. " A full and well-informed discussion of a decidedly interesting subject." Literary World. " By far the most complete account of the subject in the English language.'' Melbourne Age. "One of the freshest and most practical of recent books on social econom ics. " Ch ristian I Vorld. "We greet with special cordiality the publication, by Mr Wolff, of his ' People's Banks.'" Christian Million. " This able and painstaking work . . . seems an exhaustive treatise on the subject. It should be read by all who have this pressing question of modern social life at heart." The Queen. " At once interesting and inspiriting." CasseWs Family Magazine. " Written from a practical standpoint." Ecclesiastical Gazette. "We can only advise our readers to read Mr Wolff's most excellent work. The clearness of his argument cannot fail to bring home to them the merits of * People's Banks.' Mr Wolff's book is concise and complete." Public Opinion. " Mr Wolff's book is crammed with facts which deserve the attention of all interested in the welfare of the nation." Sussex Agricultural Express. "A most interesting history, which is well worthy the attention of all who take an interest in social questions." Dundee Advertiser. " This admirable study of Continental method is especially deserving of attention." The Quiver. "The author has rendered a public service in introducing the subject to English students of social questions." Western Daily Press. " Those who are interested in ... good work accomplished, will be grateful to us for calling attention to a very valuable work on ' People's Banks ' from the pen of Mr Henry W. Wolff." Birmingham Argtis. "Mr Wolff's engrossingly interesting book 'People's Banks.'" Cork Constitution. AGRICULTURAL BANKS: Their Object and their Work. London, 1894. AGRICULTURAL BANKS ASSOCIATION, is. "It is obvious to any one who reads Mr Wolff's work, that the remedy suggested has very great merit." Economic A'evieiv. "A capital little book." Leeds Mercury. "The work is full of suggestiveness to every one interested in the agri- cultural public." Nottingham Guardian. "The objects and aims are clearly and concisely set forth." Farmers' 1 Gazette. [5] "A capital little book." Birmingham Argus. " Mr Wolff has simply, and, it must be said, in a masterly manner, put down on paper the results of his own experience of the various organisations so successful on the Continent. " Sussex Agricultural Express. "Explains in a clear and lucid style their object and work." Chester Coitrant. " The work is well worth the careful attention of all who have influence in any country district." Western Daily Press. "Mr Wolff is evidently master of his subject, and knows how to make it attractive." Essex County Chronicle. "A complete and decidedly readable summary, which should be found in ever}' village. " Worcester Herald. " Un excellent travail." Bulletin du Credit Populaire (Part's). "Ouvrage tres estime." -Journal de V Agriculture (Paris}. VILLAGE BANKS; OR, Agricultural Credit Societies for Small Occupiers, Village Tradesmen, &c, HOW TO START THEM HOW TO WORK THEM WHAT THE RICH MAY DO TO HELP THEM. With Model Rules and Model Account Sheets added. London, 1894. P. S. KING & SON. 6d. " A valuable guide." Land Agents* Record. " Ever)- page deserves careful study." The Christian Million. "Gives all the required information." Sussex Agricultural Express. " Ces judicieuses observations pourront etre lues avec fruit. "Journal des Economistes. [6] " The author has made the subject his own, and knows what he is writing about." Indian Engineer. " L'excellente brochure.'' Bulletin Mensuelde Union des Caisses Rurales et Ouvrieres (Lyons}. " Une interessante brochure." Bulletin du Credit Populaire. "It is to be hoped that it will be widely read, and that it will bear practical fruit. " Norwich Chronicle. "We are greatly indebted to the author for his indefatigable perseverance in pressing this important subject on the attention of English readers." Charity Organisation Review. N.B. A Welsh translation of this pamphlet is in preparation. A PEOPLE'S BANK MANUAL P. S. KING & SON. 6d. " Our readers will be glad to know that Mr Henry W. Wolff has written *A People's Bank Manual.'" Review of Reviews. "Gives much useful information." Scottish Co-operator. " Lays down clearly and concisely the methods on which such banks should be conducted if they are to ensure success." Bookseller. " This little work may be read with no small amount of profit." Mammon. "A most handy and useful manual." Surrey Leader. " Essentiellement pratique. La lecture du Manuel peut-etre recommandee a tous ceux qu'interesse la question des banques populaires." Reviie des Banques. 1 ' Ce travail servira utilement la cause de la diffusion des banques populaires. " Bulletin du Credit Populaire. "Should be in the hands of every one who would like to understand the growing movement in favour of establishing in the United Kingdom the banks for people of small means which have been so successful all over the Continent." Labour Co-partnership. 7 ] ODD BITS OF HISTORY. BEING Short Chapters intended to fill some Gaps. 1894. LONGMANS & Co. 8s. 6d. " Mr Wolff has gone into certain byways of history, and made some highly interesting sketches of persons and events." Spectator. " The literary flavour of the book is delicate, and there is a good deal of real, though lightly handled, knowledge in its pages." Speaker. " Those who are fond of ' picking up a little bit of neglected history ' will find this volume entertaining reading." Saturday Review. "A series of bright and pleasant essays." Observer. " Le style de ces morceaux est aimable." Nouvelle Revue. " Mr Wolff's delightful essays. . . . Mr Wolff s book is most interest- ing, curious, and picturesque." Newcastle Chronicle. "The book is delightful reading, and it is only after having been deeply interested in the subjects discussed that a reader discovers that he has been instructed all the while." Scotsman. " Emphatically the book to beguile an historian's leisure hour." London Quarterly Review. "A genuine contribution to ethnology." Pall Mall Gazette. " We can commend the essays as interesting, lively, and useful studies." Literary World (London}. "They are very pleasant reading." Morning Post. " Has more than once reminded us of that most versatile of English authors, Daniel De Foe." Literary World (Boston, Mass.). ' No intelligent reader is likely to go away discontented." Yorkshire Post. " Excellently told." Melbourne Argus. ' Xot only has Mr Wolff succeeded in his intention historically, but he has provided the means whereby blanks in every-day life can be entertainingly and profitably filled." Western Daily Press. " We have little doubt that this volume will be popular." Record. "A book which supplies both amusing gossip and instructive information." Liverpool Daily Post. " Pleasantly written pages. The volume contains much curious and interesting information." Freemart s Journal. "A chatty, pleasantly written book, containing many curious scraps of out- of-the-way information." The Dial (Chicago}. "A pleasant and instructive book. Mr Wolff, though an antiquary, is the very reverse of a Dr Dryasdust." Dundee Advertiser. " Makes pleasant reading." Academy. " Mr Wolff writes in an easy, gossipy style, which is not incompatible with erudition. " Guardian. " Highly attractive for those who like to take their history in honeyed draughts. " New Ireland Review. " Mr Wolff writes brightly. He has the enthusiasm of the historian for clearing up a mystery, and he clothes the results of his inquiry in a very charming garb." Nottingham Guardian. THE COUNTRY OF THE VOSGES. LONGMANS & Co. 123. "A volume in every way admirable." Saturday Review. "An interesting book, full of curious and valuable information." Academy. "Most entertaining and vivacious." Times. " A most complete picture of the present state, as well as the past history of the Vosges." Spectator. " One of the few books of travel that can hardly fail to interest every one." Church Times. "It would be difficult to find a dull or tedious page." The Galignani Messenger. "The book will interest all." Guardian. "One of the most entertaining volumes which we have read for many a day." National Review. "It would be almost impossible to speak too highly of Mr Henry W. Wolff's 'Country of the Vosges.'" Westminster Review. [9] " The writer's taste, association, observation, and sympathy impart a peculiar grace to his pictorial tale." The World. " Brimful of information ; there is plenty of anecdote to enliven the text, which runs on in an easy graceful fashion." Graphic. "A pleasant volume." Athenaeum. " Rarement un etranger a aussi bien penetre dans 1'histoire d'un peuple et a mieux compris et etudie ses moeurs que vous 1'avez fait en ecrivant votre livre sur le pays lorrain, alsacien et messin." F. des Robert. " Certainly one of the most delightful works of its kind that we have seen." Sunday Times. " Un travail d'erudition." Polybiblion (Paris}. ' ' Wherever you open this book you are sure to find an amusing traveller's adventure, an historical reminiscence, or a bit of description which sets you longing for summer and a knapsack in the Vosges. " St James's Gazette. THE WATERING-PLACES OF THE VOSGES. LONGMANS & Co. 45. 6d. "The book is eminently readable." Saturday Review. "The bits of history, with here and there an anecdote, make this book a delightful bit of reading." Medical Press. " We can recommend Mr Wolffs book." -Lancet. "The book is admirably written." Queen. " Mr Wolff writes pleasantly, and is not forgetful of historical associations." Athentzum. " The information conveyed in his brief historical sketch is remarkably interesting, and the sketches themselves are especially lively and instructive." The Galignani Messenger. " Mr Wolff's book may be confidently recommended." British Medical Journal. " Mr Wolff is at his best in describing the social life of the more quaint and less known of these health resorts." Speaker. "Mr Wolff's book may be recommended with confidence." Edinburgh Medical Journal. " Pilgrims in search of health could scarcely find a more pleasant instructor than Mr Wolff." Scotsman. RAMBLES IN THE BLACK FOREST. LONGMANS & Co. 75. 6d. " The book is delightfully written. "Knowledge. " One of the most readable, and in the best sense of the word picturesque, books of travel which we have recently come across." Speaker. "The book is charming, packed with information, abounding in novel pictures. World. "The more his book is read, the more people will go to the Black Forest, and they can have no better guide." Evening Post (New York). " Mr Wolffs enthusiasm and acquaintance with the Forest make him an interesting and entertaining cicerone." Spectator. " The book can be recommended in the highest terms." New York Times. "A magazine of information and anecdote, lore and legend, of one of the most fascinating regions of the Continent. " Sunday Times. " Mr Wolff has a great deal that is interesting to say of the old customs still existing in the Black Forest." Guardian. "Mr Wolff is a very fascinating guide, and he knows his subject. "- Scotsman. SUSSEX INDUSTRIES. SOUTH COUNTIES PRESS, LEWES, is. "Amusing and curious essays." Athenaum. "The information is quaint and curious, and of real archaeological value." National Church. "The author has acquired the happy knack of imparting a vast deal of useful and solid information to his readers in a light, almost jocund, and entertaining manner." The Reliquary. "A very interesting little book, and we cordially recommend it to our readers. " Agricultiiral Gazette. PEOPLE'S BANKS PEOPLE'S BANKS Ctf RECORD OF SOCIAL AND ECONOMIC SUCCESS BY HENRY W. WOLFF. v " If some one had told me a few years ago what progress co-operation was about to make, I should have said that he was talking of a vision of Utopia." Mr GLADSTONE. " Le plus grand banquier du monde est celui qui dispose de 1'obole du proltaire." JULES SIMON. Second Bfcitkm. REVISED AND ENLARGED. LONDON : P. S. KING & SON, 12 AND 14, KING STREET, WESTMINSTER. 1896. All rights reserved. Printed at THE DARIEN PRESS, Edinburgh. TO THE HON. L. LUZZATTI, Councillor of State ; late Italian Minister of the Treasury and Finance THE FOUNDER OF THE ITALIAN BANCHE POPOLARI, HIS COUNTRY ? S BENEFACTOR, THIS VOLUME IS DEDICATED IN TOKEN OF WARM PERSONAL AFFECTION AND UNALTERED ESTEEM. 113569 SPRECKELS CONTENTS. PAGE- PREFACE ....... xiii PREFACE TO THE FIRST EDITION . . . . xv PUBLICATIONS BY THE SAME AUTHOR ON THE SAME AXD ALLIED SUBJECTS . . ... . xvii LIST OF AUTHORITIES xix CHAPTER I. INTRODUCTION Social Importance of the Subject Its Bearing on the Labour Question Its Bearing on the Land Question Capital and Labour are not necessarily antagonistic The Working-man "his own Capitalist" Want of Employment remedied by Increase of Production Two Californias Success of People's Banks A System based upon Self-help Mr Gladstone on Thrift Self-help made Productive as well as Provident What People's Banks may do In Towns Working-men their own Employers In the Country " A New World " " Co-operation has done it all " Moral Results superior even to Economic Appreciation by the Poor Simplicity of the System Its Security Our past Indifference to the Subject "Aidez-a- faire." CHAPTER II. THE GENERAL IDEA The general Idea is not new Difficulties of its Application Efficacy of Credit Only small Funds required at starting Early Co-operation in Spain and Portugal The Problem to be solved Sir R. Morier's Opinion : Labour can be Mortgaged " The Capitalisation of Honesty" The Working-man to work out his own Salvation Wastefulness of Charities as compared with Self-help Instances quoted from France Difficulties of inducing the Honest Poor to borrow Security is not obtainable otherwise than by Self-help Self-help has succeeded where Charity has failed Instances quoted from Alsace, Italy, and b viii CONTENTS. CHAPTER II. continued. PAGE Germany Frankenheim The Lesson to be drawn The Poor Man is the most scrupulous Repayer Sir R. Morier's Cardinal Rules "Democratised Credit" In England Credit is still the Monopoly of the Rich" Aspirare a discendere." CHAPTER III. THE Two PROBLEMS . . . . .30 The Task is two-fold Its Economic Aspect People's Banks as Savings Banks "Collecting Banks" People's Banks as fixing Savings in their own Localities The first economic Object is cheap Credit The Question is not one of Money but of Security Lord Salisbury on "Money" Scotch Cash Credit Two Foundations for Security Agricultural and Industrial Credit The Point of Divergence Characteristic Requirements in Dense Populations In Sparse The two kinds of Credit are not antagonistic, but complementary. CHAPTER IV. THE Two ASPECTS OF THE QUESTION . . -41 " Mutualism " and " Co-operation " Advantages of purely Econo- mic Co-operation Interest stronger than mere Sense of Duty How this applies to Co-operative Banking " L'esprit de lucre domine tout " It is nevertheless useful Altruistic Co-operation It is genuinely Co-operative And based upon Self-help Its Effects Recriminations between Partisans of the two Types. CHAPTER V. CREDIT TO AGRICULTURE . . . . .49 Why Agriculture must be classed as a " Poor " Calling Agriculture has become a " Business" without the Resources of a " Business " Its Need of Money Instances of the Utility of Money : Woolwich Fresnes Dippoltshausen The Need is furthermore attested by the Report of the Royal Agricultural Commission " Tant vaut 1'homme, tant vaut la terre" The Small Cultivator's Needs Profitableness of Small Holdings A Case quoted from Germany The Forest of Montello The Case of the Larger Farmer Where Money may help HOW T Credit helped in the Drought of 1893 An Example from France M. Giraud in the Nievre Similar Cases occurring in Germany and Austria A Sussex Landlord's Application of the Lesson What Credit the Farmer has now Landlord's Credit Dealer's Credit Banker's Credit Scotch Cash Credit Usurer's Credit Why Ordinary Banks cannot provide what is wanted Opinion of the President of the German Imperial Bank " L'echeance agricole n'est que nominale " Necessity of creating a marketable Personal Security. CONTEXTS. ix CHAPTER VI. PAGE THE "CREDIT ASSOCIATIONS" OF SCHULZE-DELITZSCH . 71 The Germans the first Organisers of Co-operative Credit Schulze- Delitzsch The first "Credit Association" Dr Bernhardi im- proves the System Schulze's peculiar Aptitude His Difficulties Government Persecutions Schulze's Problem stated by himself Unlimited Liability It is not indispensable The real " Key- stone of the System " " Compulsory Savings Banks " Schulze's System described The Success of the System Extended beyond Germany Smallness of Losses Practical Success assured in some measure by Departures from Theoretical Rules Agricul- tural Credit Its large Amount The Credit Associations of Augsburg Insterburg Gotha A small Bank: Walldorf Cosel Defects in the Schulze-Delitzsch Organisation Salutary effect of a Compulsory Audit In spite of all the Schulze-Delitzsch System has done inestimable good Statistics. CHAPTER VII. THE RAIFFEISEN " LOAN BANKS " . . . 1 1 5 The Origin of Raiffeisen " Loan Banks " Their Founder The " Jews ; ' Their Usurious Practices Excessive Distress calls forth a Remedy A Co-operative Bakery Co-operative Purchase of Stock The First "Loan Bank" Triumph of the Movement Never a Penny lost Raiffeisen's Aim His System Safe- guards adopted Simplicity of the Method How the Loan Banks are trusted Federation of the Banks The Central Council The Central Bank Its Services Co-operative Supply Further Developments Benefits of the Loan Bank System The Causes of Success Analysed Instance of Mulheim "A Happy Combination of Business and Philanthropy." CHAPTER VIII. OFFSHOOTS AND CONGENERS . . . 152 Spread of Co-operative Banking Offshoots in Germany Of the Schulze-Delitzsch Type Of the Raiffeisen Type " Particularist " Secessions The Haas Associations The "Peasants' Associa- tions " Political Banks " Co-operative Law " Belgian " Peasants' Associations " Austria and Hungary Co-operative Banking among various Races Slav Associations Communal Loan Banks German Credit Associations Instances Credit Associations in Galicia Schulze-Delitzsch Banks in Hungary Army and Navy Loan Associations Raiffeisen Banks An Official Inquiry The Result An Austrian Raiffeisen Bank Slav Raiffeisen Banks Transylvania Hybrid Banks in the County of Pesth Co-operative Banking in Scandinavia In the Netherlands In Russia In Servia In Roumania In Spain and Portugal The Spanish Positos Modern Co-operative Bank- ing in Spain India : The " Nidhis " China Japan. x CONTENTS. CHAPTER IX. PAGE THE "BANCHE POPOLARI" OF ITALY . . 195 Past Attempts to create Popular Credit The Italian Savings Banks Luigi Luzzatti Departing in some features from Schulze's System, he creates a New Type of Bank He limits Liability Reduces the Value of Shares and the Time allowed for Payment How Honesty is "Capitalised" Wholly Democratic Adminis- tration The Results are : Admirable Management, a large Inflow of Deposits, Safety of Transactions Bankers Support the Move- ment The Friendly Societies History of the Movement The Pioneer Bank of Milan Its Troubles and its Triumph The Causes of Success Representation of Classes in the Banks Organisation Comitato di Sconto Comitato dei Rischi Variety of the Banks' Operations Short Terms and Small Loans Pre- ferred The Supply of Funds The Consiglio The Sindaci The Probiviri The Reserve Fund Merits and Defects of the System The "Loan of Honour" Credit to Agriculture The Law of 1869 Cartelle Agrarie The Law of 1887 Cartelle a scadenza fissa M. Sani's Method Spread and Growth of the Movement Present Position of the Banks Scarcely touched by the Crisis Unsound Banks Instances of Sound Ones Agri- cultural and Urban A Working-men's Bank "Catholic" Banks M. Luzzatti, "the Benefactor of his Country." CHAPTER X. THE "CASSE RURALI " OF ITALY . . .260 Need of Small Village Banks Common Features in Rural Italy and Rural England Instances of Oppression Usury common before the Banks were created The Earliest Propaganda Dr Leone Wollemborg His first Cassa Rurale Its Organisation A Slight Departure from Raiffeisen Methods Increase of the Casse Their Success The Village Bank of Loreggia Its Work Ex- plained Object-lessons Corazza The Good which Milage Banks generally have done Testimonials to their Work Village Banks employed as Succursales to great Savings Banks Parma "Catholic" Village Banks Don Luigi Cerutti The Work of such Banks Advantages of and Objections to the Enlistment of the Denominational Principle The Casse as a Factor of National Regeneration. CHAPTER XL THE BELGIAN "BANQUES POPULAIRES" . . . 286 Local Circumstances favouring Co-operation "Unions du Credit" Need of more Popular Credit Leon d'Andrimont, the Schulze- Delitzsch of Belgium His Early Difficulties Eventual Success Statistics Instances The People's Banks of Verviers, Ghent, Liege The Problem of Credit to Agriculture still unsolved The CONTENTS. xi CHAPTER XI. continued. PAGE Reason why Some Prejudices against the Raiffeisen System Ultramontane Raiffeisen Banks M. Mahillon overcomes the Prejudice Present Prospects of Success. CHAPTER XII. CO-OPERATIVE BANKING IN SWITZERLAND. . . 305 Distinctive Character of Swiss Money Co-operation Co-operative Purchase of Cattle in Thurgau and Zurich Local Substitutes for Popular Credit Easy Mortgages Caisses Ouvrieres Co-opera- tive Business Banks The " Schweizerische Volksbank" Other Co-operative Banks Some Lessons to be Learnt from Swiss Co-operative Banking Pioneer Raiffeisen Banks. CHAPTER XIII. CO-OPERATIVE BANKING IN FRANCE . . -321 Backward State of Co-operative Banking in France Ingenious and Costly Experiments in the Past An Adverse Law French Etatisme has much to answer for " La Furia Francese" The Silos of Algiers -The Start of the Movement The " Credit au Travail" The " Societe Mere" and its Offspring Disastrous Effect of the War of 1870 Italian Example reanimates the Movement Vigano's Bank at Cannes The Bank of Mentone It creates Village Banks and becomes the Centre of a new Move- ment The Second Centre : M. Durand's Caisses Rurales Their Astonishing Increase The Third Centre : The Syndicats Agri- coles Objections to their Methods The Bank of Productive Associations The Credit Cooperatif de Lorraine M. Rouzes' little Bank at Paris Hopeful Prospects. CHAPTER XIV. CONCLUSION . 356 The Sum of the Tale told Economic and Moral Results The Underlying Principle is one Merits of the various Systems And Dangers besetting them The Lesson for the United Kingdom Why it may be held that there is Room for Co- operative Banks among us Our Needs Existing Institutions evidencing the Existence of a Want and the Applicableness of the Co-operative Remedy Our Hindrances Our Advantages Unreasonable Objections A Flaw in our Savings Banks System People's Banks might correct it Our Pioneer Banks in England, Wales, and Ireland A Needful Warning An Associa- tion gone astray It is absolutely essential that Co-operative Banking should be built up upon Self-help and the quickening of Responsibility No Gifts or Patronage allowable Encouraging Progress of the Movement in England and Ireland Banks to be found in Australia The Need of India Relief in Prospect " The Resources of People's Banks are Illimitable." PREFACE TO THE SECOND EDITION. So much new matter has been added to the earlier " Record " of People's Banking, that this Second Edition may almost rank as a new book. In our own country the idea of Co-operative Banking lias, as I must gratefully own, met with a far more ready reception than I had any reason to anticipate. The interest betokened has appeared to me to call for fuller and more detailed description of many points affecting the subject than I felt warranted in entering into in the first edition. I owe thanks for information freely given to so many kind friends that it would be hopeless to attempt to mention all by name. I must, however, single out one, namely, Mr E. W. Brabrook, the Chief Registrar of Friendly Societies, whose ready help in the preparation of Model Rules, alike for PEOPLE'S BANKS and for VILLAGE BANKS, has proved invaluable. Please God, the good cause having succeeded in enlisting interest, will now speed here as it has sped else- where, to the benefit of millions ! So far as I am able, I shall always be happy to assist with further explanation in whatever quarter such assistance may be asked. H. W. W. June 1896. PREFACE TO THE FIRST EDITION. THE subject discussed in the following chapters is new to most English readers. The kind interest with which articles dealing with one portion of it, recently published in the Economic Review and the Agricultural Economist, have been received, the attention accorded to lectures delivered in various places, and the direct bearing which the matter obviously has upon our present social that is, at bottom, economic troubles, encourages me to hope that in some quarters, at any rate, some information upon one of the most signally successful movements of our century may prove not unacceptable. I desire to record my sincere acknowledgments for information very liberally given, orally and by letter in some cases at no small sacrifice of time and trouble to a considerable number of gentlemen connected with the cause of provident action and co-operation, more particularly to the Hon. L. Luzzatti ; Herr R. Raiffeisen ; M. E. Tisserand, Conseiller cTEtat et Directeur de r Agri- culture, in the French Ministry of Agriculture ; Dr von Langsdorff, of Dresden, and other heads of Agricultural xvi PREFACE. Departments of German States ; Dr von Jekelfalussy, Chief of the Statistical Office of Hungary ; our Chief Registrar of Friendly Societies ; Dr von Keussler, of St Petersburgh ; Director Cremer, of Neuwied ; Professor Concini, of Rome ; M. A. Micha, Secretary-General of the Federation of Belgian Banques Populaires ; M. A. Yersin, Director-General of the Schweizerische Volksbank ; M. L. Durand, of Lyons ; and the Very Reverend Father de Besse. H. W. W. February 1893. PUBLICATIONS BY THE SAME AUTHOR UPON THE SAME AND ALLIED SUBJECTS. PEOPLE'S BANKS. A Record of Social and Economic Success. 1893. Longmans. 75. 6d. {Out of print.} AGRICULTURAL BANKS. Their Object and their Work. Agricultural Banks Association, 7 & 8 Palace Chambers, Westminster. 1894. is. VILLAGE BANKS. How to start them How to work them What the Rich may do to help them. With Model Rules and Model Account Sheets added. P. S. King & Son. 6d. A PEOPLE'S BANK MANUAL. Rules and Directions. P. S. King & Son. 6d. CREDIT CO-OPERATION IN GERMANY. Economic Review, October 1892. PEOPLE'S BANKS FOR ENGLAND. Economic Review, October 1893. OUR VILLAGE BANK. Westminster Review, May 1894. CO-OPERATIVE CREDIT. Economic Review, July 1894. PEOPLE'S BANKS. New Ireland Review, August 1894. THE POOR MAN'S Cow. National Review, October 1894. CATHOLIC BANKS. New Ireland Revieiv, May 1895. CO-OPERATION IN AGRICULTURE. Contemporary Review, October 1895. THE CASE FOR AGRICULTURAL BANKS. Contemporary Review, April 1896. THE CO-OPERATIVE BANKING MOVEMENT. Economic Review, April 1896. ESSAIS DE CREDIT POPULAIRE EN ANGLETERRE ET EN ECOSSE. Cinquienie Congres des Banques Populaires Francaises. Actes dn Congres. Imprimerie Cooperative, Menton. 1894. LES BANQUES POPULAIRES AU POINT DE VUE COOPERATIF. Sixieme Congres des Banques Populaires Francaises. Actes du Congres. Imprimerie Cooperative, Menton. 1895. LE CREDIT AGRICOLE. Journal des Economistes, December 1895. LE CREDIT AGRICOLE. Httitieme Congres des Banques Populaires Francaises. Actes du Congres. Imprimerie Cooperative, Menton. 1896. (Shortly.) Information on the subject dealt with in this book will be found in the following publications : SCHULZE-DELITZSCH, H. " Vorschuss- und Creditvereine als Volksbanken," 1876. RAIFFEISEN, F. W. "Die Darlehnskassenvereine. " " Kurze Anleitung zur Griindung von Darlehnskassenvereinen," 1890. \VUTTIG, N. " Fried rich Wilhelm Raiffeisen." BRANDT, O. "System Raiffeisen." SCHMID, F. "Die Genossenschaftssysteme," Wien, 1887. LUZZATTI, L. " Rapport du President de 1'Association des Banques Populaires Italiennes," Rome, 1889. " La Diffusione del Credito, Padova," 1863. LEVI, ETTORE. " Manuale per le Banche Popolari," Milano, 1886. MANGILI, F. " La Banca Popolare di Milano," 1881. CALLIN, ANGELO. " Guida per la Fondazione delle Piccole Banche Popolari nelle Citta e nelle Campagne," Venezia, 1886. ANDRIMONT, LEON D'. " Le Credit Agricole/' 1888. MICHA, A." Le Reescompte," 1892. LAVELEYE, E. DE. "De 1'Organisation du Credit Agricole." DURAND, L. " Le Credit Agricole," 1891. SAY, J. B. L. " Dix Jours dans la Haute Italic," Paris, 1883. ROSTAND, E. " Une visite a quelques institutions de prevoyance en Italic,'' 1891. YIGANO, FRANCESCO. " Banques Populaires de 1865 a 1875," l %75- ROCQUIGNY, LE COMTE DE. " Les Syndicats Agricoles et le Socialisme agraire," Paris, 1893. " LA COOPERATION DE PRODUCTION DANS L' AGRICULTURE," Paris, 1896. COURTOIS, A. "Banques Populaires," 1890. VALLEROUX, HUBERT P. "Les Associations Cooperatives en France et a 1'Etranger, Ouvrage Couronne," 1884. LECOUTEUX. "Les Syndicats et le Credit Agricole, in Le Journal d*' Agri- culture pratique" 1890. BESSE, P. LUDOVIC DE. "Deux Rapports," Paris, 1892. xx LIST OF AUTHORITIES. RAYNERI, CH. " Le Manuel des Banques Populaires," Guillaumin, Paris, 1895. CRUGER, H. "Die Erwerbs-und Wirthschafts-Genossenschaften," 1892. CONRAD, JOH. " Handworterbuch der Staatswissenschaften," Jena, 1889, &c. FASSBENDER, Dr M. "Die Bauernvereine und die Landwirthschaft," Pader- born, 1884. STOGER, Dr O. F., in Schmoller's Jahrbuch, 1891. Heft III. " REPORTS BY HER MAJESTY'S REPRESENTATIVES ABROAD ON THE SYSTEMS OF CO-OPERATION IN FOREIGN COUNTRIES," 1886. " LANDWIRTHSCHAFTLICHE JAHRBUCHER, 1875 an< ^ 1876." Berlin (con- taining the Report of the Royal Commission). MINISTERIO DI AGRICOLTURA, &c. "Le Societa Cooperative, &c., nell' anno, 1889," Roma, 1892. " Statistica delle Banche Popolari," Roma, 1885. - "Banche Popolari, anno 1893," Roma, 1895. " Bollettino delle Societa per Azioni " (monthly). " EXPOSITION UNIVERSELLE DE 1889." Congres International d'Agriculture. Rapport, Paris, 1889. " EXPOSITION UNIVERSELLE DE PARIS," 1889. Rapport presente par Leone Wollemborg : Les Caisses Rurales Italiennes, 1889. " EXPOSITION UNIVERSELLE DE PARIS," 1889. Rapport presente par M. A. Micha. " BANQUE POPULAIRE DE LIEGE." Rapports (annual). "FEDERATION DES BANQUES POPULAIRES," Liege, 1887, and subsequent Reports. ANNUAL REPORTS OF THE CONGRESSES OF BELGIAN Banques Populaires. "DENKSCHRIFT DER SCHWEIZERISCHEN VOLKSBANK," 1869-1889. "BERICHTE DER SCHWEIZERISCHEN VOLKSBANK," Berne (annual). "JOURNAL DES EcONOMiSTES," Paris, vols. for 1886, 1891, and 1895. " L'ECONOMISTE FRANCAIS," Paris, more especially vols. for 1886 and 1888. " JAHRESBERICHT UBER DIE AUF SELBSTHULFE BEGRUNDETEN DEUTSCHEN ERWERBS- UND WIRTHSCHAFTS-GENOSSENSCHAFTEN," Berlin (annual). *' LANDWIRTHSCHAFTLICHES GENOSSENSCHAFTSBLATT," Neuwied. "BLATTER FUR GENOSSENSCHAFTSWESEN," Berlin. " DIE GENOSSENSCHAFT," Wien. "DEUTSCHE LANDWIRTHSCHAFTLICHE GENOSSENSCHAFTSPRESSE.' " ARBEITERFREUND," vols. for 1873 and 1881. "CREDITO E COOPERAZIONE," Roma. LIST OF A UTHORITIES. xxi " LA COOPERAZIONE RURAI.E." " LA COOPERAZIONE POPOLARE." " L'UNION ECONOMIQUE," Paris (more particularly III., 2 and 3). " BIBLIOTHEQUE UxiVERSELLE," Geneve, vol. for 1889 (June). 'REPORTS OF THE ANNUAL CONGRESSES OF FRF.NCH PEOPLE'S BANKS," Imprimerie Cooperative, Mentoni. " BULLETIN DU CREDIT POPULAIRE," Guillaumin, Paris. " BULLETIN MENSUEL DE L'UNION DES CAISSES RURALES ET OUVRIERES." " VEREIN FUR SOCIALWISSENSCHAFT, SCHRIFTEN," vols. 20, 22, 23, 24, 25, 28, 30, 35. 38. " RUSSISCHE REVUE," 1874 and 1890, IV. "BALTISCHE WOCHENSCHRIFT," Nov. 23, 1891. " MAGYAR STATISTIKAI EYKUXYV." "THE ECONOMIC REVIEW," 1892 and after. 4i REPORT REGARDING THE POSSIBILITY OF INTRODUCING LAND AND AGRICULTURAL BANKS INTO THE MADRAS PRESIDENCY," Government Press, Madras, 1895. PEOPLE'S BANKS: A RECORD OF SOCIAL AND ECONOMIC SUCCESS. CHAPTER I. IN TROD UCTION. AT a time when every mind appears busy with schemes of Social Import - "social reform," when every effort, alike of statesmen and ance of the J matter. of philanthropists, seems bent upon doing something to raise the social status and improve the material condition of the poorer classes, no excuse should be needed for calling attention to an institution which British, as some of its supporters hold it to be, in its prime origin, but adapted and developed abroad has in some neighbouring countries proved more helpful than any other in furthering the objects aimed at, but which among ourselves has thus far strangely escaped notice. The problems which at present perplex us are not, we ought to remember, our peculiar monopoly. They call as clamorously for solution elsewhere. In France, in Germany, in Austria, in Italy, in Belgium, as its bearing on among ourselves, Labour jostles Labour, the rapidly in- creasing host of those who have to earn their living by toil demand with a voice growing louder and louder the boon of independence and a larger share in the rights and com- forts of life. There, as here, the plaintive cry of the desti- A 2 PEOPLE'S BANKS. tute, the suffering, the helpless, homeless, foodless whom the country has brought forth and the country, it is con- tended, ought to sustain may be heard appealing for relief. There, as here, in one shape or another whether as a matter of possession or as a problem of providing more ample means wherewith to improve what is already pos- its bearing on sessed the troublesome Land Question casts its dark ticm an S sna -dow across the scene. It cannot, of course, be argued that other nations have been more successful than ourselves in finally solving the problem with which we are all grap- pling. But in respect of one or two points, amid a good deal of profitless experiment and actual blundering, some of them seem at any rate to have come nearer to sound remedial action. They have discovered that it is not necessary to assume, as many among ourselves appear to Capital and do, that Capital and Labour, whose recurring strife is n^cessadf 6 n0t res p ons ible for one of our main perplexities, are necessarily antagonistic, antagonistic forces, with different interests, different aims, different aspirations belligerent parties, between whom peace can be established only from time to time, as a matter of terms. In one instance, at least, they have managed to bridge over the dividing gulf and blend the long-opposing interests into one, by making, in the apt The Working- words of Schulze-Delitzsch, the working-man " his own Capitalist " Wn capitalist." And they have shown that other means are available for adjusting differences arising between various factors of national production than encroachments upon production itself; that it is not an inexorable law of Nature that whatever is given to Labour must necessarily be taken from some one else be it capitalist employer, or be it rate- paying community. Xot everywhere is it contended that Labour should be benefited one might almost use the term " protected " by a restriction upon output. Emigra- tion, though necessarily tolerated, is looked upon by some of our neighbours rather as an evil to be put up with than INTRODUCTION. 3 as a desirable remedy. When employment runs short, the Want of Em- first question asked by them is, whether it is not possible ^^iSl by to provide more, by creating new sources of production, increase of Foreign methods may not be our methods in some in- stances they distinctly cannot be. It does not seem likely that the resource which various German Governments have found so useful, of stimulating cottage industries to furnish employment for the hands overflowing from the larger workshops, will recommend itself to ourselves, at any rate at present, amid totally different circumstances. There is more to be said for the modern German practice of multi- plying small holdings, which has proved most signally successful, and the results of which might well have been taken into account in our own recent attempt to deal with the same matter.* By far the happiest solution yet dis- covered, and apparently the most adaptable to varying circumstances, is that for which our neighbours are beholden to Schulze-Delitzsch, Raiffeisen, the Hon. L. Luzzatti, M. d' Andrimont, and Dr Leone Wollemborg who have taught them to establish " People's Banks," and thereby to create large capitals providing abundant employment without cost to any one. One can scarcely help remarking upon the curious Two Cali- coincidence of facts which opened to Europe at exactly the same period, about 1849, two essentially different roads to vast riches. It was while our first emigrants were rushing to the newly discovered gold-fields of California big with promise, tempting to the eye with the alluring glitter of precious metal that in a small village in the bleak Wester- wald, and in a petty provincial town of that portion of Saxony which Prussia annexed in 1815, the first spade was thrust into a " gold-field " of a very different type, looking * See my article on " Repeopling the Land," in the Contemporary .Review, May 1895. 4 PEOPLES BANKS. at the time bare and barren, but concealing under its un- promising crust a store of wealth, larger and more benefi- cent in its effects by far than the gold deposits of the State which the American Confederation had then just finally made its own. Which of the two gold-fields has thus far yielded to Society the larger volume of tangible riches, it may be open to question. Which has more enduringly benefited our race the metal which began by provoking robbery and disorder, and which, along with much good service, forms a standing incentive to greed, envy, and dis- honesty ; or the " capitalised honesty " which plants virtues where there were vices, makes people thrifty, industrious, sober, honest, and enables them to build for whole classes habitations which no financial crisis can wash away to such question there can be but one answer. Success of What untold riches these People's Banks have within Banks 6 S *he forty-six years of their existence made available for small folk's needs, what millions they have added to the wealth of the countries in which, as M. Leon Say testifies, they " flourish throughout " ; what vast amount of misery, ruin, loss, privations, they have either averted or removed, penetrating, wherever they have once gained a footing, into the smallest hovel, and bringing to its beggared occupant employment and the weapons wherewith to start afresh in the battle of life, it would tax the powers of even ex- perienced economists to tell. Propagating themselves by their own merits, they have overspread Germany, Italy, Austria, Switzerland, Belgium. France is trying to graft them upon her own economic system. Russia has in her own rather primitive way followed the excellent example. Servia and Roumania have adopted them. And now we hear of their spreading from Italy into far Japan China has got something like them already while we in Great Britain scarcely yet know of their existence. INTRODUCTION. 5 The solution has all the more to recommend it among A system based ourselves, because it is essentially based upon a principle upor of which this country has long been regarded as the specific home : the principle of self-help. Self-help, it is quite true, has of late gone a little out of fashion. We are taught sometimes to look to other deities to bring us up out of the Egypt of want and distress. Nevertheless, whatever it be reserved for State-help to accomplish, in England self-help is not likely long to want adherents. Unfortunately we have thus far given to this great power only half its prac- ticable application. "It is self-help," phonographed, early Mr Gladstone in 1890, Mr Gladstone to a delighted body of correspondents on Thrlft - across the Atlantic, who thought that they had never heard their co-operative principle so neatly and tersely vindicated " It is self-help which makes the man ; and man-making is the aim which the Almighty has everywhere impressed upon Creation. It is thrift by which self-help for the masses, dependent upon labour, is principally made effective. In them thrift is the symbol and the instrument of independ- ence and liberty, indispensable conditions of permanent good." Yes, that is admirably said, and with the truth of Mr Gladstone's words no one will be disposed to quarrel. That is the interpretation which we have thus far put upon " self- help." " Save, lay by, economise, make the most of your pence, alike in provident accumulation and in economic outlay," that is the familiar counsel which for many a year back we have persistently addressed to our poorer brethren. Going further than counsel, we have provided for them facilities beyond what are known in other countries, and, to do them justice, they have readily profited by them. Our Savings Banks, our Provident Societies, our Co-operative Stores, remain unsurpassed in the known world, and secure to us without question the first place among nations in respect of the practice of thrift. PEOPLES BANKS. vident. But does not all this, after all, represent only one side of self-help ? Could not the same power which enables us to garner the ripe fruit be impressed into service also to assist us in tilling the soil and producing it ? Self-helpmade It seems strange that we should never seriously have turne d our thoughts to this problem, which for us, one would think, ought to possess no less practical importance than for any of our neighbours. There are so many bits of waste lying unproductive in our economic system which self-help, if it is within its power, might with advantage be called in to cultivate. There is so much labour which cannot be brought to the point at which our orthodox form of self-help begins the point of being able to save and lay by. And even where there is employment, there is still so much available labour and ability running unprofitably to waste ! There is so much skill and opportunity which for want of means cannot be turned to full account ! We are rich, no doubt. But the daily conflicts between Capital and Labour show that with all its abundance Capital is among us not equal to the demands made upon it ; that, rapidly as it has grown, Labour has grown very much faster ; and that, for want either of will or of power, it is still relatively too small for our national needs too small, at any rate, at the fructifying points. Then, is there no means of supplying the want, of creating the capital which is wanting, and, where there is admittedly opportunity and working power, of placing also the material to work upon at the command of the willing workman, to the diminution of misery and destitution, and the happy increase of the productive power of the nation ? The answer, given in the affirmative, is to be found in u People's Banks." To state one instance of what they may do we well understand the all but hopeless difficulty of dealing with the huge mass of helpless misery which daily, articulately or inarticulately, calls upon us to be relieved. What relief it may bring. INTRODUCTION. 7 Though our chanties flow very unevenly from different purses, in the aggregate no nation in the world gives more largely, nor more readily. For all that, if Gregory the Great is right, it is to be feared that even the most charitable among us are sorry sinners even in their very charities. For although they " offer rightly " enough, they most evi- dently do not " distribute " at all as they should (si recte offeras, non recte dividas, peccdsti}. Xow let us suppose that through this vast, unwieldy mass of distress a line might be carried, separating, not the deserving from the undeserving that is not our affair but those in whose hands money might be counted upon to fructify, to give them employment and repay itself out of their toil, from those in a different case ; and let us suppose that to each and every one of the former category could as much money be advanced readily, easily, and at a cheap rate as they think that they have employment for. By what a sub- stantial proportion would the tax upon our resources, both of purse and of application, be reduced ! Not only would the mass of destitution to be dealt with dwindle very materially, but former victims would at once become effec- tive helpers taxpayers, it may be employers, givers of charitable support instead of claimants to it. Let us further suppose that, even beyond the limits of actual want and non-employment, all those willing workers among us who, like our well-known heroes of self-help, see their opportunity for a great enterprise, who have the ability, but want the means, could go to the same source of supply and there obtain, without the indignity of begging, without having to make a special favour of the loan, what they require let us assume that the farmer or the allotment-holder could obtain the wherewithal to drain, to manure, to improve his field according to modern principles, the householder the wherewithal to set up and furnish his home cheaply, the small tradesman the means wherewith to stock his shop, 8 PEOPLE'S BANKS. the small artisan the funds for carrying out profitable work whatever the want, whatever the calling might be, suppose that it could be supplied what a vista of wealth and pros- perity beyond the wildest dreams of hope, profitable to the individual, profitable to the community, appears to open itself to one's view ! It seems almost like a vision of fairy- land. Well, and can People's Banks accomplish all this ? What People's The answer is to be found in that vast network of Banks may do. fl ou ri sn ing banks spread out over Germany and Italy, numbering by the thousand, turning homeless labourers into cultivating owners, unemployed journeymen into thriv- ing traders, starving peasants into substantial yeomen, stimulating everywhere, in M. Leon Say's words, commerce, industry, and la petite culture, which under their beneficent shelter develop "with increasing energy," in those neat, prosperous villages, encircled by smiling gardens, orchards, and heavily bearing fields, which spring up, as if by magic, not in the fertile valley of the Rhine only, but in the barren Westerwald, on the erst neglected plains of Venetia, and in In Towns. the wild Rhon mountains. It is to be found in the bustling business going on daily in that palace of the Banca Popolare which you may see in the Via San Paolo in Milan, where a full hundred of clerks are continually at work, besides about 140 unpaid officials, passing tens of thousands of pounds through their hands every day, 80,000,000 in the year, a stream of gold steadily and rapidly increasing in volume. All that work is done with a clockwork regularity and an exactitude in every detail which could not, says M. Say, be surpassed in London or New York. And all has grown up out of genuine " People's " business. Most of the transactions are small drafts of ten lire (eight shillings) are not at all uncommon. Lira by lira has that magnificent fabric been reared up out of small folk's busi- ness " drop by drop," says its founder M. Luzzatti, " like INTRODUCTION. 9 a stalactite grotto" till it has grown to be one of the largest banking establishments in all Italy. There are more than seven hundred banks of this order, small and great, in Italy, doing among them a full third of the country's banking. In Germany there are thousands. Or, Working-men to ascertain the results in a different aspect, you should, Employers. once more in Italy, go out into the country and ask the muratori and the braccianti, whom you see there building and making roads without a master to control them, where they got the money from which enables them to do the job on their own account, putting the middleman's profits into their own pockets. Or else you should walk into IntheCountry. one of those thriving villages in Venetia, in which Dr Wollemborg has set up his casse rurali. A few years ago, under the evil influence of hindrances not unknown among ourselves the accumulation of landed property in few hands, habitual absenteeism, and, moreover, a rigorous exaction of rents such as, happily, we have no conception of that district was the usurer's favourite hunting-ground, and the poor drudges who cultivated it had not a centesimo to call their own from week's end to week's end. Now the usurer is gone, and the cultivators are doing well, and laying by. Or, again, you should go into the valley of the Rhine, where the Raiffeisen Banks have been longest at work, and observe to what extent homes have been made habitable and comfortable ; how culture has been improved ; how machinery has been purchased, and the best manures and feeding stuffs ; how the vintner has been enabled to sell his produce for cash at double the former rate of return ; how the small peasant can now buy his implements and manures, of the best quality, at the cheapest wholesale prices, and yet thanks to a large reserve accumulated in his bank, raised up seemingly out of nothing, as if by fairy hands at six months' credit ; you should see how small industry and trade have been developed, how the usurer, once all- io PEOPLE'S BANKS. powerful, has been driven out of the field, and those once poor men have become small capitalists. One is afraid of falling into a strain of rhapsody in describing all these " A New results. " I have seen a new world," broke out, in explicable admiration, the Hungarian deputy, Professor von Dobransky, charged with a mission of inquiry, on seeing this country of newly created plenty, " a world of brotherhood ; it is a world of brotherly love and mutual help, where every one is the protector and the assister of his neighbour. An isolated man here finds himself transplanted into the bosom of a community whose resources multiply a hundredfold the productive power of its labour, and crown it with success." This seems high-flown language. But other visitors, dry, sober political economists, like M. Leon Say, M. Rostand, Professor Held, and M. Fournier de Flaix, speak in exactly the same strain. The late Emile de Laveleye expressed himself with less of rapture but not less of emphasis. The wealth which this new instrument has brought forth, as by a touch of Midas, wants to be seen in order to be under- stood. Looking at it, and reckoning up its benefits, one feels indeed as if on economic ground " a new world had been called into existence to redress the balance of the old." "Co-operation And "all these wonders which I have seen," writes M. Leon a5!" C Say, "are the wonders of private initiative and decentrali- sation. It is private initiative, it is the decentralisation of credit which is the dominating cause of all this progress in wealth. It is co-operation which has created it all (la mutualite a tout crie}" Moral Results And the tale of our " wonders " does not end here. Ec P oTomic? " Tne moral results," writes M. Rostand, after his second visit to these humble banks of Italy, "are to my mind superior still to the material." To apply Signor Wollem- borg's apt illustration, the golden sunshine of thrift and co-operation, wherever it has cast its rays, has " unveiled," and brought to view in plenty, unlooked-for virtues which INTRO D UCTION. 1 1 had long lain hidden like flowers shrouded by the night. The idle man becomes industrious, the spendthrift thrifty, the drunkard reforms his ways and becomes sober, the haunter of taverns forsakes the inn, the illiterate, though a grandfather, learns to read and write. It sounds like a tale from wonderland. Yet it is all sober fact. We find a Prussian judge officially reporting that litigation, especially in respect of claims for debts, has very sensibly diminished in his district thanks to the establishment of a co-operative bank. We hear a German priest confessing that the new Loan Bank in his parish has done far more to raise the moral tone of his parishioners than all his ministrations. In Italy we have another parish priest one among many Dom Rover, the paroco of Loreggia, writing only a brief time after the setting up of the co-operative cassa in his parish : " People go less to taverns now, and work more and better. Since only respectable folk are admitted as members of the Association, we have seen habitual drunkards promise never to set foot again in a tavern and keep their word. We have seen illiterate folk, of fifty years and more, learn to write, in order that they may be able to sign their application for a loan. Poor people, excluded as being in receipt of parish relief, have vigorously exerted themselves to have their names erased from the paupers' list, and instead of living on alms, we now see them living on their labour thanks to the small capital lent to them by the Association. Poor fellows, who could previously scarcely support themselves, have been enabled to purchase a cow, out of the milk and cheese of which they repay the debt contracted, keeping the value of the calf as net gain." Learned professors and Ministers of State, dry econo- mists, parsons, men of business from all countries all, in fact, who have had an opportunity of judging by the test of their own eyes of the merits of this new Fortunatus's purse, join in the chorus of laudation. One is not surprised to find foreign Governments steadily encouraging institutions whose aim, in the words of one of their founders, Schulze- 12 PEOPLES BANKS. Appreciation by the Poor. Simplicity of the System. Its Security. Delitzsch, is " Peace " ; in the words of another, M. d' Andri- mont, " Order and Economy " ; while in practice they prove, according to the testimony of M. Leon Say, "the most effective weapon against the development of Socialism." But to gauge the value of People's Banks at its fullest, one should go among the people whom they have benefited the small tradesman, the peasant, the cottager, who has by their help purchased, rod by rod, a little holding which he surveys with pride. One should go, as I have done, stick in hand, walking from cottage to cottage, and hear these people describe the contrast between erewhile and now, and listen to them telling of their little troubles and embarrassments, and how the bank stepped in to relieve them. Many such a tale there is which could not fail to warm a philanthropist's heart. If there is one proof more conclusive than any other, as showing the practical utility of these banks, it is the devotion and the gratitude which they evoke from those whom they support and who in turn support them. And, so inquired into, the system seems so simple ! Every peasant appears able to understand it. He delights in bringing out the books, in showing them to you and explaining what all the entries mean. He can make the whole organisation clear to you. And, moreover, the business is so safe ! " Not a sou has been lost," declares M. Rostand, the chairman of one of the largest Savings Banks in France, on behalf of the Italian casse rurali. " Our losses have been altogether trifling ; in the times of economic crises less than those of other banks," writes to me Professor Concini, on behalf of the banche popolari. "Not a pfennig has ever been lost, either to creditor or to depositor," so the heads of the great Raiffeisen Union make it their boast, after an experience of forty-seven years, and speaking on behalf of a union now increased to beyond two thousand associations. INTRODUCTION. 13 It must seem strange indeed that, with our acknow- Our past in- ledged needs, with our large means, and our familiarity with banking, we should never before have seriously directed our attention to an institution which with so slight an effort can produce such marvellous results, which goes on spreading its network continually over new districts, meeting with the same success everywhere, going nowhere but to conquer we, who otherwise are not slow in our appreciation of money and of opportunities for business. It seems doubly strange that we should so long have neglected this modern development of banking, when we are told that it was our Scotch "cash credit" which is indeed abroad credited with far more helpful popular work than it has ever had the chance of accomplishing which first suggested the idea to foreign co-operators. In their earliest days our Co-operative Congresses did indeed nibble a little at the subject. Their members had heard of the " wonders " wrought abroad, and were anxious to reproduce them on British soil. They were not, however, quite clear among themselves as to what they really wanted whether People's Banks, to help poor folk by loans, or purely co- operative business establishments, to earn banker's profits for their shareholders. And so the inquiry ended in two abortive experiments. Some years ago in 1886 our Government made these foreign banks a subject of consular inquiry. The Blue Book which has resulted from those labours gives them very becoming credit. But, unfor- tunately, in its information it is barring the portion deal- ing with Italy full of inaccuracies and errors, such as unhappily occur in not a few of our Blue Books when embodying merely a relatio relatorum. I can say nothing better in respect of later official publications issued in London. They are all wanting in accuracy and fulness of information excepting only the admirable digest just published at Madras, which, of course, has scarcely yet been 14 PEOPLE'S BANKS. studied in England, and which treats only of agricultural banks. In real truth our knowledge on the subject, as a nation, is still little more than a blank. I hope that I have made out my case so far as to show that there is some ground for endeavouring to fill up that vacant space, and that the People's Banks ought to possess some interest for us. To the fullest extent they carry into practice the admirable maxim on which the Alsatian philanthropist, M. Dollfus, avowedly based the generous and useful work which has "Aidez-a- helped to make him famous: Aidez-a-faire. They do not give, but they help. They help those to help themselves whom by other means, long experience has proved, we cannot adequately help. If in the following chapters I can but make clear by what services and methods the People's Banks accomplish this, how they have grown up abroad in a variety of form which seems to indicate an almost inexhaustible capacity for adapting themselves to any description of circumstances, how wonderfully they have thriven, and what truly astonishing amount of good they have accomplished, more especially among the poor and neglected the struggling toiler, alike in town and country, the usurer's victim and the exactor's drudge my tale ought to be worth the telling. But I need scarcely add that I hope to do more ; that by the account which I shall give of the " wonders " accom- plished the work of enrichment, of education, and of a diffusion of sound principles, alike economic and moral, I hope to induce some good philanthropists to make practical trial in our country of that which has succeeded so magni- ficently abroad. CHAPTER II. THE GENERAL IDEA. THE bare idea of co-operation in matters of money was The general not by any means new when the two originators of the co- operative movement in Germany resolved to create for their country a co-operative speciality. There are traces of it to be met with in the history of most nations. The Spanish compania gallega, the Portuguese sociedade familiar, the Italian monti nummari, the Russian ivatagas, the South Slavonian droujinas all these institutions show the principle of co-operation for the common obtainment of money put into practice in some more or less elementary way. It cannot occasion wonder that, when the second French Revolution quickened the desire for full emancipa- tion among the toilers of an impetuous nation, the idea thus far rudimentarily applied should have been made to assume more definite form. It was in those days of emanci- pation by fire and sword that the German chemist Gall the same who invented the method of sweetening sour wine by the addition of fruit-sugar during the process of fermen- tation conceived the idea of " fighting Capital by a com- bination of the many small purses of Labour." But it was one thing to grasp the bare idea, and quite Difficulties of another to put that idea into really workable shape. Gall's il . s appKca- crude proposal to fight cash with cash cash which could bide its time, with cash which might, every penny of it, be called for any day to keep its owner's body and soul to- gether erred, of course, wide of the mark. What gives i6 PEOPLES BANKS. Efficacy of Credit. the capitalist his main advantage over the man with no capital, is not his hard cash, but the credit which that cash commands, and which multiplies its producing power five and ten fold. If, therefore, the poor man was to be made " his own capitalist," it must be by assuring to him the help of credit the very last thing which in the ordinary state of affairs is accorded to him, but of which, in Signer Vigano's words, " he stands in far greater need than does the rich." " He has no credit," says Giustino Fortunato, " because he is destitute ; and he continues destitute because he has no credit ; and so he moves on hopelessly in the same vicious circle, from which there is no way of escape." The question to be answered then came to be : Could by some means or other credit be provided for the poor ? Fortunately, Credit is, as Professor Laurent rather happily points out, in words quoted with approval by M. d'Andri- mont, satisfied with very little. " Credit," says the pro- fessor, " is not the creator, but simply the mover of capitals. It multiplies indefinitely their services ; it quickens their movement, as the rail quickens the revolution of wheels ; it annihilates the obstacle of time, as steam annihilates the obstacle of space ; but it does not create. It un- covers, it awakens, 'it fructifies ; it does not invent. It is a marvellous power, without which the economic movement would not exist ; but it is not a panacea. Even with enormous effective values it cannot do everything, and with nothing it will never accomplish anything. However, with next to nothing, and that is the case of the People's Banks, it will effect wonders" Only small The experience of People's Banks has fully justified this quired at start- P m ^ on - Schulze-Delitzsch, who has long been looked ing. upon as the main pioneer of modern credit co-operation, began his work with very little. It was but like a grain of sand. But in Signer Vigano's words, it gave co-operation the TTOV O-TW, from which the world might be lifted out of THE GENERAL IDEA. 17 its hinges. It was a paltry beginning, one would have thought, to lead up to the present riches and influence, in the possession of which the Schulze-Delitzsch Banks, according to M. Courtois' rather exaggerated estimate, dis- pense to trade and industry annually somewhere about 180,000,000 in loans. Raiffeisen borrowed 300, which had to be repaid within a comparatively brief time, to begin his work upon. Commendatore Luzzatti started the giant establishment at Milan, which now commands a paid-up capital and reserve exceeding 500,000, with a puny sum of 28. Signor Leone Wollemborg began his banking operations for his casse rurali with literally nothing at all except credit. And yet these co-operative banks among them have created milliards' worth of property, besides be- coming themselves substantial institutions with great wealth, in M. G. Francois' words: " Une veritable puissance financier e, dont I* importance cconomique n'a pas besoin d'etre demontree" In 1849, however, all this was experience still to come. EarlyCo-oper- In Spain and Portugal, unobserved by English or German ati in s P a , in 1 and Portugal. co-operators, the poor peasants of the compania gallega and the sociedadefamiliar\\.dj& in their own elementary way solved the problem of co-operative credit up to a certain point. Their shrewd common-sense had taught them that by con- verting their family, so to speak, into a joint-stock concern, endowed with continuity and common liability, they would be offering very much better security to the money-lender, and thereby enabling themselves to obtain very much more favourable terms. And on this principle they continued through generations to contract their little loans, uncon- sciously providing a useful stimulus to thrift and economy, and attracting into the family home or holding many a real which without such inducement would have gone in finery and dissipation. But these men had at any rate something to pledge. The Problem Schulze-Delitzsch's problem was, in his own words, " to to be solved - B 1 8 PEOPLES BANKS. procure capitals without a capital of guarantee " " to find," as M. F. Passy puts it, " means for giving credit to those who have no security to offer in exchange." The question to be solved, in fact, was this : Could labour be pledged for Sir R. Morier's money ? Sir Robert Morier, in an excellent paper con- L^ouTcan be tributed to our first Co-operative Congress, held in 1869, Mortgaged, answers that question in the affirmative. He says : " The skilled artisans of a community are as good a subject for a mortgage as the steam mill which supplies it with flour, or the broad acres which furnish the corn for the mill. All that is wanted is some equally safe means of assigning to the creditors a lien on the former as on the latter." That is the very point. In practice, of course, the^ problem did not in every case take this extreme shape. For, as in the case of the Iberian peasants, there was often something, at any rate, in the borrower's possession, which might serve as security a holding, or a house, or some chattels. But these in most instances did not amount to very much ; and in the main the problem still remained as Sir Robert had "The Capital- put it, and resolved itself in M. Luzzatti's words into one of Honesty " finding " moral " guarantees, and devising means for " the capitalisation of honesty," to serve as a pledge or security. The work has been accomplished, as will be seen, by a variety of methods. Still, looking at the banks collectively, one may agree with M. Say, who says that, differing in details, in principle they " all belong to one family." The family has proved a lucky one ; for all its members have been singularly successful, though successful in different degrees. And even that difference is not without its value. For it teaches us what an essential element of success in this matter is the frank adoption of the principle of self- help. It clearly shows that the more fully and undilutedly The Working- banks have accepted that principle, the better, in the long man to work run nave they thriven. All leaning on foreign supports, out his own ., , salvation. whatever ostensible gain it may nave brought at the THE GENERAL IDEA. 19 moment, has in the end turned out to be nothing but loss, and it has been proved beyond the shadow of a doubt that, in Schulze's words, to become "his own capitalist," the working-man must be "the instrument of his own eman- cipation (lo strumento stesso della sua redenzione"}.* "The only capital (in this application, of course) which will endure," so says Professor Laurent, with the approval of Emile de Laveleye, " is the capital created by the working- man himself. It would be idle to lend to him or to give him the implements for his work. Such gifts, like an inherit- ance under the touch of a spendthrift heir, would be squandered in little time." We ought to know that this is so, though we have given Wastefulness little evidence in the past of our having mastered the fact. of Charit j es .as compared with The record of our benefactions designed to help and raise the Self-help, working classes is a record, to a great extent, of desires and efforts which do our philanthropists credit, but to the same extent it is also a record of practical failures. Millions upon millions have been thrown away, as uselessly as if they had been cast into the sea, in kindly intended, but injudiciously executed attempts to do good to others according, not to their own, but to our ideas, to give them ruffles when they wanted a shirt, and to give that luxury in a way calculated rather to make the receivers careless, than to make them thrifty. Only a few years ago we had proof of a fresh instance of this given us in the complaint publicly expressed by a nobleman who had liberally pur- chased at his own cost " a large tract " of land beyond the sea, on which he had purposed, likewise at his own expense, to settle English emigrants. The men accepted the free passage gladly, and, that done, made their way to a more congenial settling ground in the United States. Their * Not having the German words at hand, I quote from Signer Ettore Levi's Manuale. 20 PEOPLES BANKS. intending benefactor had thrown his money away. He had pressed upon his beneficiaries what they had not asked for and did not want, and what they considered that they might relinquish without ingratitude. Hundreds of similar instances might probably be quoted, if one cared to ransack the history of our charities. Throughout history there seems to have been a peculiar bane of failure attaching, like a Pandora's curse, to those provident or charitable enterprises which did not rest absolutely on self-help. Either they did not reach the right people, or they failed in their effect upon those people, making them unthrifty instead of thrifty ; or else the method chosen proved unsuitable, or the safeguards were insufficient ; or else, lastly, the funds were misapplied by their own guardians and turned to improper purposes. Instances France has a long tale to tell of very well meant but quoted from injudiciously conceived or else mismanaged enterprises from that wretched waste of money downward, which in 1 848 Thiers branded as " cette grande folie" to the present day. The Emperor Napoleon III. tried his hand at such beneficent work. First he created a Caisse d'Escompte, endowed with a million of francs, of which he himself pro- vided one-half, which was to advance funds more especially to productive co-operative associations. As it turned out, the rules had been so stringently drawn that no borrower could be found willing to comply with them, and the institution died without having done any good. Then the same Emperor started a Societc dn Credit Agricole, which was more especially intended to benefit rural borrowers. The institution came to these men in such a questionable shape, it looked to their eyes so unfamiliar and suspicious that, timid as they habitually are, they shrank from claim- ing what was willingly offered, and the Societc, not knowing what to do with its idle money, invested a large sum in loans to the Khedive Ismail, which very soon put an end THE GENERAL IDEA. 21 to its existence. The Empress Eugenie fared no better with her Societe des Prets de rEnfance. Gambetta experi- mented with the same ingenuity, but unfortunately also with the same disappointing result. His Caisse Centrale, 4 formed with the very best object, soon found itself on the straight road to failure, because it could not attract the one class of customers whom it wanted, and in the end it saved itself only by converting itself from a philanthropic into a business bank. The truth is, it is not by any means easy to attract poor Difficulties of people of the right sort to the lending counter. With an ^S?S? to ingrained sense of very honourable delicacy they shrink borrow, from accepting what either is, or else appears to be, a gift. There were non-co-operative philanthropic lending banks in many places in Germany before Schulze-Delitzsch and RaifTeisen entered upon their benevolent career. The late Duke of Saxe-Coburg the father-in-law of our Queen more especially, had been careful to found some such in his dominions at Gotha, at OhrdrufT, at Zelle, at Ruhla, and elsewhere. But nowhere did these capitalist establishments accomplish any real good. In Berlin, Dr Criiger tells us, no man " with any sense of honour in him " would apply to them for a loan. Vagabonds came in plenty, but vaga- bonds were not to be supplied though, to the loss of the institution, unfortunately a good many of them were. And when, for want of business, the banks at length closed their doors, though their capital had considerably dwindled by injudicious loans, a large portion of the funds remained unemployed. Such unwillingness on the part of poor people, especially the poor peasantry, to come for loans to persons whom they do not know very familiarly, and by whom they do not know themselves to be known and understood, has been the standing cnix of the Governments both of France and of Belgium in their endeavours to carry into effect their pet 22 PEOPLES BANKS. hobby of establishing a form of personal agricultural credit. They tried to do this with the help of the large resources at their disposal respectively in the Bank of France and the State Savings Bank, and through the medium of local committees comptoirs d'escompte and comptoirs agricoles whose members were selected with as great care as was possible, so as to secure persons acceptable to the local clientele. It proved all in vain. The borrowers would not come. " If in a village," so complained the Belgian Minister M. Graux, pouring out his griefs on this subject in the Chamber, " it becomes known that an inhabitant borrows,, people at once begin to suspect that his financial position must be shaken. The trader, on the other hand, glories in his credit ; the larger is his credit, the higher stands his repute. The peasant will not borrow till his affairs decline, and then he puts off borrowing as long as he possibly can ; he will rather pay a high rate of interest to some avaricious notary, who may be trusted to keep his secret, than frankly apply for a loan where interest is low. Such are the ideas of our campagnards. In their view a loan brings with it a stigma of discredit." This description is true all the world over. The French Government has had much the same experience in its own country. And in Germany, Herr Cremer, Chairman of the Union of Co-operative Loan Banks of Neuwied, tells me that even the Raiffeisen Associations, which are thoroughly popular and self-administered, have in some of their districts found themselves compelled to put forward one or other of their richer members, so to speak, to " bell-wether " the poor to the lending table. Evidently it is only to lenders of their own place or district, and lenders of their own class, or familiar with its affairs who may accordingly be fully trusted to understand the position and the objects of the borrower, and to think none the worse of him for his borrowing that this shy class of customers as it happens, the only right ones to trust with money will come. THE GENERAL IDEA. 23 And if it is only to such that the right borrowers will Security is not come, it is only such also who may be trusted to adapt their jjjwjjjfttaii methods to the case, and be liberal without being careless by Self-help, as regards security. In the most typical cases already quoted from French economic history there has always been either too much or too little caution. To what extent official administration can shipwreck even a good fund, is shown by the fate of the Legs Rampal, liberally left by a philanthropist for the benefit of co-operative societies. Unfortunately Rampal entrusted the keeping of the fund to a Committee to be appointed by the Municipal Council of Paris ; and that Committee simply strangled the fund with red-tape. Framing its rules with municipal wisdom, it lent to those to whom it ought not to have lent, and did not lend to those to whom it ought, and by this means very effectually frustrated the entire object in view. By this means the Legs is being systematically frittered away. In 1887, out of 437,000 francs lent out, 100,000 francs were reported irrecoverable. In 1889, out of forty-nine associa- tions lent to, eighteen were found to be bankrupt, eighteen more in course of liquidation, and three suspiciously in arrear. Even co-operative loan associations, it has become plain, from experience collected, more especially in Italy, must not step outside the district within which they are genuinely local and co-operative, unless they would miss their effect. Co-operative banks, endeavouring to extend their work over a wider district by means of branch offices, where there was not sufficient touch, found themselves making a loss. The branch districts afterwards organised their own inde- pendent banks, based on touch and mutual knowledge of one another among members, and the new institutions throve. The losses sustained by co-operative credit associations in Germany in the course of their operations occur almost without exception amongst such as have attempted to work outside their own district or without a recognised districtat all. 24 PEOPLE'S BANKS. Self-help has It is interesting to note the difference in the fate which where d Charit ^ as befallen, on the one hand, genuine co-operative loan has failed. institutions, supported and officered by those for whose benefit they are intended, and, on the other, loan institu- tions of a different type, be they official or philanthropic, however well conceived and organised. Instance of One case in point is that of Alsace. The German Government, on taking possession of the newly conquered province, found popular credit unprovided for, and at the same time millions of marks, either savings banks' money or else communal funds, lying idle in its tills. With sound judgment, as it appeared, and great thought, it organised popular Advance Banks ( Vorschusskassen\ by which such available moneys were to be lent out to the peasantry and other small folk on very liberal terms. Every precaution was taken ; yet the practical effect proved next to nil. A few years ago Herr Raiffeisen planted one of his co-opera- tive Loan Banks on the same ground. Within five years that one multiplied to seventy-three. In 1892, when I visited M. Chevreton, the Chairman of the Provincial Committee, at Saint Hippolyte, there were 126, all thriving, all doing a large business, alike in granting loans, and in taking savings. Since that time the number has been very largely increased. Never had grain of seed fallen on more fruitful soil than that on which the official variety had barely germinated. Experience in Something very similar has happened in Italy. In 1869 the Italian Government, being anxious, like its neighbours in France and Belgium, to provide small agricultural culti- vators with cheap and easy personal credit, by a special law authorised the formation of banche agricole, very similar in constitution and practice to the French coinptoirs d'escompte. In 1882, of the thirty-odd banche so established, all but nine had collapsed. Of those nine only two were doing any business to speak of, and that, as it turned out, THE GENERAL IDEA. 25 only owing to special circumstances acting in their favour. One would have thought that in that district surely there could be no demand for credit. Yet, scarcely had Com- mendatore Luzzatti's banche popolari set up their tables on the same seemingly barren soil, but business flowed to them from all sides, and they grew in a few years to most successful establishments. In Berlin, where the late Emperor William's money, Experience in granted in 1865, on Prince Bismarck's urgent recommenda- tion, to endow socialist associations of the Lassalle type, proved a hopeless waste, and where those philanthropic loan banks already referred to had to close their doors for want of business ; and in Thuringia, where the banks supported by the various small Crowns accomplished very little the Credit Associations established by Schulze- Delitzsch have found a most ready and favourable market. One very striking and characteristic instance comes to Frankenheim. me from the Grand Duchy of Saxe- Weimar. There, in what not long ago was a forlorn district, something like a rural Seven Dials, stands the erst forsaken village of Franken- ' &> heim poor, neglected, it was, with tumbledown houses, all of them heavily mortgaged, badly tilled fields, and an uncouth, barbarous-looking race of inhabitants, rightly or wrongly reputed capable of any misdeeds, and possessing some few famished cattle, nine-tenths of which really belonged to the "Jews." In pity the Grand Duchess had some model dwellings set up, erected at comparatively considerable cost, but to be let at a nominal rent of 303. a year. The success was not particularly encouraging. Some time after, the Lutheran vicar of the parish resolved on trying the effects of a Loan Bank of the Raiffeisen type. With the help of the money so secured on these poor people's own collective credit he built houses, each of which, with the ground upon which it stands, and the 26 PEOPLE'S BANKS. garden surrounding it, cost a little under 60. For these houses the occupiers are required to pay 4^ per cent, interest, plus y 1 - or ^ of the principal each year, by way of sinking fund, therefore in all, according to circumstances, either $. I2s. or 6. I2s., in consideration of which the houses become their own after a certain period. All these houses have been readily taken up, the tenants pay their rents regularly, and, thanks to the money brought into the village, the whole face of things has become changed. The dwellings have become decent, the gardens well kept, the fields well tilled, the " Jews " have been paid off, the cattle are well fed, and the human inhabitants are known through- out the country as orderly, well-conducted, industrious, saving and thriving folk. The Lesson to From all these instances, and more which are on record no doubt they might be matched in this country it seems unmistakably evident that institutions like those now contemplated, formed to assist poor people with money which is to be well expended, and honestly repaid, must not, if they are to be of real benefit to the borrower, to promote useful outlay, and thrift, and honesty, come to him like little Providences from outside, with a strange face and a condescending air Providences whose gifts cost him nothing, and for aught that he is aware of may cost no one else anything, and may be repeated ad libitum but must be his own creation, raised up, as Commendatore Luzzatti, the founder of the banche popolari, puts it, " by a heroic levy on his daily wages." If he is to value the gift, he must be his own benefactor ; if he is to deal scrupulously with it, he must be its guardian. The rich man's dole, coming as from a rich man, is held in comparatively slight estimation, as issuing from a full treasury in which it will not be missed. Hence those ruinous losses, by repeated default, in the French philanthropic funds founded by the State, or the Emperor, or the Empress. THE GENERAL IDEA. 27 Wherever, on the other hand, the lending institution has The Poor Man presented itself to the borrower as genuinely popular and scropuk^s genuinely co-operative, there has been found to be no more Repayer. regular and more scrupulous repayer than the small man. Even the French Credit Agricole, which was but moderately " popular," has not lost a penny by its peasant customers, as M. Josseau honourably testifies. The debtor who wrecked the institution was the Khedive. The peasant may be tardy in his payment, so says M. Garreau in Les Societes Cooperatives ; but once his sense of responsibility and honour is aroused, he is sure to pay. Similar testimony comes from all quarters. In Germany we have Herr Raiffeisen bearing witness, who has never lost a penny ; in Italy Commendatore Luzzatti ; in Portugal Senhor Costa Goodolphim. In Italy, in the casse rurali, ministering to the poorest of the poor, not a centesimo has been lost. Emigrants send in their debts from America, and when by chance a man is so hopelessly out of pocket, through things going wrong, that he really cannot repay, his fellows with a creditable sense of class honour make up the amount. It is just the same thing in America. What the " People's Banks " were which flourished in the United States before the Civil War, to revive in later time practically as Building Societies, we do not quite know. There is no precise record left of their operations. Except in New York, where they were made the instrument of reckless speculation, they did well. And evidently they were more of lending societies than are their modern antitypes. For we find the Commissioners appointed by the United States Govern- ment to inquire into their practice and success reporting that they have "demonstrated beyond doubt that, with equal prudence and intelligence on the part of the lender, loans to the industrious and economical poor arc as safe as those made to any class whatever of the rich." 28 PEOPLE'S BANKS. Sir R. Morier's Cardinal Rules. "Democra- tised Credit.' In England Credit is still the Monopoly of the Rich. By what methods such " prudence " should be exercised Sir Robert Morier has very accurately pointed out in his paper already referred to. He mentions as the three main conditions of success, the pillars upon which the credit structure must rest, the following: (i) Maximum of re- sponsibility ; (2) minimum of risk ; (3) maximum of publi- city. Perhaps the elements of successful organisation might be grouped under other headings, but in substance it would come to the same thing. However, beneath these supporting pillars, experience ample by this time, alike on one side and on the other, confirmatory or refuting has made it quite plain that, if the fabric is to stand and to show itself equal to the burden placed upon it, there should lie a foundation which makes the structure entirely popular, familiar to those who are to use it, a thing with which they can identify themselves, therefore co-operative, and in the best sense "democratic." " Avec les banques populaires" so says M. d'Andrimont explaining the fruitful work which he has accomplished in aid of the poorer classes in Belgium "le credit est democratise" "Capital," he goes on, "which was previously beyond the reach of workers, has been brought close up to their doors." Making this principle his own, M. Leon Say affirms the object of People's Banks to be " la democratization du credit'' That hits a weak point in our economic system. We pride ourselves, on both sides of the political boundary line, upon our " popular " institutions, which make us, as we think, the most "democratic" nation in Europe. Nevertheless in respect of the main supports of the two great divisions of our economic fabric we are distinctly anti-democratic. As the basis of agriculture we have land laws which, for good or for evil, are, from a democratic point of view, a century at least behind those of other countries. And as the basis of commerce we have credit still almost the monopoly of the rich. We do not, accordingly, know that which, thanks THE GENERAL IDEA. 29 to their People's Banks, the Germans and Italians have well learnt, namely, what an ample and practically inexhaustible resource of productive power there lies hidden in the labour, the frugality, the honesty of the nation's workers, as material for what Commendatore Luzzatti calls " capitalisation " just as people who have not seen rivers like the Danube or the Rhine, could not possibly estimate from the little rills and driblets which go to make them up, what a vast volume of water may be collected from those insignificant sources. It is the object of the founders of " People's Banks " to bring those scattered streamlets together, to give them aim and force, and by doing so to make the very atoms which compose them more fruitful, more productive by the sense of responsibility awakened, the principles of business instilled, the knowledge of dealing with money and an appreciation of its productive power diffused. It is quite true, as Dr Johnson unkindly reminded Goldsmith, that it takes 240 poor men's pence to make one capitalist's sovereign. But once the sovereign is so put together, it is a totally different sovereign from that taken out of the rich man's safe. It has behind it 240 wills, 240 pairs of watchful eyes, 240 thinking brains. It has, so to .speak, become an animate sovereign, with prudence, energy, vigilance, diffused through all its parts. Every spring, every wire of the com- posite machine takes a personal interest in the collective doings, watching the other parts, guarding against loss and waste, correcting the slightest irregularity. And the more ; Aspirarea completely the distribution is carried out, the lower the discendere -^ " democratising " organism descends, so as to gather up from the lowest strata all available and useful elements, the more fully, so we see in the practical application of the prin- ciple abroad, does it realise its beneficent aim. Not without reason, accordingly, did Commendatore Luzzatti inscribe upon his banner, when he started on what proved to be a triumphal progress of economic success, the apt motto : Aspirare a discendere. The Task is two -fold. Its economic Aspect. CHAPTER III. THE TWO PROBLEMS. IT may be well, before entering into a detailed explanation of the several systems of co-operative banking to be reviewed, to consider briefly the general nature of the task to be dealt with. That will help us better to understand, not only the merits of the several systems, but also the differences subsisting between the one and the other. Obviously the task set is not a simple one. There are more problems than one rolled up in it. I speak of two. It may be urged that there are really more. Employment, surroundings, class, locality, all these things necessarily impress in each case a distinct character upon the work. And there are a variety of ulterior objects which People's Banks are designed to serve, often quite as im- portant as the primary aim. However, for practical pur- poses it will be found that we can well group all the objects to be kept in view under two great heads. In the present consideration I propose to leave out of account all those " ulterior " objects referred to, and to confine myself exclusively to the one economic work which to ourselves in the United Kingdom is likely to present itself as the most important. That work is the provision of cheap credit for those who require it and cannot at present obtain it. We stand in this respect upon rather a different footing from what our neighbours did at the time when they took the task in hand, and to some extent do even now. In Germany and Italy, when Schulze and THE TWO PROBLEMS. 31 Luzzatti set out upon their work of economic reform, People'sBanks popular credit was wanted, but there was something else j} S an jJs ingS wanted even more. Provident institutions were very spar- ingly developed. Savings Banks were few and far between, and situated mainly in great centres, where they were accessible only to comparatively few. People accordingly required above all things to be taught to save. And while being taught to save, they must also be provided with suitable receptacles for their savings, and means for keeping those savings in their own districts, available for their own use, instead of allowing them to be drained away into large towns. I am far from denying that in the United Kingdom "Collecting there is room still for the development and multiplication Banks -" of provident institutions. The results of which happily our " Collecting Banks " are able to boast afford proof of the substantial gleaning which may be accomplished on ground seemingly well harvested already by provident agencies. The " Collecting Societies " send volunteer officers about to collect, as a labour of love, the pence and twopences which workmen receive, and which, without collectors to carry them into safety, they so often manage to fritter away. The collectors call at the right time, when the money has just come in, snatching up the coppers before they can find their way into the public-house or into the shop where little luxuries are sold. As a rule the societies allow no interest on deposits. They could scarcely afford to do so. They tell depositors plainly that if it is interest which they want, they must take the trouble of carrying their deposits to the Savings Bank themselves instead of having them collected for them. They act merely as a money-box, hoarding up small sums up to a certain limit I believe it is $. By such modest work the " Collecting Banks " have managed to gather together in very short time, in the parish of Fulham something like 2,000; in that of St Anne's, 32 PEOPLE'S BANKS. Soho, between .300 and 400. Surely here is an institu- tion richly deserving of public favour. However, generally speaking, there is not in this country the same need of additional depositories for savings which undeniably exists in Italy and Germany. People'sBanks Again, it cannot be affirmed that we stand in any very in ^Tnfheir ~ ur g ent nee d of additional money reservoirs to collect, and fix own localities, in the locality of their production, those local accumulations of money, which in a healthy economy there ought to be, instead of allowing them to be sucked up into the great monetary " wens." M. Luzzatti's able lieutenant, M. Enea Cavalieri, is at times wroth with me for not putting forward this plea with the same emphasis in England, with which it is pressed by himself and his chief in Italy. However, the plea does not apply to us in the same degree. In Germany and Italy, where the whole banking apparatus is less developed, the arteries intended to promote circulation either do not exist, or else are periodically choked; and the con- sequence is that plethora in one place is apt to become chronic, and to produce as enduring anaemia in another. In our country money circulates freely and readily,. and were I to urge M. Luzzatti's and M. Cavalieri's pet point, I should simply prejudice my cause by using a misplaced argument. There are different grounds upon which it appears to me to be desirable to eliminate from the present considera- tion those moral and educational merits of co-operative banking which attract many others as well as myself far more than the economic. However, we must grow our tree before we can look for fruit from it. The economic question lies at the root of the whole system, and serves as its foundation. Accordingly, let us be logical, and deal with the purely economic aspect of the matter first. The first The work, then, which we have now to keep exclusively economic m v i ew [ s the making credit accessible on cheap terms to Objectischeap , , .. . , Credit. those to whom the way to credit is at present barred, no THE TWO PROBLEMS. 33 matter whether they be farmers, or artisans, or anything else. It is all one work, and to whomsoever it may be applied, it has some main features in common. It can only be effected by a union of forces. And that union of forces, it is important that we should understand, must be directed less at bringing together driblets of means to collect such, as into The Questio- a common treasury, from which afterwards to redistribute j. s . not e of , J \ . .... Money but of them tJian at creating some new security recognised in the Security, market, which may be relied upon as a magnet to attract that cash which is wanted. The pence and shillings and pounds which may be collected to form a common capital may well be made to contribute towards such security. But collect them as carefully as you will, once you have got them together, in nine cases out of ten they are sure to prove wholly inadequate to the purpose aimed at. The provision of money towards which so many well-meaning but insuffi- ciently thinking men direct their main effort is really altogether a secondary consideration. " Money," so said Lord Salisbury Lord Salisbury not long ago in one of his public speeches, on "Money." " is so plentiful that you can hardly get money for it. It is overflowing in the coffers of capitalists and the bankers." Money is always to be bought at its price, which price is security. Again, as a distinguished nobleman, high in the country's estimation, remarked to me some time ago " The mere belongings of a number of poor people, to whatever extent you make those people liable, could never of them- selves respond to the claims for security which are likely to be raised." Indeed, without something more to respond to those claims, these people, as collective borrowers, them- selves could not in justice be asked to make themselves liable. The whole undertaking would be too hopelessly unsafe. If these people are to contribute their pound to a common fund, or if they are to make themselves collectively or severally liable, they must have a good trustworthy guarantee that the money which they make themselves C 34 PEOPLES BANKS. answerable for will not be lost or jeopardised. They must accordingly address themselves to the question of credit among themselves before they begin to think of credit outside. If the money is made safe within, it is sure to come in from without. It is not, then, the grouping of means together so much as the grouping together of elements of security the creation of sufficient knowledge of one another among the members, of touch with one another, of control of one another, and of responsibility for one another, which con- stitutes the effective factor of the system. Such elements only union can supply, organised on well-drawn lines, of which experience has established the efficacy. Scotch Cash We find the principle contained in germ in Scotch Cash Credit, which has, as its eulogists rightly boast, '*' in the space of a hundred and fifty years raised its country from the lowest state of barbarism up to its present proud position," covering it with flourishing farms, and filling its harbours with well freighted vessels. The Lords and Commons Committee of 1826 on Scotch banking explained the cause. "This system," says the report, "has a great effect upon the moral habits of the people, because those who are securities feel an interest in watching over their conduct ; and if they find that they are misconducting them- selves, they become apprehensive of being brought into risk and loss from having become their sureties ; and if they find they are so misconducting themselves, they withdraw the security." It is the linking together of close local and personal knowledge, which can discriminate between good cases and bad, deserving borrowers and undeserving, the joining of interest, of responsibility entered into, with the power of enforcing responsibility in others, which supply backbone to the whole system. There must be touch, power of control, knowledge of members among one another, and a common interest, which carries the security of the pledge given far beyond what a writ or a summons could do THE TWO PROBLEMS. 35 Once these demands are satisfied, it matters little, in the abstract, which of the two roads open to co-operative credit, TWO Founda- as M. Leroy-Beaulieu has distinguished them, you take, ^ lons f' whether that of " a small capital of guarantee," which under efficient management, we know, may be made to command a considerable multiple of its own amount in credit ; or that of the simpler expedient of "collective liability," which makes skilled management dispensable, and accordingly meets the requirements of scattered and rural communities backward in commercial education. The selection of the road must depend on local circumstances. The ground is mapped out with sufficient clearness to make the choice easy. But the first and essential principle for both courses is, that responsibility be made fully effective. So far the problem is the same. It is beyond that point that the two roads diverge. At first blush one would imagine that agricultural and Agricultural industrial or urban banking must present dissimilarities andjndustnal which render a common working hopeless, mainly because in the one case lending is likely to be required for long terms, in the other for short. In practice, however, to some extent the very dissimilarity of the needs indicated neutralises the difficulty which it seems to create ; and there are many experts who insist that the two practices should in any case be blended, in order that the one may dovetail into, and so strengthen, the other, and each supple- ment what the other wants. This argument approved by experience in a multitude of cases is, however, open to some objection, and is, accordingly, not everywhere accepted. There are many banks which have adopted the combination of twofold work advocated, to undoubted advantage. There are some few which keep the two types of banking care- fully distinct, in the same locality, and flourish no less. But in either case, so far as what may be called large agri- cultural banking is concerned, that is, credit banking for 36 PEOPLE'S BANKS. farmers, for peasants, for all but the very humblest class of cultivators, the question of essential difference as between agricultural and industrial credit does not arise. The same methods are found equally serviceable, and even the extension of time, absolutely necessary for agriculture, is found practicable under a system originally framed for very short lending only. The Point of It is on another point that the division of problems Divergence. rea iiy begins. There are, on the one hand, more or less dense populations to be ministered to, or populations with a dense nucleus and outliers sufficiently answering the char- acteristics of a dense population to admit of being dealt with as such. Such outliers I take to include fairly sub- stantial agriculturists of recognised position. There are, on the other hand, the sparse populations of the ordinary rural parish, and it may be, some small towns or suburbs, embracing too few to give to a bank the same prima facie financial strength, and at the same time less qualified, it would seem, for engaging even in elementary banking business. It will be seen that, although, as a rule, greatly wanting in commercial education, those sparse populations provide elements of strength which stand for very much indeed in the solution of the problem of co-operative credit on distinctive, but very safe lines. Generally speaking, in the former class, there will be, if not actually greater wealth, at any rate more available money whether it be of a small capital already realised or of regular earnings facilitating cash transactions, even though on the top of it credit may still be needed. In this class of banks the number of members is likely to be large, if not at the outset, at any rate not long after the bank has got into working order. Indeed it must be. But there is likely to be comparatively little touch between units. The clientele will be a com- paratively large, money-earning population, possessed at any rate of some rudimentary notions of business, but THE TWO PROBLEMS. 37 shifting and unstable, on the individual member of which it may be difficult to establish a very firm hold. Amid such surroundings needs may be large or small, but they will generally be for short periods and for industrial or domestic uses. There may be material to be purchased for the workshop, or furniture for the house, or else money wanted for wholesale purchase of food stuffs to save expense, or for some little building job, or else cash to enable the borrower to tide over the time till he can dispose of his produce without falling into the hands of sweaters ; or, it may be, money, to get him out of the usurer's clutches. In the other case the population will be fixed, but sparse. The banks will have to be small, sometimes very modest indeed. Most members are likely to prove uninstructed in matters of business. They are pretty sure to be short of money. They may be genuinely poor. They may merely hold their small wealth in an uncoined shape, or labour for wages in kind. They will want their loans generally for a long term, because, if independent, they turn over their money slowly ; if wage-earning, their earnings are scanty, and it will take a long time to make up the sum. It does not matter, in this respect, whether they are agricultural cultivators or village traders. For the village trader has to adapt himself to the needs of his customers, who are necessarily tardy payers. But such clientele will have this advantage, that touch between them, knowledge of one another, checking and controlling one another, are really very easy and may be relied upon, and that generally they make a dependable class of persons to deal with. The specific characteristics of the two classes clearly determine the methods which should be applied to answer their several cases. In the former class, where you have both numbers and Characteristic a comparative command of money, moreover presumably ^^ense 161113 a large number of transactions, a rapid turnover of money, Populations 3 8 PEOPLE'S BANKS. and some familiarity with business, you will be able to rely upon these factors in your organisation. However you limit or fail to limit liability, you will make a prominent feature of your "small capital of guarantee" a share capital, that is, paid up and serving as a guarantee to those whose credit you ask and base your system mainly upon it. You will adopt commercial methods of banking, secure skilled management, which you will generally be able to command without difficulty, but which in both cases you will have to remunerate, however you may supplement salaried services by gratuitous supervision. You will rely more directly upon your directors than upon the shareholders, who are. too many in number, and too loose in texture as a mass, to be able to control the business effectively, much less to carry it on. Though not ignoring employment of the loan, you will look more to the man than to his promise respecting the use of his money. You could not effectually control the latter. Therefore you will have to make all the more sure that you have a solvent and trustworthy borrower to deal with, and place your reliance in a very great measure upon the sureties who pledge themselves for him. And since you can do that, it becomes a matter of less importance, though still of importance, how you select your members. Mere election does not involve any direct risk. Moreover, you may, for the sake of earning the management expenses which you must meet, have to do business on some lines or other with non-members, although that is really a doubtful practice. Still a bank, to do work, must live. In Sparse. None of all this would do for a constituency of the second sort. There you cannot rely to any extent upon the petty contributions of -money which the few men whom you enlist can bring to your till, even though there be plenty of money's worth at their back. You must base your system more or less upon liability, the value of which THE TWO PROBLEMS. 39 you are in a position to assess with some accuracy, and which you must study to render more effective by a very careful selection of members. Your man must be absolutely trustworthy. Your transactions are likely to be compara- tively few. Loans will be demanded for long terms, the turnover will be slight. The margin between incomings and outgoings will be small. You will have to cut down expenses to the utmost, and make gratuitous services the rule, which you can the better do since the call made upon your officers is not likely to be very exacting. You cannot adopt commercial methods, which your clients will not under- stand, and which would be out of place. But you have all your members well under your eye. You can control every one of them, and make them control one another. You can interest the mass of your members even in the petty affairs of the bank, and so make your machinery more effective by arming it, to repeat my earlier simile, with watching eyes and checking hands at every point. You can effectively check your clients' employment of their loans. You can bring class feeling and local feeling, and moral and social influences to bear. Therefore, if you have to be very careful in the selection of your members, you may also stoop very much lower in the social scale, and admit even very poor persons, so long as you can make tolerably sure that they are honest. Business with out- siders becomes an impossibility. Finally, resting your system mainly on liability, you must apply yourself to strengthening your available capital by carefully raising up a reserve fund, which you can scarcely make too strong. So stated, the two cases appear to me, at any rate The two kinds fully to explain themselves, and there seems no room for not"amaLonis- even theoretical antagonism between them. The two tic, but corn- methods are not rivals. Each directly supplements the p e other ; and, indeed, each seems incomplete without the other to supplement it. It is satisfactory to think that, 40 PEOPLES BANKS. after long, needless, and bootless hostility between the advocates of the two, the view to which I am giving ex- pression is coming to be more and more accepted, and on this score peace between traditional rivals seems at length in prospect. In what precise manner the two methods are practically applied in different countries and localities I shall have to explain in subsequent chapters. CHAPTER IV. THE TWO ASPECTS OF THE QUESTION. CO-OPERATIVE banking, like every other kind of co-opera- "Mutualism" tion, has two aspects. You may co-operate merely to help yourself, to secure, by combination with others, support intended to procure for you personally an advantage, an equivalent direct return for that which you put into the common concern. That is what our neighbours in France, more discriminating in these matters than our- selves, call " mutualism " (mutualite). Or else you may co-operate to help, yourself indeed, but at the same time also to help others, or by your support to place them in the position to help themselves. You may take your choice between these two principles. They are both legitimate, and both have been found to produce useful results. According as you select the one or the other you will give a different colouring to your enterprise. We have specimens of co-operative work of either species in this country co-operative associations which measure their success by the direct benefit obtained, as in a joint-stock company, and study above all things big profits ; and co-operative associations which, remaining true to the aim which the first Rochdale Pioneers kept in view, regard those immediate profits only as a means to an end, only as supplying the wherewithal to pursue loftier objects, and study above all things to provide steady employment, greater independence, and generally a better position to the classes whose cause they have taken up. 42 PEOPLE'S BANKS. The latter principle is, I believe, more likely to re- commend itself to generous minds. It seems to take a broader and fuller view of its object, and to aim at higher ends. There is, moreover, by the light of experience, this to be said in its favour, that its success rarely fails to include, like the divine response to Solomon's choice of a blessing, the narrower, more material gain which it seems to spurn, or at any rate not to desire for its own sake. Certainly, also, it is better calculated to generate a feeling of satisfaction, and a propagandist zeal and enthusiasm in its adherents. Advantages of However, let us not despise the former principle. It is Si^Co^p^a" more P rosaic ; it: appears less lofty. But it is the principle don. which is best understood and recognised in the world. And for economic purposes it has this advantage, that it may be absolutely depended upon. A mere sense of duty may lose its impelling force when that duty begins to grow Interest irksome. Once you make it a man's distinct interest to do me^SensTof a thing, you may depend upon it that do it he will, Duty. if to do it be at all possible. Nor should we take too narrow or too low a view of the results which this principle, worldly and selfish as it may appear, places within reach. Good economy and morality, as Minghetti and Mr Goschen have both shown, lie very close together, and have a great deal of connection with, and influence upon, one another. We have ere now heard it said that the most effective pro- pagators of European civilisation in uncivilised countries are, not our missionaries, but our traders. I do not pretend to affirm that this is entirely correct. But certainly it may be said that under the training of good co-operation, and more particularly co-operative banking, sound economy, business habits, mechanical training to commercial honesty, have been found to act as admirable moral educators at home. When you are dealing with the poor, or the comparatively poor, the mere providing of means for better education, THE TWO ASPECTS OF THE QUESTION. 43 for the acquirement of greater comfort and a better social position which, once secured, are sure to be valued is bound to tend in this direction. But there is more educa- tional power in good co-operative banking. Now let us consider how the two principles may severally How this affect our problem in hand. There are leaders in the * co-operative movement, founders of co-operative banking Banking, systems, who look upon co-operation merely as an economic junction of forces, the binding together of so many sticks to a bundle. They are strong in their protestations of the necessity of pure self-help, by which they mean self-help for individual gain, the self-help in which not a group of weak and strong unite to help themselves and help one another, but in which every person studies his own interest. In this aspect co-operation is nothing but combination resorted to for egotistical ends. Under this principle very much is made of individual effort. Every gain secured is to be entirely earned. But the effort made is to benefit the particular person. There is to be a strict debtor and creditor account between the association and its member. The gains from self-denial are to be carried rigidly to the personal account of the self-denying one. Whoever is too poor to contribute his quota in money is roughly bidden to remain outside in the cold till he has collected enough to enable him to take up a share. There must be no common fund created, to his proper portion of which each individual has not a distinct and indefeasible right, and from which each individual is not free upon due notice to withdraw his own portion. We often speak of this kind of co-operation as pure joint-stock trading. Perhaps it is no more. But it secures very serviceable results. Generally speaking, the largest and strongest co-operative banks which exist have been raised up upon this egotistical, purely calculating, self-seeking system. Not many months ago I was speaking to the manager 44 PEOPLE'S BANKS. "L'espritde of a bank of this type in the South of France about his 1 tou r t e " d mine own establishment. M. G- - had little to say in its praise, from a co-operative point of view ; for as a business establishment it is sound enough. " There is no co-operation in it. It is a bank like other banks. Lesprit de lucre domine tout'' There are no gratuitous services, no limita- tion of dividend, no " loans of honour " to the poor, no study of high aims. Members pay in their money, it may be franc by franc, and for so many francs they purchase such and such advantages, among which they are taught to expect, as gauge of all, a decent dividend. Surely this is a picture without any attractiveness about it. And this particular bank, I may add, is not looked upon by officers of the best of its sister establishments as a peculiarly corn- It is neverthe- mendable specimen of its type. " But have you not made useful. credit accessible to small folk, to whom formerly it was inaccessible ? " I asked. " Oh, yes, certainly." " Have you not popularised, democratised, decentralised credit ? Have you not taught people to bank, to place their money on deposit and draw it out when they need it ? Have you not taught many small folk business habits ? " " Oh, decidedly, we have." " Do you not lend money to people who even now cannot go to other banks, say, to working men ? " " Oh, yes, distinctly we do. Why, there was a cabinet- maker here only to-day who works for a firm. Formerly he was in abject dependence on that firm. Now he comes here whenever he is short of money, to hold over his goods, it may be, or to buy material, or for household purposes. We have many such." Are not all these distinctly useful services ? Is not the country the richer, the happier, the better endowed with producing power for them ? Unquestionably banks of this class, which will neither give nor take anything for nothing, which scrutinise their member-customers with a keen, selfish, discerning eye, which think nothing of educating, THE TWO ASPECTS OF THE QUESTION. 45 of elevating the poor, which apply only the hard, cold principle of purely economic co-operation, have rendered perfectly inestimable services to the small trading classes, the agriculturists, the working population of their countries, and have strengthened the social fabric of their nations just where strength was most needed and tells to best effect. But now let us turn to the other aspect of the question. Altruistic There are persons, as everybody knows, who are not in a c -P eratlon - position to take their place in the former kind of co- operation, who have not the means to take up a share, or at any rate to pay for it in cash, to remunerate directors and secretaries, and allow a handsome reward to capital. Are these people to be left altogether without help? It is they who need it most. And it is they for whom co- operation was really intended, because only by co-operation can they mend their lot. Is it " co-operative " to tell them, as advocates of the first principle sometimes do, that they should go to " charity " and live on patronage till they can manage to scrape enough together to make them "ripe" for co-operation ? That is equivalent, in a " co-operative " sense, to sending a man to hell in order that he may there qualify for heaven. Your object and your duty is to train him to self-help. And you bid him prepare for it by deliberetely estranging himself from it. Persons in this condition can co-operate like the others. But in the same proportion as their needs are greater, are their objects likely to be larger. They want financial assistance badly. To obtain such they have a good deal that they can give, and must expect to give freely time, labour, attention, application. You cannot procure either money or credit for nothing. But you must in fairness allow the equivalent given to be value. It is nonsense to maintain, as has been done, that such co- operation is not self-help. When you give what you can give It is genuinely to obtain what you cannot, you are not receiving "charity," c -P eratlve - but exchanging one value for another. However, all this 46 PEOPLE'S BANKS. co-operation to obtain, not profit in return for money, but money in return for exertion, implies objects of a different kind, which are necessary for the purpose, and which, apart from being necessary, persons in this position instinctively feel to be desirable. It brings out the social, educating, moral side of the question. To people, such as we are now thinking of, the co-operative association or bank becomes, not merely a shop in which goods or credit may be bought, but an economic hearth and home, a school for all kinds of economic action, for business training, and for higher social virtues, a social as well as an economic money-box. This co-operation, like the other, must be built up upon And based pure self-help. No serviceable co-operation is possible on other lines. It is exertion which must purchase every gain. To alloy or adulterate self-help would not only be perfectly gratuitous, it would be distinctly prejudicial to the object for the attainment of which co-operation is resorted to. It must necessarily defeat that object. However, I cannot for a moment admit that self-help loses one particle of its economic purity when it is made to embrace a number of men instead of being confined to one. I cannot concede that self-help becomes less self-help when it is impressed in the service of a group of persons, who, being individually weak, and weak in varying degrees, and on various points, combine for the purpose of turning their weakness into strength, and supplementing one man's feebleness by another man's comparative power, each supplying his own quota of what he can give, to benefit by a similar though different contribution from his fellows. That is the self-help by which a community or a nation rises to greatness. So far from being questionable, it appears to me even to be the purest and fullest co-operation. Its Effects. Now, see how co-operation of this kind acts upon the men who engage in it. It knits people very much more closely together ; it enlists very much higher senti- THE TWO ASPECTS OF THE QUESTION. 47 ments than the mere pursuit of gain. It links interest. It binds people together as with the ties of one single family, bringing sentiment, aspirations, the consciousness of common needs into the co-operative enterprise. It sets very much higher motives at work. And it opens a door through which others, not needy themselves, wishing to help rather than to be helped, may legitimately come in, helping, but only by helping people to help themselves. Here is the feature which has particularly endeared this kind of co-operation to so many noble minds, and has generated that peculiar ardent enthusiasm which cold- blooded economists wonder at and cannot understand, but which has helped more than anything else to spread this movement and impel it forward. You can now help without giving. You can help while carefully safeguarding yourself against the danger of being made to give money, that is while insisting that every assistance rendered in money shall be fully and promptly repaid help by lending guidance to the unskilled, experience to the inexperienced, time, labour, interest, attention, safeguarded liability, all on a footing of equality. And by doing this you help those whom you wish to benefit infinitely more than by giving them money. This kind of co-operation does not draw a strict dividing line between those who have money wherewith to take up a share and those who have not. It does not, Shylock-like, bring to the business only its com- mercial ledger and its bond. It does not go into places in which gold chinks freely and discount business is brisk. It goes abroad among the outcast and poor, dropping help into seemingly waste places, and picking up seemingly helpless persons from their misery. It goes into the villages where money is scarce, and the other kind of co-operation difficult. The structures which it raises are not as large or as resplendent with gold as those built up under the more commercial system. But on its own modest lines it 48 PEOPLE'S BANKS. does a great deal of good, and good which absolutely no other agency could accomplish. Surely I need not stop to explain why it is that those who work for the principle last described seem generally fired with a peculiar fervent and contagious enthusiasm. They feel, to quote the words of P. de Besse, that they are engaged not in an affair of business (une affaire), but in a good work (line ceuvre) ; that they are, as F. W. Raiffeisen, the first who applied this principle to regulated practice in respect of banking, has put it, " working for God." Recrimina- The world would not be the world if such aspirations as dons between these had not prompted in the mouths of rivals unkind the two Types, sneers at high religious professions of "Christian principle," " Christian Socialism," and " Love of one's neighbour," which sentiments they judge to be quite out of place in work which is, after all, mainly economic. Nor is it surprising that the altruists should have retaliated by taxing the other side with " greed," and " egotism," and " deliberate dividend- hunting." These mutual vituperations are all the less called for since it would be difficult to draw a hard and fast line between various systems, to serve at the same time as boundary between the several applications of the two principles described. The territories overlap at more points than one, and there is promise of the principles blending in some neutral region. Indeed, in some places it has already been found possible to bring them from war into union. Where this is not possible, surely there is no need of anta- gonism. There is room for both principles. There are places in which the one is not called for ; there are places in which the other could not act. Accordingly we may well be content to " give to rigid economy the things which pertain to rigid economy, and to altruism the things that pertain to altruism," and allow both systems to grow up and overspread the ground and produce good fruit, side by side. CHAPTER V. CREDIT TO AGRICULTURE. I HAVE spoken thus far of co-operative credit as a help why Agri- intended for the poor, in the ordinary and most familiar culture must be classed as a sense of the word the wage-earner, the toiler, the man of "Poor" muscle, whose powers must run to waste unless money can Callm g- provide both material upon which to set them at work and a stock of necessaries wherewith to keep him alive until his labour may bear fruit in a marketable shape. However, poverty in our present sense ought to have a much wider application. Obviously, it ought to be taken as including every one who has a productive use for money or credit, and yet finds himself unprovided with the one and practi- cally cut off from the other. There is one great calling to which this description pre-eminently applies. That calling is agriculture, which, from being a cornucopia yielding almost automatically, not one, but actually those " three " livings of which Lord Beaconsfield spoke something like twenty years ago, has recently, under the stress of adverse circumstances, become changed into a business standing very sorely in need of help, and, if evidence collected in many quarters is not altogether wrong, in need of help more par- ticularly in the shape of money. It may be convenient to consider the position of agriculture as an interest calling for credit, if not exactly in forma pauperis, yet at any rate by other means than those which are now available, in the present chapter, although I am quite aware that so placing the subject will expose me to the charge of in some measure D 5 o PEOPLE'S BANKS. anticipating what I have to say with regard to England at the end of the book. Credit to agriculture has so im- portant a bearing upon all the systems which I shall have to discuss, that it will be well to realise beforehand what are its particular needs 4n respect of credit. Agriculture Under pressure of advancing times agriculture has has become a b ecO me, from the easy, self-rewarding occupation which it "Business" Jt *> . without the is understood once to have been, a business of money and a enterprise like all other callings, an industry like any other industry having the same tasks set to it, but not the same means at its disposal wherewith to accomplish the task. We should probably be in a better position to consider what are its needs for the future could we bring ourselves more fully to realise this fact I ventured to insist upon it upon the hopeless incongruity between an old system and totally altered circumstances, as a condition almost neces- sarily leading to a crisis some years ago at one of the half-yearly meetings of the Royal Agricultural Society, and I had the whole meeting with me. We congratulate our- selves upon the amazing growth and development of our commerce, our trade, our industries, our banking. But what resources have we placed at the disposal of those callings, or allowed them to secure for themselves ? Had we treated them as we have treated agriculture, it is only too likely that they would find themselves in precisely the same backward and depressed condition in which agriculture now is. However, we have treated them differently. We have fed them with large supplies, alike of money and of education and intelligence. We have replaced slow and sparing hand labour by the rapid and creative labour of the engine and the loom, multiplying har- vests while increasing their bulk. We have introduced perfected machinery, we have removed anachronistic shackles and insisted upon full freedom of practice. We have recast all the organisation of the industry, arranged CREDIT TO AGRICULTURE. 51 our commerce so as to enable men to take advantage of even the slightest change in the market, of every oppor- tunity which may offer even an infinitesimal gain. All these things mean a larger command of money. They are absolutely impossible without it. But for additional money invested they assure a pretty safe return. And to provide that money we have developed a system of credit which places funds almost without limit at the disposal of the respectable trader or manufacturer credit, without which, every man of business will readily allow, all this huge world of industry could not subsist for a day. The capital of those of whom it is composed would be utterly inade- quate to its purpose. So we have created the " acceptance," which buys at pleasure, just as occasion may demand, for every enterprise which promises a profit. Could we treat agriculture in the same way, is it not at any rate con- ceivable that, what with production cheapened and facilities afforded for taking advantage of the market, we might make it fare as other industries have fared ? All evidence available on the subject seems to support such a conclusion. " Agriculture," to quote the words of a Minister of its Need of Agriculture, spoken in the Belgian Senate, " is changing, ' and must change. Change is for it a condition of existence. It finds itself to-day in conflict with conditions altogether different from those of earlier days, and in such conflict it can have no prospect of success, except by arming itself according to the fashion of the day. We want more artificial fertilisers to-day, and more powerful ones. We want ma- chinery, and many other things that our fathers never dreamt of. These new appliances ensure a higher yield, but they demand, on the other hand, a larger working capital." Those words, spoken at Brussels, and with reference spe- cifically to agriculture in Belgium, apply to the very letter to agriculture elsewhere, not least to agriculture in Great Britain. Indeed they have been, since quoted by me, echoed 52 PEOPLE'S BANKS. in the Report of the Royal Commission on Agriculture.* I have recently! quoted a case illustrating their truth I admit, under exceptional circumstances. Instances of It is that of a small farm held by a Co-operative Supply the Utility of Association which in twenty-seven years has grown up from Money : J . . Woolwich. the most modest beginnings to a position of great prosperity. The Society ten years ago decided to purchase for its own use a freehold farm of 52 acres. (It has since purchased another of 20 acres.) The farm, which was in a very poor and neglected condition, would, it is admitted, have speedily reduced any ordinary tenant, coming to the holding with the traditional small working capital, to ruin. The Society came to it with practically as much money as it might * The Royal Commission on Agriculture, in their second Report, recently published, fully recognise the existing call " for increased out- lay on improvements necessitated by changes of agriculture," and they propose as a means of meeting it State loans to landlords, for which, they explain, there is " ample precedent." They practically disavow their own recommendation by adding : " We do not contemplate that the demands upon the Exchequer would be of a serious character." In that case, it is to be feared, they will furnish no " serious " relief, and do no "serious" good. In all probability State aid, to make up for " the very serious reduction of rents," would be very acceptable to the persons affected ; though it is not quite clear why a merchant or manufacturer, when the market goes against him, should be expected to sell out and make room for some one stronger in capital, while the landlord is to be artificially propped up by the general taxpayer, whom he is keeping out of the possession, by honest purchase, of his coveted land. To most people, certainly, economic action unsup- ported by the State, such as the German Landschaftcn, and the much more democratic and more successful " mutual " Landwirthschaftliche Creditverein von Sachsen have shown to be practicable, will appear preferable. The loans here contemplated do not, however, affect our present problem, which is, how to provide money, not for such extended periods as twenty-five, thirty, and forty years, for the permanent im- provement of the property, but for shorter terms, to make the business of farming more profitable. t Contemporary Review, October 1895. CREDIT TO AGRICULTURE. 53 want. It had, moreover, its own market to depend upon, which constitutes, I admit, quite as great an advantage as the possession of an unlimited capital. But just let us look at the increase of production which it brought about with the help of its large capital, leaving the market out of account. It set up new buildings, it trenched the land two feet deep, gave it a bottom dressing, so to speak, of sixty tons of manure per acre, in short, it laid itself out for the highest farming. It sank a good deal of money in the farm, to such an extent that at the present time, what with rates and assumed rent (at the rate of 5 per cent.), it has to write off from 30 to 35 of the gross profits per acre every year as expense. However, it produces magnificent crops 43 worth an acre of cabbage, 36 of peas, ,30 of potatoes, 39 of sprouts, fyo of tomatoes, go of marrow, and so on. Its takings from a piggery, mustering from 300 to 350 strong, figure at nearly 500 a year. In 1894 it realised 2,283 from its produce. The original loss has been recovered, in addition to 5 per cent, being steadily drawn on capital invested, and a rate of depreciation allowed which now gives the farm to state one example its horses absolutely for nothing. Good " capitalist " farming makes the farm pay in spite of bad times. Similar cases may be quoted from abroad. In the Fresnes. Journal of co-operation was first suggested by the miseries brought upon many of his neighbours by that trying dearth and famine which swept across Germany during the years immediately preceding the last Revolution. He was then living in his little native town of Delitzsch, filling a judicial CREDIT ASSOCIATIONS. 73 post corresponding, roughly speaking, to that of a County Court judge in England. By this means he was brought into contact with many small folk, and led to understand and appreciate their sufferings. Schulze had visited Eng- land, and knew something of our provident societies and our early beginnings of co-operation. Accordingly, it occurred to him to apply for the mitigation of their suffer- ings the same means which had already proved effective here. In conjunction with his friend Dr Bernhardi, of Eilenburg, he set on foot, first of all, a sort of provident fund. Next, the two philanthropists organised an insti- tution which has since become exceedingly popular in Germany, a co-operative association for the joint purchase of raw material. German co-operators sometimes express astonishment at our not having adopted the same con- venient form of co-operation in this country. The reason probably is that our trade is generally carried on on a larger scale, and that our wholesale dealers have better accom- modated themselves to the wants of their clients. Moreover, none of our traders would wish his rivals to know how much raw material he himself purchases. But to the joiners of Delitzsch and the shoemakers of Eilenburg the new institu- tion came as a veritable godsend. They took it up readily, their example was followed elsewhere, and to the present day, among a considerable number of associations for the pur- chase of raw material, co-operative shoemakers' societies continue numerous and flourishing in Germany, more espe- cially in Saxony, Brunswick, and the adjoining districts of Prussia. From the co-operative purchase of raw material to The first other co-operative supply, and from that to the co-opera- tive supply of money, was in each case but a step. Schulze 1850. took both, one by one, and the year 1850 saw his first " Credit Association " established. That association was not in the fullest sense co-operative, and hence its early 74 PEOPLES BANKS. weakness. It was a capitalist institution, philanthropic and condescending, supplied with funds by members who did not themselves expect to become borrowers. Evidently Schulze was cautiously feeling his way. But he made his bank co-operative at any rate to the extent of insisting that no one should obtain a loan who did not himself become a member of the bank, and so pledge himself to regular payments (ergo, to savings) up to a certain figure, and, moreover, that the loans granted should be treated, not as a matter of charity or favour, but as a matter of business. There was a notable advance in this upon old methods. The German apostle of co-operation did not long halt at this half-way station. While he was away meeting one of those numerous vexatious prosecutions with which his Government unpleasantly seasoned his career, his friend DrBernhardi Dr Bernhardi worked out at Eilenburg a more fully co- System 68 operative scheme, upon which he modelled his own local bank. The experiment proved a decided success. As many as 396 members joined, paying in in the very first year 2,242 thalers (336) in deposits, and so enabling the association, with the help of 3,703 thalers (555) of borrowed money and its own small capital, to lend out in the twelve- month 8,801 thalers (1,320), and to realise a net profit of 142^ thalers (21. 75. 6d.), which was considered exceed- ingly encouraging. Schulze, returning to Delitzsch in 1852, at once recognised the superiority of his friend's system, and forthwith grafted its principle upon his own less perfect institution, with the result of increasing the number of members from the 30, to which it had fallen, to 150, and raising sufficient funds to enable him to lend out something like 5,000 thalers (750) in the first year after the change. Schulze's Thus was the first stone laid of a fabric which was Aptitude destined to become a great co-operative stronghold, the first seed planted of a crop which was to overspread the entire Continent. In substance the Schulze -Delitzsch CREDIT ASSOCIATIONS. 75 associations are the same still ; in the main the original type has been adhered to. It was a bright light which Schulze had set a-burning, and he was not the man to hide it under a bushel. He may be described as a born eco- nomic missionary. His striking personality, his convincing eloquence, his invincible faith in his own cause, and his truly contagious enthusiasm made him an almost ideal pro- pagandist. He " stumped " the country with a will, making clear with a remarkable lucidity of exposition to audience after audience the principles of his system, the benefits of its application, the incalculable gain which it must bring alike to individuals and to the community. Thousands flocked to hear him ; thousands became converted to his idea. I personally well remember the wonderful effect of his propaganda ; for during the time when he gained his most signal triumphs I happened to be in Germany, and in one of his own best working districts. His economic gospel took the country by storm. Everywhere new " Credit Associations" sprang up followed in many cases by supply associations and everywhere they accomplished astonishingly good work. When in 1883 the great German champion of co-operation was called home there are said to have been no less than 4,000 associations of various sorts established in Germany, organised on his rules, comprising something like 1,200,000 members, disposing of capital of their own to the amount of more than ; 10,000,000, and doing business at the rate so Herr Schmid, of Vienna, calculates of at least ; 100,000,000 a year. That is without including a large number of associations formed avowedly on Schulze-Delitzsch lines in adjoining countries. Without doubt Schulze had carried his idea to triumph. Schulze's path was not at first altogether strewn with Hi s Difficul- roses. He had to fight his way to success by his own ties ' efforts. Those were the days when in Germany there was still a common talk of the " limited understanding of 76 PEOPLE'S BANKS. subjects." The " first," and really the only, " duty of citi- zens " was declared to be, " to obey." Governments must do all the thinking, as well as all the governing, and the State alone was reputed competent to render help. When therefore this " Democrat " as he happened to be, and a Liberal was at that time almost a social outcast presumed not only to think out his own scheme for benefiting his fellow-men, but topped this offence with the arch-heresy of suggesting that men could actually help themselves without the interference of the State, the Manteuffels and Bismarcks felt their prerogative invaded, and resolved to make the audacious innovator suffer for his presumption. He was an obnoxious person to them to begin with ; for not only did he openly avow himself a Liberal, but, in addition to this, he was a leader of the party aiming at German Unity to belong to which was at that time reckoned next door to high treason. The Government began by worrying the poor man out of his judgeship. When they could not refuse him sick-leave as a judge, they granted it coupled with the condition that he must not, while on furlough, visit his native town. When, know- ing this condition to be illegal, he nevertheless proceeded to Delitzsch, where he was received like a hero returning from victory, they promptly announced that a month's allowance would be stopped out of his salary. Indignant at such arbitrary treatment, Schulze threw up his judge- ship in disgust, and resolved to devote himself from thence- forth entirely to his philanthropic work. Government But he had not yet done with " paternal " Ministers. Persecutions. j? vei y conceivable hindrance was laid in his way. When in 1859 he convened his first Co-operative Congress the most harmless Congress, one would think, which a man could convene under the dictation of the Government in Berlin even fair-minded King John of Saxony dared not open his dominions to the supposed traitor, who was ac- CREDIT ASSOCIATIONS. 77 cordingly compelled to summon his adherents to that one available refuge, as it then was, for persecuted Germans, the Thuringian duchies. When it was seen that in spite of all this official harassing and badgering, prosecutions in courts of law, and tabooing in the press, Schulze still kept gaining ground with the people who were not by such means to be dragooned out of benefits apparent to all and appealing to all Herr von Bismarck, the unsparing anti- Socialist of later days, raised up a Socialist Jannes to withstand him, in the person of Lassalle. This man was systematically petted and caressed, favoured even to the length of the acceptance of his idea of Socialist workshops. At the instance of Herr von Bismarck, who personally in- troduced the forerunners of Bebel and Liebknecht to King William, some experimental ateliers, endowed with money from the King's privy purse, were set up at Berlin, and carried on for a brief time of course with the result of losing His Majesty every farthing ventured. In 1865 the Prussian Diet appointed a Committee to draw up a law on co-operation. By explicit direction of Herr von Bismarck the one person in the House who knew anything about co- operation was deliberately excluded. And so this harassing and baiting went on. To the end of his career was Schulze, who enriched his country by more milliards than Prince Bismarck conquered for it in 1871 to say nothing of in- stilling the principles of thrift mercilessly harassed on his course. And to this day the odium of political partisan- ship of which Sir E. Malet speaks in his Blue Book evidently under a false impression, because he applies the charge to the wrong party as still attaching to the co- operative movement, is clearly attributable to that long- continued official boycotting. Of course all this childish persecution entirely missed its aim. Every weal which Prince Bismarck's sharp whip raised on the popular favourite's skin secured the latter fresh 7 8 PEOPLE'S BANKS. hosts of admirers and converts. There is absolutely nothing to be said in justification of the official badgering. To make it the less excusable it was directed altogether against the wrong point not the point at which, unfortunately, the system eventually proved to be vulnerable, but that at which it was absolutely blameless. Schulze's Schulze himself has stated the problem which, when Problem forming his first People's Bank, he set himself to solve, to stated by him- self, be how to obtain the use of borrowed capital without a " capital of guarantee." Taking this view of his case, it is not surprising that he should have made it his first aim to create the " capital of guarantee " which he found wanting. That really is the pivot upon which his whole system turns. Sir R. Morier, writing as a warm admirer of Schulze, Unlimited describes unlimited liability as the " keystone of his whole Liability. system," its indispensable support, "just as the principle ' all for one and one for all ' is the soul and breath of all co-operation." He goes on say that " with unlimited lia- bility " the fulfilment of these two conditions the selection of trustworthy officers, and the acceptance of sound rules, both being known to the public will " suffice to attract the local capital to the market" In respect of the latter point Schulze-Delitzsch himself seems to have taken rather a different and a more timid view, for he designedly resorted to more powerful means of attraction. And although in his day he insisted quite as strongly as ever Sir Robert could afterwards do upon the absolute necessity of unlimited liability ; and although his chosen champion and pupil, Dr Criiger, writes that " without the unlimited liability of mem- bers it would be almost impossible to do anything, and no money could be obtained," in these present days unlimited liability has come to be looked upon as a practice which even Schulze-Delitzsch banks could very well dispense It is not indis- with. In Belgium, in Italy, in France, credit associa- tions more or less of the Schulze-Delitzsch type have done CREDIT ASSOCIATIONS. 79 very well without unlimited liability. And in Germany they are learning to cast it aside with equally good results. It is now indeed generally accepted as a maxim that, although for a bank in its earliest stages unlimited liability is unques- tionably a substantial help, as securing a larger credit, nevertheless a bank which has once been fairly put upon its legs may very well dispense with it, and a bank which by success has become strong is without doubt better without it.* There will be something more to say on the subject of unlimited liability in the next chapter, in connection with a system in which unlimited liability is undoubtedly indis- pensable, but in which also it has been successfully disarmed of its terrors. Outside Germany the constant insistence by advocates of the Schulze-Delitzsch system upon unlimited liability has proved really the most serious hindrance to the spread of co-operative credit associations. In Germany, at the time when Schulze began his work, no other form of joint liability can be said to have been known. Even we, the original inventors of " limited liability," had not yet passed our " Limited Liability Act." And even after it was passed, our neighbours did not show themselves particularly eager to appropriate its benefits to themselves. And evidently, even in spite of some serious mishaps, in Germany people have become so much accustomed to this form of guarantee, that in the teeth of all its dangers, which Dr * Dr Criiger and his fellow-champions of the Schulze-Delitzsch system profess to look upon the question of limited or unlimited liability as immaterial. For ourselves (as for the Italians, according to the testimony of Commendatore Luzzatti) it is decidedly material. Signor Ettore Levi will have it that in his later days Schulze himself strongly inclined to acceptance of liability only limited. This is, according to the testimony of Herr Siegl, a mistake. According to Herr Siegl, Schulze was with difficulty persuaded by his friends in his last days to agree to the sanction of limited liability. 8o PEOPLE'S BANKS. Schneider, one of the foremost of writers on the Schulze- Delitzsch side, has compared to those of a " two-edged sword," * they still prefer it to any other, as assuring advan- tages not otherwise to be secured. Of 4,401 credit associa- tions furnishing returns for the year ending 3ist May 1892, as many as 4,169 are shown to have been based on unlimited liability. And that was after a law had been passed in 1889 which specifically authorises, and, in fact, rather in- vites, unlimited liability associations to limit their liability. Even though at that very time a new class of credit asso- ciations had sprung up, basing their action upon limited liability, from 1890 to 1891, the number of limited liability credit associations had risen only from 41 to 146, and on 3 ist May 1895, out of a total of 6,295 credit associations registered (leaving out of account 122 unregistered) as many as 5,932 adhered to unlimited liability. That may be taken as indicating with sufficient clearness that, generally speak- ing, German co-operators are not afraid of the unlimited form of liability. And provided that proper safeguards are adopted, under their own circumstances there is certainly something to be said for adherence to an institution which long practice has made familiar, and which increases the credit purchasing power of capital very considerably, while adding an incitement to vigilance where vigilance is par- ticularly needed. No, Schulze selected unlimited liability, not because he considered it absolutely indispensable, but because he found it the familiar and accepted German tradition ; and, no doubt, it also promised him the most rapid success. The real The real " keystone of the system " is the compulsion " Keystone of brought to bear upon members to save, regularly and the System." b * Dass die auf unbeschrankter Solidarhaft beruhende Genossen- schaft in ungeschickten Handen eine sehr gefahrliche Waffe sei, die in den minder bemittelten Volksklassen viel Unheil anrichten konne. Blatter fiir Gcnossenschaftsivesen, 1886, p. 81, ss. CREDIT ASSOCIATIONS. 81 steadily, and by their savings to raise up a "capital of guarantee," a capital sufficient to command benefits which are offered, not wholly as an end in themselves, but no less as an inducement to members to practice the great economic virtue of thrift. Hence, Schulze-Delitzsch's associations have been popularly called "Compulsory Savings Banks" "Compulsory (Zwangs-sparkassen). For moral results Schulze looked no higher than thrift. He himself and his followers have often openly sneered at the " religious " objects kept in view by " Christian Socialists " such as our Judge Hughes and E. Vansittart Neale. But thrift they are thoroughly willing to stimulate. The Schulze-Delitzsch banks, then, may be not in- correctly described as, in their founder's original intention, savings banks first and credit banks afterwards. The want of credit urging people to apply for membership was to be used as a means for turning them into habitual savers, as the first condition for enabling them to satisfy that want At the outset, then, at any rate, and for a considerable time after- wards, the lender's interest was placed before the borrowers. Schulze's scheme, in his own original conception, may Schulze's be briefly summarised thus. Every member joining is System TT : J described. expected to take up one share. He is not allowed to take more, partly because, his unlimited liability being pledged, no more is held to be wanted to provide security ; partly, also, to prevent the capture of the association by a few greedy capitalists for their own selfish profit. The value of the shares Schulze advisedly fixed high. Large Shares. The original figure was, I believe, ^"30. Of course, it is provided that that sum need not be paid down at once ; rather is it assumed that it will be made up by instalments, which may be very small. This principle necessarily com- mits the newly-joining member to a long course of saving, which is just what Schulze desired to bring about. With the help of the capital in course of formation, of savings F 82 PEOPLES BANKS. deposits invited in addition to the accumulating instalments, of other deposits, and of the credit which the small capital and the unlimited liability of a large number of members among them are sure to command, the banks ought to be and in fact are in a position to raise all the money which may be required from them in loans. They have now even arrived at raising more, in fact quite enough sometimes seriously to embarrass them. Interest was at The loaning is to be done freely, but not necessarily first high. verv cheaply. The borrower came from a market domi- nated by usury. And as he was willing to pay, both Schulze and M. d'Andrimont maintain (as quoted by M. Ettore Levi) against M. Luzzatti and RaifTeisen, who plead for kinder consideration that there is no wrong done in taking from him fairly high interest. The usual charge at the outset varied from 12 to 14 percent; not very long ago it stood generally at 8 though ostensibly at only 6, the additional 2 being tacked on under the guise of a " commission " of J per cent, reckoned for three months. A flooded market has more recently reduced it. Security rather The banks practically ask no questions as to the object than Specifica- o f fa e i oan or the person of the borrower, except that no lion of Object r . . insisted upon, money is now (since 1889) lent outside the association (it is the new law which makes this condition imperative) how- ever willing the latter may be to accept deposits or loans from outsiders. What the associations look to in the matter is security. And they allow practically any form of security mortgages, pledges, sureties, bills although, wisely, at headquarters mortgages are viewed with decided disfavour, as constituting an inconvenient, and even dangerous, pledge. However, generally speaking, provided that the security is acceptable, the banks are willing to grant credit to any amount which appears safe, in the shape either of current accounts or of specific loans, the latter being generally secured by an acceptance or promissory note. CREDIT ASSOCIATIONS. 83 The loans may be large or small. But they must be Short for short terms. Schulze has laid it down as a cardinal rule that a banker cannot lend out money for a longer term than that for which he himself has received it. Any banker's clerk could tell the learned gentlemen at Berlin, who still write in defence of that doctrine, that it is practi- cally nonsense. What the banker has to do is, not to collect money in distinct pieces of coin and dispose of such pieces for just as long as he is allowed the use of each, but to take care that in his lending he does not exceed the term for which in some way or other, not making the transaction unprofitable, he can make reasonably sure of obtaining money himself, no matter whether that be by the steady automatic inflow of deposits or by specific loan. However, the principle has a neat and "taking" ring, which makes it still a favourite in theoretical discussion, though practical credit bankers have long abandoned it. Accord- ing to the strict principles of the system, then, three months constitutes the ordinary period of a loan, with one renewal, for another three months, permitted, but not favoured. A member, accordingly, can, on this supposition, always obtain money for a short term, provided that he has security to offer which is acceptable to the Committee. That body, upon whom the main burden of administration falls, invari- ably consists of three. It is elected by the members at their annual general meeting, and in consideration of the services rendered, is paid a regular salary, with a commission added, the latter being regulated by the amount of business done. To check the Committee, and to audit their accounts, a Council of Control or Audit is added, being likewise elected every year at the annual meeting, and generally consisting of nine members. This Council meets, of course, much less frequently. It has the decision on the granting or refusing of loans constitutionally reserved for its judg- ment. But for practical reasons that provision remains, as 84 PEOPLE'S BANKS. a rule, a dead letter. There is more business than the Council could effectively control. Schulze was a great believer in the principle which says that " the labourer is worthy of his hire." Good work, he maintained, was to be secured only by payment. Accordingly he was an opponent of gratuitous services. Even the members of the Council are under his rules entitled to remuneration, according" to o their attendances. That regulation still holds good in nearly all the banks. Large One important feature in the system is, that the banks are allowed a very large, and almost unwieldy, area to work in. The bank sets up its counter in a convenient centre, and invites all who live within an accessible distance to come and join it. It is contended that, to secure a sound foundation and to work satisfactorily, the bank should have as large and as mixed a constituency as is at all procurable, consisting of members of all callings, whose blending is calculated at all times to equalise supply and demand of money, security and risk. The large area, of course, means a considerable number of members, and correspondingly substantial business. And with such support the Schulze- Delitzsch associations have grown comparatively large, and represent, generally speaking, far more substantial numbers and capitals than do their rivals. And this, it is pleaded, not only provides greater financial strength, but, moreover, saves management expenses. The Success Whatever be the theoretical merits or demerits of the f the System. S y S t emj ft certainly has secured a very large measure alike of support and of success. In Germany alone, according to the last return published, the number of credit associations which had accepted the Sehulze-Delitzsch principles num- bered in 1894 something like 2,700. But only 953 of these had actually become members of the Central Union. In- deed, it is not strictly speaking quite correct to call even all those 953 "Sehulze-Delitzsch banks," inasmuch as one CREDIT ASSOCIATIONS. 85 or two consider themselves of an independent type. The difference is almost one of name only. And one or two more have actually converted themselves into joint-stock companies. There has been a slight diminution in the number during the past few years, which does not neces- sarily mean a loss of strength. The same thing has happened in Italy. I am not in a position to state the precise amount of transactions done by all these banks. But it will give some idea of the magnitude of the collective operations if I quote the following figures referring to 1,047 credit associa- tions that have furnished returns, all of them being of the Schulze-Delitzsch type, though not all incorporated in the Union. The 1,047 associations, then, lent out among them 1,550,012,619 marks (77,500,630), that is, on an average, 1,480,432 marks (74,021) per association. That, of course, includes renewals. Probably the approximate amount of bonafide new borrowing was somewhere about 50,000,000.* The total number of members was 509,723. Therefore on an average every member had had 3,040 marks (152) placed at his disposal. The collective property (capital and reserve funds) of the 1,047 associations is returned at 155,680,698 marks (7,784,035), the money borrowed or received on deposit at 457,734,531 marks (22,886,726). Of this large sum, which compares very favourably with the total of the association's own funds, only 13,541,531 marks (677,076) had been borrowed from large banks. As much as 380,917,418 marks (19,045,871) had been collected in deposits and savings, 57,252,243 marks (2,862,612) stood to the banks' debit on current accounts, and 6,023,124 marks (301,156) was due from the bank on acceptances. Thus, in all, these associations disposed of a working fund of 613,415,229 marks (30,670,761), which is * The annual return gives the figure of renewals at 16,746,678 only, which would raise the new lending to 60,763,952 ; but that leaves both mortgages and current accounts out of consideration. 86 PEOPLES BANKS. surely a very considerable sum. The clear profit netted is re- turned at 9,487,700 marks (474,3 8 5). The roll of members, it may be added, was made up of all varieties of classes, 31.5 per cent, being, roughly speaking, persons engaged in agricul- ture, and 26 per cent, artisans working for their own account.* Extended It should be borne in mind that the business of these beyond Ger- ^047 banks making returns, represents, roughly speaking, only one-half, perhaps less, of what Schulze-Delitzsch credit associations are actually doing in Germany alone. More- over, the same system has spread far beyond the German border. Herr Schmid, of Vienna, in 1886 calculated the entire number of Schulze-Delitzsch banks then existing at 4,500, with 1,500,000 members ; and attributed to them collectively an annual business of 450,000,000 a huge sum. Surely this is a most satisfactory measure of success, and it tells of an almost incalculable amount of good done by the supply of cash for productive purposes. And as for dividend the result by which many among ourselves, it is to be feared, will be inclined to gauge the success of the undertaking though some " Credit Associations " have done badly, others have declared 10, 12, 14, up to 20, and even 30 per cent. On an average they have, in a year which was not particularly favourable for business, netted 5.19 per cent, on their working capital, after allowing 3,913 for charities, and 48,359 for losses, the latter averaging only about is. i id. per member. Looking at this all together, it cannot be pronounced an unsatisfactory result, even though there be a diminution upon some preceding years. f * For more complete statistics, see the note at the end of this chapter. t The figures for some preceding years were considerably more favourable. Commercial depression has affected co-operative like other banks. In 1891, for instance, 1,072 associations returned a share capital of 5,853,993, that is, n. 6s. per member. The entire transactions amounted together to 138,745,134; the credit granted to ^82,078,709 ; the sums raised by loan to ,12,691,313. CREDIT ASSOCIATIONS. 87 And in the main the business done has been done Smallness of smoothly and in a business-like way. The losses, as has Losses - been shown, although severe in some particular instances, are not heavy., taking the whole volume of business. The lending has been done on every variety of security ; to Securities some extent small, but still too large, viz., 592,043 on taken - the year, and 2,478,395 in all on mortgages ; 4,722,953 has been lent on simple note of hand. The main lending has been done on acceptances or promissory notes, on dis- counts, and, in the last place, on current accounts. The last-named form of credit, copied from the Scotch " cash credit," and resembling what we in England know as " overdraft," is rightly much favoured by the leaders of the movement, as being convenient alike to bank and borrower, and a form of transaction training to business habits. The leaders of the movement continue also to urge upon their followers the advisability of extending the use of cheques, which is at present still very little practised in Germany. Generally speaking, the acceptance or pro- missory note is the instrument favoured for loans, not- withstanding that there is among some classes in Germany a very pronounced feeling against this form of bond, be- cause it is very often put to improper use, and the German law is exceptionally severe upon drawers making default. The loans granted by the 1,047 Schulze-Delitzsch referred to on acceptances or bills of exchange figured in the past year in all at 29,342,628, of which sum 14,442,745 stands for new business, and 14,899,884 for renewals. The sums employed in discounting bills figure at 15,819,418; and the current accounts (overdrafts) at 27,023,583. The credit associations are much appreciated as savings banks. Most of the banks are open every day. Their credit in the open market is excellent. Altogether, the Schulze- Delitzsch credit associations have in respect of magnitude of business, of extension of their system, and of work done, an exceedingly good record to show. 88 PEOPLE'S BANKS. Success But that record has not been secured, it ought to be some e rneasure explained, without some rather remarkable departures in by Departures practice from the rules laid down in theory. That is, I retical Rules. ta ^ e **> no blame to the system, even though Schulze be originally responsible for some of the precepts which practi- cal men have put aside, but which his teaching successors still cling to, no matter how conclusively experience may have shown them to be unsuited or however much circum- stances may have changed. Schulze's system was self-help self-help undiluted, unalloyed, individualist* almost to excess, purely economic self-help giving to every man in proportion to what he had expended in effort. Oddly enough, while insisting with great emphasis upon the strictly individualist character of his co-operation, Schulze made himself (unintentionally) guilty of a curious piece of inconsistency in adopting unlimited liability, which as a matter of course gave the system a collectivist character, with an application which many of his followers have seen reason to deplore. That, as I have shown, could not be helped. Schulze knew what circumstances he had to deal with, but he could not tell in precisely what manner his methods would act, whether they would prove too drastic or too little effective. He operated on untried ground, at a period when money was scarce, saving undeveloped, and the individual feeble. Naturally or, at any rate, excusably he argued that he could not do too much to attract both numbers of members, to act in union, and capital. He must have capital ; he must have good administrators ; he must have a lively sense of self-interest awakened. These things are to be got, if you will offer them a proper reward. * Compare Dr Hantschke's " Individualismus und Kollektivismus in der neuen genossenschaftlichen Bewegung" in " Zeitschrift der Centralstelle fur Arbeiter-Wohlfahrtseinrichtungen," 1895, Nos. 14, 17. Dr Hantschke is one of the Secretaries of the Union of Schulze Co-operative Associations. CREDIT ASSOCIATIONS. 89 Hence those high rates of interest allowed, the salaries and commissions permitted for services, and the non-limitation of dividends, which has spelt up to 20 per cent, in a good many cases, and in some even to 50 and 60 per cent. However, times have -changed. And, moreover, some of the expedients used have proved too powerful. They were ingeniously conceived, like the cogged wheels for " grip," and the curved rails for " swing," without which our early railway engineers imagined that they could not possibly get their prospective train to run forward. Experience has shown that the train moves very much more easily and swiftly without cogs and curves. Schulze bankers I mean the practical men have made On what analogous discoveries with respect to ingenious contrivances ti n " in their own business. Moreover, money, which in Schulze's 'aken place, time was scarce as rubies, has meanwhile become plentiful, and is now almost a drug in the market. In all the great Schulze-Delitzsch banks which I have lately visited, I have heard the same complaint. There is too much money. The difficulty is not, to provide capital, but to find invest- ments. Practical men have of course accommodated them- selves to the altered " environment," even though theorists continue pedantically consistent in their preachings. The result is a startling discrepancy between theory and prac- tice. After reading about the imperative necessity of large districts, of unlimited liability and of good payment for capi- tal and for services, and about the utter unpardonableness of long credit, it makes one rub one's eyes to find districts confined within well marked-out limits unlimited liability gradually being thrown overboard by the largest and strongest of Schulze-Delitzsch banks, councillor's fees de- clined, and credit given, not for the orthodox three months only, but, if the borrower have at all a good character to show, practically by renewals for thirty months, almost as a matter of course, and in exceptional instances even for 90 PEOPLE'S BANKS. fifteen and twenty years. Only by such deflections from the course marked out has the system managed to do as well as it has done. It stands absolutely to reason. Things which at one time were a help have now become a hindrance. The unwieldy districts which Schulze believed to be necessary, to provide numerical strength, have proved to mean, quite necessarily, a loss of touch and knowledge among men in a concern in which touch and knowledge are essential, but none too strong to begin with. There is no breach with the " system " in the abandonment of an inconvenient detail. In the same way those monstrously large shares, which are bound to keep out any really poor man, have been found a direct hindrance when money is plentiful. Schulze knew very well what he was about when he recommended them ; but his methods have proved Shares are too effective, and circumstances have changed. Banks now madesmldler com P lain f having too large a share capital, which makes them pay dividend rates instead of deposit interest for their money. They are accordingly everywhere trying to reduce it. They cannot reduce shares ; but they are can- celling them whenever an opportunity offers in one or two banks, I am sorry to say, by gradually weeding out women members and they insist that only part of the share shall be paid up, a comparatively small portion, which in Augs- burg is limited to 5 on the 50 share, in Cassel to 15 on the 37. los. share. That, again, is no sacrifice of principle. In the same manner those tremendous divi- dends, which certainly did attract capital, but capital which now shows itself to be capital of the least desirable sort capital bringing no business and swallowing profits have proved in the long run detrimental rather than helpful to the object in view. There is no class of persons more detested by Schulze-Delitzsch bank managers than the " dividend- hunters," who do no business, but seek to get out of the bank all the profit that they can. Dividends have wisely CREDIT ASSOCIATIONS. 91 been reduced, in the most legitimate way, by lowering those Dividends exorbitant rates of interest on loans which Commendatore Reduced - Luzzatti has denounced as " usurious," and which made the bank smell very malodorously in the nostrils of well-meaning men. In the majority of banks now money is obtainable at from 5 to 5 1 per cent, and dividend has, on an average, sunk to the same level. The banks are answering their purpose all the better, and are doing perfectly well. Even in respect of paying the " labourer worthy of his hire," Schulze's studied consistency has proved excessive. Directors, of course, have to be salaried. But the practice is gaining ground of members of the Council refusing their fees and being content to serve a good cause for nothing. Over- flowing coffers must certainly in any case have proved fatal Terms for to that pedantic limitation of time to three months. The practice has been found indefensible on other grounds, as being inconsistent with the object of the bank ; and, gener- ally speaking, a man of good character may make sure of being allowed to retain his loan for thirty months repay- ing by instalments and if he can make out a good case, even for very much longer. At Augsburg, Major Wein- mann, one of the directors of the bank, was good enough to go through some of the borrowers' accounts with me. In them every particular affecting the case is set forth. When a man appears not to be making good use of his money, that money is called in as fast as is possible, con- sistently with the terms of the loan. But if he is judged to be doing well with it, time is readily accorded. As a case in point, there was a poor pointsman on the books who owed money since about ten years. It was altogether contrary to the rules ; but the man was evidently doing his best slowly repaying what he could and the bank heard that he was an honest man, and gradually bettering his position. Then why should it defeat the very object for which it had been started by pressing him ? 9 2 PEOPLE'S BANKS. Agricultural Credit. Its large Amount. The Advan- tages of Schulze- Delitzsch Banks. The real fact is that all these matters of practice must necessarily be left to practice to determine, and therefore should have been settled by practical men. The writers who tenaciously hold to old precepts, and vindicate details as if they were essentials, have with the best intentions really done no service to their cause It is entirely owing to the distorted description which those theorists have given of their own system that the impression has got abroad that the Schulze-Delitzsch banks are powerless to render assistance to agriculture. No im- pression could be worse founded. What the Schulze- Delitzsch collectively have done in the way of agricultural lending we do not know. But we know enough to be able to judge that they have in the matter of amount done more than any other system. We have some partial statistics. We know that in 1885, 545 such banks, having among them 270,808 members, 72,994 of whom were purely agri- culturists, lent out to these latter no less than ^6,982,996, about one-fifth of their aggregate lending ; and that in 1894, again, 546 such banks, having among them 261,521 members, 82,513 pure agriculturists, lent out to these 8,853,751. It will be well to devote a page or two to the subject of this agricultural credit. The difficulties in the way of such credit, and the favouring factors to be set against them, have already been indicated.* The former consist mainly in the length of time for which loans are ordinarily required, the uncertainty of the date of repayment, and the absence of a recognisable marketable security. The latter are to be found in pretty absolute fixity of abode, in the ease with which information is obtainable about borrowers, and in a general predisposi- tion to honesty. The great crux of the question is the * Chapter V. CREDIT ASSOCIATIONS. 93 finding of money for just the right period. Now, to provide this, the Schulze-Delitzsch banks are in a peculiarly favour- able position. In the first place, they are all, or nearly all, well-established for there is no propaganda now in progress well-known in the market, therefore commanding a good credit, and very strong in capital. Accordingly deposits and savings may be counted on pouring in, so to speak, auto- matically, and really the difficulty which, as I shall show, puzzles co-operative bankers in some other countries not a little, may be said not to exist for the Germans. In the next place, the Schulze-Delitzsch banks are, after all, These Banks mainly industrial banks. It may be said to be a moot point among co-operators whether agricultural credit should be dispensed in union with industrial or by itself. In Italy we shall come across some co-operative banks, almost purely agricultural, working side by side with industrial banks in the same locality. The followers of Schulze- Delitzsch are thorough believers in blending of as great a variety of types of business as is possible, in order that one may dovetail into and supplement the other. The broader the basis, the safer the superstructure. This principle applies with special force to the relations between agricul- tural and industrial credit, since it is found that agriculture borrows most when times are bad, and when industry and trade, having less use for money, restrict their borrowing. From a banking point of view, the old verselet holds true Rustica gens Optima flens, Pessima ridens. In the Schulze-Delitzsch banks, generally speaking, the majority of members, and even in a greater degree the majority of borrowers, are industrial men, who contribute a volume of business generally rapid, and so large that it will well carry along with it a certain proportion of slow agricultural work. We have seen that in the 545 banks 94 PEOPLES BANKS. agricultural members numbered one-fourth, but borrowed only one-fifth. At the present time the average proportion among banks doing agricultural business appears to be respectively as one-third and one-fourth. We have there- fore, so to speak, a tolerably solid wall to lean upon, suffi- ciently well secured by industrial " binders " to admit of filling up with agricultural " rubble." More fully to explain the system in operation, I cannot do better than quote some specific instances. The Credit There is, then, first, the great "Agricultural Credit Asso- Association of c i a ti O n " of Augsburg, the premier bank of the whole con- Augsburg. nection. It is really not a Schulze-Delitzsch bank at all, as one of its directors was careful to point out to me, though it has for practical reasons attached itself to the Union. But the differences in the two systems are so absolutely trifling as practically not to come into account. The bank was really created for the benefit of agriculture, and was originally endowed in part, and of course more than corre- spondingly controlled and directed, by the State. That State interference the director, Herr Hederer, soon saw, must be got rid of at all costs. It was so, and with it the State endowment, and the bank is all the stronger for the loss. True to Schulze-Delitzsch rules, the bank adopted unlimited liability, and, to raise ample money, it issued large shares of 50 a piece, of which members were allowed to take several. Since 1889 not only has this plurality of holdings been rigidly eliminated from the system except in the case of older members, who are allowed to retain two as the maximum number but, moreover, in the case of new members, the bank declines to allow more than one- tenth, that is, 5, to be paid up. That small proportion may be paid up by instalments of as little as 2s. a month. The bank has now about 1 1,500 members, who have among them subscribed about 200,000, of which about 100,000 is paid up. The reserve fund accumulated represents 25,000 CREDIT ASSOCIATIONS. 95 more. The bank is administered, like ordinary Schulze- Delitzsch banks, by three directors, forming the Com- mittee, and a Council of Control of nine, which nominally decides upon the loans to be granted, all materials for decision being got ready for it by the directors and the staff. The admirable and complete way in which all information required for reference is kept, always handy, well arranged in boxes, books, and card catalogues, is par- ticularly deserving of notice and commendation. The bank grants every year about 1,000,000 in loans. All such loans are under the Act of 1889 restricted to members only, and accordingly not a few members go " in " and " out " just as necessity may prompt them to join or to resign. Of all that lending only about 200,000, that is, about one-fifth, is done to agriculturists, scattered over the whole of Upper Bavaria. There are about 7,000 of these, and in the course of a year the bank may issue 6,000 or 7,000 agricultural loans, amounting on an average to 30 each, though some of them mount up to 1,500 and more. The smallest do not exceed 505. Much industrial lending is done by means of current accounts, that is, cash credits or overdrafts. For agricultural purposes that method is found inconvenient, because trans- actions are too few. Therefore borrowers, as a rule, raise money on acceptances or promissory notes, on which generally both the date and the name of the payee are left blank, in order that both the expense of a fresh stamp on renewal and the trouble of obtaining new endorsements may be avoided. Such loans are held on from three months to three months, the longest term allowed for borrowing without repayment of any kind being eighteen months. Provided that part-repayments are made, the loan is often allowed to go on for a long time, five years and more, according to circumstances. The interest charged is generally speaking about 5 per cent, but commissions raise it practically to 6f per cent., all of it payable in 96 PEOPLES BANKS. advance. The losses sustained have in the twenty-five years of the existence of the bank proved so trifling as practically not to come into account. Alike for its own convenience and for that of members living at a distance, the bank has stationed agents all over its province, wherever there appeared to be an opening and wherever a suitable man could be found. It is the special office of one of the directors to appoint these. There are in all something like 250 agents, generally merchants or tradesmen in a good position in their particular locality, remunerated at the rate of \ per cent, on business done through them. None of these agents have a definite district assigned to them. Any member is free to apply to any one of them for a loan. But should he go far afield to make his application, when he has an agent near, of course inquiry is instituted into the presumable cause of such conduct. There appears to be considerable scope for the exercise of energy in such agencies, for Major Weinmann told me of one agent who had in little time increased his takings for commission from nil to something like 4.0 or ,50 per annum. The agent is given no power whatever. He simply forwards applica- tions, makes inquiries, advises the Central Bank, and pays out moneys at his principal's direction. It is the authorities at Augsburg who decide on the applications made. The better to be able to form a judgment, they secure the assistance of a " man of confidence " in each district, who is unpaid, and whose name and person it has proved prac- ticable to keep altogether secret. By such means the bank manages to serve a very large district effectively and with safety. And its services appear to be appreciated, for its position keeps improving. Insterburg. To take another bank, very differently conditioned- there is that of Insterburg, in Eastern Prussia, reputed one of the best banks in the Schulze-Delitzsch Union. This bank, founded in 1860, has a smaller area in which to carry CREDIT ASSOCIATIONS, 97 on its business, and its members' roll does not exceed 3,800, 1,700 being persons engaged in agriculture, and cultivat- ing from 2.5 to about 2,500 acres each. A share capital of 64,000, which is considered more than ample for its requirements, enables the bank to dispose of about 200,000 annually in loans, at a rate of interest varying from 4j to 6 per cent., according to the " goodness " of the borrower, of which amount about 126,000 goes to agricul- ture in amounts varying from as little as 55. up to 1,500, but averaging generally 17. los. The lending is always done on acceptances or promissory notes, drawn for three months at a time, but renewed on very easy terms that is, in consideration of very trifling repayments so that there are loans outstanding which have run for fifteen and even twenty years. For the purpose of providing information as to the qualification of borrowers, the bank which confines its operations to the area of something like a petty sessional district has " men of confidence " stationed in various localities, all of them being members of the bank, unpaid, and all of them considered persons who may be relied upon to give trustworthy information, not only in consideration of their known character, which determines their selection, but also because their unlimited liability pledged to the bank makes it their interest to do so. I have found the same engagement of liability relied upon as sufficient in France, in the Indre - et - Loire, where the Agricultural Syndicate of the Department lends on much the same principle, less developed. The Credit Association of Gotha is another bank often Gotha. held up as an example in respect of its agricultural lending. This is a bank which has, by a long and successful practice, made good its hold upon almost the entire little- Duchy of Gotha. It is particularly popular as a savings bank, and twice a week, on market days, its office is more than crowded with depositors. The general centralisation of G 98 PEOPLE'S BANKS. local business life in the little capital of course helps the bank very materially to obtain information with respect to borrowing members. To inform itself more fully, it has fifty-three local committees, consisting of from three to five persons each, understood to be men of independent position, and therefore likely to be unbiassed, appointed in various localities. These committees subject all applications made for loans in their district to a careful investigation, and advise the bank, each member by himself, writing down their answers to the questions put on printed forms, and forwarding these, folded like voting papers, to the central office, which holds itself in no way bound by the opinions expressed, but decides absolutely at its own discretion. The questions asked of agents are put mainly with a view to ascertaining whether the applicant is a trustworthy person and doing a good business, not what he is actually worth. In a stable and steady population like that of the Duchy of Gotha, it is not difficult by this means to avoid bad business. The local committee men receive a very small commission on business negotiated, which very often goes in a harmless little common jollification at the end of the year. It does not amount to very much. By such means the bank manages to cater financially, very effectively, for the 2,000 or so of its members (out of a total of 3,000) settled in villages. They are not necessarily all agriculturists ; many are tradesmen or artisans. The loans, though granted in each instance for three months only, are readily renewed up to thirty, provided that one-tenth is paid off at each renewal. Strong in its command of money, the bank renders very useful service in lending, not only to individuals, but also to agricultural supply associations, co-operative dairies, societies letting out threshing machines, cattle-breeding and sheep-raising associations, and similar bodies practis- ing co-operation in the service of agriculture, as well as to village councils and other local bodies. CREDIT ASSOCIATIONS. 99 To quote a third instance there is the little village bank A small Bank : of Walldorf near Meiningen, a very much smaller institution, ^ alldorf - but of the same type, which has a capital of only 1,400, and about 240 members, in a village peopled by about 1,500 inhabitants. It has its regulation three officers, one of whom is the schoolmaster, who receives an annual salary of 15. His two colleagues between them receive only 11. In so small a place of course neither "men of con- fidence" nor local committees are required. The Council of Control and the Committee know pretty well all that it is requisite to know about applicants for loans. They manage to lend out annually about 3,000 or 4,000, not counting cash credits, of which, when I was in the place, there were nine outstanding, amounting in all to 1,240. The maximum loan allowable to one person is 300. I ought to mention that in this bank, as a departure from ordinary Schulze-Delitzsch practice, all money is lent simply on note-of-hand, no promissory notes being issued. There are practically no losses, and the management expenses total up to about 50 a year, including salaries. The little bank, which has been growing since 1869, has, I may add, successfully managed to oust a usurer from the village who was a curse to the district What pleased me particularly in this bank was the close touch and active interest main- tained among members, not a usual feature in Schulze- Delitzsch Banks, but to be accounted for, of course, in this case by the smallness of the district and the absence of other objects of interest. I have noticed exactly the same thing in some of the smaller agricultural banks of the Luzzatti type, more notably in that of Spigno. The utility of the bank, its educational value, and its security as a business institution as a matter of course increase as such community of interest becomes more marked and realised. I must quote just one bank more, because it appears to Cosel. me particularly interesting by reason of its locality and ioo PEOPLES BANKS. peculiar circumstances. The bank of Cosel, in Silesia, is situated in a district almost entirely agricultural, and still rather primitive in its institutions. The population to a large extent consists of Poles,someof whom are so illiterate that the bank managers have found themselves constrained to dispense in many cases with those written applications and receipts which the Schulze-Delitzsch authorities at Berlin hold to be absolutely indispensable. Very much of the work has to be done by verbal instruction, such as pointing out to the sureties that it is to their own interest to watch over the men for whom they go bail, and prevent the bank from suffering loss. In spite of all this the losses sustained are so trifling that within the last fifteen years, on a business amounting to 6,400,000, not more than 1,500 has had to be sacrificed. The bank was originally started as an industrial bank. Agriculturists, however, soon found out its value, and came crowding in in such numbers that at the present time they represent about 67 per cent, of the total of members, that is, about 850 out of not quite 1,300. There are agriculturists of every description, some of them substantial yeomen, owning six hundred acres and more, others small illiterate peasants. The bank has a capital of about 10,000, with about 6,000 accumulated as reserve fund, and generally about 20,000 or 23,000 of savings in its keeping. It has generally about 50,000 outstanding in loans. Most of this is lent for comparatively long terms. It is interesting to note that, on an average, loans contracted to make good a deficiency in the crops, or due to some other accidental misadventure, are repaid in about two years ; loans contracted for the purchase of live stock in three ; and loans contracted for acquiring land or putting up buildings, or else for carrying out agricultural improvements, in from six to eight years. The bank never presses borrowers unduly, but is of course careful to make sure that the money will come back to it. For purposes of inquiry it CREDIT ASSOCIATIONS. 101 maintains its own representatives in different localities, but it appears to rely really more upon the self-interest of sureties, whom it does not accept without adequate inquiry.. To serve a quasi-detached district, some distance from Cosel, which includes about thirty villages, the bank main- tains a distinct branch establishment in the Moravian settlement of Gnadenfeld, which forms the centre of that district. There is an accredited agent at Gnadenfeld a local tradesman, who receives a commission of 10 per cent, on all interest collected. He has no voice in the granting of loans, but merely transmits applications and information. The practice has proved perfectly satisfactory. There are now about 300 members enrolled in this branch establish- ment, all of them being of course members also of the parent association, and having the option of doing business, as they may prefer, with the one or with the other. In all there are 155 parishes in which the bank does business, lending out annually about ; 170,000 or ^"200,000. To be able to do this it borrows at times considerable sums from other banks, which it finds that it can do without difficulty. These five instances, taken from different districts, in widely different parts of Germany, and representing typical cases, demonstrate, I should say, with sufficient clearness, that banks of the Schulze-Delitzsch type are, when well officered, and managed with common - sense, perfectly capable of meeting the requirements of agricultural credit, so far as they are strong in capital or credit, or else in a steady receipt of deposits. So far so well. But in spite of all that has been said, Defects in the in spite of all these magnificent services and the phenomenal S^ 126 " success recorded, it may still be questioned whether the Organisation. Schulze-Delitzsch associations to the fullest degree realise the ideal of co - operative banking. To begin with, a system in which failures and liquidations occur so fre- quently, that even one of its chosen eulogists not many 102 PEOPLE'S BANKS. Frequency of Liquidations, Failures, and Conversions into Joint- Stock Com- panies. Small Repre- sentation of the Working Classes. years ago could not help admitting " g\ per cent," * and from which numbers of associations have seceded and still secede, in order to convert themselves into joint-stock com- panies, cannot from either a business or a co-operative point of view be judged absolutely perfect let alone that it is altogether contrary to our idea of co-operation, that the humblest classes, the working men proper, should be ex- cluded and bidden to wait outside until they have accumu- lated sufficient funds to qualify themselves for membership involving the taking up of big shares. There are working men, no doubt, in the Schulze-Delitzsch associations ; but only a very small proportion. From the last official statistics, we learn that on an average only .9 per cent, of the members of Schulze-Delitzsch banks were "servants and commissionaires " ; .7 per cent. " shopmen and shop- women"; 2.3 percent. " railway employees," and the like (not " hands ") ; 5.6 per cent. " factory hands, miners, and journeymen " ; and 26 per cent. " artisans working for their own account," that is, the best-to-do of their class. That is in all only 35.5 per cent, not really of working men and women. The bulk of the members is nearly everywhere made up of small tradesmen, small landowners, and men of similar independent or quasi-independent position, men of the classes, in fact, from which our Loan Societies ordinarily recruit their ranks. Our idea of co-operation is, that it should above all things benefit the working classes. If Herr Siegl who writes with a great deal of specific knowledge is right, Schulze, having originally learnt co- operation in England, at the outset desired, like ourselves, to bring working men within the sphere of his beneficent action ; and " in the early years of the movement he * Dr F. Schneider, writing in 1885, in the Arbtiterfreund, admitted 184 failures among 1,910 banks, and pleaded that that was a small percentage, " only 9^ per cent." CREDIT ASSO CIA TIONS. 1 03 occasionally succeeded in doing so " (was ihm anfangs aucJi uiehrmals gelang]. It is to be regretted that he himself and his followers did not persevere in this course. However, working man co-operation is absolutely incompatible with very large shares. The frequency of failures and liquidations has, it ought Failures and in justice to be added, very substantially decreased, as Dr Ll< l uidatlons - Criiger rightly points out in Jahrbucher fur Nalionalo- konomie und Statistik* since the law of 1889, shaped to some extent upon our Industrial and Provident Societies Act, has made a biennial audit imperative. The first effect of that measure was, we are told, temporarily to increase the number of liquidations, because the shaky associations were at once found out. But, that first shower of collapses Salutary effect over, there has been an appreciable diminution, and no ^ r a ^ ( doubt the remaining associations are all the more healthy. The effect suggests this question : why did not the Central Board of the Schulze-Delitzsch Union, which now recognises the merit of the innovation, but which will not hear of further modifications, and which had quite as much to say for the unimprovable excellency of its system before 1889 as it has after, resort of its own accord to so useful a practice as that of periodical audit? The pedantic sticklers for the system absolutely as instituted by Schulze give their case away by such inconsistent argument. The average proportion of failures has no doubt steadily decreased, but there have nevertheless been some very awkward liquidations and suspensions. The very last return issued records five failures and thirty-one liquidations. And, moreover, there has been that ugly crash at Weimar, which is particularly instructive from our point of view, since it reveals with great clearness the crucial point upon which the Schulze-Delitzsch organisation is \veak. The Bank of Weimar a few years * Dritte Folge, Zehnter Band, Fiinftes Heft. Jena, Fischer, 1895. 104 PEOPLES BANKS. ago made a loss of 175,000, leaving it with an actual deficit of 123,000, which, it is satisfactory to be able to add, is now gradually being worked off, and so, thanks to the forbearance of its creditors, the bank is recovering its solvency. But how was that disastrous collapse brought about? Why, the members of the Council of Supervision, the men of all others to whom the shareholders looked for the safeguarding of their interests who ought to have made it their supreme aim to keep the bank safe had themselves borrowed sums amounting to 20,000 and 30,000 apiece, which they were unable to repay ; three of them had borrowed 75,000 among them. 20,000 and 30,000 borrowed from a Peoples Bank ! Does not that in itself show that the institution had been wholly turned aside from its proper purpose ? How come People's Banks to allow such colossal lending ? This Weimar case is of course a peculiarly glaring instance, but it is by no means the only one of its kind. Conversions And then there are those conversions into joint-stock StockBanks. companies. I must speak of them at once, because both collapses and conversions arise to some extent from an identical cause. There is no denying the fact of frequent conversions. We find Dr Schneider bewailing it in the official organ of the Union, the Blatter filr Genossenschafts- wesen. In the kingdom of Saxony alone, according to an official return prepared by the Ministry of Justice, out of 115 "Credit Associations" existing on the 1st October 1889, by the 3ist January 1891 no fewer than twelve had converted themselves into joint-stock lending banks pure and simple. In July last year, when I went to visit the great People's Bank of Leipzig hitherto, next to the Bank of Augsburg, the premier bank of the Schulze-Delitzsch Union : a bank having about 6,000 members, and a share capital of 150,000, and doing business annually to the amount of 7,250,000 I found CREDIT ASSOCIATIONS. 105 that bank converted into a joint-stock company, and con- gratulating itself upon the change. It still adhered to the Schulze-Delitzsch " Union," of which it could scarcely be described as a bona fide member, rather on personal than on logical grounds. In its new shape it found itself much less cramped in its action ; management had become more convenient. But, then, the main object of the bank had been sacrificed. Loans are still made to small people. But what guarantee is there that that practice will be con- tinued? The direct interest and responsibility of borrowers in behalf of its prosperity, the union of interests between lenders and borrowers, are certainly gone. Already, I found the preference was being given to large business, and higher rates were being charged in proportion as the transactions grew smaller. Italian banks, upon Commendatore Luzzatti's injunction, even when they grow capitalist as unfortunately some of the older sort do grow still, at any rate, remain so far faithful to their original principle as to give the preference systematically to small business. What is the reason of this twofold deterioration the The Causes of decline in safety and the abandonment of the democratic, Excl^Son'oT ' popularising, co-operative principle ? The exclusion of the the Working poor classes has, no doubt, a great deal to do with it. It ^^shares. eliminates the element which as a matter of course makes for a popular character. Those tremendous shares of ^"30, 40, and ,50 they average now between ,15 and 2$ are bound to keep out the class which I have in view. How are working men with prudence to pledge themselves to saving up so large a sum out of their small earnings ? The idea is preposterous. But the main cause is that Schulze, when adopting co-operation as a form, did not at Excessive the same time adopt with anything like sufficient fulness ^^^^J 1 what we now everywhere recognise as the co-operative the Lender, principle to wit, consideration, above all things, for the consumer. Our stores are not intended to provide a profit io6 PEOPLES BANKS. Ineffective Provision against Un- safe Business. for those who do not buy of them, who only hold shares. They are to provide goods cheap and good for those who do buy. Analogously, co-operative banks should not exist to provide a large profit for the shareholder, but aim, so far as is practicable, at cheap credit for the borrower. However, Schulze at the outset reversed the order of things. The consequence is that, so far as his followers have in this matter adhered literally to his teaching, his banks have become mere ordinary trading banks, in the words of my friend at Nice, " des banques comme les autres" what the late Professor Held has called " simple trading banks (einfache Handelsbanketi)"* They have studied above all things business and large dividends. They have acted as our co- operative stores would act if they were to lay themselves out for " corners " in any produce in which they deal, in order to be able to declare a large dividend. Obviously, business, studied for its own sake, is in a co-operative insti- tution nothing but a snare ; and " big dividends " are to the same institution what M. Elie Reclus has rightly called them in a report (on this very subject) presented to one of our early Co-operative Congresses, "a greater danger than heavy losses " manifestly so, because they estrange the institution from its proper purpose. The danger of business-hunting has in the Schulze-Delitzsch banks been rendered greater by the allowance of a commission to directors on " business." All other systems of People's and Agricultural Banks make it a paramount rule that no risky or speculative business shall on any account be engaged in. Under the stimulus of the commission promised, some Schulze-Delitzsch directors have directly sought it, for the sake of pelf, lending money on the most questionable security. In Heilsberg they lent money on a river-mill which was bodily washed away by the stream. In Cannstadt they lent money on a * Arbeiterfreund, 1873. CREDIT ASSOCIATIONS. 107 theatre which they eventually had to seize by foreclosure a most inconvenient pledge to become possessed of. More- over, there is in these matters such a thing as depreciation of security, more particularly when that security consists of real property. When things came to a crisis, the real This makes danger of the unlimited liability adopted in this system Liabm^ became at once apparent. Members were suddenly called Source of upon to make good serious deficiencies. The very sad experi- ences gone through, even by retired members, who had con- sidered themselves perfectly safe not a few being absolutely ruined makes painfully clear the danger of unlimited liability adopted on such lines. Unlimited liability no doubt is extremely useful, and may be entirely harmless, when the management of affairs is committed to tJie same persons who have to bear the burden of liability. But in the case under consideration the burden does not lie with the same weight upon the managers who direct the enterprise, speculative or otherwise, and the general number of members ; because the former are to a considerable extent indemnified by their commission, which serves practically as an insurance. Under improper guidance, unlimited liability has in very truth shown itself the "two-edged knife" as which Dr Schneider has himself described it, spreading ruin among shareholders as in the case of the City of Glasgow Bank. The head of the Agricultural Department of one of the German kingdoms writes to me (privately) on the subject to the following effect : "The credit associations (of the Schulze-Delitzsch type) aim at high dividends by the largest possible extension of their business, as regards both territory and operations. This has in many instances led to speculation for the sake of gain (the acceptance of unsafe mortgages in consideration of a higher interest, the dealing in speculative shares, or else the investment of the reserve in such effects, the discounting of bills without sufficient knowledge of such business), more especially where officers are remunerated by tantieme (i.e. commission). These are, briefly summarised, the causes why the ' credit associations,' io8 PEOPLE'S BANKS. which had been much in vogue up to the company-promoting years, 1871 to 1873, have in this kingdom found themselves compelled to call up very considerable payments from their members, in order to enable them to continue their existence, or else to go into liquidation. . . . The very painful experiences in respect of credit associations, by which many an agriculturist, required, after years had gone by, to meet un- expected calls, has lost all his property, made people at first so shy that for a long time they could not be convinced that the Raiffeisen Loan Banks, in striking contrast to these associations, afford almost absolute security, since they are administered on totally different prin- ciples (no dividend, no speculation, salary only to the cashier, small districts, confined only to one parish or to one or two adjoining ones)." Once you introduce the element of individual gain- seeking and make its pursuit allowable in a co-operative institution, as a matter of course you plane the way for transformation into a joint-stock company, which is the legitimate body for such an enterprise. Indeed, you may be said actually to start your association as in principle a joint-stock company, even though you call it co-operative. And you also open the door at once to such abuses as those revealed in the case of the Bank of Weimar. Committal of All the dangers already indicated are immeasurably mairTtoYhree 6 a gg ravate d by a feature in the constitution to which writers Salaried on the Schulze-Delitzsch side have thus far failed to pay proper attention. Their associations are deliberately made large, alike in numbers, and in respect of the area which they cover. There is, therefore, from the very outset, an inherent danger of looseness of organisation, and want of touch in them. In small banks, like that of Walldorf, and in the Spar- und Gewerbebank of Leipzig, I have found far more touch, interest in common affairs, and generally a more co-operative spirit prevailing. However, those cases, unfortunately, constitute the exception rather than the rule. Instead of endeavouring to neutralise the danger existing, by somehow tightening the inter-connection among members, and providing additional means of control, Schulze has CREDIT ASSOCIATIONS. 109 deliberately added to it by concentrating practically all administrative power in the hands of the three salaried officers, the very men who are entitled to draw the commis- sion, and therefore are least exposed to the penalty involved in liability. Wherever I have inquired and I have been to see some of the best banks I have had the admission made to me that the supervision committed to the "Council" is almost purely nominal, inasmuch as the business is far too voluminous to make it possible for its members to exercise any effective control. Hence comes that frequent incurrence of risks which Dr Schneider and Dr Criiger attribute simply to happy-go-lucky easiness, to Vertrauens- dusel infatuated confidence which lends money on in- sufficient security : the " careless giving of credit, loose control and indifference, and unparalleled fatuity of confi- dence," bewailed by Dr Schenck, the chairman of the Union. In the Italian and Belgian People's Banks the governing body is a committee of unsalaried members, which appoints and checks the administrative officers, being itself checked by the Council, for which the work is accordingly rendered manageable. The difference in organisation is one of extreme importance. And its results are seen in this, that, although in Italy and Belgium there have, no doubt, been suspensions and liquidations, those collapses have shown themselves neither as numerous nor as dis- astrous as those occurring in Germany. Dr Criiger in his article already quoted, practically confirms the view which I here take by stating that within the last fifteen or twenty years failures and liquidations of Schulze-Delitzsch banking associations have, as a rule, been due to "large credits granted to members of the Committee or the Council, or of both, without taking adequate security in return, therefore to a shameless abuse of the trust reposed in them by members of the association." The defect, surely, is capable of rectification. And leaders who have accepted the no PEOPLES BANKS. German law of 1889 as an improvement, ought not to be above adopting other improvements so clearly indicated by experience. " Rien ne nait a I'etat parfait" so writes in the Economiste Francais M. Maurice Block, a careful student of these things ; " // faut done perfectionner aussi les principes sur lesquels r organisation des associations de Schulze-Delitzsch repose" In spite of all Very true. However, I am anxious not to be thought the Schulze- unduly severe upon the oldest, in one sense the most System has sturdy, and still the largest of organisations, of Co-opera- done inestim- tive Credit. That organisation has blemishes, but its foundation is good. After what I have said, I should not like it to be thought that the Schulze-Delitzsch associations are generally unsound. Quite the reverse. Practice is wiser than theory. The striking figures which I have quoted sufficiently prove that practical men have been able to bend imperfect rules into a shape making them service- able. Besides, all men are not rogues. If the Council of Weimar, and the Committee-men of some other Credit Associations, have abused their opportunities and their dis- cretion, the vast majority of officers of the Schulze-Delitzsch banks have shown themselves not only unquestionably honest, but also very capable men. It would be most unfair,, on the score of one or two weak but remediable points, to disparage the system, which has done more for Germany and Austria and indirectly, as stimulating to imitation, in other countries for the poorer classes generally than it would be easy to express in words. However, it must on the face of things be apparent to every one who can judge of the circumstances, that what- ever surprising good the associations spoken of may have done in Germany and kindred Austria among Germans, their system is not suited to the habits of other countries, and, more particularly, entirely unsuited to our own. Dr Criiger, in fact, glories in its being specifically " German." CREDIT ASSOCIATIONS. in Italy has found itself compelled to modify it considerably before accepting it in practice ; Belgium has had to modify it, France has had to modify it. We are in exactly the same position. It deserves, moreover, to be noticed that even in Germany the system of Schulze-Delitzsch has ceased to spread. Other systems are multiplying their banks at a rate which is truly astonishing. We hear of no new " Credit Associations" formed. The number of associations, of members, of business remains pretty much the same from year to year. There is much writing in the press, much talking on the platform. But that writing and talking is mainly defensive, and directed against other systems ; it does not represent the same pushing oratory and argument which in Schulze's own days fired the public to action, and made banks start up like legions under the stamp of Pompey's foot. There must be some reason for this ; there ought to be something like a warning in it. Rome did not worship " the god Terminus " until after it had passed the zenith of its greatness. Evidently some new stimulus, or else some remedial modification, is wanted. One cannot help re- gretting to see a power so large and so well tried in practice as the Schulze-Delitzsch organisation, which is still undoubtedly the centre of co-operative action in Germany and the largest union of co-operative credit institutions in the world although some other systems number more banks con- demned to the mere maintenance of its ground. Of course, it has accomplished much of the work which it set out to do. It has covered much ground, on which now provision is made for democratised credit credit which is dispensed freely, and on the whole cheaply, to the benefit of millions among the humbler classes. But such a giant as this ought still to be going forth conquering and to conquer. There are still kingdoms to be won. Even now, the Schulze-Delitzsch Union is performing one of the most useful services that Germany stands in need of in presenting a bold front to ii2 PEOPLE'S BANKS. State Socialism, advocated and pushed in high quarters, and in insisting on the sufficiency of self-help. It sent out the promptest and the clearest note of protest against that utterly reprehensible proposal, put forward, and unfortunately carried, by the most State-Socialist of all governments of Europe, the Government of Berlin, in favour of the endow- ment of a Central Bank, to give credit to agriculture under State supervision, with State funds, the amount of which within a twelvemonth has had to be quadrupled. But while feeling grateful for all that it has done and is still doing, one would wish to see it taking M. Block's advice and perfecting its machinery even still more it may be, by studying what its own imitators have done elsewhere in submission to the demands of modern times,and turning itself once more, phoenix-like, into a propagandist force, advancing, as everything which exists has advanced since 1 8 50, becoming more democratic in its government, more popular, more of the poor man's friend. There is surely room still for very much work even within the lines of its own programme.* * The following figures will give some idea of the lines on which the work of the Schulze-Delitzsch banks is carried on, and of the magni- tude of their operations. There were, on 3ist May 1895, 953 credit associations belonging to the veritable Schulze-Delitzsch Union, which is divided into 32 sub-unions, and comprises, in addition, 454 supply associations, 14 building societies, and 53 miscellaneous societies 1,474 in all. Some of these associations, that is to say, 10 credit associations and i supply association, had registered themselves as joint-stock companies, and 5 credit associations as companies en com- mandite, that is, having a small number of persons liable without limitation of their responsibility, and a large number limited up to a fixed amount. The admirably compiled Annual Statistical Report, prepared by Dr Schenck, chairman of the Schulze-Delitzsch Union, does not say how many of the 1,047 credit societies sending in returns belong to the Schulze-Delitzsch Union proper. They may, however, all be assumed to be organised on Schulze-Delitzsch principles. There are now about 2,700 credit associations of this type in Germany. The 1,047 associations furnishing returns muster among them 509,723 CREDIT ASSOCIATIONS. 113 members, that is, on an average, 487 members per association. That figure remains pretty steady. The number of members per associa- tion varies from under 50 (in 14 associations) to more than 6,000 (in 2 associations), 11,436 being the maximum number, with a long interval between it and the next. About half the number of associations have members' rolls ranging from 100 to 400. Of 479,353 members of associations, of whom a special census has been taken, 45,888 are shown to be women, nearly one-half of them women without an occupa- tion ; but there were 1,264 female servants, and 1,022 women of the artisan class. The total of 479,353 members is shown to have been made up as follows : 31.5 per cent, (as compared with 31.3 in the fore- going year) were independent agriculturists, market gardeners, &c. (142,432 men and 8,662 women) ; 3 per cent, (against 3.1) salaried persons employed in agriculture, market gardening, &c. (12,974 men, i, 1 66 women) ; 3.1 per cent, (no change) were manufacturers, owners of mines, and builders (14,608 men, 406 women) ; 26 per cent. (26.3) independent artisans (120,174 men, 4,636 women) ; 5.6 per cent. (5.5) factory hands, miners, journeymen (25,700 men, 1,022 women) ; 8.7 per cent. (8.6) independent tradesmen and dealers (38,786 men, 2,983 women) ; .7 per cent, (no change) shopmen and shopwomen (3,289 men, 188 women) ; 4.8 percent, (no change) jobmasters, barge-owners, and public-house keepers (20,494 men, 1,640 women) ; 2.3 per cent. (2.2) postmen, railway employees, waiters, and persons employed on barges and boats (11,014 men, 134 women) ; .9 per cent, (no change) commissionaires and servants (2,958 men, 1,264 women) ; 6 per cent. (6.1) medical men, pharmaceutical chemists, teachers, artists, authors, and municipal or parish officers (27,707 men, 1,194 women) ; and 7.4 per cent. (7.2) persons without occupation (12,899 men, 22,593 women). It will be seen that the working classes are very sparingly represented. A special census shows that in 974 associations there were 151,094 members of the farming class. In 546 of these there were, among 261,521 members in all, 82,513 of the farming class. These had among them raised ,6,982,495 in loans. The total paid-up share capital of the 1,047 associations is returned as ^6,025,623; the accu- mulated reserve as ^1,758,912, making up a collective capital of ,7,784,035, which is ;7,435 per association (,1,680 being reserve), ll. 1 6s. per member. In addition to this working capital, the associations raised ,22,886,726 by loan, ,21,860 per association, ;44. 1 8s. per member. This gave the 1,047 associations an entire working capital of ,30,670,761. Of every ,100 working capital raised, ,19. i2s. stood for paid-up share capital, ,5. 145. for reserve, and H ii 4 PEOPLES BANKS. 74. 143. for borrowed money. The 1,047 associations lent out in all 77,500,631, made up as follows : On bills of exchange issued directly to the association, 29,342,628 ; on bills of exchange brought to be discounted, 15,814,418; altogether on bills, .45,157,046; on current accounts, ,4,722,953 ; on notes of hand, 27,023,583 ; on mortgages (new lending), 592,043. This makes 7,435 per associa- tion, and more in all by 850 than in the preceding year, and shows an indebtedness per debtor of 152. In addition to the 27,023,583 of cash credits or " active " current accounts, there was a total of " passive " current accounts (balances in hand on drawing accounts) of 26,709,603, which shows that in practice the one class nearly balances the other. These moneys represented the balances of 51,529 drawing accounts. About 950,000 more had been lent out in the year against, acceptances as compared with the preceding year. The losses recorded amount in all to only 48,359, which is about is. lid. per member. The management expenses figure as 323,504, which is at the rate of about 20 per cent, of the gross profits. The transactions resulted in a total net profit of 474,350, of which sum 122,293 was carried to the- reserve fund, 15,371 forward to next year's account, 3,914 was em- ployed for charitable and educational purposes, and 330,634 was paid out in dividend at the average rate of 5.19 per cent, on the capital employed. The returns record 31 liquidations and 5 failures. One of the failures is due to embezzlements to the amount of no less than 15,000. The return shows a smaller amount of business than some of the earlier years, which is owing to slack times, and also probably to a diminution in the number of banks in this particular Union, which may be only apparent, since, as Dr Criiger has verbally explained to me, for some years associations appeared in the lists which were really dead. There is, however, a rather notable increase of business and in the number of members as compared with 1893, and the proportion of losses keeps decreasing. CHAPTER VII. THE RAIFFEISEN " LOAN BANKS." No two people, setting out for substantially the same goal, The Origin of could have started from two more directly opposite points. 'LoanBanks." than did Schulze-Delitzsch and Raiffeisen. It is rather a curious tale the story of the origin and the gradual growth of Raiffeisen's co-operative organisation from its tiny beginning, as a veritable grain of mustard seed, planted on the barren soil of the neglected Wester- wald, to its present commanding position, in which, to adhere to the simile, it resembles an " exceeding great tree," spreading out its branches over all Germany, and Austria, and Italy, and Hungary, affording shelter to innumerable living beings rejoicing in its shade, with offshoots already penetrating into France, Servia, and Russia. It is of banks of this type that the economists quoted, MM. von Dob- ransky, Emile de Lavaleye, Rabbeno, and Leon Say to mention no more write in so rapturous a strain about " wonders " and " marvels." The whole thing may be said to be the result of a bodily infirmity, which brought hard- ship to one man, but inestimable benefit to more nations than one. Born in 1818 at Hamm, in Westphalia, F. W. R.aiffeisen Their found himself in his youth destined for a military career. Founder - Before, however, he could obtain his commission, he was compelled by a constitutional ailment, which impaired his eyesight, to retire. An opening was found for him in the Civil Service, and the year 1845 saw mm installed as n6 PEOPLES BANKS. Burgomaster (under the French law still prevailing in Rhineland) at Weyersbusch, in the bleak forest district of the Westerwald. In due course he was promoted to the Burgomastership of Flammersfeld, likewise in the Wester- wald, with a union of twenty-five parishes under him to administer. It was in this position that Raiffeisen had the crushing troubles of the poor peasant cultivators brought vividly before his eyes in the famine years of 1846 and 1847. His was one of the districts which the scourge of those years visited the most severely.* It was a poor country to begin with, with barren soil, scanty means of communication, bleak surroundings, indifferent markets. Nature had proved a very stepmother to this inhospitable bit of territory upon which the half-starved population ill- clad, ill-housed, ill-fed, ill-brought up by hard labour eked out barely enough to keep body and soul together with the support of the scanty produce of their little patches of rye, of buckwheat, or potatoes, and the milk and flesh of some half-famished cattle, for the most part hopelessly pledged to the " Jews." The "Jews/ 3 That reference indicates a peculiarly sore point in the rural economy of Western and Southern Germany. In this country we have no idea of the pest of remorseless usury which has fastened like a vampire upon the rural population of those parts. Even the gombeen-man cannot compare with the hardened blood-suckers of those parts of Germany. The poor peasantry have long lain helpless in .their grasp, suffering in mute despair the process of gradual exinanition. My inquiries into the system of small holdings in those regions have brought me into personal contact * Sir E. Malet is entirely wrong in placing Raiffeisen's first labours "in Silesia," as he does in his Blue-Book Report. Probably our Ambassador had heard of the great distress prevailing among the handloom weavers in that province, and was so led into his mistake. Raiffeisen had no connection whatever with Silesia. THE RAIFFEISEN "LOAN BANKS." 117 with many of the most representative inhabitants heads of agricultural departments, judges, parsons, peasants and from one and all here, there, and everywhere have I heard the self-same, ever-repeated bitter complaint, that the villages are being sucked dry by the " Jews." Usury laws, police regulations, warnings, and monitions have all been tried as remedies, and tried in vain. There are not a few Christians, by the way, among those " Jews," though originally the evil was no doubt specifically Hebraic not altogether owing to a predilection of those who made a practice of it. They were practically driven into it. Ger- mans do pretty well even now in the way of anti-Semitism. But that is nothing to the outlawry everywhere practised against the obnoxious race before 1848, when in scarcely any town were they allowed even to trade, except by shel- tering themselves behind some friendly Christian, who could be brought to lend them the use of his name. The conse- quence was, that all the humbler Jews flocked into the vil- lages, where, being practically debarred from taking up other callings, they fell back with all the peculiar aptitude and ingenuity of their kindred upon the small trade the trade in cattle, goods, corn, money, whatever it might be of which in many places they secured an absolute mono- poly. Of the iniquitous practices to which that monopoly Their soon gave rise this is not the place to speak at length. U suri . ous Whole volumes have been written on the subject in Ger- many, after careful inquiry, by men with practical expe- rience, quoting chapter and verse, and painting all the hideous horrors of the system in ghastly detail. The " Draconic " laws with regard to bills, and the peculiar regu- lations applying to foreclosure, the personal liability of the debtor for any balance of debt remaining uncovered by a forced sale, and lastly, the convenient practice of lending out live stock, as Einstellvieh, to remain the creditor's, though fed at the cost of the debtor, materially and terribly n8 PEOPLES BANKS. facilitate the crafty practice. Plenty of cases are cited in which the poor peasant has been compelled to take the usurer's lean and dry cow at a high price, in order to feed it up and return it, in exchange for a fresh lean one, when brought into condition and in calf. It is a current saying, that once you are beguiled into trading with one of these Christian or Mosaic " Jews," you are infallibly lost, as surely as is a fly caught in a spider's web. You are made to buy from him, to sell to him all at his own prices. One of the greatest mischiefs practised is that connected with the sale of real estate, which is habitually done by public auction, on condition of the purchaser's agreeing to pay the purchase money by a number of instalments. In one aspect that is an admirable practice for both parties being small, cultivating folk. To the vendor it raises the price; the purchaser it enables practically to pay for his pur- chase out of its own proceeds. Only it has this drawback the vendor may want his money. And as, under the old state of things, in nine cases out often he sold his Verkaufsprotocolle (his bonds for payment of future instalments) to a "Jew," in the event of every payment not being met to the day, the purchaser found himself at the Jew's mercy. Thousands of families, I am assured, have been ruined in this way. Excessive Under this oppressive system, in 1846 and 1847 the forth? 8 alIS " J ews " were " ma king hay." Among the poor peasantry Remedy. the distress was great. And the peasants' distress was the " Jews' " opportunity. Every little wattle cottage and tumble-down house was mortgaged ; most of the peasants' cattle belonged to the " Jews " ; there was little employment on the roads or in the forests the sole available means for netting a few additional shillings ; the poor land yielded but a bare pittance ; and famine and ruin stared the poor inhabitants in the face. There was no one to turn to for help but the " Jews." The whole district accordingly was converted into a usurers' hell. THE RAIFFEISEN "LOAN BANKS." 119 Naturally, Raiffeisen's heart was touched at the sight of so much misery. And when, in 1848, he was removed to a rather larger, but equally distressed district, in the same \Vesterwald, he promptly resolved to take up the cudgels for the poor oppressed peasants, and declare relentless war against the plague of usury. He set to work at once. His first raising of funds was by no means the easy process which Sir E. Malet's account in the Blue Book seems to suggest. But some small funds he managed to scrape A Co-opera- together, and with their help he forthwith established a tive Baker y- co-operative bakery. Co-operative bakeries have since be- come a popular and familiar institution in every country, and as a rule they pay. This one at Flammersfeld proved on its small scale a signal success, for it enabled the peasantry to purchase their bread at just half the current price. The next step taken was the formation of a co- Co-operative operative cattle-purchase association. That, likewise, has s^k^ 6 f become a familiar feature abroad. In half the Swiss Canton of Thurgau little cattle is purchased, at any rate by small folk, by other means. This move attacked the " Jews " in one of their strongest outworks, and reduced their mastery at a vital point. But still they held their bonds and mortgages for money debts. Raiffeisen now put his scaling ladder to the very citadel. With a balance The First of the 300 which, in all, he had succeeded in raising with a good deal of trouble, in 1 849 he set up his first " Loan Bank" (Darlehnscasse), and offered the peasantry, who would subscribe to his rules, to supply them with money for their needs. In the retrospect it seems a small undertaking. To A Small Raiffeisen's neighbours it appeared hopeless. "Where was the money to come from ? " " From there," answered Raiffeisen, pointing upward to the skies. It was in that very year, possibly in that very month, that on the banks of the Seine Proudhon with a noisy flourish of trumpets 120 PEOPLE'S BANKS. opened his own far more pretentious " People's Bank," which was, as he thought, to regenerate France. One can scarcely help remarking upon the striking contrast between that splendid enterprise, flush of funds, big with promise, hopefully watched by thousands of expectant Frenchmen and yet doomed to end in nothing but smoke in less than two brief months ; and, on the other hand, the modest little bank, scarcely daring to show its face, with barely a few hundred pounds of borrowed capital, unheard of out- side its own small parish, and yet destined to grow up a flourishing institution, distributing millions through its' thousands of channels, and establishing plenty everywhere where it set foot proceeding victoriously on its triumphal progress long after its early rival had been forgotten, except as a curiosity in the reading of political economists. That little bank, to which no one has ever contributed a penny in share capital, which has lived by lending money as cheaply as it possibly could, and finding means for borrow- ing still more cheaply, a few years ago resolved upon dividing its reserve (having forsaken its founder's co- operative principles), and discovered that that fund, the product of tiny surpluses arising from petty transactions among its members, had grown to more than 2,000. Triumph of The Flammersfeld Loan Bank did its work well. The " Jews " found themselves compelled to relax their grasp, and the peasants were given a new lease of life. Like Schulze-Delitzsch, Raiffeisen had carried his idea to practi- cal triumph, which it only remained for him to follow up. As an advocate of his cause he was as unlike his rival as could be. Modest, unassuming, content to do his work in his own limited sphere, he attempted no advertising and no noisy propaganda. If his work was good and useful, he trusted that it would prove its own best advocate. The result has amply justified his confidence. His system at first sped very slowly. It was five years (1854) before a THE RAIFFEISEN "LOAN BANKS." 121 second bank was formed and of that bank Raiffeisen was again the founder, on his removal, once more as Burgo- master, to the district of Heddesdorf, close to Neuwied. Not till 1862 was a third established, not till 1868 a fourth. Really not until 1874 did the Loan Banks become at all widely known, and not till 1880 did they begin to multiply perceptibly. From that time forward, however, they spread with astonishing rapidity. By 1885 their number had, in Germany alone, grown to 245, by 1888 to 423, by 1891 to 885. The very material service which they rendered to agriculture in that terrible year of drought, 1893, added a further stimulus to their multiplication. In that period of trial it was shown that they could do more to give assist- ance, by self-help, than the State with its well-filled purse. They enabled cultivators, by co-operation, to remove their live stock, for which they lacked keep, to districts in which it would still fetch a decent price. They laid up stocks of feeding stuffs, which, being bought in good time, could be sold cheaply to members, and help them to tide over the period of distress. And when the drought was over, they supplied cash wherewith to re-stock farms and folds on easy terms. By New Year 1896 their number had increased to 2,000, by ist May to 2,169, not counting even more kindred associations independently organised. Wherever they went, as Laveleye says, they succeeded, and made them- selves general favourites. Governments now encourage them, provincial Diets ask for them, priests and ministers pronounce their benisons upon them, the peasantry love them. When in 1888 it was announced that Raiffeisen __had breathed his last, half Germany mourned over her benefactor by the name by which he is still fondly remem- bered, that of " Father Raiffeisen." At the present time, not a day passes without notices coming in of the establish- ment of one, two as many as five. Dr Schenck in the last issues of his admirable and very impartial Annual 122 PEOPLE'S BANKS. Report candidly owns that the largest increase recorded in the returns belongs to them. Both their spread and their Never a Penny reputation seem deserved, especially since, after forty-six years' experience, they can make it their boast that by them neither member nor creditor has ever lost a penny. Raiffeisen's It is rather difficult to compare Raiffeisen's banks with those of Schulze-Delitzsch. Both have grown up amid essentially different surroundings, in different spheres of action, with different tasks. Schulze worked in a town, among townsmen, and mainly for the benefit of townsmen, not of the poorest class. His banks could not benefit the very poor. Raiffeisen's specific object was to benefit those very poor people left out in the cold, and to benefit them in the most effective way. So he came to the conclusion that he must exact nothing from members joining, and that he must make long credit the rule. Calling upon a poor man, who deliberately joined in order to borrow, to pay down money, would to his mind have amounted to sheer mockery. His very reasonable principle was this : to make a loan at all serviceable to a poor or embarrassed man, time must be given the borrower sufficient to allow it to repay itself ; to tax other resources for repayment would be, not to help, but to cripple the borrower. He might want the money for buying manure, or seed, or feeding stuffs. In that case he could scarcely be expected to repay it before a twelvemonth. He might want it to improve his herd of live stock, or to build a barn, or sink a well, or else drain a field. In such cases he must be given credit for two years, I for five, or ten, or even more. His System. In brief outline, the system upon which the Raiffeisen practice is based is this. Raiffeisen begins by confining each association to one particular district a parish by preference, but if one parish be too small (he does not favour districts with less than 400 inhabitants), and if the matter can be conveniently arranged, a union of two or THE RAIFFEISEN "LOAN J3ANKS." 123 three. Within these narrow limits members are elected, Election of on application, with great care and discrimination, by those who have already joined. The object is not to secure a large roll of members, but rigidly to exclude every one who is not really eligible. That done, the association is organised Democratic . .. ' ,.- c to . Government. on entirely democratic lines. No difference of any sort is recognised between poor and rich, except that the rich, bearing the brunt of the liability, are by accepted under- standing allowed also to take the leading part in the administration.* Both on the Committee in every case consisting of five, and charged with all the executive work and on the Council of Supervision consisting, according to the size of the district, of from six to nine members, and entrusted with checking and supervising the Committee, overhauling all that it has done at least once a month it it is understood that the richer members (without a sprink- ling of whom Raiffeisen would have no association formed) should be in a majority. Neither members of the Com- No Salaries, mittee nor members of the Council of Supervision are allowed to draw a farthing of remuneration, be it in the shape of salary or of commission. Every chink and crevice is deliberately closed against the intrusion of a spirit of cupidity or greed, so as to make caution and security of necessity the guiding principles of action. One man only is paid, namely, the cashier ; and he has no say whatever * This shows how very far Mr Yerburgh, not having studied the question of which he has set up as a master, has strayed from that " Raiffeisen scheme" which at public meetings he tells people that his "Agricultural Banks Association" has "adopted" on the ground of its satisfactory results, obtained abroad, in prescribing in Rule VI., that there may be " Honorary iM embers," who shall " not have any of the liabilities of Ordinary Members," but " be eligible for election on the Committee." Whatever Mr Yerburgh pretends as to his " scheme," so long as he adheres to that preposterous rule, he is, in respect of co- operative banking, at the very opposite pole from Raiffeisen, his scheme is an absolute negation of Raiffeisenism. i2 4 PEOPLES BANKS. in the employment and distribution of the money, being Strict Audit, merely an executive agent. To make quite sure of every- thing being kept safe and square, the Central Office employ a body of auditors continually travelling from association to association, examining books, inspecting accounts, and overhauling the whole business of every association, at least once every two years. Furthermore No "Bank- all "banking," in the ordinary sense of the term, is strictly forbidden. The associations are loan associations, and the sole instrument which they employ is credit. Banking profits are very acceptable in their way, but they must mean risk. And risk is the one thing which the Raiffeisen associations set themselves to avoid. There are no accept- Personal ances, no pledges. " Ce qui me plait dans les banques Credit. popi4laires agraires, cest qu'elles font dtt credit personnel le credit tout court, sans phrase? so says M. Leon Say. And they supply that personal credit only by borrowing, and Small Shares, borrowing on the credit of the association. As the rules were originally framed, no member was asked to pay down anything on joining, either for shares or in entrance fees. The Legislature, by its law of 1889, overruled this regula- tion, and ordered that there must be shares. The Raiffeisen associations met this dictation by making their own shares as small as possible, generally 10 or 12 marks, at most 15 No Dividend, marks, payable by instalments. Raiffeisen advisedly would have no dividend, because there is to be no direct profit. Once more the Legislature overruled him. However, the members of the "Loan Banks" have voted all their dividend away, once for all, to two different reserve funds, keeping back only sixpence a head, which goes in subscription for the official publication of the associations, in which the balance sheet of every bank has to be published. All through, it is one of the essential features of the organi- sation, individuals are to derive no benefit except the privilege of borrowing, and every farthing which is left THE RAIFFEISEN "LOAN BANKS." 125 over out of transactions is rigorously claimed for the two reserve funds instituted. One of these is an ordinary reserve fund out of which to meet occasional deficiencies. The other, Thelndivisible called " Stiftungsfond," * to which without fail two-thirds Reserve - of the annual profits must go, is an entirely peculiar feature. It belongs wholly to the bank, and must not be shared out on any account or pretence. This second reserve fund really is the backbone of the whole system. Little by little only it keeps increasing, but with " mony littles making a muckle," it is bound to grow up in course of time to an impregnable rock of financial solvency. Its first object is to meet deficiencies or losses for which only with hardship could individual members be made responsible. Its next, of course, is to supply the place of borrowed capital, and so make borrowing cheaper to members. Lastly, should it outgrow the measure of such employment, it may, at the discretion of the society, be applied to some public work of common utility benefiting the district. Not even in the event of the association being dissolved is any sharing-out permitted, lest a rich associa- tion be tempted to dissolve for the sake of the spoils. In the case of a dissolution it is provided that the money must be handed over to some public institution to be kept on trust until required for the endowment of a new association formed in the same district, and under the same rules. Or, * This name was adopted in 1889 under the new Act, which made the designation of Vereinsvermdgen'J(property of the Society) no longer suitable, inasmuch as such "property" must be disposed of in some way by vote every ten years. That would have been a deathblow to Raiffeisenism. Therefore the Act had to be circumvented somehow. We are much in the same precarious position, sinceour Friendly Societies Act does not allow us to create a permanent fund not divisible on the dissolution of the Society. The German Parliament has just passed a short Act reinstating the " Property of the Society" in its old rights. We must hope that our own Parliament will some day help a good cause in .a similar way, by granting similar powers. 126 PEOPLE'S BANKS, that failing within a reasonable time, the reserve may be employed for some useful local public work. Thus the whole fabric is built up on the lines of pure co-operation, Safeguards o f safety, caution and stability. This same principle is adopted. , . , . . / . . . applied also to the practice of lending. Loan association though the association is, for safety's sake, it deliberately makes borrowing, not easy, but difficult. Indeed, the whole machinery is so framed as to check borrowing rather than encourage it. Money is, indeed, to be found for every one who needs it ; but in every instance he must first make out his case, and prove alike that he is trustworthy and that his enterprise is economically justified. There is nothing which the associations more determinedly set their face against than mere improvident borrowing, stopping up one hole by making another. If an applicant make out his case, be he ever so poor, the money will be placed at his disposal. Without such proof, be he ever so rich, the money is sure to be refused. And once the money is granted, to the specific object for which it was asked must it be conscientiously applied. Once every three months the Council of Supervision meet for the special object of re- viewing the position of debtors and their sureties, and considering the employment given to the loan money. Should a surety be found to have seriously deteriorated in solvency or in trustworthiness, a better surety is at once called for in the interest of the association. And should that demand not be complied with, or should the debtor be found to have misapplied the money, under a special clause the loan is at once called in, at four weeks' notice. This may seem harsh dealing. But it is absolutely necessary for the security of the association. And in practice it has not been found to work at all harshly. Those who apply it are the debtor's own neighbours, who are sure not to have recourse to this ultima ratio except in cases of positive necessity. As a matter of fact, it has scarcely been resorted THE RAIFFEISEN "LOAN BANKS." 127 to at all which just shows its value as a birch-rod on the mantelpiece. In another respect the banks are wisely equally inexorable. Alike interest and principal, they insist, must be paid to the very day. The principal is, for all loans running any length of time, made repayable by equal instalments ; and on any point rather will the asso- ciation give way than on that of prompt and punctual repayment. Not only does this arrangement materially facilitate the carrying on of the business, but it is far more valuable still as training the borrowing folk to habits of punctuality. Our country folk so says M. Garreau, a man of some experience, in agreement with many other writers are capital repayers, but without training they have absolutely no idea of the lapse of time. The service, then, which these associations render by instilling into them both business habits and the sense of a duty to meet engagements promptly, is very considerable. In the matter of method, lending is advisedly made as Simplicity of simple and as easily intelligible a process as possible. the Method - All that, as a rule, is asked for is a note of hand, unbacked, or else backed by one, or more generally two sureties, according to the circumstances of the case. That, of course, precludes all raising of money by passing on acceptances. Every farthing that is wanted, so far as it is not supplied by the savings or other deposits paid into the banks, has to be raised by borrowing. At the outset that may appear rather a cumbrous proceeding. But what with a high reputation secured by exemplary business habits, and the substantial guarantee of unlimited liability of all members, the banks have long since gained for themselves a position commanding such very easy credit, that they have no difficulty whatever in borrowing all that they want, be it from public banks, be it from private individuals, at the cheapest market rates. / Con- How the Loan T.J . .. . . i i- i i 1 / Banks are ; nuence in their security is so well established that (as trusted. 128 PEOPLES BANKS. Federation of the Banks. The Central Council. The Central Bank. appears on official evidence from a report published in 1875) in Rhineland Law Courts actually allow trust moneys to be paid in to them on deposit ; and in those two critical epochs of crucial testing of German credit, the years of the two great wars, 1866 and 18/0 when deposits were with- drawn wholesale from other banks and when even diplo- matists like Sir R. Morier found it difficult (so he himself reports) to supply themselves with money deposits were actually pressed upon the Raiffeisen Banks, for safe keeping, though it should be without any interest at all.* In truth, the savings banks deposits alone go a long way. Some banks have, at the outset, to do as good as altogether with- out them. But in not a few of the older established they supply actually all the local demand and even more. The multiplication of Loan Banks has as a matter of course led from co-operation between individuals to co- operation between associations. Every large district has its own Union, with a Representative Council meeting to discuss the common affairs of the district. And at the apex of the whole fabric stands the Generalanwaltschaft, with its Representative Council, and the Annual General Meeting, to check and direct its action. Since 1877, more- over, the union of associations possess their own Central Bank, in which the affairs and interests of the whole system are, so to speak, focussed, and which has proved a very appreciable convenience and source of common strength, and, moreover, a most useful intermediary be- tween local banks and the general market, as the president of the Imperial Bank of Germany, Dr Koch, has recently testified in the German Parliament.! The Central Bank is really a joint-stock company, based on limited liability * Dr Schneider says that the same thing happened in the case of the Schulze-Delitzsch Banks. t Kolnische Zeitung, 27th March 1895, No. 269. THE RA1FFEISEN "LOAN BANKS:' 129 only. It derives its strength from the local associations, the vast majority of which at the present time 2,094 out of 2,169 are shareholders in it. Every local bank is allowed, and invited, to become a shareholder, but none is obliged to do so. It is entitled to the services of the Central Bank whether it holds shares or not. The collec- tive share capital of the Central Bank now stands at 5,000,000 marks (250,000), distributed in 5,000 shares of i.ooo marks each. The small balance not taken up by societies is held by individuals. The bank is intended as an institution only for the benefit of the Raiffeisen associa- tions. It does absolutely no business beyond that of the Union. It is intended to serve as common cash box, equalising excess and want, and facilitating common busi- ness. Since the dividend payable on capital is limited to 3^ per cent. all surplus being carried to the reserve fund and since the business has become large, the bank can lend out to local associations at very reasonable rates, all the more so since the Imperial Bank has, in considera- tion of its financial strength and soundness, put it on the " most favoured bank " footing, and agreed to dis- count its acceptances at 2 per cent. The Neuwied Bank is the only co-operative bank now admitted to such pre- ferential terms. It lends out to local societies at the rate Its Services, of 3! per cent., and allows them on deposits 3^ per cent, up to the sum of 500, and 3^ per cent, beyond. Its business is so simple I have seen it all done on the spot that i per 1,000 of the turnover suffices for all expenses. The turnover has grown very considerably. In 1877 (four months only) it was 9,000. By 1880 it had risen to 56,000, by 1890 to 500,000, and by 1894 to 1,400,000. It was then decided to create provincial branch banks acting as succursales to the Central Bank. There are now ten such, severally established at Konigs- berg, Danzig, Berlin, Erfurt, Breslau, Cassel, Wiesbaden, I 1 3 o PEOPLE'S BANKS. Strassburg, Nuremberg, and Wachenheim in the Palatinate. None of these branch banks did a considerable business in 1895. But the aggregate turnover rose at once in that year to 3,000,000. In the first four months of the present year it amounted to 33,260,500 marks (1,663, 02 5). Tnat does not by any means represent the total amount of lending and borrowing done between bank and bank in the RaifTeisen connection. Very much business about 10,000,000 in the year is done between local banks with- out the interposition of the central institution. General Anwalt Cremer estimates that, thanks to such co-operative banking, the current rate of interest generally has been reduced by about I per cent., and credit has been cheapened to that extent. The Central Bank with its branches has become a veritable Little Providence to the local institutions, enabling new banks to establish themselves and grow up with a credit granted to them, which places them in a position to do without other borrowed money, and to dispense even with local savings, while weak and not calculated to attract such. The Central Bank has already a strong reserve fund standing at present at something like 12,000. Co-operative The possession of a Central Bank has enabled the Supply. Central Office to multiply its services in a very acceptable manner to the local associations and their members. Among other things, it has helped it to establish during the past few years a system of co-operative supply, mainly for agricultural purposes implements, feeding stuffs, manures, seeds, and also coals which was very much needed. Like the focussing of business in a central bank, this new feature of Loan Bank co-operation has been pretty widely copied by other co-operative and ^tfjz-co-operative institutions, and by this means agricultural co-operative supply has of late years spread very rapidly all over Germany, so as to have outstripped anything that we have in our country. The Central Bank is not by its rules permitted to THE RAIFFEISEN "ZOAN BANKS." 131 v carry on such business itself. Accordingly it has proved necessary to form another Central Institution, a Trading Firm, which among other things also does the association printing. This firm buys the manures, and other commodities, for which the Bank first collects the orders from the local associations, and delivers them for cash to the Bank. The Bank delivers for cash to the associations. Whatever lending is done, accordingly, is done only by the local associations to their members, not as a giving of credit for goods, but as an independent loan transaction. In this way the Raiffeisen Firm has become the means of supplying already as much as 80,000 or 90,000 worth of goods in the twelvemonth ; and the figure keeps steadily growing.* Considering of how recent origin is this business, that certainly appears no un- satisfactory result. And, really, it represents only a part of the co-operative supply done for the associations. For the local associations have long since learnt to carry on not a little co-operative trading on their own account in their own localities, forming supply associations by the side of the banks, which employ bank money raised by credit, but keep their operations and liabilities strictly separate. As I shall show, there are local associations which in this way do as much as 2,000 worth of supply business in the year, and, indeed, this business is now increasing very rapidly. Like the Bank, the Trading Firm is a limited liability concern, acting under self-denying rules which preclude any dividend, applying the profits to the defrayal of establishment charges, travelling expenses, or any other outlay required for the common service. Whatever is left over beyond that is carried scrupulously to the general reserve. The uses of the system do not end here. A co-opera- Further De- tive Insurance Department is in course of formation to i^jmcef : Dairies, Vine- growers' * During the first two months of the present year the Trading Associations. Firm did a business of 46,007. 1 32 PEOPLE'S BANKS. insure, among other things, cattle against disease. There are co-operative dairy associations in connection with the system, a co-operative hop-growers' association, and, lastly, a most useful speciality, co-operative vine-growers' associa- tions. These last-named societies are organised on two different methods, as dealing either wholesale, or else retail, and in either form they have proved an inestimable boon to the vine-growers in the valleys of the Rhine, the Moselle, the Ahr, and in Transylvania, actually doubling cultivators' receipts. In olden time every peasant used to press his own grapes and prepare the juice ready for the market, being almost absolutely dependent for the sale upon dealers, who knew how to turn the transaction to good account. Now, as I have myself seen it done in the Ahr valley, all the grapes gathered go at once to the common press, where they are immediately tested for sugar, and credited to each grower according to a scale previously agreed upon. By means of the credit open to it, the association is enabled to pay cash down, reserving a small balance to be distributed pro rata at the end of the year. The pound of grapes which formerly sold at from 1 8 to 20 pfennigs (2 Jd. to 2jd.) now sells at from 30 to 48 pfennigs (3! d. to 6d.) ; the pound which fetched 12 pfennigs (ijd.) now goes for 25 pfennigs (3j-d.), and so on in proportion. The public find this inno- vation advantageous, because it enables them to buy their wine pure, and also to buy it very cheap. One-shilling-a- litre Ahr-wine from a co-operative cellar is very drinkable liquor ; two-shilling wine is as good of its kind as you can buy anywhere.* * I am glad to be able to state that there is a fair prospect of these co-operative methods being copied alike in Italy and in some parts of France, where there is ample room for their application. What I have written on the subject in the Journal de r Agricultures.^ the Democratic Rurale has attracted the attention of some active associations whose leaders profess themselves anxious to put the matter to the test. THE RAIFFEISEN "LOAN BANKS." 133 For the formation of co-operative dairies the " Loan Banks " are found to be most valuable institutions. They have no difficulty in raising the money required, which they advance to the dairy associations at easy rates, stipulating for gradual repayment. Keeping back I pfennig (|d.) on every two pounds of milk delivered enables the association as a rule to pay off such debt in about ten years. Even this does not exhaust the utility of the " Loan Co-operative Banks." Of late they have begun to practice co-operative of Pro ~ selling of agricultural produce as well as co-operative purchase of farming requisites. The problem is not an easy one. But some little successes have already been secured. At the provincial headquarters at Cassel last year I found the chairman of the district, Herr Rexerodt, a landed proprietor, who has given himself up to this work as a matter of Christian duty, seated in his office like a broker in his shop, with samples of seeds, grain, and other produce ranged all round. Some common sales of corn have also been effected, securing the seller in one case a gain of 303. per ton, in another a profit of ,5 per truck, an excess return not to be sneezed at in bad times. No doubt the organisation, which is still in its infancy, will be perfected and yield even better results. With so great utility, in such variety, to point to as Benefits of the a recommendation, and a degree of success which in its financial application may be summed up in " millions of money lent, mostly to poor people, and not a farthing ever lost," it is not surprising that, once the Raiffeisen Banks became really known, they made way exceedingly fast, and that now they are meeting with ready imitation all over the Continent. To trustworthy persons their establish- ment has made want of money for productive purposes absolutely a thing of the past. Every one can obtain what- ever he wants at about 5 per cent, interest, and he can obtain it for practically any length of time. M. Courtois i 3 4 PEOPLES BANKS, has ascertained that of the tens of thousands of loans granted of neither the number nor the amount of which o there is a complete return extant only about 1 5 per cent, are granted for one year or less, 43 per cent, for from one to five years, 34 per cent, for from five to ten years, and 8 per cent, for longer. So long as the borrower continues regular in his payments, and applies the loan to the object for which the money has been granted, he may be sure that this will go on. If a member has money that he does not know what to do with, there is the savings bank open or the deposits department. If any one finds himself help- lessly in his creditors' power, his property mortgaged, and his credit gone, so long as there is any margin of solvency left, the bank with its inexhaustible resources is ready to step in, take over his estate, and see that it goes for its proper value, handing him over the balance for a fresh start. This has been done in hundreds of cases. And in all this large and complicated business, in about a thousand associations, during forty-three years, there have been only ten cases of embezzlement or misappropriation, which were in every case met out of the reserve or by the sureties. I have no more recent figures ; but cases of loss continue few* * In 1893, 6 10 Raiffeisen Associations had among them 17,720,871 marks (,886,043) outstanding in loans, in addition to 3,068,334 marks (,153,411) advanced in cash credits, therefore ,1,039,454 in all, at the rate of about ,1,706 each. They held only 473,758 marks (,23,688) in share capital, but in addition 1,176,389 marks (,58,814) in two reserve funds, and 24,620,600 marks (1,231,040) in savings deposits. The total olf management expenses was returned as 240,905 marks (.12,045), not 19. 133. apiece. As much as 6,830,114 marks (,341,505) had been lent out in the course of the year, in addition to 4,380,452 marks (,219,022) in cash credits, ,560,527 in all (nearly .919 per association). Savings had been taken in the course of the year to the amount of 10,542,561 marks(.527, 128), and loans had been repaid to the amount of 5,030,473 (251,523). This shows the business to be i\ THE RAIFFEISEN "LOAN BANKS." 135 It may be well to stop at this point to examine the The Causes of causes of such signal success. ess ' Above all things, there is the common, the joint and Common several liability call it " unlimited " if you like without Liabilit y- which a sound Raiffeisen Bank is inconceivable. The lia- bility is not really " unlimited," as I shall show. It is to the interest of the society itself that it should be rigidly safeguarded far beyond what can be done by the very obvious and desirable expedient of limiting the lending powers of the governing body, in the case of collective lending as of individual loans and that no risk of any kind should be incurred. But so far as the " one-for-all and all-for-one " is adopted, the adoption of that principle must be absolute, and absolute with full equality as between members, assigning equal rights and equal liabilities to all. That is the very pillar of the system, the pivot upon which the whole organisation must necessarily turn. The avowed object for which you co-operate is, by means of collective sound, and serves as a conclusive refutation of M. de Malarce's gross misstatement, avowedly made on hearsay evidence, that repayments are backward. Profits amounted on the balance to only 70,502 marks (,3,525). In 1893 there were a little more than twice the number of banks in existence of those which had furnished the returns here summarised. At the present time there are nearly four times that number. The turnover of the Central Bank, now that the provincial branch banks have been constituted, amounted in the first eleven weeks of the current year to 18,629,620 marks (^931,480), the turnover of the Trading Firm to 1,414,777 marks (,70,739). Of 2,107 associa- tions existing on I5th March, 2,026 had joined the Central Bank. In the year 1894 the entire turnover of the Central Bank amounted to about 28,000,000 marks (,1,400,000). The paid-up capital stood at 1,300,000 marks (,65,000) ; the reserve fund, including an addition of 29,913 marks made out of the profits of the year, at 196,356 marks (,9,818). The expenses did not reach 28,000 marks (,1,400). The profit realised was 8 1, ooo marks (^4,050). The co-operative supply done for members in respect of manure, feeding stuffs, seeds, implements, and coals, amounted to 1,426,188 marks (,71,309). 136 PEOPLE'S BANKS. effort, by, so to speak, the creation of a " faggot-liability," to obtain for yourselves the credit which in an isolated condition you do not, or every one of you does not, com- mand. That means that within the association you must provide an efficient substitute for that pledge credit which M. Say condemns, and which your members have it not in their power to purchase ; and outside the association create security ample for your borrowing, and such as will make inquiry by the outside lender in every specific case super- fluous. The ostensible financial " goodness " which you collectively pledge to the outer world may be that of one man only in the whole association. That is his contribu- tion to the common stock, perfectly legitimate if it is safeguarded. But please observe that in this application " credit " and " liability " do not at all mean the same thing as "money." We do not ask any man to give a single penny, be it to a fellow-member, be it to the association collectively. Quite the reverse. We particularly beg him not to give. We tell him that, not in his own interest only, but far more in the interest of the association, it is essential that he should carefully abstain from giving. He is to support to help others to help themselves. The employer, who has his employee financially well in his power, may unhesitatingly assure him credit by lending him the use of his name. The banker who holds, not perhaps directly negotiable, but ultimately adequate, security from his client, may well grant that client an overdraft, or accredit him with another institution. In the same way in the Raiffeisen associations we try to create and have indeed succeeded in creating a security which acts as an efficient substitute for a pledge, and secures those who lend their credit by making it their fellow-members' direct interest, not only to be honest themselves, but also to see that others are honest. That is Raiffeisen's great triumph; the creation of such security, where previously there was none, is his peculiar THE RAIFFEISEN "LOAN BANKS." merit as an organiser of co-operative credit. The lively sense of responsibility required, for one's self and others, is absolutely not to be assured without the enlistment of liability, not only direct, but going a good deal beyond the value of a share or a good many shares, be they small or be they large. There is nothing to sharpen the wits of people concerned, to make them watchful, critical, ob- servant, inexorable, like effectual liability. You have the principle in germ and in germ only in Scotch cash credit. Let me quote upon this point the Report of the Lords Scotch Cash and Commons Committee of 1826 on Scotch Banking. tains^hTprin- " Any person," so says the Report, " who applies to the ciple in Germ, bank for a cash credit is called upon to produce two or more competent securities, who are jointly bound, and after a full inquiry into the character of the applicant, the nature of his business, and the sufficiency of his securities he is allowed to open a credit." " This system," so the Report goes on, " has a great effect upon the moral habits of the people, because those who are securities feel an interest in watch- ing over their conduct ; and if they find that they are misconducting themselves, they become apprehensive of being brought into risk and loss from having become their securities ; and if they find they are so misconducting themselves, they withdraw the security." Here are important elements of security indicated establish] by inquiry of the borrower's trustworthiness, and control of his action of employment. There were at the time spoken of about 1 1,000 cash credits outstanding collectively for about six millions of money. In addition to the 1 1,000 borrowers, there were, as the evidence points out, between 30,000 and 40,000 persons liable for the loans, acting as checks and controllers ; 30,000 or 40,000 pairs of eyes, directly inter- ested in the case, watching the borrowers on behalf of the bank ; 30,000 or 40,000 tongues to remind them of their cngi, . two|L-X\ rqentj 138 PEOPLES BANKS. duty, and warn them if they threatened to go wrong. That explains the whole satisfactory working of the system. Here are the two main pillars of co-operative credit recog- r\\sed joint liability and individual checking. The sureties become an intermediate body between capital and want, helping the latter, but also effectually safeguarding the former. Now this is co-operative banking applied in a very halting and middle class sort of way, among people who possess property and also some commercial education. Our object is to dive deeper in the words of Com- mendatore Luzzatti, " aspiriamo a discendere " so we must proceed upon very much broader and more popular lines. We must multiply our sureties and quicken the vigilance and control by responsibility carried still further. The Germ The fundamental idea of co-operative credit banking Developed. -^ a } reac [y b een explained. It is, that a number of men, poor alone, or poor and rich, join together to pledge their credit in common, in order thereby to obtain the temporary command of money which individually they cannot secure, with a view to disposing of that money among themselves, likewise for temporary employment, and for profitable pur- poses. The practicableness of the scheme hinges upon the feasibility of ensuring repayment from members, and thereby creating a good foundation for credit by securing absolutely securing those who pledge what they possess, practically " up to the hilt," for the benefit of others. That is done by selecting your members, by watching the borrower, by watching the loan, and reserving to yourself effective power for calling it in, and by subordinating everything that is done to the one consideration of safety. Now see how unlimited liability directly serves to supply all this. ^? 1 ? m . on Without unlimited liability, to begin with, you can secures careful never make sure that your bank will be sufficiently careful Members f m ^ e se l ect i n of its members. Such selection, limiting THE RAIFFEISEN "LOAN BANKS:' 139 your membership to persons absolutely trustworthy, is the first condition of your success. With only his 55. or i share at stake no person in town or village would care to say " No " to the application for admission of any but an openly disreputable neighbour. Why should he disoblige him ? However, we know from experience that co- operative banks have had to be broken up simply because one or two black sheep had found their way into the fold. Make people understand that in electing the new member they practically make themselves liable for any default which he may make, and all considerations of etiquette and mere neighbourly courtesy are sure to vanish. The breeches-pocket knows of no etiquette. Hence, in a great measure though not solely that marvellous morally educating power which it is generally admitted that Raiffeisen banks exercise upon their members. This it is which has helped to make the Loan Banks such admirable moral reformers, instilling principles which previously were not altogether common. People soon find out the value of a cheap lending institution, when they see their neighbours regularly employing it. Once they are made to understand that membership is altogether dependent upon their good character and good conduct, and its continuance upon their perseverance in such virtues, it is astonishing how fast the drunkard forsakes his sottish ways, the spendthrift his extravagance, how fast the idle becomes industrious, the quarrelsome man peaceful, and the reckless careful. Xext, without unlimited liability, you would not, at any It secures rate to the same extent, secure the admirable management st tion n which is admitted to distinguish these little village institu- tions. M. Alphonse Courtois recognises this as one of the chief causes of their success : " Elles sont cTailleurs re- marquablement administrees ; cette division tres nette des attributions entre pour beaucoup, presumons nous, dans le succes de ces unions" 140 PEOPLE'S BANKS. It is not only that the unlimited liability of members prompts those members to be careful to select none but the most competent officers. We know that that is necessary. " // ne suffit pas d 1 avoir une bonne machine" remarks M. Leon Say, addressing himself to this very point ; " il faut aussi avoir un bon mecanicien" At the outset, at any rate, the success of the banks has, as Emile de Laveleye, one of their warmest admirers, has pointed out, invariably been the work of some individual zealous workers who have taken up the cause for the sake of the good to be effected des hommes devoues. The attractive idea the idea morale, as Commendatore Luzzatti calls it may suffice to secure such. But the unlimited liability of officers at the same time leads them to be extremely critical in their disposal of bank moneys very strict in their demand of prompt repayment, which is one of the most essential conditions of success, economic and educa- tional. Not only their own money is at stake and may be lost; any risk incurred would jeopardise other people's money as well, the money of those whom they particularly desire to benefit. If this consideration touches more particularly wealthy people who may be in the bank, and who may be answerable in a higher degree for its liabilities than others, such wealthy people will of course be represented on the governing body. And since it is they who supply at the outset the apparent backbone of solvency, and their pre- sence in the bank is on that account sure to be desirable, they have the power practically of insisting upon any- thing which they may consider necessary in the interest of safety. They may, therefore, adequately secure them- selves. It secures Without unlimited liability, furthermore, there could not w^tchTng of P oss ibly be all that watchfulness and control which really the Loan. make up the system of Raiffeisenism and which keep it safe, that " admirable " principle, as the Duke of Argyll THE RAIFFEISEN "LOAN BANKS." 141 calls it, " of strict payments and watching the loan." You keep your members generally under control. More especially do you control your borrowers, and take care to ascertain that they remain honest, thrifty, careful, deserving of credit. You watch specifically the employment of the loan, its application to its proper purpose, failing which you call it in unmercifully otherwise there can be no success. You insist upon prompt payments. You build up your whole fabric upon a system of mutual checking, the borrowers being checked by the committee, the committee by the council, the council by the mass of members, all without offence or invidiousness, all in the interest and for the protection of the very people checked. " Ecartez la solidarite" so says Father de Besse, " et personne ne voudra meme dans une association, ni corriger son prochain, ni se laisser corriger :" " Semo in cento che se femo la spia nn con I'altro onde x imposibile che nessun fazza un bruta parte" So explained a member of the first Raiffeisen bank formed in Italy, that of Loreggia, of which I speak at greater length elsewhere, in his uncouth Venetian patois. It means : " We are a hundred persons who watch one another like spies ; it is not possible that any one of us should fail in his duty." And all this, as observed, without offensiveness. Quite the reverse. All that zealous, lively, warm, and loving interest in their local association, which every observer remarks upon as a distinctive, striking feature among members of the Raiffeisen Loan Banks, is plainly traceable to the principle of unlimited liability, which makes every one feel that he and his fellows have become " members one of another." Under this system an association becomes what Ettore Levi says that every genuine co-operative association should be una famiglia onesta e laboriosa an honest and industrious family, with a community of aims, of interests, and of sympathies. Every one knows that there is no hostility in this mutual observa- 142 PEOPLE'S BANKS. tion. In no system of associations have I witnessed the same manifest feeling of " belonging together," and at the same time the same lively interest in the affairs of the association as in this. In the Schulze-Delitzsch associations and the Luzzatti banks 100 members will attend a general meeting out of 1,000 or of 15,000. I know of a bank in which 1 1 men could with difficulty be whipped up out of 11,500. In the Raiffeisen Associations you may be sure that the members will be represented to a man, so far as that is at all possible, and that every member will bring his ears and wits with him. Often may you see members about the office when there is an important committee meeting. It is to their interest that they should know what is going on. And they will know it. Publicity in respect of everything except savings, and democratic government, the full equality of all who are in the associa- tion, are absolutely essential for success. However, that close touch, that insistence upon full equality where equality appears at first sight sometimes difficult, that strong feeling of social and moral, as well as financial, solidarity all these things are impossible without common liability. When the poor man knows that he may have to pay for his sub- missiveness, his shyness and his awe of social superiors soon wear off. Small Districts Another very important element of success, that is, of the safety which has in this case been combined with unlimited liability, is the smallness of the district assigned to every bank. The followers of Schulze-Delitzsch will not understand this, because in their own system which is essentially different in its entire construction success means a large " business." In the Raiffeisen system, where there are no salaries, no expenses to speak of, and where " business " consists merely in simple borrowing and lend- ing, whether the sum be is. or 1,000, the object to be aimed at is not "business," but absolute safety. Profits THE RAIFFEISEN "LOAN BANKS." 143 scarcely come into account. In any but a small district there could not possibly be that knowledge, and vigilance, and checking of one another, upon which stress has already repeatedly been laid as constituting a sine qua non of suc- cess. "It is the smallness of the districts," writes, officially, Herr Gau, of the Agricultural Department of Saxe- Weimar, " which makes the Raiffeisen associations so generally trusted." Creditors know that in such districts strict control and supervision are likely to be efficient. The Raiffeisen system is, in truth, essentially one designed for small, self- contained rural districts. Raiffeisen dubbed his associations specifically "agricultural." He never contemplated the application of his system to towns. He kept in his ideas to the modest country parish. Signer Contini has tried to apply the system among an urban population in Milan, but thus far without success. Even should success be obtained, it will only be like the success of keeping a tropical plant alive in some exceptionally sheltered spot out of its own climate. I know of one or two Raiffeisen banks only which flourish in larger districts than those which Raiffeisen himself contemplated. One. of these is at Dahlen in the Kingdom of Saxony. It is really abnormally large. But its success is entirely due to the peculiar organising capacity of its chairman. The other is in Trebus in Prussian Lusatia. The district of this bank which its founder, Herr Becker,, formed after about two years of careful preparation covers about 22 square miles. It is decidedly successful. But the district is peculiarly constituted. There are, so to speak,, five little hamlets, each of which contributes a committee- man. Certainly good touch appears to be maintained. And General Anwalt Cremer himself admitted to me when I spoke to him of that very successful bank which, when I was there in 1894, had an annual turnover, after not three years' existence, of 5,000 among a constituency of about 1 20 members, taking up a share of 55. each, and i 44 PEOPLES BANKS. had accumulated about 50 in its two reserve funds * that something more might probably be done in the way of grouping small parishes or villages. But under ordinary circumstances a parish is the ideal area, because within such a district watching can certainly be made easy, and every one is in reach of the bank, and moreover every one knows one another. The creation of such a bank, it ought to be remembered, is not purely a question of numbers. In the new agricultural settlements of the eastern provinces of Prussia, where truly admirable work is being done in cutting up more or less bankrupt large estates into small holdings by which means entire new villages are being raised up although the use of more money is unques- tionably appreciated, Raiffeisen banks can be formed only very sparingly and slowly, because the settlers, gathered together from all parts of the Empire, do not yet sufficiently know one another. This explanation was given to me by President von Wittenburg, who is a zealous admirer of the system, and has himself, as landrath in Silesia, formed two Raiffeisen banks by means of advances of public money made from the savings bank .of his district so safe is the business considered to be at the ordinary rate of 4 per cent., which advances he found repaid much faster than he either anticipated or desired. In the great majority of cases it is just the smallness of the district which ensures success, not merely by making the vigilance required possible, but also by giving to every association an entirely local char- acter, and bringing thoroughly home to members their personal interest in it. * This bank limits its loans to one member to ,50 ; it pays 3^ per cent, on deposits, and charges 5 per cent, on loans ; it also grants current accounts, and has established a co-operative cattle insurance society, which at that time 60 of its members had joined, insuring among them about 200 head of cattle up to three-quarters of their value. There was an appreciable saving on premiums. THE RAIFFEISEN "LOAN BANKS." 145 This really cannot be understood at a distance. To They quicken realise it you must go among the people, and see and talk Interest - to them, watch the pride with which they contemplate their successful institution, the zeal with which they make them- selves acquainted with all its transactions. They can show you the books and explain everything to you. They are not a bit afraid of what on paper appears espionage among themselves ; rather do they accept it willingly as an effective bulwark of safety. They have their savings bank and put into it, because it is their own. They watch at all points to make sure that the association may suffer no hurt. They discuss all that goes on in connection with it. It has linked them together with a new bond of union which firmly establishes peace and kind feeling. The seemingly raptur- ous language of M. von Dobransky is not a bit too strong for the case. I have never been more interested in my life than when going into one or other of these villages, in Avhich there is a co-operative loan bank, and judging from the evidence presented what that bank has done for its members. Here is one, to me particularly interesting, case that of the village of Miilheim on the Rhine, not very far from Coblentz. The peasant of the Lower Rhine is as a rule whatever the "peasant girls with deep blue eyes " may have been in Byron's days not a particularly genial and attractive specimen of humanity. But it is surprising what a metamorphosis the advent of this human- ising instrument has brought about. The best among the population of Miilheim, some two hundred and fifty persons, have joined the bank. Though the soil around is rich and well watered, the place is said to have been some time ago rather neglected, and not a little pestered with " Jews." The latter have quite disappeared. That is another advantage of small districts. " L'usure They facilitate ne pent etre combattue que de pres" rightly urges M. Leon S Say. In Germany it has baffled even Bismarckian methods K i 4 6 PEOPLE'S BANKS. of eradication, which do not usually err on the side of gingerliness. What the Prince's " blood and iron " could not accomplish, co-operative gold and the silken bond of union have brought about with ease. Whole battalions of these greedy gentry have been put to the rout, and driven discomfited from the field. Instance of To come back to my instance of the Loan Bank at Mulheim the old wattle and post-and-pane houses, with their rickety timbering and ramshackle roofs, have dis- appeared, and given place to neat, substantial stone build- ings. There is an unmistakable look of plenty, of order, of neighbourliness observable everywhere. Of course, according to the teaching of our own agricultural authorities, these people are farming on an entirely wrong system. But there are no signs of agricultural depression about their properties. The gardens are tidily kept, the fields and orchards look throughout bien soignes, and everything appears prosperous and flourishing, so that, after all, perhaps facts are more correct than theories. Land fetches about i the German rod, which sums up to 288 an acre. On such soil of course good husbandry tells ; and co-operation has perceptibly stimulated it. You see drainage, new implements even a steam threshing machine has been provided by co-operation, one of those expensive imple- ments, which our English journalists writing down la petite culture as Goethe's " German " portrayed a camel which he had never seen periodically assure us that the small peasant could never manage to purchase out of his small purse. Here is one purchased by him and purchased without money, to begin with, and without cost in the end. He has let it out, to members at 8s. 6d. per hour, to non- members at 95. 6d., and that has paid for the machine. He does a good deal in the way of co-operative supply, agricultural and otherwise. By the side of his co-operative credit association he has set up a co-operative supply THE RAIFFEISEN "LOAN BANKS." 147 association, which does from 1,800 to 2,000 worth of business in the twelvemonth, for all of which it borrows the requisite money from the bank. Himself and his neigh- bours pay in about 2,000 in savings every year. There is at Miilheim a considerable revenue from cherries. This is one of the three German districts which supply us pretty liberally with cherries in three successive periods. From this village alone in good years we now receive some 3,000 to 4,000 worth of cherries. In July 1891 cherry-growing members of the association paid into their bank 23,945 marks of cherry money on deposit, after deducting what they required for current expenses. Moreover the associa- tion does a considerable business in Verkaufsprotocolle bonds pledging purchasers of small real estate to certain payments by 'instalments. All the dangers arising from that once very formidable process have been overcome with the assistance of the Loan Bank. It buys them at a moderate discount, and all goes on peaceably, and merrily, as if there never had been any " Jews." This little bank has annually about 2,200 worth of these bonds coming into its possession, and holds generally something over 6,000 worth in its hands. All in all, it has an annual turn- over of about 35,000, leaving a net profit of about 250, every farthing of which goes to the reserve. By this means, though the bank serves all its customers very cheaply, since 1880, when the association was formed, a reserve has accumulated of about 1,500, enabling the bank to allow to its customers six months' credit on co-operative purchases without adding a penny to the wholesale price. The bank employs a cashier, who acts also as secretary, at the small salary of 37. los. a year. He has got all the bookkeeping at his fingers' ends, and knows all, financially, about every one with whom he has to do. The gratuitousness of services is another distinct factor Advantages of of the success attained, and an additional safeguard to the i 4 8 PEOPLE'S BANKS. common liability pledged. The idea of the association is, that members should give that which they have got in order thereby to purchase that which they have not. They have not got money, which under ordinary circum- stances purchases credit; so they give vigilance, labour, effort, time. In giving it it is only reasonable and con- sistent that they should labour without demanding remune- ration. But there is further justification. What is, under circumstances like those here contemplated, freely given, among neighbours, is most likely to be honestly given. Schulze objects that " the labourer is worthy of his hire." True. But, then, his hire may be worth something to him. He is dependent for it upon the votes of his fellow- members. Those fellow-members may be applicants for loans. Their applications may be improper. Is every officer likely to stand firm when the member who can give him his salary or take it away puts to him the brutal Bismarckian " do ut des "? " Officers of co-operative credit banks," says Commendatore Luzzatti, " should have a con- science free from all personal pre-occupations and from pressure of any sort." They should know " neither father nor mother," and consider business coming before them purely on its own merits. Benefits of There is another important feature making for success, Profrsnd S of closel y allied to the last > and that is the disallowance of all the inalienable profits, all individual pickings out of the bank, which is Reserve Fund.. not j ntenc j ec j as a profit-bearing institution ; and, neces- sarily allied to that, there is the creation of an inalienable reserve fund belonging absolutely to the bank and not divisible under any circumstances. That fund is a mon- strosity to purely economic and commercial co-operators like those of the Schulze-Delitzsch school. An " anomaly" it may well be called, but an anomaly which, as Felice Mangili has said, is justified by its circumstances and results. There is no magnet, nothing to bind members THE RAIFFEISEN "LOAN BANKS." 149 to their association, like money laid up, in which every one entitled is naturally anxious to retain his interest. There is no danger of breaking up an association or diverting it from its object when there is a good " Stiftungsfonds." And everything that tends to keep members together, to make it their interest to strive to continue worthy of membership, that stimulates their interest, everything also which tends to attract others to the association, and accordingly incites them to make themselves morally eligible, amounts to a direct gain. Beyond this, the direct benefit arising from the inalienable reserve fund in fortifying credit, in provid- ing funds for useful enterprises, in cheapening credit, and making it more convenient for members, is considerable. V Lastly, there is the simplicity of business. Raiffeisen Simplicity of rules most positively interdict "banking," or business, or risk, or speculation of any kind. Their "business" is simply to lend and to borrow. If a loan should go wrong, under such circumstances you know exactly what you can in the worst case be made liable for. That i or 10 absolutely limits your loss. There can be nothing ulterior. And joined to this simplicity of business is the simplicity of business arrangements, bookkeeping, organisation, and so on. Everything is simple, everything is intelligible. M. Durand says after careful investigation: " Avec les garanties presentees par r organisation des Darlehnskassen, la solidarite ria aucun danger et ne saurait effrayer les grands proprietatres" By such means, simple in themselves, but telling, Success. Raiffeisen has made it his task to raise up his system of educating and lending banks. It cannot be doubted that he has succeeded. His work has been subjected to many a test. Unfortunately, like every good work, it has had opposition and obloquy to contend against, which have, however, led only to its more brilliant vindication. In 1874 the late Emperor William appointed a Royal Com- PEOPLE'S BANKS. Report of a Royal Com- " A Happy Combination of Business and Philan- thropy." mission to inquire into its work, presided over by the late Professor Nasse, and having Dr Siemens for a member. The Report, published in 1875, proved so favourable that the banks have from that time forward counted the Im- perial Family among their warmest patrons, including the Empress Frederick, who has more than once given proof of her interest. The late Emperor William testified his approbation by a gift of 1,500 from his privy purse, to which his grandson has recently added another 1,000. Among the evidence collected by the Commission men- tioned occur the statement already referred to of the Rhenish parson, who confessed that the Raiffeisen bank in his parish had done far more to raise the moral tone among his parishioners than all his ministrations, and the deposition of the presiding judge of the Court of Neuwied, which shows how materially litigation has diminished in his district, owing to the conveniences afforded, and the good principles instilled, by the local Raiffeisen Loan Bank. Those good effects have been sustained. In 1886 the Diet of Lower Austria sent two experts to inquire into the system, who expressed themselves so entirely satisfied of its merits, that that Diet, and other Diets of the Austrian Empire following in its footsteps, at once resolved to encourage the formation of Raiffeisen associations in their several provinces, and backed that resolution with grants of money. In Saxony, in Baden, in Hesse, in most provinces of Prussia, Governments are giving proof of their desire to have these banks multiplied. And by economists and philanthropists who have seen them they are warmly eulogised and recommended as justifying the verselet (in German it is one) with which a writer on the subject recently headed his pamphlet i " The setting up of Raiffeisen associations means the pull- ing down of workhouses." M. Rostand commends as their distinguishing traits : " extreme simplicity and cheap- THE RAIFFEISEN "LOAN BANKS." 151 ness, non-allowance of any dividend, limitation of the district to a parish or a hamlet, the strict prohibition to touch the reserve, the support of the clergy, the common liability replacing the helplessness of agricultural units, the prevailing spirit of devotion and sense of social duty." Mr F. A. Nicholson, in the preface to his Report, sums up the teaching of the inquiry into various systems of co-operative credit for agriculture which he has carried on under orders of the Madras Government in these words : " Find Raif- feisen!" " I have examined many systems," so writes M. Durand, who has himself become a zealous and most successful apostle of co-operative credit in France ; " I have not found one which reconciles so fully the demands exacted by Credit : security of operations and the social and moral requirements of rural populations. I do not hesitate emphatically to pronounce the Darleknskassen of Raiffeisen the finest creation, alike from a moral and an economic point of view, which has ever been invented for agricultural credit." To the mind of M. Rostand they conclusively settle the question whether the small agricul- turist requires credit at all. It has been denied. It has been affirmed that if he had it he would abuse it. Here, says M. Rostand, is the answer. It is undoubtedly a great work which Raiffeisen has achieved in one aspect, greater even than that accom- plished by Schulze, although, developing more slowly, it has not yet proved the means of raising quite so much money greater, because it begins upon less, compasses more in a moral point of view, and rests upon a safer and more popular foundation. To the system of Herr Raiffeisen as to that of the banche popolari may justly be applied M. Rostand's felicitously-worded phrase : " Cest rheureuse union de r esprit d'affaires avec les sentimens d'une veritable, d'une pratique philanthropic^ CHAPTER VIII. Spread of Offshoots in Germany. OFFSHOOTS AND CONGENERS. ONCE co-operative banking had, under Schulze's and Raiffeisen's skilful guidance, shown itself a decided suc- cess, the idea was of course readily taken up in many quarters. Every wind, so to speak, caught up seeds drop- ping from the fruitful and richly bearing tree, to waft them across the Continent, and indeed beyond Europe, scattering them here and there as the soil seemed favourable. On some land they struck root rapidly, and grew up luscious plants. Elsewhere, under a less clement sky, their growth proved more sparing. In one or two places the pushing sprouts found indigenous kindred produce to mingle with, and so helped to bring forth new types and to afford fresh proof of the astonishing adaptability of the newly discovered system. In such a way, first among all countries, was GERMANY overspread with offshoot associations, thriving, and tiller- ing, and intertwining, and multiplying to a very forest. A very provoking feature about all this German money co-operation, however, is, that more teutonico it has become split up into a bewildering multitude of sections, all of them independent in organisation, and all most orthodoxly jealous of one another. Could they but bring themselves to sink their differences, to co-operate loyally among themselves as members of the same family, instead of deliberately hinder- ing co-operation by venomous opposition, they would re- present a truly colossal force, capable of conferring untold OFFSHOOTS AND CONGENERS. 153 blessings upon the struggling classes. The 7,000 or 8,000 associations now existing in spite of all their internal bickerings and hostilities, which are bound to cripple their action keep in circulation, fructifying in people's employ- ment, and bearing ample fruit, a sum of money for which ; 1 20,000,000 can scarcely be an excessive estimate. What might the result be if the soldiers of this Colchian army were loyally to join hands among themselves ! However in Germany that seems too good a thing to hope for on this side of the millennium. The Schulze-Delitzsch system has in Germany itself sent OftheSchulze- forth very few independent shoots. There are, as has Type* 50 been shown, some credit associations organised outside the recognised union. Of such are the ninety or so associations established in Posen and West Prussia, for the use of the Polish population, of which the Rev. P. Wawrzyniak is chairman. These banks are exceedingly good, and they dispense a great deal of agricultural credit. They are specifically Polish, and owe not a little of their success to the assiduous labours of the Roman Catholic priests who, in societies formed altogether of Roman Catholics, have, of course, free scope allowed them for their well-directed energy and parental solicitude, strikingly falsifying the im- pression often owned to among English co-operators that Rome is unfavourable to co-operation. The banks main- tain a useful and well-managed central bank at Posen. Of such associations also is the Bank of Augsburg, already referred to ; and there are others for instance, the credit associations of Wiirtemberg. In all these detached growths of Schulze-Delitzschism the deviations from the parent sys- tem are so slight, and affect the general principle so little, that they cannot seriously come into account. The system of Raiffeisen has been far more productive Of the Raif- of both genuine and spurious offspring. Some of its off- feisen T 5 r P e - shoots are legitimate children enough, thoroughly of a piece 154 PEOPLE'S BANKS. with their parent in organisation and principle, and inde- pendent only because they choose to be so. Such are the Raiffeisen banks of Silesia, organised originally inside the Raiffeisen Union, by Herr von Huene, popularly known as " the Silesian Bismarck," strong-willed like his prototype, but, unlike him, a staunch Ultramontane. To some extent, of course, his peculiar denominational leaning is reflected "Particularist" in his associations. There are different reasons for the in- >ns ' dependent organisation of the majority of Raiffeisen banks in Bavaria and Wiirtemberg. Their secession has been prompted purely by that peculiar German speciality of political feeling which passes by the name of "particularism." Patriotic Bavarians or Wiirtembergers could not bring themselves to remain long in a union of which the head- quarters is in Prussia. Accordingly Wiirtemberg has organised its own unions, alike of Schulze-Delitzsch and of Raiffeisen banks, and Bavaria has organised even two unions of the latter type, both unnecessarily independent. The Wiirtemberg Federation has formed its own central bank, which a few years ago got into difficulties through bad management. The Haas By far the most important secession from the Raiffeisen >ns ' army has been that of the banks directed by Herr Haas, the prefect or administrator of a political district in Hesse. His dissenting union of banks has already grown to more than 1,500, many of them strong and flourishing ; and it is growing still. I do not like to criticise these banks with any degree of severity, because they form an integral por- tion of a very much larger union of agricultural co-opera- tive associations or " syndicates," which are doing a great deal of good to German agriculture, and are pushing ahead in their practical application of co-operation to husbandry, far more than any other body of associations. They are remarkable for an inspiriting amount of " go." They buy, they sell, they unite their members for work, they form co- OFFSHOOTS AND CONGENERS. 155 operative dairies, vintries, and strike out new paths with a degree of energy and practical sense which do them all credit. The banks following the lead of Herr Haas are likewise distinguished by some peculiar features, which may be argued to tell in their favour even, it may be, in com- parison with the Xeuwied banks such as admirable book- keeping and an aptitude for accommodating themselves to altering circumstances, in respect of cash credits and of facilities afforded for the collection of savings. Their leaders, to be fully fair, do not own themselves to be seceders. Two of them, at any rate, Kreisrath Haas himself, and his countryman and fellow-labourer Dr von Langsdorff, have in their days been Raiffeisen's recognised lieutenants ; and in the teeth of their master's own state- ment, to the effect that they do not show themselves ani- mated by the same " spirit " as himself, profess themselves now his " true " followers, and call the Xeuwied section the apostates, notwithstanding their boast of apostolic succes- sion. It is very possible that some of the defects which the Haasists allege as justifying their own defection may have shown themselves in practice in the Neuwied Union. Evidently personal considerations personal dislikes play a considerable part in the feud. But it is very likely that the Xeuwied organisation became too strongly centralised, therefore wanting in elasticity and local autonomy, and that Xeuwied at times did pose a little too much like Rome in the Church. We know that Germans are constitutionally pedants. These defects are, however, rapidly being remedied. The creation of great district banks necessarily carries de- centralisation in its train ; and the autonomy of provincial unions which has, subject to acceptation of the main rules, always been recognised is being more fully developed. The main objection on the part of the Haasists appears to be, that the Xeuwied rules present themselves to them as inconveniently severe. Propaganda, they thought, was not 156 PEOPLE'S BANKS. being sufficiently pushed. The stern Sarastro kept his temple gates too relentlessly closed against unregenerate Taminos. Co-operative banking would spread far more rapidly, and help would be brought far more largely to the suffering multitude, if principle were made to bow to tem- porary expediency, and the conditions were relaxed. Rather cleverly, from a strategic point of view, Herr Haas allied himself with Raiffeisen's great foe and persecutor, Schulze, to arrange with him some middle course which should be Raiffeisen while also being Schulze, and so disarm Schulzist Their Peculiar criticisms. In deference to Schulze, he sacrificed two of the main pillars of the Raiffeisen system, to which Schulze more particularly objected the refusal to issue shares, or else the reduction of the value of such shares to a mini- mum, and the accumulation of an indivisible reserve fund. Such evisceration obviously corresponds very much to the taking of the part of the Prince out of the play of " Hamlet." The admission of the poor without a tax, the appropriation of all profits, to the exclusion of dividend, to a common fund, are what make Raiffeisenism what it is. However, Herr Haas did not evidently mean to apply his Schulzoid rules as they were laid down. If he recommended shares of 25, he was content to collect only 503. upon each. Indeed, he left his banks to do pretty well as they chose, provided that they would affiliate themselves to him, which has resulted in his gathering together under his banner a large army, doing a considerable amount of good, no doubt, whilst things go smoothly, but heterogeneous as regards principle and organisation, and wanting generally in the backbone, wanting certainly in the morally educat- ing, the economically disciplining element, which constitutes one of the most essential and attractive features in the true Raiffeisen system uniting members simply for the pur- pose of enabling them to obtain money, as a matter of temporary, personal convenience, and uniting them under OFFSHOOTS AND CONGENERS. 157 a latitude with regard to rules, which makes the union a veritable omnium gatherum of good, indifferent, and very bad. I will give an instance. At Biirgel, close to Offen- A Bad Bank, bach, so to speak under the very nose of Herr Haas him- self, I found in a populous parish an association of this Federation, composed of only about forty members, who keep themselves scrupulously select. Their shares are for 503., all paid up. Until recently they levied an entrance fee of 255., but that they have lately reduced to 155. They constitute a most solvent bank, with a capital of 1,200, and excellent credit. But they will not do what Raiffeisen banks were intended to do. They will not take in the poor. There are about 700 savings deposit accounts, con- tributed, of course, mainly by persons left outside. Sav- ings, in fact, pour in at the rate of 40 or ^45 a week. On such the bank allows 3^ per cent. only to pay its members 10 per cent, on their shares. Such a rate of in- terest is totally opposed to the Haas rules. But even within a few miles of his own headquarters Herr Haas is powerless to prevent the abuse. Here is a usury shop, known to be a usury shop, set up under the style and title of the " True Raiffeisenism ! " I was warned before going that I should find the bank a bad one. But, then, why is it kept in the union ? The Neuwied Union would turn it out. There are more like it. I will not say many. But obviously being in the Haas Union affords no sort of guarantee for the character of a particular bank. Generally speaking, the system is Raiffeisenism un-Raiffeisenised the educating, elevating, altruistically helping element extracted, and merely the economic and commercial accommodation left, which has, generally speaking, thriven thus far though there have been more liquidations and collapses than in the Xeuwied system but which offers no guarantee that it will thrive in trying times. It is not it is not intended to be a thing to generate enthusiasm. It is calculating, gain- 158 PEOPLES BANKS. seeking co-operation, like Schulze's, only less consistent. Its growth is in no small measure due to the countenance which it has very openly received from the followers of Schulze. It must have been mortifying in the extreme to those gentlemen to find that, when the State-Socialist Government of Prussia, at the instance of one of Herr Haas' colleagues, Herr von Mendel Steinfels, set up at Berlin a Central Bank, subsidised by the State, and in- tended to prop up agricultural banks by artificial means, the Neuwied Union, like the Schulze Union, promptly and frankly declared that it would have nothing to do with that mischievous introduction of State help, since a sound co- operative union must be strong enough to support itself whereas the Haas Union at once jumped at the proposal, and readily seized the hand held out to it with money which has already proved insufficient for its purpose, as State grants invariably do, and is now to be quadrupled ! With every wish to do justice to Herr Haas' scheme, with every recognition of his good work on other co-operative ground, I cannot bring myself to look upon his banking system as altogether perfect ; I cannot think that it is " co-opera- tive " to dissociate education, discipline, opening the door to the very poor, from pure economics. And no one can yet say with what degree of success these banks will weather trying times. The "Peasants' Next to the Haas Associations the " Peasants' Asso- Associations. c { at j ons {Bauernvereine) may well claim a place in this record, inasmuch as they have all written co-operative credit, to be given to small agriculture, conspicuously upon their rather comprehensive programme. The absolute necessity of popular credit as one of the main wants of agriculture is indeed now so well understood and so generally appreciated in Germany that it appears as if no propagandist society of any sort or any tint or shade of opinion social, political, or denominational could be formed without at any rate OFFSHOOTS AND CONGENERS. 159 promising financial services. That accounts, among other things, for the creation of that Conservative Junkers' Asso- Political ciation, formed and officered by Herr von Broich, which is Banks - to " primrose " the agricultural population with the help of easy credit, not unsubsidised from above, but as yet only promised. For the actual business of these associations is next to nil. The " Peasants' Associations " have likewise a political, and, even more, a religious flavour about them. " Mother Church," if not clearly set forth upon their banner, is known to be invisibly present in their councils, and to have a hand in directing their work. And benevolent large landowners, who are not likely to require much assistance themselves more particularly such as are faithful to Rome take a leading part in the proceedings. The first Peasants' Association was the creation of the late Herr von Schorlemer Alst, a staunch leader of the Ultramontane party in Parliament From Westphalia the institution has spread into Upper and Lower Rhineland, Baden, Hesse, Nassau, the Eichsfeld country, East and West Prussia, and Silesia, and nearly everywhere the associations have attained strength. That is attributable to the fact that, in addition to propagating " sound " religious and political views, they also practise very wholesome co-operation, and give the peasants very much assistance in respect of things needed instruction, legal advice, opportunities for inquiry and discussion, as well as cheaper and better manures, seeds, feeding stuffs, and the means for co-operating in agricul- tural production. Their "co-operative law" is very much "Co-operative appreciated. The Peasants' Associations constitute them- Law ' selves, so to speak, the guardians of the peasants, and take their part to such an extent against sharp-witted and over- reaching dealers and usurers, that the mere mention of the name " Bauernverein " is often quite sufficient to cause the greedy aggressor to beat a hasty retreat. Upon a question of law arising, any member has the right to take gratuit- 160 PEOPLE'S BANKS. ously the opinion of the association lawyer, paid and retained by the association. Should he advise proceedings and the member lose his case, the association undertakes to pay the major part of the costs. The largest of these asso- ciations at present is that of Kempen, which employs agri- cultural chemists to analyse and advise, sends dairy in- structors about, teaches peasants bookkeeping, does a large business in agricultural goods, and maintains for the benefit of its 41,000 members no less than 138 agricultural banks in a district already fairly well-stocked with such establish- ments from Neuwied. All over Germany the Peasants' Associations practise, for agricultural credit, the Raiffeisen system pure and unadulterated, as the one best approved by experience. The associations of Hesse and Nassau have indeed wholly handed over the management of this part of their business to the authorities at Neuwied. Oddly enough, the Peasants' Associations there are at present ten maintain no sort of touch or union among themselves, which accounts in a large measure for the provoking absence of statistics as to their aggregate work, which must be con- siderable. When attending a meeting of the Rhenish asso- ciations last year, I ventured to suggest inter-association co-operation, at any rate to the extent of collection of statistics, and I believe that my suggestion will be acted upon. As it is, the credit given by the Peasants' Associa- tions is not included, even by way of estimate, in any of the statistics published. Belgian An institution so useful for propagandist purposes was Associations." sure to be c P ie d outside the borders of its own native home. Under the leadership of Professor Francotte and Abbe Mellaerts, Belgium, which is, co-operatively speaking, either darkly Ultramontane or else glaringly Socialist, has readily grafted it upon its social system ; and some of the earlier French syndicates seem, in principle, with their membres fondateurs and membres effectifs, and their patron- OFFSHOOTS AND CONGENERS. 161 age and oligarchic government, to have been, so to speak, " made in Germany," or at any rate inspired from there. AUSTRIA and HUNGARY have not shown themselves Austria and slow to learn the useful lesson taught by their neighbour, Hun s ar >'- Germany. Indeed, on the Danube co-operation for credit has become the most popular form of co-operation known ; for in 1893 Austria possessed, out of 2,825 co-operative associations in all, no fewer than 2,118 credit associations. In 1889 the number of credit associations was in Austria actually greater in proportion to territory than that regis- tered in Germany, namely, 1,312 as compared with 2,200. But the German associations are larger, and also do a more voluminous business. Statistics find their way into print very tardily in the Empire on the Danube. The last trust- worthy figures published are those relating to the year 1891, which are given in the Statistisches Jahrbuch of 1893. For 1891, 1,599 associations had sent in returns, showing a col- lective roll of 635,206 members, and an aggregate lending in the year of 290,898,000 florins (23,271,840), nearly a third being lent on mortgages (which should not be), more than half on acceptances. Their collective property amounted to 32,180,000 florins in paid-up shares, and 15,472,000 florins in reserve funds, all in all 47,652,000 florins (3,812,160). They held among them 289,037,000 florins (23,122,960) in savings deposits, and 11,783,000 florins (942,640) in loan money. There are some peculiar features about co-operative Co-operative banking in Austria and Hungary which make it an in- Bankm S . , 11 1 among various terestmg study for the inquirer. Above all things there Races, is that almost Babylonian medley of races Teuton, Latin, several varieties of Slav, and even Turanian. In such a realm manifestly an institution may be said to be put searchingly upon its trial for adaptability. Co-operative credit has been taken up by all these races least readily, oddly enough, by the Italians and everywhere it has L 1 62 PEOPLES BANKS. been found to answer, with varying degrees of success. SlavAssocia- The Slavs, we know, are almost born co-operators. Some of the earliest forms of co-operative organisation are to be met with among their families. At the present time the specifically Slav provinces of Austria Bohemia, Moravia, and Galicia decidedly take the lead in co-operation, main- taining the largest number of associations. Of the 1,599 societies referred to above, there were 439 in Bohemia > 347 in Moravia, 248 in Galicia, moreover 15 in Carniola, and 34 in Bukowina 1,083 in all, claiming 509,490 out of the 635,206 members, holding 20,529,000 florins in share capital, 12,635,000 florins in reserve funds, and lending out annually 230,173,000 florins. (I have not included Silesia among the Slav provinces, although a large portion of its population is Slav.) It is true, the associations enumerated were not all Slav. Among the 439 of Bohemia there were 170 or 1 80 German. But evidently Slavism stands for much in the co-operative organisation of Austria, though, unfortunately, its associations are not generally speaking as good in quality as they are plentiful in number. In Austria generally, as Mr Maude points out in his Blue Book Report of 1886, administration of co-operative societies is a little lax. Among leaders of the movement this is frequently made a subject of complaint. Neverthe- less the record of the Slav societies cannot be called a bad one. There were in 1895 no less than 728 specifically Czech credit associations collectively in Bohemia, Moravia, and Silesia, of which 486 numbered 292,132 members, held 8,375,692 florins in share capital, 11,929,588 florins in re- serve funds, and 201,069,753 florins in savings deposits. The amount of collective lending is not stated in the Genossen- schaft, from which I take these figures. But as in 1891, 420 banks had lent out among them 111,754,425 florins, and as the 486 banks referred to had raised by deposits and loans 205,205,341 florins, in addition to their own OFFSHOOTS AND CONGENERS. 163 property of 20,285,280 florins, it is evident that their business must have been considerable. Dr Wrabetz, in his comments, remarks on the rapid growth of the business of these Czech associations, and expresses regret at the want of equal union and common action among the German banks. The Slav societies study union as an essential part of co-operation. Whereas of the 180 German credit associa- tions in existence in Bohemia in 1895 only 31 had joined the common union, nearly all the Slav Czech, Polish, and Slovenian had affiliated themselves to their several central bodies. Among the German associations there is generally a want of union and of common action, which tends to weakness and bad practice. Of 2,428 co-operative banking associations known to have existed in Austria alone in 1894, and doing a business of probably somewhere about ^"30,000,000 in loans, only 120 had joined the recog- nised German Union. The German Union has for some time been, in the bargain, weak at headquarters and feebly led. Under the remarkably able leadership of its present chairman, Dr Wrabetz, who is more particularly valued as a man of practical business knowledge, it is rapidly con- solidating its strength. Of course Slavs decline to have any dealings with Germans and Magyars, just as Germans and Magyars decline to deal with Slavs. And so there are divisions running through the entire organisation, and busi- ness is made needlessly difficult. Another peculiar feature in Austrian and Hungarian Prevalence of credit co-operation, on which Dr Wrabetz rightly insists, is this, that the co-operative banks organised under the two-headed eagle recruit their members to a far larger extent than their sister establishments in Germany from the agricultural classes. Even in the Schulze-Delitzsch banks of Austria agricultural membership preponderates. The credit associations of Podersam, Eger, Radonitz, Langenlois, Tachau, Kaaden, two in Krems, and most of 1 64 PEOPLE'S BANKS. the Polish, Czech, and Slovenian associations are made up mainly of agriculturists. Communal To some extent Austrian credit associations have found Loan Banks. t h em selves forestalled by a far less perfect, specifically local, lending institution, the Gemeindedarlehnskasse (parish loan fund), the presence of which has more or less influenced their own development. The Gemeindedarlehns- kassen are very numerous. Galicia alone has 2,521. They dispose of tolerably considerable funds, which were handed over to the parishes out of the compensation paid in exchange for peasant rights attaching to manor lands when feudal services and dual ownership were abolished. It very soon occurred to the inmates of the parishes so endowed as it has occurred to the inhabitants of parishes in France receiving State compensation for failure of crops after the drought of 1893 tnat tne funds placed at their disposal might with advantage be employed in occasional advances to the parishioners. A good deal of lending is done in this way. But it is not generally good lending. Borrowers claim the money as a matter of right, and have learnt to look upon the money borrowed as belonging to themselves, for which reason they often show themselves remiss in repayment. However, these Darlehnskassen have unquestionably given a stimulus to the formation of other more or less co-operative banks in many cases, it is true, only very imperfectly co-operative which are rather numerous in Austria. Visitors to Carlsbad may see one such, rather a typical one, at Pirkenhammer. It has existed something like ten years, and has a paid-up share capital of 8,705 florins 243 shares distributed among 182 members in addition to a reserve fund of 1,083 florins. The main reason given to me to explain why this bank had not adopted the Schulze- Delitzsch rules was, that members like having more shares than one. Besides, they do not appear to relish a very strict OFFSHOOTS AND CONGENERS. 165 regime, more especially since all services are rendered gratuitously. Theirs is a very easy kind of lending. Pirkenhammer lives on Carlsbad, and in the season nets good earnings. So the lending practically resolves itself into an anticipation, during the slack winter months, of the earnings expected to be made in the brisker times not avery provident kind of borrowing. Members can always borrow up to the amount of their shares, and should the bank require more money than it has, the provincial treasury at Prague is ready to assist it with funds. The annual business in lending amounts to about 43,000 florins. The Austrian co-operative banks adopting the Schulze- German Credit Delitzsch system now probably number more than the * sc 2,428 given by Dr Wrabetz in his last returns as the number for 1894. Generally speaking, the German credit associations of this type are strong in capital. Accord- ingly we must not be surprised to find limited liability more largely prevailing than in Germany. Of the 2,428 referred to above as many as 986 limit the liability of their members to the amount of their shares only, or, more generally, to a multiple of that figure. Of 117 associations sending in returns for the year 1894, 43 doing something less than a corresponding amount of business were limited liability associations. These 1 17 associations had in 1894 a paid-up share capital (including reserve fund) of 7,235,743 florins, on the strength of which they had been able to borrow 40,324,255 florins. Of course the societies adopting limited liability are apparently strongest in capital of their own, which means, that they have been able to borrow least. Thus, among the limited liability associations in Styria, the proportion of share to borrowed capital is as i to 2.3. In Lower Austria and Moravia, where liability is unlimited, it is as I to 5.4 and 5.5. Not taking into account renewals, the 117 banks, it is shown, had lent out in the year 54,682,267 florins, which means, according to 1 66 PEOPLE'S BANKS. Dr Wrabetz's explanation, that, including renewals, they had probably lent out 80,000,000 or 85,000,000 florins 6,400,000 to 6,800,000. That is not bad business. The losses appear to have been trifling. Of course the number includes bad and indifferent banks as well as good the best presumably being members of the Union. Like their sister banks in Germany, of the same system, the Austrian associations are much encumbered with funds, which they do not quite know how to employ. It may be a useful hint to our own co-operative supply associations, similarly em- barrassed, to quote Dr Wrabetz's opinion to the effect that this embarrassment is owing to the fact that co-operative production, which could provide ample and very legitimate employment for such funds, is insufficiently developed. Kaaden. As a type of a good Austrian Schulze-Delitzsch bank, I will quote one which I have the authority of Dr Wrabetz himself for considering one of the very best of his Union. The Credit Association of Kaaden in Bohemia was founded in 1870 by sixty members. It now numbers more than 1,000. Among these there are 754 engaged in agriculture, from allotment holders up to owners of fairly consider- able properties. The bank has a share capital of 159,924 florins (12,800), and in 1894 lent out 871,979 florins (69,800), not counting cash credits. Within twenty-five years its annual turnover has risen from 8,552 to 233,064. It has done a business of 3,635,908 (including 1,360,000 lent out on acceptances), and has lost in all not more than 128. Its business management is simple. It has tried the castelletto, which assigns to every member an available credit open without question, but has abandoned it as com- plicated, and now judges each application on its merits. In the place of Schulze's three, it has four members on the Committee, and, moreover, as many as twenty-four on the Council of Control. That of course ensures better supervision and inquiry. Its management expenses are OFFSHOOTS AND CONGENERS. 167 very small 3,647 florins on 2,913,342 florins of turnover. Add to this 2,615 florins for rates and taxes, and you have a little over 2 per 1,000 as representing all establishment charges. The bank serves large and small without any distinction, granting a cash credit to a large landowner for more than 2,000, and advancing petty sums to small folk. It holds about 55,416 in savings deposits, for which it allows 4 per cent., charging 5 per cent, on purely personal and 4f per cent, on secured credit. Its large Council of Control, recruited from all parts of its area, enables it to serve an extended district (which nevertheless covers only half the ground of what is usual in Austria) without appoint- ing local committees, or agents, or " men of confidence." Notwithstanding the comparatively small margin allowed between interest charged and interest given, this bank has on an average of the last ten years paid dividend at the rate of a trifle over 6 per cent. It has had credits offered to it by several large banks, but has been so well supplied with funds of its own as not to require them. There can be no doubt that this bank has rendered admirable service. Very near it, at Schlackenwerth, is a credit association Schlacken- which shows the Schulze-Delitzsch system in a less attrac- wert ' tive light. It is organised nominally on the identical principle, but with very much less of a co-operative spirit to apply the common regulations. It deliberately keeps down the number of its members, so as to secure a large profit. The Bank of Eger, again, not very far off, studies Eger. profit (10 per cent, dividend) by keeping down its share capital and borrowing very largely, much beyond what Dr Wrabetz considered safe. These instances of abuse of course do not stand altogether by themselves. Dr Wrabetz points out their danger with great persistency. He is urgent in recommending all round a limitation of dividend, the simplification of accounts, and an advance in respect of management in sympathy with advancing times. 1 68 PEOPLE'S BANKS. Credit Speaking of abuses, a word or two may be due to the crecu t associations established in the province of Galicia. As has been already observed, credit associations are un- questionably strong in Galicia. But they are not credit associations of the most perfect type. Galicia is the chosen home of a peculiar race of Jews strongly given to profit- seeking. These men of course find their way into the banks, to such an extent that 50 per cent, of the members are said to be Jews, whereas there are only about 1 1 per cent, of Jews among the general population. Of 248 associations existing in 1891 (265 in 1892), the majority are said to have been officered and administered by Jews. Between 1890 and 1892 no fewer than sixty-three such associations were started specifically by Jews, to be managed by Jewish committees. It is of course fully as legitimate for Jews to join credit associations as for Christians, and for dealers of one kind as for dealers of another. And the partiality shown for co-operative credit associations by the sharp-witted Jews of Galicia goes a long way to establish the economic merit of the institution. However, there are two sides to the question, two uses to which credit associa- tions may be put. And the high rates of interest prevailing among these Galician associations appear to suggest that among their members there are more than the average number who have found out the specifically weak point of the Schulze-Delitzsch system, and know how to turn it to account for their own advantage. The Galician credit associations are said not to stand in the best of odours with the general public, and to be considered as profit- mongering rather than co-operative. As a rule they occupy large districts, districts comprising from So to 120 parishes. The number of their members is stated (at New Year 1893) as 169,663, including 90,786 (54.6 per cent.) small agricul- tural freeholders. Their aggregate share capital is given as 5>373>39 florins, their reserve funds as 1,323,746 florins, OFFSHOOTS AND CONGENERS. 169 their savings deposits as 15,592,948 florins, their loans raised as 4,529,405 florins, placing at their disposal a work- ing fund of about ,2,045, . With the help of such resources the banks had in 1892 lent out collectively 2,040, 504 only, but at such rates as to leave them a net profit of 38,936. On the eastern bank of the Leitha, the Schulze-Delitzsch Schulze- associations are as fully in the ascendant in comparison Banks^n with Raiffeisen banks as in Austria. However, Dr von Hungary. Jekelfalussy, the President of the Statistical Department of Hungary, refuses to recognise them as fully co-operative. Dr YVrabetz finds fault with them for departing to a serious extent from orthodox Schulze-Delitzsch rules, which pro- bably means that, as in Galicia, they have become rather profit-earning institutions, for the benefit of the few, than co-operative, in the service of the many. The Statistical Year Book of Hungary for the year 1894 shows that in 1892, 658 credit associations were in existence, whereof 610 were in Hungary proper and 48 in Croatia and Slovenia. There is no information given as to membership or busi- ness. For 1891 there are, however, returns extant for 645 associations. These banks held among them 34,223,000 florins (2,737,840) in share capital, 2,163,000 florins (173,040) in reserves, accordingly 36,386,000 florins (2,910,880) as collective working capital, and had at the close of the year 66,563,000 florins (5, 325,040) outstanding in credits. All these items show a very substantial increase upon the business of 1882. The credits have something like doubled. But the figures afford no clue whatever to the character of the business. Under the head of Austro- Hungary some special refer- Army and ence may perhaps appear due to a small group of associations Associations, of a peculiar type, in which membership is restricted to officers in the army and navy and civil servants, on active service or retired. There were, in 1887, 77 such, with a total capital 170 PEOPLE'S BANKS. Raiffeisen Banks. An Official Inquiry. of 7,028,218 florins, and a reserve of 399,103 florins. The number of associations has decreased. There were in 1893 only 48 in Austria and 22 in Hungary 70 in all. But the share capital had grown to 9,753,285 florins, and the re- serve funds to 656,848 florins. The amount outstanding in advances is given as 11,915,579 florins. As much as 997,402 florins had been taken in savings deposits, and 770,290 florins had been borrowed (including 640,334 florins from the Life Insurance Departments of the same associations at 4^ per cent, interest). These societies numbered in all 32,120 members. The Raiffeisen associations are far more sparingly developed in both halves of the monarchy. But they are multiplying rapidly, and have become very popular. They are individually very much smaller than the Schulze- Delitzsch institutions, so much so that Herr Siegl calculates one Schulze-Delitzsch association to be equal in number of members and financial strength to no less than thirty or forty Raiffeisen associations. The latter owe their re- markable recent increase and growing popularity in Austria, and to a lesser degree in Hungary, more specifi- cally to an inquiry, which was set on foot as late as 1886. Since that date there has been a pitched battle going on in the Hapsburgh empire between the two systems. Very hard things have been publicly affirmed against the Schulze- Delitzsch system. It has been alleged that it has failed to satisfy the demands which it professes to meet. The adminis- tration of the associations, it has been stated, is not what it ought to be ; it has been said that there have been specula- tion, losses, excessive interest, disappointment, and disgust. In Lower Austria, the metropolitan province, a sharp attack made in the Diet resulted in a vote of funds granted, to enable two expert officers to proceed to the Rhine and examine on the spot the practical merits of the Raiffeisen system. They came back delighted with what they had OFFSHOOTS AND CONGENERS. 171 seen. Their report was wholly favourable. And since that The Result, day the Raiffeisen associations are the official and popular favourites. Other provincial Diets have followed in the footsteps of the Lower Austrian. The Austrian Chamber of Deputies has taken favourable note of these associations, accepting Professor Marchet's declaration made in 1889, to the effect that they form " the only means known calculated to satisfy personal credit in a manner which could be approved." Herr Schmid, one of the auditors of the Austro- Hungarian Bank, having inquired carefully into the matter, added his testimony : that the Raiffeisen banks " are better calculated than any other form of association, in a crisis such as the peasantry, alike of Germany and of Austria, have never before been subjected to, to afford efficient assistance, not only by actual money help, but also by counsel, and instruction." With such recommendations the Raiffeisen banks have pushed their way rapidly to the front, spreading over Lower and Upper Austria, the Tyrol, Styria, Carinthia, Vorarlberg, Salzburg, Hungary, Tran- sylvania, and other provinces, and ingratiating themselves wherever they went by good work. The provincial govern- ments were anxious to encourage and, if possible, to help them. The question was, how to do it in a legitimate way. By votes of the various Diets, a grant of 250 florins (about ^19) is made to each association newly formed, to defray its first expenses purchase of office furniture, a safe, books, and so on. And in addition to this, a loan of 2,000 florins (about ;i6o) is placed at the disposal of every association so formed, at the rate of 3 per cent, for not longer than two years, to provide it with the first working funds. That moderate advance appears to have been found adequate, for the associations are everywhere showing signs of active life, multiplying and growing in strength. It is a very limited amount of help, but it suffices to set the wheels turning which, once in motion, provide their own further 172 PEOPLE'S BANKS. propelling impetus. The experiment is interesting, and its results have often been found satisfactory. In all these institutions, from the Raiffeisen and Schulze-Delitzsch firstling banks downward, it has always been the first step which involved the most serious difficulty. Here is a help which ought to be within reach of associations in most places, and which is scarcely open to serious economic objection, provided that repayment is rigorously insisted upon. On the other hand, no doubt, there is a rather serious drawback to this practice, of which we, of all people, whose rich men are so far more anxious to help with money than with work, will do well to take note. The subsidy is really not necessary. Banks can very well do without it. It may help, it may further and develop. But it is also liable to suggest abuse. Under this coddling system not a few soi- disant Raiffeisen banks are said to have grown up which are really only political agencies, or else started at the instance of a district administrator to secure him promotion or a decoration. In any case, the employment of such a forcing influence as has been spoken of ought to be applied only with great care and discrimination better, I should say, not at all. An Austrian Having given a sketch of the practice of a particular Bank 615 Schulze-Delitzsch bank, I may do well to quote in the same way an instance of well-conducted Raiffeisen banking, as a specimen of what is to be met with in Austria. The Raiffeisen Bank of Brunnersdorf, in Bohemia, close to Kaaden, was formed by Herr Hafenrichter in 1888, with the help of a subvention of 250 florins (,19) voted by the Estates of Bohemia, which grant is nominally repayable, but in fact is not claimed back. The population of Brun- nersdorf consists almost exclusively of small peasant pro- prietors. There were at the outset only twenty-one members to join ; there are now 1 10. The bank has, like most other Austrian associations of its type, issued shares of 10 florins OFFSHOOTS AND CONGENERS. 173 (i6s.), and levies in addition an entrance-fee of one florin. By this means the little bank has gathered together a small share capital of 2,071 florins (165), which it has strengthened by a reserve fund of 332 florins (26), the result of five years' painstaking work. But it has attracted 41,233 florins (.3,296) of savings deposits, and has thus been enabled to lend out (in 1894, including renewals) 52,641 florins (4,208) for varying terms, the longest of which is four years. As in our own country, there seems to be some difficulty in Bohemia about keeping the reserve fund untouched and inalienable on the dissolution of the society. But it is provided that in the event of dissolution the fund shall go to the parish. There have thus far been no losses. And there can be no doubt that, in its humble way, this bank is doing very useful service. The Slavs appear to take less kindly to the system. In SlavRaiffeisen Galicia, where there is a good deal of supply co-operation, Banks - there were as late as 1892 only five Raiffeisen banks, all of them due to the propagandist initiative of Professor Stefezyk, of Czernichow, numbering among them 646 members, and having an aggregate share capital of only 614 florins (about 50), in addition to about 60 reserve fund. They had, however, taken no less than 3,228 in savings deposits, and lent out 3,168 in loans averaging 96 florins each, and had made no losses. On the eastern bank of the Leitha, the stronghold of Transylvania, genuine Raiffeisenism is in Transylvania, where there are already about fifty Raiffeisen banks in all, formed and well maintained by the Saxon settlers in the country. These banks are to all intents and purposes genuine Raiffeisen banks, like those of the Rhine. Forty-seven of them, having among them 2,820 members, had at New Year 1894, 762,485 florins (61,000) outstanding in loans, and 470,906 florins (37*672) accumulated in savings deposits. By the side of this co-operative credit, a good deal of common supply is i 7 4 PEOPLE'S BANKS. done, and there are four vintners' associations, doubling the proceeds of their members by co-operation, just like their prototypes on the Rhine and Ahr. There are 301 members in these vintners' associations, which sell annually about 20,000 florins' (1,600) worth of wine. Hybrid Banks Whatever good the agricultural credit banks of the ofPesth. y county of Pesth, established within the last ten years by Count Alexander Karolyi and his helpmate, Dr Bernat, may be doing within their own sphere, it is not altogether accurate to speak of them as " Raiffeisen Banks." On the showing of their own officers, their system represents some- thing of a " cross " between the Raiffeisen and the Schulze systems, which means, that they depend to a somewhat larger extent, than do the Raiffeisen banks proper, upon share-capital, as contrasted with liability only. In a theo- retical aspect they may be said to resemble the associations formed in Germany by Herr Haas with this difference, that the majority of them have, up to the present time > limited the liability of members. Evidently the large land- owners, who were mainly instrumental in creating these banks, were afraid of unlimited liability, applied to them- selves just as our big men, zealous for the formation of " Agricultural Banks " in this country, are manifestly afraid of it. Our would-be " Raiffeisenists " invented the anti- Raififeisen rule about honorary membership as a safeguard to themselves and to others of their class entitling big folk to come into the bank as patrons, with much social influence, and to direct the management, without making themselves liable, except to pay a subscription, the amount of which may be regulated, and the value of which may be dispensed, according to the varying merit from a subjective point of view, which may be political of the members. The Hungarian apostles of this useful but, to my mind, only half-bred Raiffeisenism, started their Central Bank, origi- nally endowed by themselves, and kept under their own OFFSHOOTS AND CONGENERS. 175 control, to supply the local banks with funds. This is the " supporting central institution " of which Dr von Jekel- falussy speaks (as quoted by me in my first edition, p. 47), as enabling " Raiffeisen Banks " to subsist without un- limited liability. The Central Bank has a share-capital of 500,000 florins (40,000), issued in 100 florin shares, of which at the end of 1894, only about 300 (2,400) were held by societies. The larger portion by far remained in the hands of individuals, the original promoters. The objection to Objection to this half-and-half system is, that it does not produce quite their s >' stem - the same results as genuine Raiffeisenism. It does not make members of local banks rely to the same extent upon their own powers and their own efforts; it " gives," instead of stimulating self-help ; it does not act as an educator; it does not make its votaries " an honest and industrious family." Our pseudo-Raiffeisenists in England ought to take warning by this. M. Gyorgy, who attended the Inter- national Co-operative Congress in London, states in his Report that, notwithstanding the limitation of dividend payable on Central Bank shares to 4 per cent., laid down in the rules, there is "a disposition observable" to transforming these " Raiffeisen Banks " into " ordinary trading banks " just as has happened among deteriorated Schulze-Delitzsch Associations. Accordingly, I am not sorry to learn from Dr Bernat, the Secretary of the Federation, that a spirit of more genuine Raiffeisenism is likewise making itself observ- able, that under its influence unlimited liability is spreading, and that the genuine Raiffeisen banks formed on this system "are working till now quite well." Under the circumstances one is entitled to hope that the more co-operative principle, which scorns "support," and trusts solely to "self-help," will extend and become before long the predominant feature. The number of agricultural credit banks of the type just described, all situated in the county of Pesth, stood at the close of 1895 at 3 1 /) having 63,220 members, with I 7 6 PEOPLE'S BANKS. Co-operative Banking in Sweden, Norway, and Denmark. 125,856 shares issued, to the collective value of 3,332,937 florins (266,635), of which money, however, only 1,338,928 florins (,107,113) was paid up. To this must be added, to arrive at the total amount of working funds, 90,786 florins (7,263) reserve funds, and 1,293,396 florins (103,471) deposits. All these figures show a remarkable advance upon those given for 1894. The number of members (and shares) has almost exactly doubled. The year's transactions balance at 7,918,106 florins (633,448), allowing for a profit of 1 16,364 florins (9,309). The loans outstanding, on bills of exchange and otherwise, figure at 7,633,069 florins (610,647). In the three Northern Kingdoms whose shores are washed by the cold waters of the Baltic and the North Sea, co-operative credit has thus far thriven but poorly. There have been beginnings and strugglings ; and here and there a bank, raised up when, under the influence of the Schulze-Delitzsch triumphs in Germany, the co-operative fit was on the nation, has lived down to the present day. But, generally speaking, amid the sparse populations of SWEDEN, NORWAY, and DENMARK, little fruit of such sort has been brought to perfection. In countries in which in other respects co-operation has become a power, on soil which has brought forth such picturesque co-operative specialities as the Swedish bergslags and forges, and, again, such excel- lently organised associations as the Danish building societies and co-operative dairies, one would have looked for better things. But the working population of Sweden, at any rate, so Herr C. Krook contends with their natural con- tentedness and their ample wages, are too comfortably off to stand in serious need of funds. There is Mr L. O. Smith's Aktiebolaget Arbetaringens Bank, of course, and there are in Sweden some thirty People's Banks, in Den- mark much fewer, and in Norway scarcely any beyond the Kristiania Folksbank, all doing more banking than loaning. OFFSHOOTS AND CONGENERS. 177 However, all these kingdoms have something to show which in some manner or other congenial to local ways takes the place of People's Banks. Some means of popular credit, it appears, there must be. Denmark, in addition to a few Credit Unions of the Belgian type, possesses some fairly useful "Aid Associations" and Monts de Piete. Nor- way has Savings Banks, which lend out money pretty largely, chiefly amongst small folk as would appear from the fact that only 18 per cent, of the loans granted exceed 28 each. And in Sweden, banks provide the poor with what they want by means of the Kassakreditiv, an institution of local origin which has become very popular, alike with public and with private banks, for loans of small amount. Not many years ago the accounts opened in this manner amounted in public banks to ^"1,1 12,000, in private to 5, 600,000. In the NETHERLANDS co-operative credit has fared little Co-operative better, owing to entirely different causes. As in the days of Louis XIV., it appears, the Low Countries are still the El Dorado of marcliands de boutique, the traders, who will allow no one to interfere with their monopoly. Co-opera- tion there is as unpopular as is Judaism in Vienna, and almost as fiercely persecuted. " The opposition of Colonial dealers and other retail tradesmen against co-operative associations," so writes Dr Elias in the Blatter fiir Genossen- schaftsivesen, " has reached such a pitch that it has become next to impossible for a member of a co-operative associa- tion to have himself elected into a Town Council, into the Assembly of Provincial Estates, or into the Second Chamber." Fortunately for co-operation, there is a First Chamber to hold its protecting hand over the poor outlaws, and a Crown to afford them some little sanctuary. The admirably organised societies Eigen Hulp and Neder- landsche Cooperative Bond are now fighting the battle of the co-operative cause with so much success, that without being over-sanguine we may probably look for some early M 178 PEOPLE'S BANKS. development in the direction of co-operative banking, for which there is unquestionably room, more especially in the country districts. At the present time there are one or two very useful little working-men's credit associations, some- thing after the style of our " Slate Clubs," collecting icd. a month from every member, till the sum reaches 75 florins (6. 5s.). After that the money is distributed. These associations do some lending to members out of their own funds and funds obtained from deposits (which are taken from 2d. upwards), on which 4 per cent, is allowed to members and 3^ per cent, to non-members ; and some of them are Raiffeisenites so far as to insist that the object of the loan shall be stated beforehand, and rigidly adhered to, on pain of forfeiture of the loan. Repayment is exacted by instalments, and interest is charged at the rate of i per cent, per ten weeks, that is, 5} per cent, per annum. A rather commendable feature is this, that on earlier repayment than what is stipulated for (just as among our best Loan Societies) a rebate is allowed, varying from J to J per cent* Co-operative It is very interesting to watch the gropings of RUSSIA Banking in f n one aspect one of the oldest homes of co-operation in Europe after an efficient and popular system of co- operative credit, to supply that working capital which is nowhere more urgently needed. There have been many tentative beginnings, such as, in the country of the arteles^ one would have thought, must have led to some satisfac- tory result. But the country is as yet still too much in Government uniform for anything to succeed in which self- * While these sheets are passing through the press I learn that two Raiffeisen Banks, the first in their country, have quite recently been opened in the Netherlands, one at Bergum, the other at Oenkerk. t These have recently, very late in the day, attracted some notice in this country. What has been published in English is thus far of very little value, and very belated. The arteles are not really co- operative associations in our sense. OFFSHOOTS AND CONGENERS. 179 help forms an essential factor. Some of the early experi- ments, indeed, were not without promise. "La Russie marche bien" wrote M. Brelay, a little more than a decade ago, in the Economists Fran^ais. And in 1883 Russia could boast that she had exactly 1,000 co-operative associations, with 207,259 members and 1,2 16,960 share capital, and lend- ing out in the year 3,819,920. Since that time, however, things have gone backwards. The number of associations has dwindled from 1,000 to below 800.* In truth, even the 1,000 had more of show about them than of reality. It is Government harassing the hard-and-fast rules forced upon associations from above, interference, supervision, and restriction which is killing co-operation. How possibly can credit co-operation succeed while the Government cate- gorically forbids associations to expel members ? How is it to keep so much as solvent while members, being indeed limited in their borrowing to "productive" purposes only, are allowed to evade that wholesome provision by first improvidently disposing of their " productive " possessions, in order then to have an excuse for claiming association money for their re-acquisition ? That seems a device spe- cially contrived to facilitate improvident borrowing. Thirsty moujiks know well enough how to adapt their practice to so accommodating a rule. They sell their seed-corn, their * The latest returns published quote 764 as the figure of credit associations now existing in Russia. Of that number, 638, scattered over 280 "districts," are shown to comprise collectively 211,400 members. Co-operative banking appears to have pushed its way into Siberia, and even into Central Asia. There are said to be 21 credit associations in the department of Tobolsk alone. Of the credit asso- ciations mentioned 455 are reported to be rural banks, 175 urban, and 32 associations composed of employees of distinct industrial establish- ments. The collective lending done in the past year is returned as 28,000,000 roubles (more than ^3,000,000), which is an advance upon the figures of previous years. i8o PEOPLES BANKS, horse or their cow, and, having orthodoxly got through the sale money in vodka, they have a splendid pretext for falling back upon the funds provided by philanthropic capitalists. Since the law prohibits the taking from them of their horse, their cow, cart, sleigh, harness, implements, farm buildings, seed-corn up to twenty-five pouds, clothes, and food and fuel sufficient for one month's use, in satis- faction of any debt, in this little manoeuvre they are per- fectly safe. The whole thing has been turned into a farce and a caricature of self-help. Co-operation made a fairly good start in Russia among the German settlers under the Empress Catherine. Since then the Crown has tried its hand at the problem. Great nobles like Count Araktschejeff have done the same ; and M. de Louguinine, a zealous and genuinely philanthropic disciple of Schulze-Delitzsch, some time back devoted him- self with fervent earnestness to the charitable work. He may be regarded as the " father " of modern Russian credit co-operation, such as it is. Other good men have bestirred themselves M. Khitrowo, M. Jakowlew, M. Van der Vliet, M. Stokolowski, Dr von Keussler, and more besides. Yet with all this the movement has made but little way except among the Germans in the Baltic provinces. This is an exception which fully proves what everybody who has looked into the matter insists upon, outside Russia and in it namely, that it is Government interference which fatally checks the movement. Give it but a little liberty, as in the Baltic provinces, and at once it thrives according to circum- stances. There were in 1892 in the Baltic coast-land sixty- nine associations, not including some RaifTeisen associations newly formed. Dr von Keussler, in the Baltische Wochen- schrift, owns to an opinion that the latter are far better qualified than the Schulze-Delitzsch societies to prosper in his own country. The Schulze-Delitzsch associations, he objects, are not at all suited to local circumstances. Out- OFFSHOOTS AND CONGENERS. 181 side the Baltic provinces, in spite of very zealous encou- ragement given by the landschaften, by nobles, and by Government authorities, credit co-operation can be said to be only vegetating in a languid way, losing more ground than it gains.* Of the 1,438 associations formed in all, less than 800 survive. Of these, some years ago, 699 sent in returns for the year 1890, showing a members' roll of 200,950, a collective share capital of 6,160,391 roubles, and a reserve of 1,274,426 roubles. A larger number of associa- tions (728) reported a total business (money spent and money received) of 79,062,058 roubles ; and 722 reported loans issued to the amount of 16,067,929 roubles. For a country like Russia that is nothing. And yet it cannot be said that the instinct of the people is opposed to co-operation. Education, no doubt, is deficient, and that is a hindrance. Poverty is great. But in other applications of the principle, Russians show themselves born co-operators. Not a work is undertaken but the men form themselves into a co-operative artele, and that institution works, on the whole, very well. The one fatal obstacle in the way of success of co-operative credit is Government interference, kindly intended, no doubt, but of its very essence so inimical to co-operation that where it is the other cannot thrive. If Russia is backward in co-operation, its neighbour Co-operative and whilom protege SERVIA has in the brief time of its independence set a brilliant example to other nations by organising co-operation, and more particularly co-operative banking, with a degree of assiduity and success which cer- tainly deserve commendation. Servia needed co-operative credit, for usurers were fleecing its peasantry that is to say, the great bulk of the nation to the tune of 400, 500, * The " Peasants' Banks " of Russia and Poland are not credit institutions in our sense. They are mortgage banks, facilitating the purchase of land. 1 82 PEOPLES BANKS. and even 1,000 per cent, of interest, to such an extent that the Skuptchina felt itself called upon to interfere, and, to prevent all Servia from being swallowed up by the greedy money-dealers, to pass a law wholly anomalous in principle, which vests all property in land nominally in the State. Mortgaging and selling are accordingly made impossible without the consent of the authorities. This extraordinary law, for a wonder, is held to have worked well, and to have accomplished its end thanks, I should say, to the concur- rent creation of convenient institutions for providing credit on more reasonable terms. Servia is a country with only about 2,000,000 inhabitants, 99 per cent, of whom are en- gaged in agriculture, the majority that is, about 79 per cent. being occupiers of holdings of from 5 to 25 acres (of land not nearly in the same state of cultivation as ours), 15 per cent, of holdings of from 25 to 50 acres, and only 5 per cent, owning larger properties. With such a population, almost exclusively agricultural, Servia finds business not only for a National (Issue) Bank and three ordinary commercial banks, but in addition for no less than sixty-three (urban) People's Banks, and, moreover, already for sixteen agricultural banks. Probably there are by this time more. All these institutions are of recent growth; for co-operation never entered into Servia till about two decades ago. And some of them are not over-sound. Co-operative banking is, it may be added, practically the one form of co-operation thus far developed in the kingdom. There have been some supply associations, which, being badly organised, have collapsed. There is some little co-operative production tailoring and shoemaking and the like but it does not amount to much. Trade is in Servia all on a small scale, and it is actually decreasing. There are no large factories ; all is petty trade, very much in want of money ; and it was for its relief that co-operative banking was first introduced. The first Servian People's Bank was formed at Belgrade in OFFSHOOTS AND CONGENERS. 183 1 88 1. In point of organisation it resembles, like its sister establishments subsequently established, the French and Italian type of banks rather than the German. The Servian law allows no unlimited liability, accordingly liability had to be limited from the outset to the actual amount of the share. An entrance fee is exacted, and the share is made payable by instalments of 50 centimes a month. There is no limit to the number of shares which a member may hold, and as business is profitable, and there is no limit set to the rate of dividend which frequently rises to 10 per cent., and at present stands, for the Belgrade Bank, pretty steadily at 15 per cent. such freedom of purchase has led to a sad abuse. Investments are scarce in Servia, and no invest- ment is reckoned so safe as a share in the Belgrade People's Bank. Accordingly rich members have bought up shares to the number of 200, 300, and even 1,000 each, practically converting the concern into a joint-stock business. The Managing Committee is in this bank, as in the others, large, comprising fifteen members in the place of Schulze's three. On the other hand, the Council of Supervision consists of only seven. And five members of the Committee are continually told off to act as a " Com- mittee of Discount," which has to decide what bills are to be discounted. The Servian law is very liberal in respect of acceptances, which are given as a matter of course by professional as well as commercial men. Accordingly acceptances constitute the favourite form under which loans are negotiated. Interest is high in Servia. Accordingly from 7 to 9 per cent, is charged on loans. The People's Bank of Belgrade has a paid-up capital of 1,205,000 francs, with 205,000 francs reserve (56,400 in all). Its holding in savings deposits (on which from 4 to 5 per cent, is allowed) a year ago amounted to 2,800,000 francs, and it had 2,200,000 francs outstanding in loans. The other sixty- two banks are very similar in organisation and practice ; 184 PEOPLE'S BANKS. but there is in every case some little peculiar feature of practice to distinguish one from the other. Some lend to members only, others also to non-members. Among them the sixty- three banks* hold 1 0,184,40x5 francs in paid-up capital, and 958,680 francs in reserve funds. The number of their members is 43,120. Not to speak of other quasi-co-operative institutions designed to facilitate common holding of land and common labour of various kinds zadrouga, moba, pozaimitsa, spreg, and batchie to provide agricultural populations with loan money, Servia possesses one agricultural " bank " and fifteen " caisses." The difference between the two orders is this, that the former is based upon limited lia- bility, and is more of a business bank ; the latter is based on unlimited liability, and very much restricted in its busi- ness. To bring themselves under unlimited liability, which the Servian law disallows, the caisses have had to bind themselves under a special law of "contract." The oldest of these institutions, the " bank" of Smederevo, was formed by M. Michel Avramovitch, who is really the leader and the soul of the movement, in August 1893. Nominally it has 10,000 shares of 100 francs each. In truth, only 2,500 of those shares have been issued and paid up. And it deserves to be noticed that the principal shareholders are not the persons for whose direct benefit the bank is really designed, but public authorities. The " department " holds 1,000 shares ; each of the seven "arrondissements" of the department holds some shares; the 118 "communes" of the district come next ; and actually only 600 shares are * The banks are distributed among different departments as fol- lows : Belgrade has 7 ; Nich, 5 ; Valievo, 5 ; Vrania, 3 ; Kragoue- vats, 8 ; Kraina, i ; Krouchevats, 3 ; Morava, 4 ; Pirot, 2 ; Podrinie, 3 ; the Danube, 7 ; Pojarevats, 6 ; Roudnik, 3 ; Timok, I ; Toplitsa, I ; Oujitse, 2 ; and Tserna Reka, 2. OFFSHOOTS AND CONGENERS. 185 allotted to bond fide members peasants, tradesmen, &c. The bank does practically every kind of business, lending on acceptances or notes of hand, and also making small loans of " honour " to very poor people. The peasantry will not pledge their produce. They consider that infra dig. The bank has a Managing Committee of ten mem- bers, every one of whom must be a resident in Smederevo, so as to be handy for attendance. Moreover, there is a Council of Control of five, three being likewise residents in the town, two named by the country members from among them- selves ; and, moreover, there are representatives of the several arrondissements, four to each arrondissement, to watch the business on behalf of their particular constituents. The bank is not allowed to lend to one single member beyond five times his holding in shares. The lending is done dearly, at 7 or 8 per cent. On the other hand, the bank allows 5 or 6 per cent, on savings, the higher rate on the smallest savings, in order to stimulate thrift. It main- tains school savings banks in every large school, issuing halfpenny (five centimes) savings cards, which are handed in as deposits as soon as the twenty squares, standing col- lectively for a franc, are filled up. On the 3ienza Jissa^ bonds which, like our Exchequer Bills, run for fixed terms and bear interest, which, I find, varies in Italy as much as from ij to 10 per cent* These long- term bonds have not managed to secure a very large market. In 1893 there were bonds only to the value of 48,334,708 lire (,1,933,388) in circulation. That is a material help, no doubt, but it is only about one-tenth of what the banche generally speaking must keep at their disposal. Evidently, to issue long-term bonds, corresponding to our * In one case only, in Calabria ; generally speaking, there is little beyond 7 per cent. 228 PEOPLE'S BANKS. Exchequer Bonds, in any amount, a stronger body is needed than a People's Bank. It is all the more satisfactory that the People's Banks' custom of prompt repayments and their high character have made them so much trusted that large withdrawals of deposits are scarcely known. The Comitato di sconto, which has to sit in judgment upon every claim for an advance made, is not the only represen- tative administrative body appointed in the banche popolari. Indeed, their whole organisation is representative and elec- The Consiglio. tive. There is the Consiglio, or Council, which acts as a General Committee, regularly elected at the annual meeting, in most cases for two years, one-half retiring each twelve- month. This body, wielding next to the general meeting supreme authority, varies in number from about seven, in the smaller banks, to 130 or 140 in the large Bank of Milan, every member of it being unpaid, and, for the security of All Services the members in general, elected with care. M. Luzzatti Gratuitous. insists more and more urgently, as time goes on in op- position to his master Schulze-Delitzsch upon purely gratuitous services. In the larger banks, of course, there must be a paid staff, and, in accordance with a resolution formally adopted at one of the great Congresses of People's Banks, these are paid not only by salary but also by com- mission on profits not on " business." That is one of the Italian declarations in favour of profit-sharing. This is found to act as a useful stimulus to good work. Some banks make such payment dependent upon the dividend attaining a certain minimum figure. Signor Levi recom- mends as a rule that the profits should be appropriated as follows: 70 per cent, to dividend, 20 per cent, to reserve, 10 per cent, to the employes. A provident pension and sick insur- ance system, according to the rules laid down by Alfred de Courcy, has long since become a regular institution with all these banks. Of the higher officers, the Italian banche pay three the president, the cashier, and the chief book-keeper THE "BANCHE POPOLARI" OF ITALY. 229 in about the following proportions: the president, 1,500 lire ; the cashier, 1,300 ; the capo contabile, 1,100 lire. From its own number the Consiglio elects from three to The Sindaci. five sindaci, upon whom devolves the daily supervision of affairs. As a rule, they take the duty in turns, each for a week at a time, and after so much sacrifice of time and labour are allowed to retire at the close of a year; Distinct from all these is a board of honorary officers The Probiviri. which is altogether peculiar to the Italian banche, namely, the three probiviri, to whom an appeal may be carried on any point whatever arising in the administration of the banche, and whose judgment to be pronounced only in banco is final. A candidate refused admission, a member refused credit, a member sentenced to expulsion whatever the question may be, an appeal lies to them, and their jurisdiction has in practice been found a rock of strength in maintaining harmony and keeping things in a satisfactory groove. I have incidentally spoken of the Reserve Fund, which, The Reserve of course, these banks accumulate out of profit, allotting Fund> annually from 15 to 25 per cent, to its formation. The weaker banks are in capital, the more importance, as a matter of course, do they attach to a reserve fund ; and thus we see every good bank in Italy building up as strong a reserve as it can so strong that, in the case of the Banca Popolare of Bologna, it actually exceeds the paid-up share capital, standing at 1,292,077 lire as against 1,260,540 lire. I have also already referred to the practice adopted of issuing shares at a higher value, in proportion as the re- serve fund increases, so as to make the incoming member pay for the share which he, so to speak, acquires in the accumulated reserve, though, of course, that share cannot be claimed or drawn out by any one. This is another dis- tinct departure from the German system, and is to be accounted for by the fact that in Italy the shares really are 230 PEOPLES BANKS. shares, whereas in Germany they represent merely parts sociales. The premium on shares is in Italy everywhere actuarially ascertained from year to year. It varies con- siderably. In many cases there is none at all. In others it amounts to but a few centesimi. At Parma, it now stands at 12 lire on the 50 lire share; at Milan, in the Banca Cooperativa Milanese, at 25 lire on 50 ; at Tortona, at 44 lire on 50 ; at Bologna, in the Banca Popolare di Credito, at as much as 58.60 on 60 lire. In a joint-stock company, of course, such an arrangement must be held perfectly legitimate. But it may be questioned if it is altogether commendable in a co-operative association. It may lead to such betrayal of the co-operative principle as has become notorious in the cases of the Paris lunettiers and the Roman tipografi. It has already led to abuses. The shares of some of the older Italian People's Banks are openly quoted and dealt in in the market, like ordinary stock. That should not be. We have had the same thing happening in respect of our own co-operative workshops for instance, at Hebden Bridge. But our societies have very promptly put a stop to it. Generally speaking, it is true, thus far, no particular hardship has been felt to arise from the Italian practice. Merits and Thus judiciously constructed, " fitly joined together " in a11 itS P artS > the fabn " C f Italian Pe P le ' s Banks has shown itself admirably adapted for the discharge of a sur- prising variety of functions, of which all have not yet been told. One or two of their best works remain still to be described. Cramped and hampered by the advice of "prac- tical men," to whose judgment M. Luzzatti held himself bound to defer, they began as essentially " business " banks, bidding for support by dividends and salaries, and deliberately excluding i iniseri, as " unripe " for credit, and likely to abuse it. All these " practical " principles im- ported from across the Alps have been cast aside long THE "BANG HE POPOLARI" OF ITALY. 231 since. " We have suffered, not from scarcity, but from a superabundance of funds," says Commendatore Luzzatti over and over again. "We have succeeded too well." The banks have paid 6, 8, 10, 14, 15, 20 per cent of dividend. " Yes, but stop that," now urges M. Luzzatti, year after year. " Limit dividends ; throw away every inducement to greed! Critics justly urge" (as does M. Leon Say) "that our ' credit populaire riest pas bon marche et de plus, il est inegal! M. Francois, in the Journal des Economistes, points out that it ranges from 4^ to 10 per cent. The Government statistics show the same thing. Eight per cent." (the very figure which M. Luzzatti somewhere declares excessive) "occurs frequently as the accepted rate. Leave that alone now ; cheapen your service ; study, not dividend, but cheap loans ; and remember the ' womb ' from which you have sprung, the womb of the working-men's friendly societies : lend to those societies and to their members, work in co- operation with them, and having attained prosperity, do your best to help the poor ! " This exhortation has not remained without result. Existing banks it is not very easy to induce to revise their terms. But new banks are formed with more popular and more generous rules. And all banks that have worked themselves up to any position of wealth now give according to their power for philanthropic purposes and render help to the needy. Under such impelling influence has sprung up what M. The "Loan Rostand commends as " that original and noble piece of machinery of Italian co-operation (cet original et noble rouage de la cooperation italienne)" the prestito suir onore the " loan of honour." Besides voting money for charitable purposes, some of these banks seventy in 1893 every year devote a certain proportion of their funds to a special sen-ice, granting loans to the poor who have nothing to pledge as security except their " honour," their promise to repay " a very doubtful security," English bankers will 232 PEOPLE'S BANKS. say. But experience has shown that losses under this head are rare and perfectly trifling. In the case of the Banca Popolare of Milan, in twelve years they did not amount to 10 per cent. In 1890 the Banca Popolare di Credito of Padua reported only 2,000 lire of losses out of 100,000 lire ; only 43 " doubtful " loans out of 2,000 contracted. The Banca Popolare of Bologna in the same year set down only 2,000 out of 100,000 lire lent as " doubtful." In 1889, out of 9,250 lire lent out in 93 loans, it had lost 313 lire. It stands to reason, says Senhor Costa Goodolphim, arguing on such loans, that the debtors will make their best effort to repay, because they may want to borrow again. In the year 1893 the seventy banks referred to among them granted in all 8,149 "loans of honour," to the amount of 621,471 lire (24,858). The amount is exceptionally small, because the Bank of Bologna for some reason or other suspended its service of such loans during that year. (During the year 1895 it lent out 17,630 lire under this head.) The number (8,512) and amount (621,426 lire) of loans repaid during the year pretty exactly balance both these figures. The large Bank of Lodi alone granted in that year 54,468 lire in such loans ; the Operatives' Bank at Turin 35,676 lire ; and the People's Bank of Nocera Inferiore (not a very strong bank) even 210,950 lire. Of course, the banks do not give their money to every vagabond who may claim it. They have special committees appointed to inquire into cases. Thus the Banca Popolare of Bologna nominates a distinct committee of five to deal with the matter. Some other banks as, for instance, those of Cremona and Bergamo entrust the distribution of the money voted to some allied friendly society. The Banca Popolare of Milan makes a point of having always some representatives of local friendly societies on its " loans of honour " committee. Most of the loans granted are small. But I have come across grants to one man of 500 lire THE "BANCHE POPOLARI" OF ITALY. 233 (20), and even more. The Banco, Popolare of Milan and the Banca Popolare of Bologna never grant more than 200 lire to one applicant. The Banca Cooperativa Operaia of Milan (founded only in 1884, with a subscribed capital of 134,800 lire) had in 1890 granted 1,455 sucn loans, 655 being under 50 lire each, 595 between 50 and 100 lire, and 25 upwards of that amount. The " loan of honour " is always made repayable by instalments as a rule, in ten months, though in some cases the time of repayment is spread out over sixty weeks or even longer. Some banks charge a moderate interest, others lend gratuitously. From the bancJie popolari the useful institution of prestiti sul? onore has spread over the whole network of provident institutions in Italy. The istituti di mutno soccorso have taken it up, and most friendly trade societies stonemasons', barbers', sign painters', and so on practise it as a regular part of their work. Thus, thanks to the creative initiative of the bancJie popolari, a stream of gold has been set flowing, far less costly and far more beneficial than our well-sponsored charitable enter- prises, watering the desert of distress with fertilising little currents which " return not void." Even that is not all that the banche can do in the way Banche of philanthropic work. When times of trouble arise, and JjSSfci the benevolent subscribe their thousands to help the house- Distributing less and starving, no machinery has been found so effective Rehef - for beneficently distributing the money collected as the People's Banks. They are in a better position to dis- criminate between deserving and undeserving cases than Government officers or committees specially appointed. They know the country and the people. They can take care that the money given is properly expended. And, lastly, applying their own system of distribution, they are able to make the money go four or five times as far. Thus, in 1879, when the Po overflowed its banks, spreading ruin 234 PEOPLE'S BANKS. all round, no relief machinery was found to do better service than the popular banks, which, being handed over 100,000 lire each from the relief funds, managed to multiply that sum to about 400,000 lire in the course of distribution, with the help of their credit it is true, only lending the larger sum, but lending it so as to make it repayable by easy instalments spread over five years. And 4 lire so lent was to the poor flooded worth a good deal more than I lira given. In 1882, under similar circumstances, the Banca Cooperativa Popolare di Padova did even better service. Upon the guarantee of the province it advanced to the sufferers out of its own funds, with due discrimination, in all 295,417 lire, at 2 per cent interest, demanding repay- ment by annual instalments spread over as much as ten years. The Little As an instance of what a People's Bank may do, on the Bank of verv humblest lines on which its work is possible, I quote the record of the little bank of Montelupo, in the Florentine districts, one of the very earliest which was started, as an outcome from purely local initiative. The place is a sort of rural Whitechapel, with a poor population earning a bare livelihood mainly as stovighi, that is, makers of the cheapest kind of lucifer matches. Of these poor folk 375 started a banca with lo-lire shares, to be paid up in ten months. Accordingly they began with but 15 among them, and never got beyond ^"150 of share capital, even at the end of the year. Notwithstanding this, with the help of their riputazione, in the very first year they managed to attract ^1,120 of deposits, and to lend out ^1,240 in loans, netting a profit of more than ;i2O, which nearly repaid the shares. Credit to Agri- Like the Schulze-Delitzsch associations in Germany, the bancJie popolari of Italy have often had the reproach levelled at them that they fail to provide for the needs of agriculture. The charge is as unjust in one case as it is in the other. It is THE "BANCHE POPOLARI" OF ITALY. 235 not even quite fair to say that they leave small agriculture unprovided for, although, roughly speaking, that statement comes very much nearer the truth. I have already referred to the rather striking increase in the number of small- cultivator members in these banks. These men would not have joined if they did not find that they got some good out of the bank, beyond securing a convenient receptacle for their savings. There can be no doubt that a Luzzatti bank, established in an agricultural district, and having a certain amount of general business to rely upon, can, and in all cases that I know of, does, dispense its helpful loans to small agricultural folk as to others, so far as short-term lending is acceptable to them. Some banche popolari also make a point of lending a certain sum annually, after the example of the wealthier savings banks, at an unremunera- tive interest, really as a charity, to small agricultural folk. But, generally speaking, it is quite true that this system is not adapted to very small agricultural business. It was devised for comparatively dense populations, and it stands to reason that you cannot have an omnibus to carry a load of people along the well-paved streets of a town, which shall also serve as a light buggy-cart, to jolt the isolated peasant over his rough mountain tracks. Wherever the banche popolare attempt to serve a secluded rural district, they either become weak and incapable of standing the test of trying times, as has recently been witnessed in Piedmont, or else they really change their character, and become, under humane guidance, very similar to Raiffeisen banks with this important drawback, that they have not the Raiffeisen clauses written in their rules, and therefore have no fully adequate safeguard against abuse. The two in- stitutions obviously have different spheres marked out for them. M. Luzzatti has himself practically admitted this in his preface to the last official Report, and in his speech delivered at the Congress of Bologna, in both of which he, 236 PEOPLE'S BANKS. with sound judgment, pleaded for an alliance between banche and casse, the banca to form the trunk and the casse the branches, radiating from and supported by the central institution, as is actually already the case in the French Riviera. Nevertheless, the Italian banche popolari without question do a great deal of lending in support of agriculture. Various Credit to agriculture has, in truth, long been the peculiar ethods tried. pet child of Italian legislators and economists. It has all along been felt to be so much needed. And at the same time it has proved so difficult ! I have already stated that, as the outcome of an agitation immediately succeeding the The Law of establishment of political union, the Italian Government in 1869 passed a special law which authorised a number of banks to issue notes for specified amounts 30, 50, and 100 lire on the security of certain cash balances held. The notes issued serve as legal tender in their provinces, and pass current, indeed, much beyond. One would have thought that this must be a highly profitable business for the banks. However the country has never taken to the system. The brief term to which lending under this law is restricted three months was of course against any large practice. In addition, the difficulty already referred to, of having to be prepared to cash whatever paper was issued, the moment at which it might be presented, prompted the issuing banks themselves to keep their issue within bounds. There are now only two credit institutions issuing under the law, namely, the excellent Savings Bank of Bologna, and the equally well-managed Monte dei Pasclii of Siena, and their joint issue has dwindled to about ^64,000 in all. Cartelle Approaching the same task from a more independent, but perhaps a more practical, standpoint, M. Luzzatti endeavoured to adapt our practice of Exchequer Bills and Treasury Bonds to the Italian market. He introduced the THE "BANCHE POPOLARI" OF ITALY. 237 buoni di tesoro cT agricoltura or cartelle agrarie, which under the shape of bills or bonds secure credit for long periods. Before issuing such, he prudently made sure of the willing- ness of the large banks to discount them. It is interesting to note that in thus adapting themselves to the demands of agricultural credit, the banche popolari have introduced into their regolamento a rule evidently borrowed from the Raiffeisen banks, requiring borrowers to state the object of their loan beforehand and to adhere to it on pain of for- feiture.* The business actually done has not realised the hopes entertained. In 1881 the banche had 12,224450 lire of agricultural paper outstanding. By 1889 the circulation had contracted to 6,390,210 lire, which is actually less than was recorded in 1876, the first year in which statistics were collected. But the money was apparently all taken up in small amounts. There were 1,425,750 lire outstanding in 30- lire bonds (24 shillings), 760 lire in 4O-lire bonds, 1,592,650 lire in 5O-lire bonds, 3,188,800 lire in loo-lire bonds, 182,000 lire in 2OO-lire bonds, and only 250 lire in a bond for that maximum figure. I do not believe from what I hear that the practice has at all extended since these figures were col- lected. So far as I can gather, the cartelle have been taken up in the main by friends of the movement, just as the first shares in the Milan Bank were as a means of lending sup- port to a good cause. There is no bond fide business done in them in the market. It wants, as has been already said, a stronger body than co-operative banks to make Exchequer Bills pass current. In 1887, when the law of 1869 had incontestably proved The Law of a failure, the Italian Government decided experimentally to l887 ' adopt M. Luzzatti's plan, fortifying it by the imposition of * Regolamento Provvisorio per Pemissione dei Buoni agrari prese le Banche Popolari del Primo Gruppo italiano (Rule 4 in Ettore Levi's Manuale, p. 548.) 238 PEOPLES BANKS. Government authority. The Act of that year gives power to credit institutions to issue bonds running for a fixed Cartellea period (cartelle a scadenza fissa], for the length of which no scadenzafissa. limit ^ s j^ down In p ract i ce , I believe, that two years is about the longest term permitted. The loans issued under this law may be secured either by mortgage, or else by a " privilege " equivalent to that given under our law of distress. To ensure this, lenders must have their claim registered. This is done free of charge. But it means a great deal of trouble and delay and entanglement in red tape. The Savings Bank of Bologna, which probably does the largest business of this sort among non-government institutions, had last October about 1,700,000 lire (68,000) of such cartelle in circulation. That is not very much. Generally speaking, the second experiment is admitted to have resulted in failure like the first, and bankers, still retaining their sym- pathetic fondness for agricultural credit, are expectant as to a new and more perfect law which is said to be on the stocks, and which is to apply some more suitable method to the task. M. Sani's To Signer Sani, the Chairman of the Banco, Popolare of Bologna one of the largest and certainly the most enter- prising and original of Italian People's Banks the method prescribed by the law of 1887 appeared from the outset so little contrived to serve its purpose, that he preferred to make the ordinary practice of lending, on acceptance or by cash credit, available for agricultural uses. Being excep- tionally strong in capital and deposits, his bank is in a particularly good position to do this. Long terms cannot occasion any serious inconvenience to it. The agricultural population of the district consists mainly of freeholders. However, mortgages would be inconvenient as a security. So the bank secures itself by sureties or deposited effects mainly by sureties lending on acceptance for the term of six months after which a renewal may be granted or THE "BANCHE POPOLARI" OF ITALY. 239 by cash credit for the term of a twelvemonth, on the ex- piration of which the credit may likewise be renewed. In either case the interest stands at 5 per cent. This method has proved not only acceptable to the agricultural popula- tion, but also very safe. It is easily applicable, even with- out the precaution of local committees such as are usual in Germany, because the large Council of the bank includes men from all districts, persons who know sufficient about the agricultural population to be able to ascertain and advise what borrowers deserve to be trusted. In any case there have been no losses. M. Sani's method, being simple and practical, is the How it is method which, roughly speaking, all agricultural banks appie * dealing at all in agricultural credit have elected to put into practice Lodi, and Brescia, and Bergamo, and Cremona, and Rovigo, and that whole cluster of banche popolari which the late Postmaster-General of Italy, M. Maggiorino Fer- raris, has helped to raise up in his native country of Pied- mont, established mainly for the service of agriculture. The cash required is provided either by the steady inflow of deposits, the command of a strong reserve fund, or the issue of long-term bonds, which, after all, secure to strong banks such substantial sums as 680,036 lire to that of Lodi, 581,119 lire to that of Brescia, and 213,922 lire to that of Rovigo. Those were the figures in 1894. Or else banks of this kind adopt the precaution of keeping a com- paratively large proportion of their funds invested in readily marketable securities of steady value, so as to be prepared for sudden calls. These securities are made to answer the same purpose as the " mobilised portfolio." In Italy, where Government Consols pay nearly 5 per cent, interest, and Post Office Savings Banks accordingly make a profit, this is an easier process than it would be in the United King- dom. In any case the banks show that they can provide the money. To ascertain the borrowing value of their 240 PEOPLE'S BANKS. Credit in con nection with Agricultural Syndicates. clients they employ pretty much the same methods as the German banks. They have succursales, or local committees, or else local men to whom they can apply for information. In many cases the task is facilitated by a combination, very usual in the country, of tax-gathering with banking, which provides useful information, brings people to the " shop," secures a small profit, and materially reduces the otherwise heavy taxes levied upon the bank itself. On the other hand, the work is more difficult than in Germany, because among the agricultural population the proportion of tenants is very large, and tenants have rent to pay, in default of which, as in England, they may be distrained upon, under a law which is as severe as our own. That is one reason why it is absolutely indispensable that the credit granted should be personal " Esso e tanto piu im- portante in una provincia come la nostra nella quella prevale il latifondw e I'affitanza impresaria rimpone come una necessita? So writes to me M. Tullio Minelli, Chairman of the Co-operative Bank of Rovigo, which in 1 894 lent out, out of 7,900,000 lire in all, about 4,740,000 lire (; 189,600) to farmers. " Tenant-farming imposes personal credit as a necessity." In the district of Rovigo, the landlord is gene- rally applied to for information about his tenant, and in many cases he readily goes bail for him. In the Lodi- giano, where there are mainly large farmers, farming 600 to 800 acres and more, who may require substantial sums, and who consider themselves every bit the landlords' equals, such practice is out of the question. However, really, the landlord's testimony being unavailable, the tenant borrowers are all the more careful to satisfy the bank with regard to the danger of a distress. In any case the losses are in- finitesimal. The rapid spread in Italy of the institution of agricul- tural syndicates which we may consider as simply agri- cultural co-operative associations with technical instruction THE "BANCHE POPOLARI" OF ITALY. 241 added to their programme has suggested to M. Luzzatti a new method of organising agricultural credit, specifically with a view to facilitating common purchase of goods. The method has been actually put into practice, but not long enough to make it possible to report results. It is in principle the same which has for some time back been practised with good effect in the Raiffeisen associations of Germany. The members of the agricultural syndicate, so far as they wish to avail themselves of credit, join, or else form, a co-operative bank, which upon any demand for credit of course satisfies itself with regard to their trustworthiness, and, if desired, opens to them a cash credit secured by sureties or otherwise. That credit, or part of it, the member assigns to the agricultural syndicate, which thereupon opens him a corresponding credit for the purchase of the articles in which it deals. He may make use of such credit, or he may not. If he does not, he will have nothing to pay. The practice effectually helps farmers over the difficulties which I have found to stand in the way of agricultural co-operative sup- ply in this country viz., a want of ready cash. The farmer buys practically on credit, like our own poor or thriftless farmers ; but having made sure of a credit with the bank, he at the same time obtains all the benefits of cash pay- ment and co-operative purchase in respect of price and quality, being charged only a moderate interest upon the money actually drawn. The method is simple, but it has its distinct advantages. I abstain from entering in any detail into the semi- charitable or philanthropic lending practised by some co-operative banks, because that is not business but alms- giving. Quite enough has surely been said to show with whar liberal hand the banche popolari, lending out in 1893 close upon 40,000,000, deal out their money, be it in showers or be it in driblets, to the small artisan or to the substantial Q 242 PEOPLES BANKS. farmer readily, smoothly, safely, with remarkable adapta- bility to varying circumstances. What a stream of almost exhaustless beneficence does this system of People's Banks seem to turn loose upon a thirsting world ! And how wasteful do our own profuse, but carelessly distributed, gifts appear by the side of these self- repay ing loans ! It may be said that we have the money, and need not look to economy. But our careless- ness leaves such a wide margin of distress which goes without benefit. And the greatest benefit of all, the lesson which teaches people how to help themselves, how to make the help received from others go farthest, the lesson of thrift and business-like habits, in our free-handed but easy- going giving which is the product rather of instinct than of reflection we generally miss altogether. Spread and As might be expected, once the " Utopianism " of M. Banche f Luzzatti's scheme had been disproved by facts, once the Popolari. People's Banks had shown themselves truly beneficent associations, hindrances disappeared, and the banks multi- plied pretty rapidly. Up to 1883, indeed, the adverse law stood in the way. Their number increased by 9, 2, 7, 5, 10 in the year. Nevertheless, in 1882 it already stood at 206, with an aggregate capital and reserve of 57,822,000 lire (2,312,880), that is, about 11,200 per bank, and a members' roll of 114,072 (821 per bank); and their col- lective lending amounted to annually 156,042,366 lire (6,241,696). By 1889 the banks had increased to 714 (as against 159 non-co-operative credit institutions), with 114,979,542 lire (4,599,180) capital and reserve, and lending out annually 285,936,946 lire (i 1,437,476). Their annual transactions had risen from 206,899,142 to 42 5, 3 39,827 lire. In 1893 there were 730 banks (of this system only, without counting the casse rurali\ of which 662 sending in returns under this head showed a collective members' roll of 405,341, the classification of whom has already been THE "BANG HE POPOLARI" OF ITALY. 243 given.* The average number of members per bank, which varies a little from year to year, stood then at 612. The collective paid-up capital of 697 banks amounted to 89,949,527 lire, to which must be added 28,278,349 lire reserve funds, bringing up the total of capital of their own to 118,228,000 lire, or 4.729,120. This capital had attracted in all 357,723,000 lire (14,308,920) of borrowed money (8,729,480 savings deposits, 3,646,040 deposits on current accounts [cash balances], and 1,933,400 in long- term bonds), and had enabled the banks to lend out on acceptances, current accounts, ordinary advances, and otherwise 992,448,400 lire (39,697,936). The loans were for the most part of medium amount, 20.97 per cent, in number, 19.37 P er cent, in value, ranging from 201 to 500 lire; 10.18 per cent, in number, 21.14 in value, from 501 to 1,000 lire ; 4.30 per cent, in number, and 29.00 in amount, from 1,001 to 5,000 lire. Accordingly, close upon 70 per cent, of the money was lent in sums ranging from 8 to 200. Only .53 per cent, in number, 13.45 per cent, in value, go beyond 5,000 lire ; and 67.02 in number, 17.04 in value, fall short of 200 lire. The rates of interest charged vary from i| to 16 per cent. But the last-named extra- ordinary figure, which M. Luzzatti condemns as " Asiatic," occurs in the case of one bank only, a small one, peculiarly situated, in Sardinia. However, the rate of interest is generally higher than in Germany, ranging from 6 to 8 per cent., which M. Luzzatti justifies by the high value of money prevailing in the poorer country. Against this it ought in fairness to be pointed out that some of the strongest and largest banks pay dividends of 10, 12, and 14 per cent., which are from our point of view not at all " co-operative." The bad or doubtful debts made upon the 992,448,400 lire of lending are, as already stated, returned at I 5>39O,i64 lire, 1.55 per cent, a figure more than five * See page 219. 244 PEOPLE'S BANKS. times larger than what occurs in ordinary years.* The actual losses made good are given as 1,334,360 lire (53,375). They are confined to 199 banks, presumably badly managed ones, of which there are more than there should be. There were 74 banks declaring a loss, instead of a profit, of 438,157 lire in all. Of that number, 18 banks are in Campania, where co-operative banking is very so-so, 9 in Apulia, where it is not much better, 6 in Basilicata, 7 in the Marches, and 6 in Piedmont, where there is a good deal of speculative spirit, and there are, as will be shown, a number of banks excessively weak in capital. The net profits realised by 694 banks (including the 74 losing ones) is returned at 6,799,855 lire (271,994), which, upon a sum of 89,949,527 lire (representing the paid-up capital of 697 banks) would be equivalent to a return of more than 7 \ per cent. Of that sum, however, only 4,827.854 lire has been distributed in dividend,! 1,156,755 lire being carried to reserve, 379,738 lire being distributed among the employes with 211,356 lire in addition carried to their provident funds, while 107,529 lire was devoted to charities. I ought to add that the year 1893 was m every respect an exceptionally unfortunate one. The figures for preced- ing years show very much better in every respect. * This exceptionally heavy figure is owing to bad banking in weak provinces. Basilicata shows 19.07 per cent., as against .47 in 1886, .01 in 1882, c. ; Apulia shows 4.83 per cent. ; Sicilia, 3.28 per cent. ; Sardinia, 2.22. Emilia has 1.20 per cent., as against .20 in 1886, its ordinary rate. Lombardy .33, which is only a slight excess upon its average figure ; Venetia, in the same way, .27 per cent. It is the bad banks which have been found out by the crisis, and spoil the average for the good. t The Statistical Report gives 6.36 per cent, as the average return of dividend declared in 1893 by 493 banks furnishing returns, or 4.97 per cent, on capital plus reserve. That is a considerable diminution on the results of the " eighties," when 9.49, 9.48, 9.44, and respectively 7.30, 7.31, and 7.23 per cent, were common. THE "BANCHE POPOLARI" OF ITALY. 245 The 730 banks were very unequally distributed over Present pretty well all the kingdom. Ostensibly Campania, which has a large number of small and not always very good banks, takes the lead, boasting, in 1893, I2 7> which by the end of 1894 had increased to 132. However, the real force of co-operative banking lay then, as it lies now, and always has lain, in Lombardy, Venetia, Emilia, the Marches, and Piedmont. Of the "business" done during 1893 by 649 People's Banks, totalling up to 12,476,186,567 lire ( ^499,047,462), the average figure per inhabitant of the province is : for Lombardy, 1,439.68 lire ; for Emilia, 643.78 lire ; for Venetia, 471.24 lire ; for Campania, 228.63 lire ; for Latium, 89.97 ^ re 5 an d for Sardinia only 3.53 lire. The average figure per inhabitant of the kingdom is 406.06 lire. Emilia, Lombardy, and Venetia, as M. Luzzatti himself testifies, show both the best banks and the greatest banking strength. Fifty-nine of the sixty banks existing in Lombardy, having 74,163 members, held in share and reserve capital 39,811,120 lire, and in deposits 163,046,660 lire, which is more than twice what the non- co-operative banks of the same province can boast ; whereas Campania, with 58,963 members, held only 17,670,321 lire of capital, and 66,410,230 lire in deposits. The figures for Venetia are less striking than those for Lombardy, but still favourable to the co-operative banks. The co-operative banks there held 10,497,384 lire in share capital, and 54,554,036 lire in deposits, against 8,103,783 and 35,014,426 lire respectively held by ordinary banks. The proportion is most telling in Emilia, where co-operative banks held 10,372,695 lire in capital and 52,613,048 lire in deposits, as compared with only 55,918, and 917,487 lire respectively held by other banks. Assuredly these figures show what a power co-operative banking has grown to be in M. Luzzatti's country. The year 1893 was, as observed, an exceptionally bad 246 PEOPLES BANKS. The Crisis has one. It was then that the commercial crisis really began Co-operative to ^ nc ^ out t ^ ie c -P era tive banks which had stood, so to Banks less speak, like a rock, while the non-co-operative institutions B a a n n k ^ rdinary tumbled to pieces, and crash followed crash. As a matter of course, a decline of business tells upon industrial banks, no matter whether they be co-operative or otherwise. In 1887, 608 co-operative banks held a " portfolio " of accept- ances discounted of 285,000,000 lire, and deposits of 427,617,000 lire, on a paid-up capital of only 104,109,000 lire. By 1893 the paid-up capital had risen to 118,228,000 lire, but the "portfolio" had shrunk to 214,490,000 lire, and the deposits to 357,723,000 lire. Among non-co-operative banks the decline was very much more marked. Their share capital went down from 324,605,000 lire in 1887 to 261,873,000 lire in 1893, their deposits shrank from 688,045,000 lire to 419,423,000 lire, and the discount busi- ness had gone down from 353,000,000 to 186,000,000. From 1893 to 1894 the number of People's Banks in Italy diminished by ten. There are now only 720, allow- ing one People's Bank to every 42,089 inhabitants as compared with one to 165,439 in 1881. There have been several collapses, owing to bad management. Thus the important (industrial) Bank of Brescia, which had specu- lated in sulphur, had to close its doors. The Bank of Alessandria, which had locked up a large sum of money in mortgages, had to suspend payment. It has since revived in an amalgamated shape, having allied itself with another bank. And the Bank of Genoa, having dabbled too freely in building operations, has likewise had to place itself, for a time only, in its creditors' hands. It is now once more solvent and busy. In the main, the decrease, which is very partial, is due, probably, in some degree to the ridiculously heavy taxation levied upon the banks by the State, and, moreover, to the discomfiture of some puny credit institu- tions which started with a wholly insufficient capital, made THE "BANCHE POPOLARI" OF ITALY. 247 up of 5-lire shares, or else levying their funds from members, like our Loan and Self- Help Societies, in monthly pay- ments. Societies organised on such lines can obviously never acquire real stability. They build, so to speak, their walls with the material which should go into the foundations. We in England see the results of such unwise policy in the rapid changes perpetually taking place in the number and strength of our Loan Societies. A Loan Society will rise up to-day, to-morrow will be suffering from a superabund- ance of funds, only to find all its money drawn out and itself condemned to a happy euthanasia the day after. You cannot work a bank without some fixed and stable capital. On the other hand, to start a limited liability bank with 45. shares is obviously a risky operation. With all their merits, these Luzzatti banks will not work on very small means. Out of ten banks which have, on the balance, shut up shop in 1894, eight are small agricultural banks with such diminutive shares started in Piedmont. Two of these held capitals severally of ^30 and ^36 only. For a Raiffeisen bank that would be ample. For a Luzzatti bank it is nothing. There are diminutions also in Basilicata, Apulia, Sicilia, and the Abruzzi, all of them weak provinces, where banks are feeble. On the other hand, in Liguria, Lombardy, Yenetia, Tuscany, and the Marches, there is a small increase. Business, in the sense of lending, has further decreased from 268,736,000 lire to 243,910,000 lire. But deposits have grown from 357,723,000 to 372,164,388 lire. Quite evidently the business of the co-operative banks is Ho\v the not only sound, but the soundest that there is in Italy. Banks s P read - And although their activity has met with a temporary check just as in Germany the marked difference in com- parative decline between them and other banks, telling strongly in their own favour, shows that they are destined, not only to maintain themselves satisfactorily, but to renew their advance as times improve. There is no more en- 248 PEOPLES BANKS. couraging feature about these banks than this, that one of them is never set up without calling up within very little time a family of others, clustering around it, to serve for different clienteles more or less pretentious as the case may be. By the self-evidence of its advantages the business seems to propagate itself. Thus around the Banca Popolare of Milan have sprung up in that city alone eight new banks, as on a graduated scale ; round the Bank of Bologna five ; round that of Naples twenty all of them more or less ttagees, " ranged in tiers," suiting their require- ments to their own peculiar public, and issuing shares of from 5 lire (43.) up to 100 lire (4). They push forward in their own peculiar way. A central bank begins by sending out succursales ; after a time the succursales decide to turn themselves into independent banks ; the central bank, with- out a suspicion of jealousy, readily helps them, and their business doubles and trebles. Thus province after province is taken possession of with a regularity of method, and a certainty of success, which remind one of the conquest of a country by a victorious army. There are cases in which the unselfish parent-bank has, like a pelican, fed its offspring on its own flesh. Thus the Bank of Cremona has four succursales, which do not yet pay. Indeed, three of them Soresina, Casalmaggiore, and Piedana among them in 1890 made a loss of 6,000 lire. Nevertheless the 5,100 members composing the five establishments, holding, in all, 42,000 shares, work together as one body, drawing precisely the same dividend throughout. The thing will right itself in time. The old Bank of Lodi has five succursales and eight agencies, the Bank of Novara seven, and so on. The common feature throughout is amicable co-operation, carried out on the principle which M. Luzzatti ever presses upon his banks, namely : " Independent seinpre, isolati mat" union combined with decentralisation, in- dependence, and yet general alliance alliance extended THE "BANCHE POPOLARI" OF ITALY. 249 so as to embrace also the savings banks and other similar institutions, all of which claim and are allowed their place in the periodical congresses, and study to further the cause of self-help by all means in their power. The great lending and the great borrowing or distributing institutions remain friends and allies as they have been from the beginning. By way of further development the banche have combined to a co-operative insurance union, IlPopolare, for which every banca acts as an agent. With so large and so dependable a clientele the society is bound to do well. Of late the proposal has been brought forward to focus the common affairs in a central bank. In view of the local centralisation which has already taken place, concentrating Lombardy business in Milan, Emilia business in Bologna, and so on, it is held questionable whether there is really room for an additional central institution. Throughout Italy these banks have become a power for "A Nation in good ; and if Lord Jeffrey spoke truly when he laid it down Banks - that the greatness of a nation and the happiness of its people do not depend so much upon the increase of its military strength as upon " the spread of banks and the increase of banking facilities," Italy, with her smaller army, has no need to shrink from comparison with her more powerful military neighbours with their mighty " nations in arms " against which she has to pit her " nation in banks." Looking at all these busy, laborious hives,, in which not a drop of honey is allowed to run to waste, you cannot fail to realise that they represent a great and beneficent national possession, a richly yielding horn of plenty, and that, in M. Durand's words, " This magnificent network of institutions of popular credit, for which Italy is beholden to M. Luzzatti, may well excite the envy of Europe." " It is impossible," says M. Luzzatti, with just pride, in his presidential address of 1887, "not to acknowledge that we have delivered the small folk and the middle classes from crushing usury, that 250 PEOPLE'S BANKS. Some unsound Banks. Instances of Sound Banks The Banca Popolare of Bologna. we have assisted commerce, and, lastly, that we have helped to cultivate throughout the fruitful tree of thrift on ground which previously appeared absolutely barren." The large host of banche popolari, it is idle to deny, includes alike good, bad, and indifferent, according to the spirit prevailing among the local leaders. It would be a great mistake to look upon the system as absolutely self- regulating. Some original sin the first Italian banks in- herited from their German parents. That sin has here and there blossomed into greed, dividend-hunting, a taste for speculation, carelessness ; and has borne fruit in the study of large business, in big dividends, high rates of interest, and occasional collapses. As the movement has gone on, its leader has applied more and more of the purifying fire of co-operative principle, which has already cleansed away so much of the dross bequeathed by the old Adam, that some months ago M. Luzzatti could publicly boast that the "good " Italian banks distinctly surpass the best among the German in " moral " character though he had to add the avowal that in Germany the second-rate banks in this respect excel above the Italian. Fortunately there are good specimens of the Italian banks to be met with in most of the districts where they have gained a footing. I have already spoken of the great " Queen Bank " of Milan, which I desire to hold up rather as an example of success than as a model for imitation. M. Luzzatti himself awards the palm for quality among all his banks to the excellent Banca Popolare of Bologna, which he speaks of as undoubtedly " the first in the world." Those words were uttered at Bologna, otherwise they might appear unkind to the banks of Cremona, Bergamo, Vicenza Lodi, Pieve di Soligo, and not a few others. However, a better model certainly could not be held up for instruction and imitation than the People's Bank of Bologna, which at the close of thirty years' existence finds its paid-up capital THE "BANCHE POPOLARI" OF ITALY. 251 increased from 111,756 to 1,260,540 lire, with a reserve fund of 1,292,077 lire at its back, and its turnover grown from 700,295 to 38,216,455 lire. Its annual profits have correspondingly increased from 5,469 to 149,975 lire. In the place of the modest 696,450 lire which marked its first year's business, it now lends out annually, among its 4,971 members, 31,439,833 lire. The brilliant success secured is not, however, what either M. Luzzatti or myself would wish to hold up most conspicuously to admiration. That success has been attained by excellent management, evidenced by the careful attention given at all points to the convenience of members but concurrently with a practical display of philanthropy and public spirit bound to attract support. The bank has shown itself largely given to good works, not only in the way of " loans of honour " and con- tributions to useful and charitable funds and enterprises, but also in spending freely for technical education, which is to bring profit to the Italian vine - growers, artisans, and husbandmen. Its "loans of honour" it grants, up to 100 lire, free of interest ; but it insists upon prompt repayment. In interest-bearing loan business it makes it a rule to give the preference to small business. Of its loans it is interest- ing to note that 4,500,000 lire has gone to agriculture, and 731,000 lire to working-class borrowers. One would wish to see every People's Bank animated by the same spirit. The People's Bank of Cremona, having nearly twice the Cremona, capital of the Bank of Bologna, is as excellent a type, and is interesting more specifically on the ground of its con- siderable agricultural business in a district quite as much devoted to agriculture as to industry. The Bank of Lodi Lodi. Banco, Mutua Popolare Agricola really the oldest bank of the Luzzatti type, is another admirable bank bearing a strongly agricultural character. Of something over 7,000,000, or even maybe 8,000,000 lire, lent out annually, quite 3,000,000 lire goes to agriculturists, generally speak- 2 5 2 PEOPLE'S BANKS. Rovigo. Credito Agrario Bresciano. ing of the large tenant class. Such loans are generally made in the form of cash credits, and losses are prac- tically nil. As a proof of the confidence which banks like that of Lodi inspire, I may mention that an English engineer on the spot, holding an appointment in the service of the " Light Railways " of the district, informed me that he had advisedly drawn his money out of the local joint-stock bank in order to put it into this co-operative bank, " because he knew it to be safer." The Bank of Rovigo has only 2,209 members as compared with the 6,000 of Lodi, and its capital is only 337,398 lire as compared with 2,228,499 n ' re (in both cases including reserve funds). It is equally agri- cultural, but caters for a different clientele the smaller tenantry. It lent out in 1893, 9> 2 97>S96 lire on bills, in addition to more than 400,000 lire granted in cash credits. Its losses on agricultural business are likewise infinitesimal. The Credito Agrario Bresciano is an independent institu- tion, but following generally Luzzatti lines. Its clientele is specifically one of what in Italy counts as " medium " farmers generally speaking freeholders. The larger farmers go by preference to the Savings Bank, which, like all Italian Savings Banks, is allowed by law to lend on personal security. The small go to the casse rurali of their districts, adapted "Raiffeisen" banks, of which I shall still have to speak. The Bank of Brescia is interesting as work- ing (until recently) side by side with an industrial co-opera- tive bank established in the same place, and in a district in which co-operative credit has not been called into being by the extortions of usury. Even without such provocation, in a district in which good cultivation makes all the differ- ence between profitable and unprofitable husbandry one- third of the area is under irrigation the urgent need of ample working capital, upon which I have laid stress else- where, has naturally come to be recognised. The Bank of Brescia has slightly over 2,000 members, a paid-up capital THE "BANCHE POPOLARI" OF ITALY. 253 of 322,238 lire, and lends out more than 2,000,000 lire, generally (practically) for the term of thirty months, the principal being repayable by tenths, at about 6 per cent, which enables it to pay its shareholders from 4 to 6 per cent, in dividend. The Bank of Acqui, almost purely agri- Acqui. cultural, is interesting because it has raised itself to acknow- ledged strength from what was practically bankruptcy. The bank was formed in 1883, to serve an exclusively agricul- tural that is, viticultural district, and within little time found itself with 400,000 lire to the bad, owing in the main to depreciation of land and agricultural produce. The present manager then took charge of the establishment. Fortunately, as it happened, another bank in the neighbour- hood came to grief about the same time, and people in the district transferred all their deposits to Acqui. Since then the bank has made deposits its principal source for the supply of funds. It takes bills from neighbouring smaller banks, but rarely passes its own on for re-discount. " A good deposit bank," so the manager, M. Scotti, puts it, " should stand in no need of credit." To secure itself against danger which might arise from a sudden withdrawal of deposits, the bank keeps a comparatively large portion of its funds invested in readily marketable securities, which means that, to keep itself safe, it does less lending in proportion to its money than industrial banks. It is now strong in position, and pays a good dividend. Speaking of agricultural banks, I am bound to mention the small banks, specifically agri- cultural, of Piedmont. Actually the smallest of these is that Spigrux of Spigno, which has little over 200 members ; in 1894 there were 228, of whom 18 were medium cultivators, and i63 } the bulk of the clientele, decidedly small men, alike free- holders, tenants, and mezzadri (inctayers). Thirty members were village tradesmen. Of the 228 members, 112 held only one share of 20 lire (i6s.) each. The small share capital could not obviously go very far, and evidently 254 PEOPLE'S BANKS. savings deposits are not very considerable. The people are very poor. The friends of the movement have come to their aid, paying in deposits and taking long-term bonds. And the local friendly society, which is really the parent of the bank, and which still provides the bulk of its members and lends its office, pays in its funds. So does the munidpio the parish council. By that means the little bank, holding only 11,849 li re f paid-up capital of its own, has been enabled to lend out in 1894, 179,670 lire, of which the major portion was lent in amounts under 300 lire. As much as 49,327 lire was lent out in amounts of less than 100 lire. This little bank is to me one full of interest But what with the support which it receives on the strength of the " moral " responsibility which Cavaliere Spingardi, the Presi- dent, frankly owns that men like himself he is the " little Providence" of the bank owe to their poorer brethren, in excess of the duty which their limited liability lays upon them, I can scarcely look upon it as a bond fide " People's Bank," however useful and beneficent it may be. And I cannot help thinking that in so small and so distinctly rural a district a Raiffeisen bank would be more in place. The Banca In Italian towns, as in the country, to see how the MUanesf banc/te popolari can do good work, it is well to step down from the level of large institutions like those of the Banche Popolari of Milan, Cremona, and Bologna, to a lower stratum. On a smaller scale there is quite as good work to be shown. There could not be a more co-operative bank than the Banca Cooperativa Milanese, which in seven years raised its profits from 38,223 lire (for seven months) to 229,874 lire, and which two years later showed a turnover of 117,404,794 lire. Its 50-lire shares sell at 75 lire. This bank, ably administered by M, Arrigo Valentini, lends most useful aid to small traders, and to other co-operative associations. It is thanks to its assistance that the Magaz- THE " BANCHE POPOLARI" OF ITALY. 255 zini Generali del Mobilio, a productive cabinetmakers' association of originally about 400, now about 700 members, have found themselves able to defeat the " sweaters " and emancipate so large a number of working-men families, who now work for their own account and earn good wages, besides raising themselves steadily in the social scale.* In Bologna, side by side with the pretentious Banca Popolare, you have the modest Operatives' Bank, locally known as La Banchina its correct title is Banca Cooperativa per gli^^ Banchina. operai e la piccola industria della citta e provincia di Bologna. The bank has something over 5,000 members, spread out over a large district, and disposes of a paid-up capital (with reserve fund) of 162,173 nre - The members are all small folk with small wants in respect of loans. The majority of loans vary between 200 and 300 lire. Serving a large district, by means of local agencies, which, in conjunction with the large amount of work necessitated by the small- ness of the transactions, swell the expenses and make a margin of 2\ per cent, between lending and borrowing imperative, the bank deals out 1,864,812 lire in loans in the course of a year. Descending lower still in the scale, there A Working- is the Cassa Cooperativa di credito della Societa Operaia men ' s Bank- maschile, which issues only 5 -lire shares, thereby securing a capital of 45,790 lire, which a reserve fund of 21,983 lire has raised to 67,773 lire. Thanks to the collection of 141,834 lire in savings, it managed in 1894 to lend out to its working-men members 603,056 lire. Since New Year 1895 the number of members has further grown to 4,000, and the capital has correspondingly increased. It is really a misnomer to speak of this institution as specifically maschile, for there is a Societa femminile which has joined the male Society to work the bank in common. This * See my article, " A Defence against Sweating," in the Economic Review of April 1894. 256 PEOPLE'S BANKS. little bank is really one of the triumphs of working-class self-help in Italy. It was set up in 1883, with only 464 members, subscribing 10,980 lire (439) in share capital. For ten years its shareholders were content to do absolutely without dividend. By dint of sacrifice and pegging away the society had by the end of 1894 crept up to 2,771 members, commanding the capital quoted. From 14,670 lire its savings deposits had crept up to 116,480 lire; its credits had grown from 23,663 to 156,417 lire. And the little institution maintains itself and keeps solvent, and does an immense amount of good in dispensing relief to working folk by loans which must not in any one case exceed 1 50 lire (6), if the loan be an advance, or 200 lire if it be granted by way of discount of an accepted bill. In the first twelve years of its existence it has, in all, lent out 6,190,161 lire in 7,274 loans. The interest charged is necessarily rather high, 6J per cent., and the maximum length of time is fifteen months. No member is allowed to hold more than five shares. The whole concern is humble, and has been raised up out of palpable weakness. However, by good management it has succeeded in main- taining itself, and maintaining itself, creditably, by self-help alone. Employees' M. Luzzatti, in his Preface to the last Statistical Return of Banche Popolari, calls attention to the recent increase in the number of credit associations formed specially for the use of civil servants, railway employees, and others forming the staff of large establishments, and dependent upon salaries. There were at the close of 1894 no less than 29 such societies in existence, some of them very strong both in numbers and in capital. Among persons of such a class, of course, co-operation for credit is particularly easy, because it is to the supreme interest of every member that he should preserve a good character. Some of our own civil servants have found this out, and organised very successful societies, THE "BANCHE POPOLARI" OF ITALY. 257 which are, in fact, co-operative credit associations, one among the Post Office employees, and some others among Civil Servants generally. The Italian employees' societies also include associations of school teachers, again a very suitable class, and abroad a class to whom occasional credit must be of considerable importance. We find the same kind of thing established in Germany. Railway servants are in Italy very conspicuous alike in this and in other forms of co-operation. They are answerable for no fewer than five credit associations in Italy. The employees of the Ministry of Agriculture, Industry, and Commerce have formed their own co-operative credit bank, as have also the clerks of the large Bank of Naples. Lastly, the Italian " Army and Xavy Stores," an establishment smaller of course than our own in Victoria Street, but admirably conducted, the Unione Militare, has introduced a system of credit which is very discreetly managed, but is found useful, mainly to junior officers, when money happens to be scarce though the sums advanced are not generally large, never exceeding 80, lent at 4 per cent. ; and the entire practice really only amounts to an equivalent to credit for purchases at the particular store. One very peculiar little association, which can scarcely A Modem be called a bank, exists at Cuglieri in Sardinia. Shares in j^oitario this institution are payable, not in money, but in corn. Two hectolitres of wheat, valued at 32 lire, make a "share." The credits asked appear likewise to be given in corn. This is, in truth, a revival of a very ancient institution, the monti frumentari, alluded to above. People's Banks having proved popular, one cannot be "Catholic" surprised at seeing the Church of Rome, always a good strategist in matters affecting her interests, studying to take advantage of the magnetic power of the useful insti- tution to add one more material support or bulwark to her fabric. Denominationalism is not in itself a desirable factor R 258 PEOPLES BANKS. to be introduced into banking, and it is to be doubted if a bank, attracting recruits by relief offered for their material needs, constitutes the best possible missionary for the Church. However, we ought to bear in mind that among purely Roman Catholic populations institutions which we should set up as generally " Christian" or " philanthropic" or ' educational," as a matter of course assume the name " Catholic," under the dubbing of good men to whom "Catholic" appears identical with, if not indeed superior in expressiveness to, " Christian," or generally " good." The " Catholic " banks are in themselves sound banking institu- tions, and do not a little good in their purely Romanist home of Venetia, where they have already become power- ful enough to act as centres to a whole network of useful, or else charitable, institutions, all of them impressed with the " Catholic " stamp, and sanctioned and headed by the bishop of the particular diocese. There are two such banks in Venetia. One the Banco, di San Paolo, of Brescia, founded in 1888 has a paid-up capital of 100,000 lire, and does an annual business, more particularly in bills of ex- change and cash credits, amounting to 7,573, 800 lire. The other is the Piccolo Credito Bergamasco, styled " Piccolo," to designate the character rather than the volume of its busi- ness. This bank was founded in January 1892, having 260 shareholders, who among them took up 2,034 shares of 20 lire each. The bank, designed to assist small tradesmen with credit and, moreover, to start " Catholic " village banks of the Raiffeisen type in three years discounted 9,732 acceptances for a total amount of 5,197,591 lire (207,904), of which already 4,313,495 lire is repaid. It is a steady, growing business. In addition, the bank has lent upon security 355,322 lire, and by way of cash credit 2 >397> 2 O5 lire, advancing in all, in three years, 7,950,115 lire (318,004), in addition to taking 3,750,936 lire in savings deposits, of which it still holds 1,881,858 lire. Moreover, THE "BANCHE POPOLARI" OF ITALY. 259 it has already sixteen Raiffeisen village banks clustered around it. This is not bad business. The paid-up capital has meanwhile grown to 245,263 lire, with a reserve fund of 20,561 lire at its back. The annual business amounts to 4,489,585 lire. The bank in truth forms the centre of a great "Catholic" social and economic propaganda, in which the " Catholic Agricultural Union/' doing a large co-operative business for its members, is the foremost factor, but which comprises also a " Catholic " bakery, a " Catholic " Young Men's Provident Society, a Young Women's ditto, " Catho- lic " soup kitchens, a " Catholic " Working Men's Club, and some other items. There is no reason why " Catho- lics " should not co-operate among themselves, so long as they do not take up a position of hostility towards others. In a strongly " Catholic " province, the inscription of " Catholicism " on the co-operative banner has certainly added a potent stimulus to the co-operative movement. Among a mixed population it would work harm. And it may be pleaded that Roman Catholics, like others, might "be content to accept good advice given by a high Autho- rity, and to render unto God the things that are God's, and unto the Caesar of economic and social work the things which are that Caesar's. Whatever be the merit of this specifically " Catholic " A Tribute to movement, and of all the other more or less independent ~ co-operative banking, which of course one must expect to see overflowing from a vessel so rapidly filled to the brim, all that work is manifestly due to the good example set by the banche popolari, introduced thirty years ago by M. Luzzatti, whom, in view of the magnificent work accom- plished, and still in progress of accomplishment, I accord- ingly have good cause for calling, as I have done in my .dedication, " the benefactor of his country." CHAPTER X. Need in Italy of Small Village Banks. Common Features in Rural Italy and Rural England. THE " CASSE RURALI" OF ITALY. As in the person of M. Luzzatti Italy had its own Schulze- Delitzsch, Providence so ordered it that it should have also its own Raiffeisen not a mere mechanical imitator, but an intelligent adapter, taking into due account the peculiar circumstances of his country. There can be no doubt that the banche popolari do not adequately occupy all the ground which calls for cultivation. They do wonders among small trading folk with moderate means. They do very little for the large class of small agricultural cultivators, who need help very sorely. The case of rural Italy ought to be interesting to us, because there are some features which link it rather strikingly with our own rural economy. In Latium, in Umbria, in the Marches, and in parts of Lombardy and Venetia, there is the same paucity of landowners, a very similar system of land tenure, even more absenteeism, and here is a point of difference incomparably greater harshness practised in the collection of rents. In Italy the need of the humble tenant classes is, indeed, owing to peculiar circumstances, even more accentuated than among ourselves. To the mass of the people in the country life is a perpetual struggle. Everything, of course, is backward tillage, trade, family economy in that little cottage which poverty has stripped bare of every comfort. The farm implements are primitive, the manure is of the scantiest, and so is the fodder given to that poor, mis- THE "CASSE RURAL1" OF ITALY. 261 shapen live stock, which, in nine cases out of ten, belongs to a usurer, who draws all the profit out of its rearing. Rents are rigidly exacted, and to the little household, perpetually in debt, "money" is as much of a meaningless " expression " as " Italy" used to be geographically before the Union. Even wages offer but a slight alleviation to the cultivator's lot. For their scale is very low 50 centesimi for a woman, from 80 centesimi to I lira, or at most ij lira for a man. Of course such an economical desert must needs bring Need begets forth its own peculiar weeds. Usury is rampant. Its practice is scarcely even held disgraceful. Indeed, the usurer has come to be looked upon as quite respectable. There is nothing on which he will not lay his hands. If the poor peasant wants money, he can have it at rates varying from 50 to 1,200 per cent. often with a Sunday dinner thrown in as a prescriptive condition. Or he may have it from a bank in the town, at which, in consideration of a heavy fee, the usurer consents to act as surety. Should the peasant require a sack of maize as he sometimes does he can have that in kind, of inferior quality, at the rate of 24 lire for what in the market costs only 12 lire, but at three months' credit a matter of 400 per cent, per annum. Should he require live stock, there is the same friend in need to provide it by an arrangement called soccida, which throws all the risk and cost of keeping upon the hirer, while securing a sure half of the profits to the lender. Should he want goslings for his wife to rear up and fatten for the market as favourite an industry in Venetia as chicken-cramming is in Sussex the usurer will let him have his 2 wherewith to buy fifty goslings, claiming back as interest, at the close of five or six months, five fat geese, representing a value of i. That has proved merry business for the usurers, but it has kept the peasantry in abject poverty, which was ren- 262 PEOPLE'S BANKS. The Earliest Propaganda. Dr Leone Wollemborg. dered more marked when hard times came, and either the earth refused to yield her fruits or the market its prices. Their condition became worse than mere poverty, for it crushed all hope and elasticity out of them. After the year 1880 had brought on the critical period of depression, there seemed scarcely anything left to work for. Cattle, implements, furniture, were all pledged to the usurer. And feed as badly, clothe himself as badly, live as badly as he would, all the peasant's toil went but to enrich his oppressor. For such a population as this the Raiffeisen Loan Banks, with their aptitude for conjuring money out of nothing, appeared the one thing needed. Of course their fame had penetrated across the Alps, and in 1883, just before Dr Wollemborg resolved to make himself their champion in Italy, M. Luzzatti cleared one hindrance to their introduc- tion out of the way by publicly declaring that " if the ardour of an apostle were to raise up banks similar to those of Raiffeisen, they should be welcome ; he would not in Italy renew those useless and disgraceful polemics with which these banks had been met by his friends in Germany if they did not disdain to accept it, there he offered them his hand for alliance and help." But, unfortunately, the fame was as yet nothing but fame. The Italians " heard the message, but they lacked the faith." No one really believed in the practicability of the thing. Signor A. Keller had championed it in speech, but gained no converts. And when Dr Wollemborg made up his mind to try his hand at a practical experiment, " everybody told me," so he himself says, "that my under- taking was 'impossible.' And I silently recalled to mind that fine saying of Carlyle's : Every noble enterprise is at its outset ' impossible.' " In his own Venetian home of Loreggia Dr Wollemborg had a good district to begin upon. Loreggia is a biggish THE -CASSE RURAL1" OF ITALY. 263 parish, with something under 3,000 inhabitants, mostly devoted to agriculture and small trade. It was at the time a typical " depressed " place because, barring Signor Wollemborg himself, none of its landlords ever came near it, contenting themselves with drawing their rents which were heavy for land not naturally fertile and poorly deve- loped. With a tolerably well-filled purse come to him by inheritance, Dr Wollemborg might have done a good deal by charity to relieve actual distress. But that would have been missing the best part of a good deed : the raising and educating of the people. So he decided to take his place by the side of his poorer neighbours as one of themselves, and to make every one contribute to " his own emancipa- tion" claiming distinction above them only in the preroga- tive of work. In June 1883, having secured the support of The First in all thirty-two members, including, of course, the cure, he Cassa Rurale - opened his little pioneer bank. " La date merite d*etre notee" says M. Rostand ; " elle marquait la naissance dune institution." His first work proved very uphill. There was no good fairy to stand by the bank. Every inch of ground had to be conquered. To provide the first funds, Signor Wollemborg himself opened his purse, advancing So besides, I presume, paying in the bulk of that ^280 of deposits which the bank managed somehow to attract in its first term of business of four and a half months. Later, the public Savings Bank of Padua consented to lend 160. Ever since, the Italian Savings Banks have all through stood loyally by the little casse once they found them to be safe. Dr Wollemborg himself confesses that, but for their support, he would have found it difficult indeed to accom- plish his purpose. The Savings Banks have not lost a penny by their confidence. And long since the casse have conquered for themselves a position which places them above the necessity of begging favours in any quarter. 264 PEOPLES BANKS. However, I am anticipating events. When the Bank of Loreggia had been in existence three months, great was the surprise of the peasants who had become borrowers, on receiving an advice from the ragioniere^ to the effect that they owed \\ per cent, on their loans. One-and-a-half per cent ! Surely that must be a mistake. Incredulous, they brought their books back to the ragioniere ; such a thing had never been heard of! When they found it to be correct all the same, the fame of their cassa travelled abroad as on wings. " The propaganda begun, " says M. Rostand, " the diffusion worked its own way. Here, there, the author of this new institution found himself summoned, sometimes by a landlord less indifferent than the rest, sometimes by the sindaco or the cure!' Now the bank numbers 128 members. It is not actually embarrassed with cash ; it has to study strict economy in all things ; many of its trans- actions seem humble and small. But it raises all the money that it wants. It has a little reserve of 2,996 lire laid up, which has grown very slowly, but promises, now that it has reached such a point, to increase more rapidly. To do them justice, the members are anxious to increase what they know must in the long run prove the backbone of their bank. At a special meeting, composed mainly of borrowers, they resolved rather to go on paying a some- what higher interest than was absolutely necessary that is, 6 per cent. than stint the reserve. The bank has gene- rally about 600 or ;8oo out in loans fructifying in people's farms, in the shape of cows, or pigs, or goats, or implements, or manures, or feeding stuffs ; or else earning a profit in village shops in the shape of raw material which gives the tradesman employment for his labour. Its Organisa- In respect of organisation Dr Wollemborg has in all essential points strictly followed Raiffeisen lines. His associa- tions are smaller than the German generallyspeaking, more needy, to begin with. Strict economy, even in small things THE "CASSE RURALr OF ITALY. 265 is accordingly a matter of even greater moment. Under the circumstances an active participation of each member in the work becomes more of a necessity, while at the same time its application is made easier. The members meet oftener and administer their own affairs more in common. Hence, if possible, an even more lively interest, even fuller co-operation in small things than is seen in Germany. There is not a meeting at which all members who are able do not attend. Should any fail, they are looked upon by their brethren much as were the t'Siwrcu, who would not vote on public matters, by the Athenians, and are punished accordingly not, indeed, with the grim pun- ishment meted out by patriotic Greeks, but with a fine of 50 centesimi, which to their thrifty notions seems quite severe enough. There is something naively simple, almost patriarchal, about these co-operative " parish councils," in which every member claims the exercise of his right to vote. There the members settle the instructions for the elected Council which meets once a fortnight, to check accounts, to receive savings, and to consider applications for loans. In most banks the general meeting will limit the lending powers of the Council to 300, or 500, or 600 lire, as the case may be, per credit to any one individual ; and to a larger figure for collective lending, while at the same time determining the interest to be charged on loans and allowed on deposits. At Loreggia the members began by limiting their Council's discretion to 10,000 lire, which they soon extended to 16,000 lire. At Vigonovo they began with 20,000 lire, to substitute, shortly after, 30,000. All the expenses are cut down to a minimum. The poor cassa of Loreggia, to state one instance, cannot afford to pay its cashier 37. ios., as does the opulent Darlehnskasse of Miilheim. It allows him 40 lire (32 shillings) per annum, and all its annual expenditure totals up to only 58 lire (2. 6s. 5d.). 266 PEOPLES BANKS. One would think that with a Post Office Savings Bank always open, the villagers would for convenience prefer to deposit their savings there, rather than wait for the fort- nightly meeting of the Council of the cassa, which allows them not a farthing more 3^ per cent. But the vast majority bring their money by preference to the cassa. It is their own. It is administered by themselves and their officers. It keeps the money in their district. They take a pride in its success. For loans, of course, the villagers have no other bank open to them except the cassa, and they appre- ciate its beneficent ministrations all the more. And hence its rare educational value. In respect of personal qualifica- tions it is strict as strict can be. A man may be as poor as a church mouse ; that is no bar to his election. But he must be honest, and sober, and thrifty, and well conducted, and thoroughly trusted by his neighbours. And he must be able to write and read, at any rate rudimentarily. Under the joint influence of the banche and casse, illiteracy, which used to be as rife in Lombardy and Piedmont as ever it can be in Ireland at election time, is being rapidly stamped out. In the applications and receipts preserved by the ragioniere you can trace the progress of sexagenarian scholarship in elementary caligraphy, in the gradual softening and round- ing of those straggling characters which stand for members' names. " The illiterate learn to write, in order to be admitted to the cassa" so reports M. Rostand, "because every member must be able to sign his Christian and surname. The door is closed mercilessly against those who have contracted the habit of drinking ; they have mended their ways, and after that have been admitted. The rules demand guarantees of personal morality : the small field- thefts have diminished, because such or such an one has been expelled. The principle of mutual aid has grown more vivid. Conscientiousness in paying was formerly instinctive ; now people have learnt to be punctual as well THE " CASSE RURAL!" OF ITALY. 267 in their payments." The little band, in fact, realise almost to the full Signor Levi's ideal of a co-operative society " an honest and industrious family," in which all members feel strongly drawn to one another, " where all gladly render gratuitous service, well knowing that in studying the common good they are at the same time furthering their own private advantage. Hence the volunteer service, willingly given, hence the love which binds all members to their bank, hence the power which enables them scrupulously to carry out all the work which they have undertaken." Among such a constituency as this there is rarely any occasion to refuse a loan. The borrower has to state his object, as in the Raiffeisen banks. He may want to buy a heifer, or some artificial fertiliser, or timber for carpentering, or some leather for making shoes. All these items are recorded in the minute-book, which shows a surprisingly varied collection of different wants supplied. And to the object stated he must adhere. Dr Wollemborg has not adopted the four-weeks'- notice A Slight clause, which in the Raiffeisen banks ensures conscientious f r o^ a [{^ re employment of the loan. But he secures the same object Raiffeisen by a different method, which at first sight is bound to appear a little roundabout and self-contradictory, but which works well in practice. For whatever term the particular loan be granted in respect of length of time and repay- ment by instalments Dr Wollemborg adheres -altogether to the Raiffeisen principle it is actually lent only for three months. Every three months it has to be formally applied for and granted afresh. By this means, it seems to be held, the sense of the conditional character of the loan condi- tional upon proper employment is more forcibly brought home to the borrower, and he is effectually put upon his good behaviour. The interest ordinarily charged upon loans is 6 per cent. which seems a little high in comparison with the Raiffeisen rate, but may be justifiable in view of the 268 PEOPLES BANKS. greater need in its early years of so poor a society to build up a reserve, and also of the higher bank rate prevailing. To that reserve every surplus is religiously applied. There are no salaries beyond that paid to the ragioniere, and there can be no dividend, because there are no shares. Thus the whole system, though in some particulars a little differently organised, is in the main the same as in the German Raiffeisen banks : simple borrowing and lending, careful checking of everything, cheapness in service, caution in granting loans, strict avoidance of everything involving a risk. And the result has been equally happy, though not yet, of course, equally large. Unlimited liability has proved devoid of any element of danger. There have been scarcely any losses. Increase of Slowly the casse have multiplied. Their increase was at a K first by nines, and eights, and sevens, till a more powerful propagating force was, as we shall see, brought into the field. There are at present 84, in addition to probably very nearly 400 of independent formation. And they have remained small, modest, humble little institutions, for the most part with a small number of members only 20, and 40, and 60. Not a few have more than 100 and there is one even with 600, and one with more than 800. But these are exceptions. None of these casse have shares except the little one of Crema, which, to satisfy the whim of a crotchety local judge, has issued such to the value of id. Some of them do a considerable amount of business, having loans outstanding to the amount of 600, 800, ; 1,500, and more. Unfortunately, statistics as to their work are very few and gappy. Since the casse have recently united to a Federation, it may be hoped that in the future more figures will be forthcoming. M. Contini, who has the best means of knowing, calculates that 160 casse of which he has seen the balance-sheets have among them 1,700,000 lire out- standing in loans, which is at the rate of 425 per cassa ; THE "CASSE RURALI" OF ITALY. 269 52,000 lire amassed in their reserve funds, which is at the rate of only 13 per cassa; and savings deposits to the amount of 690,000 lire, which is at the rate of 172. ics. per cassa. 172. los. collected in savings in a small village in which previously there was scarcely anything but debt and misery, 425 kept steadily employed in productive work, helping poor people to earn a living it all looks petty and paltry to the statistician's eye. But it means a great amount of good done in the small communities. Give such a cassa to every agricultural village, and reckon up what the result will be ! And think of the relief, the com- fort, the independence, the education which such work has brought to the poor ! Wherever they have gone they have done well. There is but one opinion as to their result : Their Success. " Elles sont administrees avec un enthousiasme et un devoue- ment" says M. Leon Say, " qui ne se dementent nulle part, et elles reussissent partout" Theirs has been the task of seek- ing the hundredth sheep, and sweeping the floor for the lost piece of money. They were planted on dry and thirsty land, and their fertilising work may be compared to that of the lupine, which, sown on barren sand where no other plant could live, sends down its roots feet below the surface, to draw up from the subsoil, particle by particle, the valuable mineral constituents sparsely distributed in the soil, and, with the treasure of nitrogen absorbed from the atmosphere and its own vegetable fibre added, builds up, layer by layer, a mould able to bear far more valuable crops. M. Yersin, using an equally apt simile, compares the People's Banks to a forest, which at the same time accumulates fertilising matter, dispenses shade and freshness, yields a valuable crop of timber, and improves the climate and atmospheric conditions of the district. To see what a bank is in practice, let us go back to the The Village pioneer bank of Loreggia. You could not find a better one to serve as a type. Nor, at Loreggia, or indeed else- 2 7 o PEOPLES BANKS. where, could you have a better guide to explain to you its work than old " Corazza," in respect of age the " father " of the bank. His real name is Bernardo Pietroni ; you could not tell that from his signature, which he has learned to scrawl after he was a grandfather, merely to qualify himself for admission to the bank. In the village his opinion counts for as much as that of any other six men. If he is deficient in knowledge of letters, you soon find out that he has plenty of common-sense and sound judgment, and has not allowed experience to go by without drawing profit from it. Indeed, in conversation he discovers familiarity with the principles of modern farming rather surprising in The Benefits so self-taught a man. "It is the bank that has taught me aS that >" he candidly admits. In providing him with the money which he required for his farming operations, under certain safeguards, it has made him think how he might best employ it. If you will go about his field and his yard, up to his corn-loft, and into his cow-house, you soon learn why he loves his bank. " I could not keep my farm like that formerly." His house is a large, simple and primitive, but substantial building, according to the custom of the country, affording room for his numerous family, comprising children and grandchildren, of twenty-eight, among whom he lives like a patriarch of old. Such large families are not unusual in Venetia. These twenty-eight are Corazza's " children." So far as they are capable of work, they are also his " hands." He requires no hired labour. Corazza will show you his maize-cobs, plump and bright in colour, his full-grained barley, his well-shaped potatoes. " We used not to grow them like that It is the bank that has found the manure and the implements for good cultivation." " But could not you have saved what you wanted for that out of what you were making ? " " There was nothing to save," says he. " It all went to the usurer. We never had a farthing over. Besides, if I had saved for buying imple- THE " CASSE RURALI r OF ITALY 271 ments, or manure, I must have starved the farm at some other point, where starving would have meant loss. The bank came in from outside. It gave me the additional pound or two, and never taxed me except out of the pro- duce of that additional pound itself. It was content to wait till that had borne fruit. So I could well afford to borrow. It cost me nothing." Corazza will go on to show you his beasts. He is very proud of them. Here are two bullocks worth 1,000 lire the ordinary price of a peasant's cow is somewhere about 200 lire. He never had a stableful like that in former times. These good beasts feed Corazza's family with milk, and they feed, what he appreciates as much, his fields with fertility. " Put into the ground as much as you can," he says, having learnt, with the bank's help, a lesson in high farming. "Our soil wants it. But it will give it you all back." Corazza has more to tell of the benefits of the bank in other households real cases, which will bear inquiring into. There was such and such an one in the parish, the tenant of a farm he has it still of about twenty acres. It was wretchedly neglected. Everything was pawned, and the only person who got anything out of it was the usurer. It was a hard case. The man joined the bank, but the bank was at a loss how much it might trust him with. It advanced him 4. That sufficed to stop a hole. He repaid the money and borrowed more. [The bank at presents lends no more than ,30 to one man. But that little sum may be kept continually coming and going, earning and repaying itself, giving the poor fellow 30 perpetually to work with.] The quasi-bankrupt of ten years ago now has his farm in tolerable condition, he has six beasts of his own and 60 laid by in the Savings Bank. " Then why does he not use that instead of the bank money? " " No, no," said Corazza, " that would never do. What he borrows from the bank he knows that he must 272 PEOPLE'S BANKS. repay. So he is careful with it. He will cast over exactly what an outlay will bring him back. Aye, we have learnt to calculate. The other money is far safer where it is now. It is a good security to the bank, and the man will not fritter it away." There was another man with a similar holding. He was miserably poor. But the bank trusted him in 1883 with 8 wherewith to buy two calves. He has borrowed again. He has put a little in here and a little there. He has now five beasts and about 1,400 lire-worth of belong- ings, instead of practically nothing, and is only 100 lire in debt to the bank. Corazza has other cases to tell you of. There was that poor old widow woman, who carries fruit to Padua to sell. What with her poverty and her debts she never felt safe from day to day. The bank let her have a few pounds. That gave her the ground to stand upon. Her profits came to herself, instead of going to the usurer. She is quit of anxiety now. Her earnings benefit herself. There was that small tradesman. He was a pauper, receiving parish relief. As such he was not eligible for the bank. But a kind friend lent him a little to get himself off the rates. The bank admitted him, gave him a few pounds to buy cheap wares with to hawk about. Now he has his little shop. All the Benefit Nowhere has gold dropped down in great lumps upon eamed Sd the P e P^ e - They have not made fortunes suddenly. But they have been helped to earn fairly and to live respect- ably. It is this being able to get an extra pound or two to do a thing well which was formerly done badly, this power of drawing on a fund never failing at any time that an opportunity offers for employing it profitably, and this pressure put upon people to calculate what they are doing, which makes this bank so tellingly useful. The aspect of the farms whose tenants belong to the bank has been mate- THE "CASSE RURALI" OF ITALY. 273 daily changed within the past decade. There is order and tidiness where there used to be the neglect inseparable from penury. " We could not then eat such good polenta," says Corazza's wife, as you stop to look at that huge mess of really appetising maize-porridge brought into the common room to serve as meal for the twenty-eight mouths, large and small. " We had to live on the inferior grain." To see the bank at work in another aspect, come to A Committee the municipio to attend while the elected committee hold thejr sitting. There is the sindaco ready to bow you into the room. These village mayors know the value of a village bank. It makes government easier for them. They help it by depositing municipal moneys. Charitable and friendly societies will do the same thing at first, it may be, to help and strengthen the little bantling, but later certainly for safe keeping. As a meeting-place the municipio is always open to the bank. In some parishes as in Vigonovo the priest will allow to the banks the use of the church. The committee meet every fortnight, or oftener, should occasion require. At Loreggia, Signor Wollemborg, as President, takes the chair. His brother, who, to save the bank expense, discharges gratuitously the functions of cashier and secretary, sits by his side. And there are the other members. It is surprising what power of following business, of mentally seizing important points, and also, in a rustic way, of expressing themselves, this bank business will infuse into these simple village folk. It is their first education in public affairs. If there are still people who believe that what village folk want to arouse their interest, and educate them to better things, is a circus and not a parish council, let them go to one of these village bank meetings, and see for themselves what a remarkably stimu- lating effect such council work has upon small rural folk. They take nothing for granted ; they will have everything S 274 PEOPLE'S BANKS. out. And be the other man a squire or a day-labourer, they will argue the case with him thoroughly. At the general meetings, which are held twice or three times a year, to discuss the limits to be fixed for loans, the rates of interest to be charged or given, or any appeal from decisions of the committee, to elect the committee-men, the council-men, or whatever the business may be, there are debates which indicate real arguing power. Elections. But the present is a committee meeting. There are candidates waiting for election. Election is no farce. Drunkards, idlers, evil-livers, and the like, the bank will not have. So, if there are any such who apply, they are rejected without much to-do. In a good many more cases than one have they come back as reformed characters to find themselves elected. Here is a market which pays value for honesty and good conduct. Job is not expected to " serve God for naught." Hence that marvellous edu- cating power which has made priests own that the bank in their parish has done more to make good men of their parishioners than all their preaching. And that is so not at Loreggia only. Abano, Vigonovo, Crema, Faller, and whatever other places possess banks, have all similar tales to tell. Savings. Now come the savings. Here comes in a little girl with her few centesimi ; next an old woman brings a few lire. There is a lad with his bare legs still all purple from treading the grapes in true Old Testament style, in a water-tight cart from which the juice runs out by a spout. He has earned a little money, and he carries the lira or two to the bank. These people all bring their savings themselves not as a matter of distrust towards others, but as wishing to manifest their own keen personal inte- rest in the common institution. This is altogether a dif- ferent affair from the public office work of the Post-Office Bank. This bank is to its members a living creature, THE "CASSE RURALI" OF ITALY. 275 whose pulse they may feel. Members do not come merely to bring their savings ; they want to hear something of what is going on. They are entitled to see the balance-sheet, which is drawn up every fortnight at the close of the com- mittee meeting, and hung up for view in the public room of the municipio. After the receipt of the savings comes the consideration Loans, of applications for loans. As a rule, there is the vacca, or the vitella, or the maiale^ to be bought though the pig is not yet as much honoured in Italy as he deserves to be. Sometimes, in the place of a cow or a calf, there will be a goat. Or else the village wheelwright will want to buy wood, the shoemaker leather, and so on. Every case meets with careful consideration. Is the applicant trust- worthy? Is his case good? Is the sum a legitimate one? Is the time proposed for repayment excessive? Are the sureties good ? It may happen that the loan is refused, though such cases are not many. It may happen that the amount is reduced or the period curtailed. According as the committee decide, the applicant is advised, and then he may come with his sureties to receive the money from the cashier in exchange for a bill of exchange, which runs only for three months, for whatever period the loan be granted two years or more in order that he may be compelled to employ the money as was stipulated. Should he fail to do so, the bill is not renewed. It would be ridiculous to say that our " Village Bank " The Good has brought about the millennium in Loreggia, or anywhere Banks have 86 else. But it has brought the local people very material done, and welcome help. It has sent the usurer to the right- about. He has left the place discomfited. It has taught members to bank their money instead of locking it away in a drawer or hiding it in a stocking, where it could not pos- sibly do any one any good. It has taught them to calculate the profitableness of their enterprises, and made them fami- 276 PEOPLE'S BANKS, liar with simple accounts. It has added a fresh stimulus to thrift It has brought public opinion and class opinion to bear upon people in the most effective way stimulating, checking, restraining. It has made the people better men and better neighbours. Where there used to be grudging and envying, ill-concealed delight in another's troubles, there is now fellow-feeling because people have learned that they are bound together by a common interest, that their neighbour's hurt is their own, their neighbour's good their profit. I will not say that to an untrained eye the difference is likely to be very striking. But any one acquainted with agriculture will be pretty sure to detect the contrast between an Italian village which has no bank, and one in which such a bank has been at work a few years. Where there is such a bank, cultivation is sure to be better. Crops look cleaner and heavier. The live stock are better kept. The buildings are in better order. There is, generally speaking, less poverty, a look of greater prosperity about both people and farms ; and if any visitor has time to look into the social life of the village, he will find that there is a good deal more still to distinguish a "bank" village from an ordinary one, even apart from increased economy, sobriety, thrift, and saving. To quote M. Leon Say : " La petite culture se developpe avec une energie croissante et les operations de credit agraire du reseau des petites banques ne sont pas un des moindres encoiiragements donnes a cette petite culture" Testimonies to "As deposits grow," so writes the parish priest of Faller, their Work. Dom Filippo p o i e tti, " the taverns are forsaken." Neat houses spring up where there were hovels, gardens are seen carefully trimmed, the live stock become the peasant's property, and everywhere the usurers find their occupation gone. " Tout cela" writes M. Rostand, after his second visit of inspection, " c'est bien la realisation pratique de rideal cooperatif au village. II riest pas possible que par THE " CASSE RURALI" OF ITALY. 277 V union, V esprit de la solidarite" "In truth," he goes on, " this second visit has satisfied us more and more that the small co-operative institutions with unlimited liability, possess, along with their practical utility manifest on the face of them, a social utility peculiarly worthy of notice. Freed from usury, the peasantry have regained courage and confidence." One more testimony I quote from Dr de Portis, the surgeon practising in Loreggia, with regard to the cassa in his own village : " The peasant who previously, helpless and forsaken, proved a ready prey to the most shameless usurer, and had no choice for him- self but between extreme misery and dishonesty, has now risen to a sense of human dignity. He is proud of being a member of the Association, and of taking part in its management. In it he acquires a sense of self-respect, of independence, a love of work, of honesty, and punctuality. Usury finds its occupation gone. The usurers themselves are compelled to acknowledge the good done by the Association, though they have to leave the district. Our peasants declare, ' We mean to bring up our sons with a love of work, in order that they may take their place among the galantuomini? " Does it not make one's mouth water to read of the magician's work done by these " attachantes institutions, dont rhumilite est la beaute"! It is all so modest, so simple so small, if you will. It is all purchased with personal pains, with watchfulness, care, and scrupulous thrift. There are as yet none of those millions which make M. Luzzatti's work so imposing, none of those marble palaces and masses of gold accumulated. But the persons whom the beneficent work has enriched could not possibly have been reached by any other means. The happiness diffused, the culture spread, the prosperity of which as yet really only the seeds have been sown, but sown surely, are likely to weigh as heavy in the balance of success as the much larger riches more easily accumulated, where popula- tions are dense, and the materials of wealth lie all ready to hand. Brick upon brick, " here a little and there a little," 278 PEOPLE'S BANKS. Adaptation of the Savings by Bank of It Produces the structure is being raised, which is likely to stand all the more enduringly, and the more securely, and to prove the better stronghold of thrift and wealth, because every inch of it was raised by an effort, and cemented with virtues and sound principles instilled. If more Englishmen would go and study the work of these banks on the spot, as I have done at Loreggia and elsewhere, I doubt if our own villages would much longer remain without so useful an institution, which has only to be seen to be appreciated. Before the proper appreciation of its work, such as seeing would bring with it, the supposed difficulties would melt away like wax. In Italy Dr Wollemborg was not allowed to wear his we ^- earne d laurels long alone once success had made the merits of his system plain. If savings banks could usefully help village banks by advancing them funds, why should not they take a shorter cut to the same end, and employ such banks simply as their servants or succursales^ thus providing themselves with a sure means of investing their money, always superabundant, while at the same time per- forming what every Italian banker has been taught to look upon as a good work, the work of assuring credit to the small cultivator. The Savings Bank of Parma some time ago decided to venture upon the experiment. Last October it had seven such succursales at work in its district. Probably there are now more. The Savings Bank is ready to help with its ample funds as many as are willing to accept its terms, which are : the adoption, generally, of Wollemborg rules, with the one indispensable proviso added, that they must abstain from collecting savings. The collection of savings, it is stipulated, shall remain the regie or monopoly of the Savings Bank itself. There is no denying that on such lines some economic g ood m ^ be done - But ft is obviously only a second- rate good. It provides the use of money for poor people. THE ^CASSE RURAL1" OF ITALY. 279 It instils into them some rudimentary notions of business. But it does not make them self-reliant, it does not tend to educate them, to make them thrifty, active in their own work, and eventually independent. It offers something of a service. It does not create a powerful bond. Accord- ingly, one can scarcely be surprised to find that the business done has remained comparatively trifling, and that the credit given has assumed a character not untinged with patronage, since it is as a rule not the Village Bank, but one or two well-to-do men, whose liability is accepted as security, and what is created is, therefore, really not a bank, but a bail-going association, dependent upon a few rich men. My own impression is that if the Savings Bank were to bestow as much pains as it now does upon the creation of such lending agencies, on the foundation of good, inde- pendent village banks, not only would it accomplish far more good for the benefit of the people whom it desires to help, but it would also find employment for very much more cash, and so do better both ways. There is another propaganda in progress in Italy which "Catholic" , , r ^ c TT ^/- 4.U i- u Village Banks has proved far more of a success. If Catholicism could make the Luzzatti system its own, in order to attract more faithful people to the Church with golden cords, why should not the Wollemborg system be made auxiliary in the same way ? One of the distinctive causes of the success of that system has always been the marked favour everywhere shown to it by the clergy. From the starting of the Bank of Loreggia downwards, \hzparoco was as a rule the first to welcome this useful educating ally into his parish. Wherever he was favourable, the cassa was sure to strike root quickly and to thrive. Wherever he held back, success proved doubtful. There are many priests chairmen of Wollemborg banks. The clergy of Venetia and Lombardy, I may explain, are well in touch with their flocks in respect of their economic and social affairs, and not unpopular with 280 PEOPLE'S BANKS, Their Founder. The First " Catholic Bank. them. They take an interest in their worldly doings as in their religious. Hence their influence, and their influence, it may be added, generally for good. Why should not the ecclesiastical colouring of the banks be deepened? To the mind of Don Cerutti, the zealous and active parish priest of Gambarare, in Venetia, the banks were not multiplying nearly fast enough. Want was calling for them loudly everywhere. There was so much to be done ! Here was an approved instrument handy to do it. But hands were wanting to work that instrument. A power was needed which would impart a new stimulus and fill the cylinder of the engine with propelling steam. Religion could provide such stimulus. Religion should be impressed there is no nobler office for it than to help the poor. As it happened, religion in Italy, as in most countries, spells " denominationalism." M. Tovini and his friends had not been long at work over their " Catholic " banking at Brescia of which I have already spoken when Don Cerutti resolved to set the Church a-doing the same work which it had performed in the fifteenth century in Florence. His parish lies in the midst of a district not unfruitful, but neglected, backward, undeveloped. The fields and vineyards were crying out for manure, and for better cultivation. The peasants' cottages were crying out for comforts, and even for mere necessaries of life. In 1889 things looked particularly black, because, on the top of other distress, the grape crop had failed, and its failure brought ruin upon many a little household. Don Cerutti resolved to set his hand to the plough, and no doubt his ploughing has been to some purpose. On the 26th of February 1890 he founded his first "Catholic" bank. It did not really begin work till the ist of July. The bank was a modest institution enough to begin with, with only twenty-six members on its roll, in- cluding three priests, the village doctor, the village chemist, THE "CASSE RURALI" OF ITALY. 281 three owners of tiny freeholds, an artisan, two employees, and fifty small tenants. There was not a stiver in the bank's coffers. All the money which was to be lent out had first to be borrowed. Friends put in some deposits. The Savings Bank of Venice granted a loan at a rather high rate of interest, viz., 5^ per cent. With such help the bank its Work, managed to deal out in the first half-year, at 6 per cent, interest, about ^370 in thirty-three loans. The greater portion of this money went for the purchase of stock and poultry, about 62 for farm work, ^48 in loans to small tradesmen for stocking their shops, and, lastly, 20 for household purposes. The bank took 6 per cent, for its loans. At the outset it limited the borrowing powers of any one member to 20. The figure has recently been doubled. The maximum of aggregate lending allowed at one time still stands at ; 1,400. The whole business is small, modest, and unpretending. But the help given is sufficient for the humble purposes for \vhich it is asked. And it is self-earned. In point of time the limit laid down for loans is three years as a maximum. But there are many short loans down to a month. By a very wise provision, bor- rowers repaying before the time stipulated are allowed a rebate in the interest. To make ends meet, expenses had to be kept down to a minimum, and actually not a centesimo was spent in fees or salaries to officers. Never- theless the first year's working, very accountably, resulted in a loss a very trifling one somewhere about i6s. Since then there has always been a surplus, small but sure, which, lira by lira, has accumulated in three-and-a-half years to something like 36, a tiny reserve, all that the bank actu- ally possesses, but a sum never to be shared out. It is the bank's property, and belongs to the bank alone. The next year the bank did better. Increasing success secured it more funds, more supporters, a larger business. It has now about 150 members, a reserve fund of about 40, and it does 282 PEOPLE'S BANKS, Instances. business at the rate of about 1,700 a year. I will give a few instances of its work. Here are three, taken from the bank records. A poor cottager was in distress for money wherewith to pay his rent. He was 14 in arrear, and the landlord would hear of no further delay. What was the man to do ? The only property on which to realise were his two cows his very bread-winners ill-bred beasts that our farmers would perhaps scarcely look at, but which meant very much to him. That would be draining a well to slake a moment's thirst. The bank stepped in, took security thereby compelling the borrower to husband his means and lay by from his weekly earnings. And within four months the cows had paid off the debt, with interest, out of their milk. Another poor fellow was in a similar dilemma, with his Martinmas rent due and no money in his stocking. There were a hundred quintals of hay to sell. But the price was, in November, only 3.25 lire per quintal. If he could but tide over till Spring ! He enrolled himself a member of the bank, obtained a loan at the rate of 6 per cent, and in May sold his hay at 5.25 lire the quintal, thus saving 200 lire by the transaction. Lastly, there was a poor widow who wanted to buy a pig. The village Shylock was ready to advance the money at his usual moderate rate of 5 lire per month, and the loan of 30 lire to be repaid within a year. That is at the rate of 200 per cent. Why not join the bank and borrow at 6, asked Don Cerutti ? Why not, indeed ? The woman took the advice, and is nearly 60 lire in pocket. These are petty savings, it may be said. But they mean a good deal to the people by whom they were made. For " little things are great to little men." * * On 2oth October 1894, 122 " Catholic" banks had 972,458 lire out- standing in loans. Of the money required they had raised 672,813 lire by deposits, and 386,222 lire by passing on acceptances for discount. The manner in which the funds of the little societies grow by the accumu- lation of the reserve fund, which is their only property, may be gathered THE "CASSE RURALI" OF ITALY, 283 That is not all. All is fish that comes to Don Cerutti's Further net with a promise of benefiting his poor proteges by co- operation. He has started a co-operative cheese factory in his village ; he has organised co-operative insurance. He is busy now endeavouring to acclimatise on the banks of the Brenta the co-operative method of pressing and selling wine which helps wine-growers so much in the valleys of the Moselle and the Ahr. Of course his " Catholic " banks have increased in num- Rapid ber. They have long since far outstripped the undenomi- Pro s ress - national parent institutions, and are becoming a veritable host, which now, after six years, already musters, probably, at least, 400 strong.* The addition of the religious stimulus has without question proved singularly effective. But is it in place? Is it properly applied ? It is difficult to answer the question either by a plain Objections to "Yes" or "No." Unquestionably, undenominational banks tionatisnTand its Advan- tages, from the fact that in 1887 the reserve funds of casse rurali generally stood at ? V of the collective deposits and loans ; in 1895 at *V- The following table shows the loans outstanding at Gambarare on 3ist December 1894, classed according to the employment for which they were taken : Loans. Lire. Purchase of breeding stock . . . 155 28,890.45 Purchase of draught cattle ... 53 12,360.20 Seed, breadcorn, &c. .... 32 4,730.00 Poultry for fattening .... 35 1,167.36 Sulphur and vitriol for vineyards . . 290 5,861.81 Insurance (hail) . . . . 112 2,798.40 Purchase of land ..... i 800.00 Household requisites .... 46 6,470.85 For trading purposes .... 27 6,215.05 Land improvements .... 32 9,050.05 783 76,044.17 * On 3ist December 1895 there were 348 "Catholic Banks," of which number 191 had sprung up during the preceding twelve months. 284 PEOPLE'S BANKS. would be better. Unquestionably, in a district with a mixed population such denominational banks would constitute a positive danger, and might work absolute harm. But, on the other hand, without the infusion of the religious idea, there would be nothing like the same number of banks, and thousands of poor folk would go without the help which they now receive. The banks are set up amid a purely Roman Catholic population, to whom " religion " means religion according to the tenets of the Church of Rome, and reli- gious influence the influence of the priests. I do not believe that at any rate at present denominationalism is turned to any improper account, and that " Catholicism " is impressed in the service more than to make people who are " Catholics " already reputable, thrifty, and well con- ducted perhaps a little more church-going. The rules say that a new member must " not be notoriously opposed to the Catholic Church and the existing Government (nota- riamente contrario alia Chiesa Cattolica ed al Goveruo cistitmto)" In the bank work Catholicism is practically restricted to the opening of the proceedings with the Actiones, and concluding them with the Agimus. More- over, it is laid down that, in the event of the society being dissolved, the reserve fund accumulated is to be applied to some Catholic work (opera cattolica) benefiting the parish, and that even where the society continues to exist, any overplus interest accruing from an excessive reserve shall be applied in a similar manner. That contingency appears remote. As it happens, the societies, having detected a weak point in the Italian law, seem destined to confine their life in each case to the brief period of a lustrum only, after which they rise, phcenix-like, from their own ashes as new casse the object being, to evade payment of rather heavy taxes which the law imposes upon co-operative societies having lived more than five years. As banks the banks are good. They accept the Wollemborg rules in toto, and THE "CASSE RURALI" OF ITALY. 285 carry them out strictly. So long as they continue to do this, I really doubt if there is much room for any abuse of clerical influence, because the Wollemborg system is bound to make people think of themselves, and safeguard their own responsibility. It is a pity that the leaders of the movement have not proved better able to curb their tongues and pens in speaking and writing about adherents of other systems who have shown their good-will by offer- ing them, not their friendship only, but also their support, as I myself have witnessed when Don Cerutti and I both met at M. Luzzatti's hospitable table in Padua. What with Wollemborg banks and Catholic banks, a very considerable portion of Italy is now occupied by at any rate detachments and outposts of the co-operative army of village banks. Of course these, being for the most part " Catholic," muster strongest in the pronouncedly " Catholic " province of Venetia. The diocese of Treviso alone had at New Year 82 to show. For the whole of Venetia the figure stood at 276. Lombardy comes next with 76 banks; Piedmont ranks third with 47; and so the scale runs down to Naples and Sardinia, which have as yet only one a piece. Doubtless the casse rurali are destined to increase still The Casse as further much more rapidly as time goes on. They have National the same satisfactory tale to tell of success and good work, Regeneration, accompanied by almost an entire absence of losses, which makes the position of their prototypes so triumphant in Germany. They have shown themselves remarkably ap- plicable to Italian habits and circumstances, and have in many a village proved a veritable godsend to the popula- tion, which under the crushing heel of usury had lost all pleasure in life and hope for earthly future. If rural Italy is to be regenerated and made prosperous once more, this evidently is the means by which it may be made so. CHAPTER XI. THE BELGIAN "BANQUES POPULAIRES." Local Circum- BELGIUM, vigorous, pushing little country that it is, akin to ourselves in many things, and therefore often styled " the little England of the Continent," has its own history of co- operative credit, conveying several useful lessons which, in view of an admitted similarity of circumstances, may well commend themselves to our notice. In economic matters, as well as in political, its population have striven to live up to the motto which its founders aptly selected for the little, kingdom : " U Union fait la force" There are no more useful supply associations than the Belgian Vooruit and its counterparts of all of which unfortunately politi- cal partisanship has seized the crank, to work the serviceable machine avowedly with the object of furthering Socialism on one side, and Ultramontanism on the other. The Unions du Credit, which have become most popular through- out Belgium, France, and Switzerland, with offshoots pene- trating into Denmark, Germany, and Austria, are admittedly of Belgian origin. And there are other cognate organisa- tions, all of which appear to indicate a national predisposi- tion to co-operation. On such soil it was to be expected that the seed dropping across the frontier from the fruitful tree planted in Germany would rapidly strike root and grow up a goodly plant. 4 ' Unions du Of the Unions du Credit, successful and surprisingly safe as they have proved to be, I have no occasion here to say very much. They are exceedingly popular. But they THE BELGIAN " BANQUES POPULAIRES." 287 apply co-operation at a point at which among ourselves its application excites little interest, and is all the less likely to do so since the method employed appears little calculated to commend itself to English tastes. It is traders not of the richest class, but still traders doing a fair business who combine in Unions, in order to make their credit go the farther. The merit of devising this type of association belongs to M. Haeck, who formed the first such society still existing in 1848. The idea is this: An indefinite number of members join together, each taking up, say, one share of 200 francs. On this they pay up 20 francs each, in some cases only 10 francs. But the share entitles them to 2,000 francs of credit, on paper to which the Union affixes its signature, and for which the Union becomes responsible. Of course, in any case of default, the Union has its remedy against members, and of course it can also in case of need call up the full amount of the shares. But of all this outsiders know nothing. They buy Union paper and look to the Union for its redemption. In many Unions, more particularly in Switzerland, members are allowed to take up a number of shares, in some Unions as many as 200 ; so that, on our assumption, a man might subscribe 40,000 francs, and by payment of 4,000 francs become entitled to credit for the larger sum, for which his brother member, taking only one share, is to the extent of that share responsible, as is the 200 share member for the debt of the one share member. The whole thing is workable only on the supposition, which thus far has been verified, that the Unions elect their members with extreme caution and discrimination, so as to allow admission to scarcely any black sheep. In practice, wherever Unions of this type have been established they have been found remarkably success- ful. The very first one formed gave an earnest of this, living safely, in the very earliest period of its existence, through a crisis almost unparalleled for severity. In Switzer- 288 PEOPLE'S BANKS. Need of more Popular Credit. Leon d'Andri mont, the Founder of Belgian People's Banks. His Early Difficulties. land, the Union Vaudoise du Credit of Lausanne began in 1864 with 150 members only, and a collective credit of 24,000 francs, to increase before long both figures, the one to 1,786 and the other to 305,280, while spreading out its system over neighbouring towns. The Credit du Leman and the Credit Yverdunois are equally prospering associations. " Mutualism " of this kind was not calculated to bring much relief to the humbler classes. But these wanted " democratised " credit fully as much as any poor folk in Germany or Italy. Belgium had its struggling small trades- man, its moneyless cultivator of a small holding, its artisan, its itinerant dealer in cheap wares. M. d'Andrimont tells of a hawking baker whom he found in Liege, hiring his barrow at the rate of threepence a day. A People's Bank afterwards enabled the man to purchase the barrow out and out, by instalments of the very amount which he had been paying in hire, in less than a year, and to find himself after- wards every year 4. los. in pocket. Of course, there are thousands of similar cases. Fortunately for the classes spoken of, M. Le"on d'Andrimont, a member of an influential family, had an opportunity of witnessing in Germany the marvels which co-operative banking was there bringing forth for equally necessitous folk, under the inspiriting leadership of Schulze-Delitzsch. Impressed with the merits of the system, he resolved to put it to a practical test in his own country. He was far too devoted a disciple of the great German co-operator to so much as dream of taking liberties with his rules. He translated them word for word, desiring nothing more ardently than to reproduce on Belgian soil exactly the same institution which he had seen working so satisfactorily in Germany. Facts have proved too strong for him. Unlimited liability showed itself as little acceptable to Belgians as it was to Italians. At the outset it was accepted only because its significance was not understood. When in one of the banks THE BELGIAN " BANQUES POPULAIRES." 289 some years later it was proposed to limit the liability to I think it was fifty times the value of the share members, who had up to that time made themselves answerable for the bank up to the hilt with absolutely the whole of their possessions, shrank back in alarm, declaring that they could never accept so heavy a responsibility. In respect of other points no less, M. d'Andrimont's close adherence to his German model has for some time stood in the way of entire success. For a long period the movement dragged heavily. Some banks grew up rapidly, but their number and their business remained stationary, with one or two added or withdrawn every year sixteen, seventeen, then fifteen representing a constituency of 10,000 or 11,000, keeping very solvent, doing a fair amount of business in a very business-like way, but never really extending their sway or becoming genuinely popular, even among those teeming millions of the most populous and the busiest little country of Europe, in which Ministers and economists like M. Graux and M. Beernaert never weary of calling out for some popular form of credit, more especially agricultural. " How is it," plaintively asked M. d'Andrimont, as President, at the Congress held in 1888, "that, having been founded nearly twenty-five years ago, the People's Banks have not grown more numerous ? " The French economist, M. Limousin, in agreement with M. Julius Schaar (Director of the Banque Populaire of Brussels), supplied a very plausible answer : the banks were not suffi- ciently "popular." "The People's Banks,"so writes M.Charles M. Limousin in the Journal des Economistes, " become in Belgium less and less popular, that is to say, less and less useful to the poorest class of the population. Soon they will have nothing that is popular about them except the name." M. Schaar complained that "the People's Banks cannot be useful to simple artisans." This frank judgment may have helped to lift the banks into a better position. They have always been, in the T 290 PEOPLES BANKS. main, well in some cases even excellently administered. But there was something about them which seemed adverse to spreading and growth. M. d'Andrimont had placed them in his country, so to speak, as a German plant put into a Belgian pot, not, like M. Luzzatti's banche^ as a German set planted on new soil, there to strike root and become part of an indigenous vegetation. The tree set in the new soil, in disregard of the conditions under which it had to live, for a considerable time just managed to keep alive, pushing on very little. Eventual During the past few years things have assumed a more Success. satisfactory aspect It is as if the tap root had at length broken through the clay enclosure, and, drawing new nourishment from the natural soil, had become really Pres'ent assimilated to its surroundings. It is now spreading its Strength of branches aloft and sending out new shoots. The last annual Report of the Federation of Belgian People's Banks which not all People's Banks actually existing have joined counts up in all twenty-three banques populaires of what is still called the Schulze-Delitzsch type, of which number the returns sent in for twenty-two show a collective roll of 13,749 members, commanding a capital of 2,714,962 francs (108,590), and doing an annual business of 261,969,728 francs (10,478,789). These are the figures for 1895. In that year twenty-one of these banks, some of them still very young, had lent out in all 43,308,066 francs (1,732,323). Their savings deposits amounted to 4,815,786 francs (192,63 1 ). They paid dividends at a rate generally of from 4 to 7 per cent. (The Bank of Ghent, which is very capitalist, declared 8 per cent., and the little Bank of Jumet, likewise very capitalist, declared even 15 per cent. But these are exceptions.) All this is not nearly as much as might have been hoped or desired. It is not even an absolute advance in respect of business. For bad times have told against People's THE BELGIAN " BANQUES POPULAIRES." 291 Banks in Belgium, as in Germany and in Italy. But it is unquestionably a relative advance, and an advance which seems likely to be maintained. But, then, these banks are no more Schulze-Delitzsch Features banks than are the banche popolari. Barring two, rather B essential, features, indeed, they much more resemble the German latter. And they seem destined to grow more and more like Banks 6 $ them as time goes on. Although Mr Gosselin, when writing his report for our Blue-Book of 1886, appears to have been unaware of the fact, the Belgian banqnes populaires have long since discarded the unlimited liability recom- mended by Schulze all but the little bank of Saint Nicolas, the business of which is very circumscribed. It is true, their limitation of liability is of a fancy character. They limit the liability of shareholders to a multiple of the value of the share, generally five times the amount, in some cases more. But notwithstanding M. d'Andrimont's per- sistent protests, the feeling in favour of further limitation, to the actual value of the share, is steadily growing, and seems destined to carry the day. There are, as observed, two features in the main, which distinguish the Belgian banks from the Italian bancke popolari. These are : the liability exceeding the share ; and the comparatively large figure adopted for the share as a rule 200 francs, to be paid up, not in ten months as in Italy, but at the member's option, in as much as 400 weeks or 100 months, at the rate of 50 centimes a week or 2 francs a month. Otherwise the resemblance between the two types is striking. Both have the Committee larger than' is prescribed by Schulze-Delitzsch, and apply, as M. d'Andri- mont has put it, "the principle of universal suffrage to purposes of credit." Both rely to a great extent upon unremunerated labour the Italian paying three officers, the Belgian two, namely, the director (gerant) and the cashier. Both are very strict in respect of control and 292 PEOPLE'S BANKS. audit. Both select their members with some amount of care, although M. d'Andrimont lays down the rule that " to be admitted as member of a banque populaire, it is sufficient for a man to be honest and industrious ; to obtain a credit, all that is required is, to comply with certain prescribed rules." Both questionably, as I cannot help thinking allow a fixed amount of credit in virtue of mere shareholding the Belgian banks as a rule up to ij times the payments actually made towards share capital. Both allow members to hold more shares than one. Both lend for short terms. Both, I may add, are, as a rule, well administered. And I think I may say, that the Belgian bankers are less exacting in respect of dividend. Evidently they study to keep down manage- ment expenses to a minimum, and are in this respect generally successful. Obviously, also, the best of Belgian banks are distinctly more co-operative than the Italian, in respect of this point, that they confine their lending rigidly to members. They make, as a rule, new members pay 3 francs entrance fee, and 50 centimes for the book of rules, which serves at the same time as a pass-book. They have now pretty well overspread the entire little kingdom. There are banks at Liege (2), Huy, Verviers, Ghent, Namur, Saint Nicolas (Waes), Antwerp (2), Dinant, Chatelet, Malines, Andenne, Termonde, Alost, Goe Limbourg, Argenteau, Louvain, Jumet, Brussels (2), Gosselies, and Gilly. It may be well to pick out from among this number a few banks to serve as types. The Banque The Banque Populaire of Verviers ought to be of P ecu ^ ar interest to us, not so much because in little time it has grown to be the largest People's Bank of Belgium- numbering, last midsummer, 2,995 members as because it has set up its counter in a manufacturing town organised to all intents and purposes like a manufacturing town in Great Britain. Sceptics in this country will insist, without THE BELGIAN " BANQUES POPULAIRES." 293 looking sufficiently into facts, that we could not set up co- operative credit in this kingdom, because we have " no small trade." It is the small workshops of Liege, Milan, Leipzig, so they will have it, which support these co-ope- rative banks, and alone make it possible for them to live and thrive. In our British towns, where industry and trade are for the most part concentrated in large workshops, and the small artisan of abroad becomes the salaried "hand" or foreman, such a thing, they say, would be impossible. Well, here is a town with large workshops only. Out of its population of somewhere about 50,000, as many as 40,000 are " hands," working in those large cloth mills and yarn factories which employ 160 steam engines or more, and turn out annually above 400,000 pieces of cloth, besides yarn, clothing the entire Belgian army, and exporting at least ^"3,000,000 worth into the bargain. Walking in the busy streets of Verviers, you might fancy yourself in Bradford or in Leeds. Well, the Banque Populaire has set up its mensa argentaria in the midst of these shop-hands, and has gathered together more members around it than any other People's Bank in Belgium. Up to 1892 the Bank of Liege, working among a population of 160,000 inhabitants, in the very home of small trade, maintained the lead. Now Verviers has outstripped it considerably. Brussels, with its 184,000 population; Ghent, with its 152,000; Antwerp, with its 240,000; Malines, with its 52,000, all rank after it, not- withstanding that they have more small trade. It is really not the " small trade," it is the understanding and appre- ciating the co-operative principle which makes a co-operative bank to thrive. In its composition the Verviers Bank is thoroughly popular and " democratic." There are, it is true, among its 3,000 members, 449 " rentiers " ; but most of these are, I believe, small men, retired from work or business. There are 446 small traders. There are 6 doctors, 26 proprietors of cafes, 33 small manufacturers, 188 counting- 294 PEOPLE'S BANKS. house clerks, 117 small cultivators, 76 teachers, 2 priests, 2 sacristans. All the rest may be described as working men and working women. And with such a constituency the People's Bank of Verviers does a business exceeding in volume the business of any other People's Bank of Belgium, excepting only that of Ghent, 'which, as I shall show, is really not a "People's" Bank at all, but a co-operative capitalists' bank. The business of Verviers amounted in 1895 to 33,707,506 francs (1,348,300), as against 15,348,522 francs reported by the People's Bank of Liege. Its direct lending alone (in advances and discounts, without including cash credits), amounted to 6,263,545 francs (250,541), as compared with 3,940,746 francs in Liege. And that with a paid-up capital of only 599,000 francs (23,960). I have sometimes been asked : What do these people borrow money for? It would be difficult to say. No account is kept of that. And by far the greater portion of the lending is done by way of cash credit, which is in truth the most useful and most educating of all forms of lending. Evidently the cash credits granted have been put to good commercial use. For, in 1895, 12,705,895 francs had been drawn out and 11,636,831 francs paid in. The account is accordingly anything but " dead." And the business is so sound that, after carrying 1,941 francs to the reserve fund already standing at 70,210 francs ; and 1,001 francs to the provident fund previously figuring at 1 16,178 francs ; besides allowing 1,500 francs to the managing committee according to attendances, the bank was in a position to pay to its share- holders 38,370 francs in dividend, at the rate of 6 per cent. From an English point of view I look upon the People's Bank of Verviers as perhaps the most instructive that there is. The Banque The Banque Populaire of Ghent is a specimen of a totally f different tyP e - Ghent, we know, is a busy, prosperous place, in which capital is allowed free sway. Hence, as a THE BELGIAN " BANQUES POPULA1RES." 295 counterpoise, that Socialist movement which has one of its chosen centres in the same city, represented by the Vooruit. The People's Bank of Ghent has, of all the large People's Banks of Belgium, remained, in respect of liability on shares, the most faithful to the German tradition of entire non- limitation. It issues 200 francs shares, which carry a liability of 5,000 francs. Why ? The Director was per- fectly frank with me on that point. There are 1,648 members at the time of which I am speaking there were just about 1,500 with respect to 1,000 of whom the National Savings Bank of Brussels had satisfied itself since it had their names that they were perfectly capable of answering at any time for the amount of liability pledged, say up to 5,000,000 francs leaving out of account altogether the remaining 500 who must after all have been " good " for something. Accordingly it allows the bank credit for practically any amount up to which it may choose to borrow. That is perfectly legitimate and perfectly safe ; but it is not " democratised " or " popular " credit. In his own People's Bank of Liege, M. d'Andrimont will not allow any member to borrow more than 5,000 francs. He advisedly bids people who require more to go to the joint-stock banks. For such business they are the proper banks ; they can do it, and, in all probability, in dealing with borrowers who, in truth, need no co-operative bank to make their credit marketable, they will do it quite as well. The People's Bank of Ghent, I may add, did in 1895 a business of 113,044,500 francs,* more than one-third of all done by twenty-one People's Banks; lending out 23,083,177 francs, about one-half of the collective figure, upon the security of a share capital of only 329,240 francs, between * The figure for 1895 is exceptionally large ; in 1894 it was 48,916,441 francs. The figure for direct lending is equally abnormal. In 1894 it was 9,353> 62 3 francs. 296 PEOPLE'S BANKS. one-seventh and one-eighth of the share capital of twenty- two banks furnishing returns. The Banque I reserve a few words for the excellent Bank of Liege, Popukire of the oldestj and pro b a bly the best managed, People's Bank in Belgium. I have been permitted to sit at its Committee table and see the business transacted, with care and circum- spection, and no sparing of pains. It was founded, in 1864, by M. d'Andrimont, who is still its President. The roll of its members shows, generally, a popular and democratic composition. There are small tradesmen bakers, shoe- makers, printers, tailors, plumbers ; moreover teachers, male and female, clerks, also better-class artisans and small manu- facturers. M. d'Andrimont intended it for a true people s bank, a bank not placing itself in competition with other banks, but stepping into the gap which those banks had left, and bringing down credit to those to whom it had been denied. The Bank of Liege still holds fast to liability in excess of what is paid up five times the amount. Opinion within the bank, I believe, is favourable to contraction to the actual amount of the share, which would get rid of that inconvenient and unsafe source of credit unpaid-up liability. However, in deference to the President, the larger, nondescript liability has been thus far retained. It is, I presume, only exaggerated regard for the opinion of Schulze-Delitzsch which leads his pupil M. d'Andrimont to insist upon this unbusinesslike margin, which Italian practice has shown to be wholly unnecessary. M. Micha is strongly favourable to a change. It is to M. Micha, who is a con- sistent co-operator, that the bank owes its very recent adoption of the practice of profit-sharing for the benefit of the employees. For twenty-two years M. Micha has steadily advocated this practice in vain. He carried it at the last annual meeting. The People's Bank of Liege is particularly strict in respect of its checking and auditing of accounts and transactions. Its controleur special, M. Fesch, THE BELGIAN " BANQ UES POP ULAIRES." 297 a trained banker, is pretty constantly at work in his off hours, inspecting here and auditing there, and the more he inspects, the better are the Committee pleased. With a members' roll of about 2,500, the bank pays out annually about 4,000,000 francs in advances, and declares dividends at the rate of 4 per cent, only, allowing to members the benefits of the larger margin secured. All this is, of course, industrial business. Well as co- Agricultural operative banks have succeeded in Belgium in towns, it is a CrediT^ 6 standing cause of grief, alike to the leaders of the movement continues and to legislators and economists, that their success remains \vhyT restricted to the industrial sphere. In Belgium, as in France, it has long been a favourite hobby with legislators to create a popular form of agricultural credit, designed to supply the thrifty and pushing cultivator with working capital, and get him out of the hands of the greedy " notaires," who take his money at a low rate of interest, in prosperous times, only to lend it back to him, when things go badly, at a truly extortionate rate. Everything, one would say, seems in Belgium to favour some co-operative form of agricultural credit. There is money, there are means of communication, there is knowledge of business, there are, in fact, all the elements of successful and remunerative banking present, with an intelligent and active class of cultivators to take advantage of them, most of them being tenants. Of about Features of 5,000,000 acres under cultivation, 76.155 per cent, is in the Agriculture, hands of tenants. And most holdings are small. Only about 3,000 holdings, of tenants or owning cultivators, are estimated to exceed 125 acres ; 35,000 holdings range from 25 to 125 acres; and the vast remainder, about 1,000,000 holdings in all, are of less than 25 acres. On these it is, mainly, that Belgian labour and Belgian agricultural skill produce those heavy crops of what is really garden produce, which competes so embarrassingly with the fruits of our native fields, turning every favouring accident to account, down to 298 PEOPLES BANKS. the shale in the soil, which being fired, enables these resource- ful husbandmen to supplement the solar warmth wanting in their climate for producing fruit considered the monopoly of more southern countries. For such high cultivation, above all things, money is wanted. But co-operative credit, which could give it, cheaply and conveniently, has thus far, in this particular application, as credit accessible to agriculture, re- mained an unrealised aspiration. Ministers have pleaded for TheComptoirs it in Parliament. The Government has endeavoured to do its part. It has placed the practically exhaustless treasures of the National Savings Bank at the service of cultivators through the intervention of comptoirs agricoles, appointed in each district, and endowed with ample powers of discre- tion. The experiment has, however, led to scarcely any results. The simple cultivator who, as both M. Graux and M. Beernaert have pointed out, habitually shrinks from " the indignity " of borrowing, and can only be coaxed into it by having credit administered by men with familiar faces and heads which understand his case and his needs, would never take to these strange gentlemen. In 1889 there were only four comptoirs existing. And of those four only one, that of Genappes, showed any signs of life. Among them the four had in 1889 lent out 810,120 francs a poor 32,404 of which some 555,000 francs was lent in sums of 10,000 francs each and more, and could not therefore very well have gone into very " small " pockets. In the debates of the Chambers and at the Annual Congresses of the Federation of Belgian People's Banks, stirring appeals from Ministers and the President, and resolutions passed in favour of agricultural credit, form standing dishes since a long time back. But the matter does not advance much beyond that point. Why not ? There are sufficient reasons, of course. Belgian co-operators, when addressing themselves to the creation of co-operative credit in their own country, THE BELGIAN " BANQUES POPULAIRES." 299 deliberately adopted the Schulze-Delitzsch system as the Some one system applicable the Schulze-Delitzsch system in its straitest and narrowest application, it was to be. And so Delitzsch it would have remained, if " facts stronger than men" had y stem - not forcibly pushed it out of the " book-taught groove." Those facts, which have moulded Belgian co-operative credit in towns, have not yet had time and opportunities for making their power felt in the country. However, men like MM. Rolin Jacquemins and Delissehave more than once plainly warned their brother co-operators that the present form of Belgian co-operative credit is not suited to agri- cultural purposes. We have seen in Germany that the Schulze-Delitzsch system may be made to render very useful and substantial services to agriculture, but only by a rather marked departure from the hard and fast line originally laid down, in respect of length of term, of amount of shares, and of the creation of a closer touch among members, corresponding to that which is in the Raiffeisen system assured by smaller districts and thoroughly demo- cratic government, and even so only on the supposition that the banks attempting to practise agricultural credit find themselves particularly strong in capital, or else can issue long-term bonds in sufficient quantity, or are in receipt of a large quantity of steady savings. In Germany it is generally the savings deposits which pull the Schulze- Delitzsch banks successfully through their agricultural business. In Belgium the People's Banks are considerably weaker at this point than their sister establishments, either in Germany or in Italy. In Germany the non-co-operative savings banks are communal, or municipal, or provincial institutions, leaving the ground fully open to competing banks. In Italy the Government savings banks are de- signed as the late Postmaster-General himself explained the matter to me only to receive the overplus from other savings, to assist people to save who cannot place their 300 PEOPLES BANKS. Why it fails respect of Belgian Agriculture. Prejudice against the Raiffeisen System. Ultra- montane "Caisses. 3 Abbe Mellaerts. deposits elsewhere ; and in point of fact they take only about a quarter of the nation's entire savings. In Belgium the National Savings Bank, strong and well established, a Government institution, absorbs the main bulk of the nation's savings. Accordingly, the problem to be solved becomes for the Belgian People's Banks a totally different in one from what it is for the German or the Italian. Instead of fixing and localising savings in a district, they are called upon to draw them back into it, to become, as it were, agencies for stronger bodies providing the capital, like the casse of Parma. The long-term bonds issued by them do not represent a large value. And their strength in capital of their own is less considerable than what we find in Germany, as appears from the fact that in 1895 they had to make 2,714,962 francs suffice for lending out 43,308,086 francs, not counting cash credits. On the other hand, the co-operators who have the ear of the public have steadily disparaged the Raiffeisen system, alike in speech and in writing. In view of about 1,000,000 holdings out of 1,038,000 being under 25 acres, and a good number, therefore, presumably very much smaller, it seems at least likely that the Raiffeisen practice, which has been found specially adapted to the use of small cultivators, would have answered the purpose aimed at very much better than the Schulze-Delitzsch system. The S shares of the d'Andrimont banks alone must constitute a formidable hindrance to the admission of many small cultivators. However, M. d'Andrimont would have none of the Raiffeisen system. Making himself the echo of hostile notes sounded at Berlin, he has denounced the Raiffeisen system right and left to me, among other people as purely political," not meaning, of course, literally, what he said, or meaning it only in application, not to the Raiffeisen system proper (which he does not appear to have known), but to that distorted reproduction which Abbe Mellaerts had THE BELGIAN " BANQUES POPULAIRES." 301 set up in Belgium, in the interest of the Church, which he did know. Those thirty odd banks, founded by Abbe Mellaerts to provide " votes, votes, votes " for the clerical party, do not appear to have done much business. However, be- tween them M. Leon d'Andrimont and Abbe Mellaerts have certainly succeeded in affixing upon the Raiffeisen system in Belgian opinion the undeserved stigma of a doubt- ful reputation. The consequence has been, that for a long time, while Belgian Ministers and co-operators, M. d'Andri- mont and others, still kept most dolefully bewailing the absence of co-operative agricultural credit in their country, suggesting that the agriculturists must be to blame, the very same men deliberately removed out of reach of the latter the one instrument which promised effectually to provide the credit wanted. In addition to Abbe Mellaerts, the founder of the Professor Boerenbond, Professor Francotte has been active in setting Francotte - up Ultramontane credit associations of his own, in imitation of the German " Peasants' Associations." The best known of these is at Argenteau. It will probably serve as a fair type for the rest. It has membres fondateurs (landlords) joining for thirty years, and taking up from I to 5 shares each, which carry no right to borrow, but, practically, the privilege of sole management ; and membres effectifs, who take only I share each paying for it by monthly or weekly instalments, of respectively 2 francs or 50 centimes who may withdraw, who may borrow, but who have little to say in the administration. That is patronage pure and simple, conveying the pill of social and political influence concealed under the sugar coating of financial help patronage so pronounced that at Perck tenants become members of the association in virtue of their entry upon a tenancy without even the formality of election or payment. The whole thing is Ultramontane " primrosery," and not self-help. Thanks to the persistent urging of M. d'Andrimont and 302 PEOPLE'S BANKS. Two Small Agricultural People's Banks. M. Mahillon organises a Belgian- Raiffeisen System. Its Prospect of Success. his friends, two banques populaires have actually organised themselves as " agricultural " banks. One of these is at Goe Limbourg the Chateau de Limbourg is M. d'Andri- mont's country seat the other at Argenteau. M. d'Andrimont owns himself satisfied with the results of their practice. However, Goe Limbourg has in six years managed to creep up only to 89 members, and Argenteau in five only to 42. M. d'Andrimont himself has now come to see that for the rural districts of Belgium different methods are required. There is money in plenty available not money to be collected in the district in order to be kept in it, but money to be first filtered through the great National Savings Bank, which, having more than it knows what to do with, is only too willing to lend, provided that it receives adequate security. It has lately even taken the propaganda of agricultural credit associations of the Raiffeisen type into its own hands. Under a law passed in 1894, ft nas acquired the right of lending out part of its holdings to agricultural banks at the rate of 3 per cent. It is anxious to see that law put into practice, and accordingly last year one of its chief officers, M. Mahillon, prepared with great care a " Manual " for Raiffeisen banks which has only one fault, namely, that of being a little too complicated. It, however, provides for intending founders of village banks a very valuable vade-mecum, giving them much information as to the security to be given, and the steps to be taken to obtain advances. Unfortunately for Belgium, M. Mahillon died shortly after issuing his book, to the great regret of his countrymen. After so many years of hostility to Raiffeisenism, it is certainly encouraging to find M. d'Andrimont now openly pleading, so far as agricultural practice comes into account, for its two essential features, namely, the limitation of a district to one or two parishes only, which is wholly contrary pitjd -IAIQ O O ^t* 04* O CO* *Ovd fx. 10 . *3" r** M O* M CO O vO *4" M ON CiHiOMON04ONC01-T}-:xO ON LO tx 04 O *O ON 04 Q <* tC coro M >o cco co Savings and Deposits on 3ist Dec. 1895. vOOOOCOO ON O^ o lovo" cy> ON ci ^f ^f OO CO O 30 TK30 v?00 oT ON ^? CO o" *0 co M r M \o o rl- t^MQA tx^d o cJ of n COO O\COC O COTt- to\O ON txvO LOCJLOTfu-jMMLOLOtxCJ OOVOO o" tC tv LO M" COiO \O"OC^ NO* rJ-COCx w vo* co' r". 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Both these things he recommends on the very ground upon which Raiffeisen has insisted upon them, namely, the necessity of producing a close touch and knowledge among members, as alone qualified to make co-operative lending safe in rural districts. M. Mahillon's " Manual " and M. d'Andrimont's pleading have not yet, I believe, had time to bear fruit. I cannot doubt that they will do so in time, and I cannot but believe that among a population apparently specifically suited for it, the Raiffeisen system will yield results similar to those which it has brought forth elsewhere, and that thus the wish which Belgian legislators have so long and so fondly cherished will at length be realised, and, in addition to a strong phalanx of urban People's Banks, some of which like those of Liege and Verviers are very models, Belgium will have its own army to show of village credit institutions, rescuing victims from the choking grasp of usury, and dispensing to the industrious cultivators, those " sinews of husbandry " which none know better to turn to good account. CHAPTER XII. CO-OPERATIVE BANKING IN SWITZERLAND. IN Switzerland money co-operation has grown up very Distinctive slowly. Swiss co-operation, generally speaking, is ex- ^^Money tremely " business-like." It studies most assiduously its Co-operation. supporters' pecuniary interests, but does not aim at very much beyond except it be incidentally to promote saving and thrift in their aspect of economic virtues. It may r accordingly, perhaps be described as a little selfish. There is none of that " Christian Socialist " nimbus about it, which in this country seems to encircle our own co-operative action as with a peculiar halo of virtue. ' Cheapness" and " profit " are the watchwords cheapness sometimes even to the disregard of quality. And when, by a stroke of good luck, fortune gives to co-operators a handsome surplus as it did some time ago to a society in Zurich, putting ^"4,000 of cash unexpectedly into their pockets then the temptation to " share out " appears to become overpowering. The members secure their prize in Zurich it was 16 a-piece and rush off each with a slice of the common goose, trusting to a kind fate to find them in more eggs, and, should that fail, quite content, after their lucky " spec," to leave co-operation to take care of itself. In spite of all this, it cannot be denied that in a co- operative aspect Switzerland is decidedly interesting. There is not a little genuine co-operation nestling unobtrusively and scarcely observed in its peaceful valleys between those giant hills. And even where it is only mere " business " U 3 o6 PEOPLE'S BANKS. co-operation a most useful agent among the factors which produce national wealth and contentment it is marked by features such as a business-like clearness of aim, apt organisation, and masterly management which make it exceedingly well worth studying. Co-operative By the very nature of the conditions in which Provi- Purchase of d ence has placed them, the Swiss are almost compelled to practise co-operation. They could scarcely make their cheese, which constitutes their most characteristic national product, except by clubbing together to form co-operative fruitieres. Co-operation in dairying it may have been which, more particularly in the Canton of Thurgau, led, by a natural sequence of ideas, to co-operation for the pur- chase of cattle. There are in the Canton of Thurgau no fewer than thirty-five cattle-purchasing co-operative associa- tions in existence, ministering to a population of 22,230, one in each parish, no matter whether that parish have but sixty inhabitants, or close upon 2,000. For more than forty years have these Caisses Thurgoviniennes* kept the inhabitants in bullocks and milch cows, rendering most useful services in their own humble way, and receiving their money back in full and punctually, with interest, which promises to enable them in course of time to extinguish the debt incurred at the outset, and put in its place a suffi- cient self-supporting fund. And all this has proceeded from the initiative of the parishes themselves. Only quite lately has the Cantonal Government voted subsidies, to the amount of 1,500 francs a village, not by way of necessary assistance, but as an encouragement to the extension of a useful practice. The modus procedendi is really very simple. The commune that is, the parish by a vote of its in- habitants, resolves to raise a fund by loan. Out of that fund any villager who can make out a case and show that * For fuller information about these institutions see my article, "The Poor Man's Cow," in the National Review, October 1894. SWISS CO-OPERATIVE BANKING. 307 he really desires to buy a beast, and has keep for it, is entitled to receive an advance. He must enter into a bond to repay the sum, with interest, by regular instalments, and also to buy from nobody else on credit. That done, he receives his money, and may buy wherever he chooses, paying cash. Should he fail in any of the duties under- taken, his loan is at once declared forfeited, and repayment is enforced. For the debt contracted by the parish, of course the parish is collectively responsible, which involves unlimited liability on the part of every parishioner up to the amount of the debt. The needs of different parishes naturally differ according to circumstances. In 1889 the little village of Wattenweil, having only 140 inhabitants, lent out 4,750 francs, the larger village of Marweil (311 population) 5,980 francs. The repayments in these two cases amounted to 3,980 francs and 4,597 francs respec- tively. Sometimes the fund raised proves excessive, at other times insufficient ; but the difference is never very great. The village of Tagerweilen, in the year mentioned, having a fund of 22,987 francs, found itself called upon to grant 27.000 francs in advances ; in Huttlingen the demands made on a fund of 18,470 francs amounted to only 17,980 francs. A couple of years ago, when I was in Thurgau, there was in all about 550,000 francs owing, which may have stood for 2,000 or 2,500 cows, purchased, for the most part, with borrowed money. Tagerweilen alone had about 600 or 650 cows standing to its credit The caisse of Illnau, in Zurich, which was newly established, had already purchased 800 or 900 cows. The consequence is that, as the chairman of one of these caisses informed me, three cows are now kept where there used to be one. And the whole country is richer by its cultivators' prosperity. The funds are kept in a state of equilibrium by moneys coming back, and the losses are infinitesimal. 3 o8 PEOPLES BANKS. Local The reason why co-operative credit generally has been Generative 01 on ^ s l w ^y organised in Switzerland obviously is, that the Credit. country has long possessed several tolerably popular and serviceable substitutes. In no country are habits of thrift more developed. They are inculcated to children at school as part of their education. Thus it comes about that those " compulsory savings banks," which are indigenous to the country, have thriven so remarkably well on this republi- can soil. They apply the lesson of thrift with rigorous severity. The man who once pledges himself to lay by must lay by for the three years for which his promise runs, on pain of a fine, or, in case of repetition, of forfeiture. The monthly payments must be not less than I franc, nor more than 50 francs. They continue accumulating and earning compound interest till the three years are over, after which they very often go to buy a part sociale in the co-operative bank, which has all the time acted as cashier. For money so saved is very rarely squandered. During the process of accumulation contributors in temporary need of money may always borrow to the extent of three-fourths of what they have paid in, being charged, however, 6 per cent, interest on the loan, in the place of the 4^ per cent. which they are credited with. For large borrowing there are other institutions ready to lend assistance. The mortgage system is in Switzerland so much developed as to some extent to cover the ground of personal credit. The legal expenses are a mere nothing. Accordingly no one who has realty to pledge hesitates to raise money for a temporary want by means of a mortgage. According to statistical returns, Switzerland is one of the most heavily mortgage-burdened countries in the world. But half its mortgages answer to what elsewhere is personal indebtedness. Mortgages for 1,000 francs (^40) are nothing uncommon, and there are mortgages even down to 1 50 francs SWISS CO-OPERATIVE BANKING. 309 Specifically for working men there are at any rate one "Caisses or two very useful People's Banks similar to that sketched Ouvri e res -" by M. Ruchonnet in one of his reports to our Co-operative Congresses, taking members' contributions by fivepenny driblets, or a franc at a time, till the figure of 100 francs is reached, which constitutes a " share " ; and lending out small sums on reasonable terms for ten months at a time, repaying themselves by regular instalments. These banks, though few in number, are useful so far as they go, though no doubt every now and then their well-intended zeal to support co-operation in the shape of productive co-opera- tive societies recruited from among their own members tin-workers, painters, plasterers, tailors, &c. leads them into mischief. By other lending the banks rarely suffer loss. Of this class of banks the Caisse Ouvriere d'Epargne et de Credit Mutuel of Geneva is a good example. From 11,275 francs with which it began work, in 1877, its capital has grown to 150,590 francs. It has taken warning by what M. Elie Reclus wrote a good many years ago, specifically with Swiss banks in his mind, about " the danger of big dividends," and has once for all limited its dividend to 5 per cent. But the type of banks with which Swiss co-operative Co-operative credit is more specifically identified is to be found in those well-managed " business " banks, of which the Schweizerischc Volksbank may serve as an admirable example. These establishments do not look much higher in their aims than to do the best that they can for their members. To that task, however, they address themselves with most praise- worthy assiduity, and, as a rule, with much skill and success. " Our first object," in substance says the Volksbank in its Report issued on the occasion of its twenty years' jubilee, " is, by means of the joint action of many, to provide a credit and the requisite cash for small folk ; our next, to earn a fair profit for our members ; and our last, to promote 3 io PEOPLE'S BANKS. thrift, as a means of converting into a small capitalist the man who is not such already." There is very little altruism in this programme. But the object pursued simple, purely economic, but very genuine co-operation is thoroughly legitimate, and answers a most useful purpose in the economy of a commonwealth. Generally speaking, these banks are not very "poor" People's Banks. There are some among them which recruit their members from pretty necessitous classes as, for instance, the Ersparnisskasse of Konolfingen, which has taken small men's savings for sixty- four years back and hoarded them for their benefit. The peculiarity of this bank is, that it pays no dividend what- ever, but carries every surplus systematically to reserve. That has enabled it in course of time to redeem every farthing of its share capital ; and now it realises the assumed ideal of a bank which confers benefits, without having cost any one a penny. All its capital is its own, earned by business. Other banks, likewise, no matter whether large or small, make no distinction between rich and poor. The working man paying his entrance fee of 5 francs, and a regular monthly instalment of I franc towards the purchase of his share, is as welcome as the millionaire who takes a large number of shares and pays cash down for them all. For the working man, indeed, it must be rather a hopeless business clearing his 1,000 franc share- that is the figure in the ScJiweizerisclie Volksbank at the Their Utility, rate of I franc a month. But, then, his member's privileges begin barring only the right to draw dividend the moment that he has paid his entrance fee and his first franc. So there can be no hardship. The object which these banks aim at is, for the sake alike of custom and of security, to enlist as large an army of members as they possibly can, and to induce these men to do all their busi- ness at their counter. That is the dominating idea in all their practice, and they study its realisation in every detail. SWISS CO-OPERATIVE BANKING. 311 " Keep down your demands made upon members in respect of instalments," says M. Yersin, the Director-General of the most successful of these institutions, the Schweizerische Volksbank already mentioned, " make those instalments as small as possible ; for the lower are your demands, the more ' popular ' will be your institution, the more members will you attract. If possible, charge no entrance fee, because even that is likely to be felt as a ' tax.' Offer your members special advantages in the shape of a rather lower discount charged on bills, a rather higher interest allowed on deposits. Interest them in your work by every possible means ; to this end make your administration thoroughly representative and democratic, allowing to each member a vote, and one vote only, whatever be his holding, and giving to each branch bank full self-government. Make people understand that you pay precisely the same attention to small business as to large. ' Third-class traffic ' is, in the aggregate, the safest, the most remunerative, and the most constant. Spread out your machinery, cover what ground you can, multiply banking facilities ; the more ' popular ' you make your institution, the better will you succeed." That is M. Yersin's advice, and in his own bank (except The "Schwei- that an entrance fee is taken) it is carried out fully in prac- tice with unquestionable skill and indisputable success. The bank, which in 1869 began with 53 members and a capital of 2,627 francs (105), has now a members' roll of 11,826, and a capital of 10,477,270 francs (419,092), with a reserve of 674,314 francs (26,972) at its back, besides a pension fund of 36,946 francs (1,476), and does business (counting both sides of the balance-sheet) at the rate of 2,347,714,270 francs a year (93,908,572), lending out, in 1895, 151,511.306 francs (60,460,452). These are the returns for 1895. Losses and law expenses did not in that year between them exceed 8,102 francs (324). There are some features about this bank which does 312 PEOPLE'S BANKS. not allow a year to pass without extending its financial sway which make its work interesting. In the districts of Tramelan and Saignelegier it does much to encourage and support the co-operative watchmaking, which is a specialty of that country. In the Cantons of Berne and Winterthur it materially assists co-operation for agricultural purposes. Being constituted strictly on " business " principles, the SchweizeriscJie V oik shank, as a matter of course, like other Swiss banks, studies to transact every variety of profitable business, even should it lie a little beyond the limits of strictly conventional banking. Thus it undertakes to act as stock- broker for its members. And it also deals in silver bullion in connection with the watch trade practised very largely at Saignelegier. But its main business, as that of the other banks of its type, is, to take deposits and savings, and to raise money in other ways ; and, again, to discount bills, grant loans, and give credit in current accounts. In one place it finds that it does more business of one sort, in another of another. Its current account (cash credit) business is now very much on the increase. In 1895 the Schweizerische Volksbank granted in all 3,185 cash credits of varying .amounts, from 100 francs up to well beyond 10,000 francs, the aggregate sum placed at clients' disposal being 28,102,541 francs (1,124,100). Of the 3, 185 credits, 1,162 were secured only by suretyship. The bank granted six months' loans to the amount of 9,525,241 francs (381,008), and loans for longer terms to the amount of 1 1,584,646 francs (463,384). For raising money for long periods the Volksbank has adopted in its own way, very successfully, the same method practised by M. Luzzatti in the issue of buoni fruttife.ri. By means of Kassensckeine, running either for a period of two years at the rate of 3^ and 3^ per cent., or else for three or five years at the rate of 3f and 4 per cent, it manages to possess itself of ready cash to such an amount, that at New Year 1896 there were 20,247,600 francs' worth of these SIVSSS CO-OPERATIVE BANKING. 313 bonds in circulation. There had been a notable increase in two years' bonds at 3j per cent, interest, a corresponding decrease in bonds for longer periods at higher rates. One peculiarity about these bonds is, that they are redeemable only subject to notice to be given three months before the ex- piry of the period for which they are issued, failing which they run on as a matter of course for another two years, or three, or five, as the case may be. Notwithstanding the preference given to members, the value of savings deposits received from non-members amounts to about three times the sum received from members, viz., 12,758,258 francs, as compared with 4,215,184 francs which is as conclusive a proof of the confidence reposed in the bank by the general market as could well be supplied. Most of the lending, apart from the pledging of shares, is done by discounting bills of exchange which are, as already observed, very well under- stood in Switzerland, and therefore involve no undue danger to borrowers, though they do occasionally bring a small loss upon the bank. Members are admitted by election of the Representative Council of Administration, from whose decision an appeal lies to the General Meeting of Delegates, should ever occa- sion arise, which is not likely to happen. For it is to the interest of the bank to have as many members as it can get, whose mere admission, as we have seen, involves no risk. Generally speaking in Switzerland retirement is made easy. In the ScJi-iueizerische Volksbank members are free to retire at six months' notice. Some other banks allow members to retire at any time without notice. Some, again, require three months' notice. In the Sckweizerische Volksbank the administration is thoroughly representative. Obviously, it would be impossible to call all the 11,826 members scattered all over Switzerland together. But each succursale has its own constituency, which may very well be convened from time to time. For every hundred members it 3 i4 PEOPLES BANKS. is entitled to return one delegate to the central representative body ; and by this means a tolerably popular representative assembly is constituted, quite large enough for practical purposes. The delegates elect a Council, and the Council in their turn nominate a Board of Directors, which, together with the permanent Director-General (M. Yersin), attends to the executive business. Beyond this, there is a special staff of auditors and " revisers " appointed, to check accounts. As may be inferred from the figures given, the business of the Schiveizerische Volksbank is a large one, and, accord- ingly, the permanent staff of officers and clerks stands at present at 169. The bank used to declare dividends of 6 and 7 per cent, but has come down to 4^ and 5 per cent. 5 per cent, in the past year. The satisfactory feature about this dividend is, that its substantial amount is the result, not of high charges, but of a large business. The average interest charged to borrowers stands at less than 5 per cent. 4.984 ; the average interest allowed is 3.600 per cent. Thus out of the margin of 1.384 per cent, on a vast number of transactions, have expenses, losses, payments to reserve, &c., been met, leaving sufficient over to pay a reasonable dividend. A Lesson Surely there is something in all this work of which our tosehSs. t0 c o- perators might do well to take note. If their minds are still set, as they were twenty-three and twenty-six years ago, upon creating a banking institution which would enable them to do their own banking, to save, and beyond that to earn banker's profits, here is a pattern to work upon ready to their hand, which should recommend itself to notice, as having been found in practice equally safe and profitable. It does not educate the humble classes to the same extent as the more philanthropic types of banks ; it does not take the poor cottier by the hand and teach him good morals along with good business, raising him, almost in spite of himself, from poverty to independence. But it makes SWISS CO-OPERATIVE BANKIXG. 315 the small means of those who possess a little go very much further than they otherwise would, and planes the way very effectively for their course through life. We must not, in such banks as these, look for that preponderance of small farming and working classes which we find in the RaifTeisen and Wollemborg institutions. According to the last annual return there are among the 1 1,826 members distributed over twelve districts Berne, Zurich, Saignelegier, Fribourg, Bale, St Gall, Wetzikon, Tramelan, Porrentruy, Winterthur, St Imier, and Uster (the last named opened only in 1895) 7,698 men, 4,100 women, and 28 societies. Grouped according to trades and callings there are : 6/0 independent persons engaged in agriculture and gardening, 62 employees and labourers engaged in the same calling, 719 manu- facturers, engineers, &c., 1,587 artisans working for their own account, 588 factory hands, 1,382 tradesmen, 743 shop- men and shopwomen, 425 aubergistes, jobbing-masters and lessees of cafes, 380 railway and post-office employees, 1,694 medical men, chemists, teachers, civil servants, notaries and literary men, and 3,548 persons without an occupation (3,224 being women). The bank is accordingly not a genuine ' People's ' Bank in our sense ; but it has a clientele to whom its services and its profits are a matter of some moment, and, ministering to their wants, it unquestionably discharges highly useful functions as a national wealth- producer. In the entire absence of official statistics it is rather General difficult to speak of this class of banks in the aggregate. CoTerativ M. Yersin has with some pains collected statistics of his Banking own referring to four years ago, which he has been good Switzerland enough to place at my disposal. They give particulars of twenty different co-operative banks, including three Unions and one or two working-men's banks. Throughout, there is evidence of useful service and of steady growth. Thus, the Gewerbebank of Zurich, which began in 1867 with 500 3 i 6 PEOPLE'S BANKS. francs (20), has raised its capital to 415,000 francs ; the Spar- und Leikkasse of Wiedikon has increased its own funds from 98,300 to 188,510 francs; the Spar- und VorscJiuss- verein of Beringen from 1,847 to 57,92 1 francs; the Spar- und Leihkasse of Morat from 8,000 to 22,500 francs ; the Spar- und Leihkasse of Boswil from 2,500 to 33,000 francs ; the Caisse Ouvricre a"Epargne of Geneva from 11,275 to 150,590 francs. All this indicates a growth of the con- stituency worked for as well as an extension of business. The full amount of business done by all the twenty banks in 1891 is returned as 2,224,675,778 francs (88,987,032), which certainly points to a large volume of transactions. There is considerable variety in the organisation and rules of these twenty banks. In the main they have adopted limited liability as their principle ; but. in most cases it is liability under a fancy limitation, just as in Belgium, extend- ing to twice, or three times, or whatever the multiple may be, of the amount of the share. Some banks allow members to take up only one share, others four, ten, fifty, up to two hundred, or else up to one-fifth of the entire share capital. Some issue shares of the value of 10 francs, others of 2,000 francs. For the most part the figure is either 100 francs or 500 francs. In nearly all these establishments the share is payable by instalments, which range from I franc a month to 5 francs. Only one or two of the smallest banks propor- tion the voting power to the number of shares taken ; as a rule the principle adopted is " one man one vote." And there are very few which bind themselves absolutely to grant credit according to the amount of money paid up. That principle, which is more or less in vogue elsewhere, has proved a little dangerous in practice. As a rule, indeed, members are allowed to borrow on the strength of their holding alone, without further security than the pledging of their shares and an acceptance with their own signature, to the extent of twice their paid-up stake. But the grant- SWSSS CO-OPERATIVE BANKING. 317 ing or withholding of such credit rests absolutely with the Board at its own discretion ; the bank recognises no right whatever. The lending upon shares opens up rather a troublous Danger of question in banking. The share is rather the member's sS^ g Up n bond than his asset. It constitutes him a part-proprietor in the bank. But the bank's security to its creditors is the share, not in its own hands, but in the member's. There- fore, by accepting the share as a pledge, instead of strengthening its own position, in one aspect it rather weakens it. For in parting with the share, it parts with potential security. Were the share to be forfeited, the bank would obviously be so much the poorer, and offer its creditors so much the less security. And if the forfeiture were often repeated, it might be left with all shares and no funds, and accordingly no credit. So serious has the danger of the withdrawal of members been felt to be, that in the SchweizeriscJte Volksbank a rule has been passed enacting that upon one-fourth of the members giving notice of withdrawal, a general meeting shall forthwith be called, to vote upon the question, whether the bank is to be liquidated while the intending seceders are still members, or is to go on without them. In practice the question is not likely to arise. And even the resignation of one-fourth of its members would still leave the bank endowed with ample capital for all purposes. But the point is one of considerable importance. For it is not every co-operative bank which can boast of the financial strength of the Volks- bank. In practice, also, there has been found to be no danger in lending on members' shares. Indeed, it has become one of the favourite methods of dispensing credit. After all, it is the members' interest, not to forfeit their shares. That would not exempt them from responsibility ; for their liability extends to twice the amount of their stake. Only, M. Yersin rigidly exacts a bill of exchange 3i8 PEOPLES BANKS. in addition to the pledged share, as giving the bank in case of need a better remedy against the defaulter. Some Pioneer Enough has been said to show that as business banks ^he co-operative banks of Switzerland have proved an entire success. However, from their large transactions one is not sorry to look down upon the humble, but far more phil- anthropic and educating work which has during the last few years been steadily carried on for the present in the Canton of Berne only by a few little pioneer banks of the Raiffeisen type. There are as yet only three. And the youngest of these is a very infant. One cannot help admiring their work, even though, as the foremost local champions of the system, MM. von Steiger and Jenni, admit, in the face of existing cheap credit and general prosperity, in a country in which nearly every cultivator is his own landlord, and even small holdings insure good incomes, there appears, in the more populous, and therefore the more active, districts, little room for these poor men's banks. There is one at Schosshalde, close to Berne a little beyond where the historic bears are kept of which the local schoolmaster is cashier. It began in 1889 with little more than twenty members, and had in December 1894, when I was at Berne, crept up to sixty. For local reasons it has fixed the value of its shares considerably above what the authorities at Neuwied approve, namely, at 50 francs, in addition to which it levies 5 francs (45.) on members by entrance fees. It is able to allow 3^ per cent, (and 3 per cent, for sums above 1,000 francs) on deposits, and to lend out at 4 per cent. Its comparatively consider- able share capital, and a subsidy of 500 francs which it has received from the Government, go not a little way to enable it to work with so small a margin. I have no data as to its lending, but in December 1894 it held 21,157 francs (847) in deposits, on 68 accounts, and it had accumulated a reserve fund of 2,400 francs (96). It is a peculiar SWISS CO-OPERATIVE BAXKING. 319 feature in the practice of this bank that the reserve is employed for co-operative agricultural supply, the purchase of seeds, cake, manure, and implements. The other bank is at Zimmerwald, some six or seven miles from Berne. This bank is smaller than that of Schosshalde, and issues only 30 franc (245.) shares. Correspondingly, perhaps, it has received a subsidy of only 300 francs from the Govern- ment. Why there should be subsidies at all, I cannot quite see. They are quite unnecessary, and may be prejudicial. But in Austria, Switzerland, and France, it appears to be assumed that the population is still in the stage of childhood in which individuals have to be tempted into doing what is really the best for themselves, by the bait of a sugar-plum or some other appeal to their acquisitiveness. It is much too soon, of course, to say anything definite with respect to the success of these little pioneer banks. But, like their sister institutions elsewhere, they appear to be perseveringly plodding on, not impatient to increase the number of their members or to multiply their business, but careful above all things to admit no member who cannot be trusted, and to keep conscientiously on the safe side. Slowly they keep growing, but every day sees new friends gained by work which, though unpretending, is beneficent, and by that marvellous educational efficacy which never seems to fail institutions of this type working on gradually but surely, and bringing out the best virtues of small labouring people. " These associations," writes the cure of Zimmerwald, Abbe Kistler, reviewing the work which they have already accom- plished under his own eyes, "create a bond of brotherhood ; and the moral support which they afford to their members ought not to be passed over in silence by the side of the financial support. It is a splendid thing, surely, and a matter of great importance for the agricultural classes, to have a solidarity produced between neighbours, and to see the strong support the weak, as one friend would support 320 PEOPLES BANKS. another, with his money and his credit, by counsel and by deed." A splendid thing it is, and while the large banks, serving for the convenience of the moderately moneyed, and earning them dividends, go on flourishing, like the Schweizerische Volksbank doing useful though more or less egotistical work one may indulge a hope that the modest beginning made in Switzerland on more philan- thropic lines may prosper as well there as elsewhere and teach the thrifty peasant of the Alps and the Jura, who is sometimes regarded as in material matters a step-child of Nature, what marvellous resources even on his bleak mountain-side he has at his command in the treasures of combination and self-help. CHAPTER XIII. CO-OPERATIVE BANKING IN FRANCE. PASSING in review, country by country, the co-operative Backward banking done in Europe, I have advisedly left France to ^^ , ative stand last. There is no country in which more research, Banking in and labour, and money, have been expended upon the France - creation of popular credit. Nevertheless when you come to look for fruit resulting from this plentiful sowing, you find, practically speaking, less than anywhere excepting only in our own backward country. Cruelly, perhaps, but not altogether unjustly, has M. Micha summed up, with piquant brevity, the story of past achievements in respect of the most favourite form of popular credit. "The history of agricultural credit in France may be told in two words : a wish for it placed on record by the Congress of French agriculturists in 1845, an d a law passed in 1888." That law, I may add, has proved disappointing. Accordingly, while Germans and Italians have long since "found salva- tion " in systems of their own, the French still continue seeking and groping for some satisfactory solution of the old familiar problem, with only small beginnings to encourage them in the belief that they are really finding it. It is odd and disappointing that this should be so. For Early History the French were one of the first nations to direct their * e Move - attention to the subject ; and in other matters of co- operation they have shown no want of resource and organising capacity. It was on French soil that Gall in 1830 conceived the idea which is held to have led up to x 322 PEOPLE'S BANKS. the fruitful action of Schulze and his rivals. At the very least since 1837, the French Government has been working out devices for securing to the small cultivators, who make up the bulk of the nation, the benefit of cheap and ready credit. After eleven years more of careful thought and study, in 1848, M. Lefour brought forward a scheme for providing credit in a way similar to that adopted by the Caisses Thurgoviniennes* The proposal, as it happened, was badly drawn, and was therefore wisely rejected. The third revolution, as a matter of course, brought forth a whole crop of new proposals, each more democratic, and more unworkable, than the other. Proudhon set up his " People's Bank," destined to live only a few weeks. Republican deputies clamoured for credit from the State, and goaded their governments into cette grande folie^ by which 3,000,000 francs was thrown away in advances to productive associations which could not possibly live. It may be as well to finish my record of similar failures, before proceeding to an account of more fruitful labours. The coup d'etat dealt a serious blow to French co- operation. The productive workshops, which had in 1849 been started with public money, were after 1851 called upon to repay their loans. They could not, of course, do so. But they could be declared bankrupt and compelled to dissolve which was just what the Government desired. There is at the present day actually only one association of that early formation surviving. The "sixties" brought about a change for the better. Sensible of his want of popularity, the Emperor courted it by ostensibly favouring co-operation. He had but to speak the word to set a whole army of prefects at work, carrying out his behests in the wrong way. Some sound little urban co-operative societies sprung up at the same time, under the forcing warmth of * See page 306. CO-OPERATIVE BANKING IN FRANCE. 323 fleeting sunshine, of which I shall still have to speak. How- ever, the Emperor's desires were directed mainly towards assistance to be afforded to the country folk, whose votes tell most heavily in the elections. With a fair capital, he in 1 860 formed the Societe du Credit Agricole, to deal out loans on easy terms and under proper safeguards to small cultivators. The Societe never lost a sou by its agricultural lending. So M. Josseau testifies. And M. Josseau ought to know. The agricultural borrowers indeed surprised the official administrators by their honesty. However, there were not nearly enough of them. The red tape conditions for borrowing were so tightly drawn that very few indeed mustered courage to come to this distant, strange, and much too fine-looking establishment. By 1870, the Societe managed to get into " correspondence " with about five hundred cultivators, who were probably large men. Since that did not provide anything like sufficient employment for its money, it lent a huge sum to the Khedive Ismail and lost it Soon after, the Empress, anxious to identify her son with a good popular work, started in his name the Fond des Frets de FEnfance. The Fond collapsed. While this was going on, a plain banker, M. Giraud, gifted with common-sense, managed to score that success in the Nievre of which I have already spoken.* The lesson was not lost upon the banking authorities at Paris. To turn it to account, the Bank of France appointed comptoirs cCescompte, consisting of local gentlemen properly accredited and considered trustworthy, whom it stationed in various districts to receive applications and negotiate loans with agriculturists. However, in the majority of agricultural districts there is little wholesale fattening, and so there was no demand for comparatively short-term loans. For the small farmers these pretentiously composed * See page 59. 3 2 4 PEOPLES BANKS. coinptoirs (Tescompte proved much too fine and too strange. Thus one more promising attempt ended in failure. For industrial lending the Emperor Napoleon III. had tried his hand unsuccessfully at a Discount Bank for Co- operative Societies. Similar ingenious experimenting was continued in the days of the Republic. Gambetta, in 1880, started a Caisse Centrale, to advance money to the same class of clients. The Caisse was to have 50,000,000 francs of capital, of which, however, only 12,000,000 was subscribed. It opened its offices with a grand flourish of trumpets, setting up " Collecting Bureaus " in various suburbs, and offering its money freely to co-operative associations. The co- operative associations at least the solvent ones however, would not accept the invitation, and in 1887 the Caisse escaped a collapse only by throwing over its original object, and converting itself into an ordinary business bank. Causes of past What is the cause of all this failure ? The matter is Failures. Qne Q f not p ure jy retrospective interest, because, with a considerable mass of new experience to support past teach- ing, we have pretty well the same lesson still brought home to us in the present day new experiments, new promises, new disappointments. M. Ernest Brelay suggests that the laiv may be in fault : " It is possible that the fault lies more with our laws than with our habits." But, then, the law was even more adverse in Germany ; nevertheless Schulze formed his banks and compelled the law to recognise them. The law up to 1883 absolutely forbade co-operative banking in Italy. Yet M. Luzzatti created a veritable army of banks. No law could possibly be more adverse, either to co-operation or to pro- vident practices, than was our own a few decades ago. We simply snapped our fingers at it. We started our co- operative associations and friendly societies, and then got the law altered. The law would present no insuperable hindrance if the CO-OPERATIVE BANKING IN FRANCE. 325 majority of French people were not still so hopelessly French etatiste wanting in the power of private initiative, and by Etatlsme - their own choice abjectly dependent upon " the State." They expect the State to think for them, to move them into action, and, above all things, to subsidise them. It seems as if in their opinion nothing could be done without it. I go into a meeting of co-operative associations, which make a boast of their independence and free initiative. There I find a member of the Parliamentary Commission dealing with subventions, who is present to consult with his friends on the manner in which the annual grant in aid of co- operation is to be appropriated. I hear of a caisse rurale started, as a triumph of " self-help," in the Alpes Mari- times. The first balance-sheet shows a Government subvention of 500 francs, without which the caisse would be hopelessly insolvent without which, I suspect, it would never have been started. In the Rue d'Athenes, we fight a brilliant battle for "self-help," defeating, in the teeth of heavy odds, the Government proposal for the creation of a central bank endowed by the State, to advance loans to agriculture. And immediately after, the chief spokesman against the proposal, the chosen champion of " self-help," hurries to the Rue de Varenne, to claim from the Ministry of Commerce his own share in the grant of 144,003 francs annually set aside for Credit Associations, which he had just before emphatically protested he would not have subsidised. All this is bound to discourage one. And it seems so much out of place. No nation has overturned its own Government oftener than the French, and showed less respect for it. Yet, when it comes to thinking, acting, doing, every Frenchman looks upon the Government which by his caprice exists for the brief period of three or else six months like a Schulze-Delitzsch draft as a sort of Zeus, by whose nod alone things are to be accomplished. Hence that absolute want of confidence among individual French- 326 PEOPLE'S BANKS. men in their own powers ! No scheme of co-operative credit is brought forward without some little Providence being suggested which is to form the backbone to provide the funds. No scheme of urban credit is devised without a promise of support having first been obtained from the Bank of France, or else from some great savings bank. No scheme of agricultural credit is promulgated without due provision having been made for the creation of a class of patrons, " founders," good fairies, who are to find the money. Schulze did not ask the great banks if they were willing to patronise his institutions. Indeed \\Q*would not be patron- ised. He repudiated such fatal friendship. He created his own security, and waited for the banks to come to him. Raiffeisen did not look around for patrons. M. Durand does not create two classes of members givers and takers. Here are the very men who write topmost upon their banner : i Death to Socialism ! War to les Krapotkine, les Karl Marx^ les Jules Guesde ! " perforce instilling Socialist maxims into the mass of the population, by telling them that self-help is powerless, and success hopeless without the taxing of others. Teach a man that he can help himself, teach him to stand on his own legs, and you kill the Socialist within him for ever. Make him believe that that feat is impossible, that all his help must come from his richer neighbours, and you make him a Socialist in spite of himself. Want of clear There is more. Want of confidence in themselves is "La Furia unfortunately not the only cause to account for failure. Francese." Father de Besse talks of the furia francese as hindering good results by impelling Frenchmen to wish to reach their journey's end without tramping over the intervening ground. They see the walls and roof of the house, and would build one like it without studying the architecture and realising that the foundations, and the framework of beams and rafters, which are not seen, are really of very much greater CO-OPERATIVE BANKING IN FRANCE. 327 importance than the brick walls and tile-roofs which are. There is still a deal of armless, shiftless, methodless veering and tacking, just as if Schulze and Raiffeisen and Luzzatti had not laboured to prepare a trustworthy chart. It takes one's breath away to observe in what haphazard, harum-scarum way some of these would-be organisers of popular credit proceed. And every Sequah and Harness offering his specific is accepted as a teacher. M. Durand shows his countrymen how Raiffeisen banks ought to be organised. There is not a word to be said against his rules, and no one ventures to say a word against them. But lie is a strong Ultramontane, and le clericalisme voila fennemi ! So a jurist objector gravely suggests that, although there are close upon 500 caisses rurales actually established on M. Durand's lines and allowed to carry on their business without shares, without any court of law so much as wagging its tongue against them, it is " open to very serious doubt whether the organisation of banks with- out shares is altogether legal." Nobody stops to inquire whether Raiffeisen banks are possible with shares though the overwhelming majority of them do issue such. Un- willing to engage in irksome study on this point, the gentlemen of Paris cast about for some new scheme. A learned avocat sends to Offenbach for some prospectuses and papers. And, never having seen a Haas Bank in his life, he stands up in a Congress to deliver a study-made lecture, and announce that here is a heaven-sent system writing, so to speak, the history of a company from its prospectus. There is no one to gainsay him, because no one knows anything about the matter. And for a brief period the general cry is for " Haas." More instances of the kind may be quoted. Co-opera- tive bankers of Italy, Germany, and Belgium will fully agree with me when I say that there is no prospect of sound co-operative credit being permanently established 328 PEOPLES BANKS. in France until Frenchmen learn, in a far greater measure than they have hitherto done, to trust to themselves, until they study with greater care the principles rather than the rules of co-operation, and address themselves to their work with patience and method as well as with zeal. The very essence of success, the pillar upon which the fabric to be raised must needs rest, is self-reliance ; the only available material out of which it can be manufactured is a sense of responsibility awakened, which guards against losses far more effectually than official endowment, municipal adminis- tration, and scientifically prepared rules. Recent We may now proceed to consider what is actually being Movement 1 ^ done in the latest period of co-operative action'. At the time when the cause of Schulze-Delitzsch scored its first great triumphs in Germany, about a decade after setting out upon its march to victory, co-operative bank- The Silos of ing may be said to have been dead in France. One curious Algiers. institution providing popular credit had managed to sur- vive in the African dependency, an institution tracing its origin back to those early days when Spain received its positos, Portugal its celleiros, and Italy its monti frumentari and nmnmari. Algiers was in those days provided by its Moorish rulers with a cognate institution termed silos. The silos were originally granaries, but in course of time became converted into credit associations. A few years ago the interesting little People's Bank of Algiers, thoroughly co-operative, but entirely local, still did good work among its own members less than 300 in number. There were then also reported to be about sixty other little popular banks of the same type scattered over French Africa all of them very humble institutions, small and unpretend- ing, but thoroughly useful and genuinely co-operative descendants, it may be, of the ancient Moorish silos lend- ing out among them about 3,000,000 francs annually to their members. CO-OPERATIVE BANKING IN FRANCE. 329 Apart from some modest little associations, resembling Buchez. rather our Slate Clubs than genuine People's Banks, that small cluster of silos was probably all of its kind existing under the shadow of the tricolor, when the paeans of triumph raised by Schulze's friends sent their echoes across the Rhine. Among a population so quick to seize upon new ideas, and standing so much in need of popular credit, those sounds were bound to touch a responsive chord, and to stimulate to emulation. Buchez, the father of French co-operation, who had devised for co-operation the well- known motto which republicanism has since appropriated to itself " Liberty, Equality, Brotherhood " had already familiarised his countrymen with the idea of "credit to labour," proclaiming in words which seemed to anticipate Sir R. Morier's dictum already quoted " // faut creer le The "Credit credit du travail, comme on a cree le credit fonder, le credit au Travai1 -' mobilier, &c" Beluze, taking up the idea thirteen years later, made it his ambition to acclimatise Schulze's crea- tion in France, as about the same time it was being accli- matised in Italy and Belgium. The French laws were until lately, as we already know from M. Brelay, distinctly adverse to such enterprise. However, Beluze knew how to turn the difficulty. In 1863 he started an institu- tion which has become historic his well-known Credit au Travail a co-operative banking society, formed en com- mandite, without shares. Such organisation, he judged, would enable members to pay in an indefinite amount of cash by instalments, as they pleased, and at the same time it would protect the association against being taken posses- sion of by a few greedy capitalist shareholders. On two rather important points Beluze deviated from his master's ideal. For administrative purposes he directed the election of a committee larger than Schulze's ; and, moreover, he gave the Commission de Controle power of its own authority to remove officers. Both these things to my mind repre- 330 PEOPLES BANKS. sent improvements. On the 27th September 1863, when the society was called together, formally to pass the rules, and legally to constitute itself, there were 172 members, subscribing among them a capital of 20,100 francs. How- over, only 4,082 francs was actually paid in by 1st October, when the Credit opened its doors for business. The work to be taken in hand was very similar to that of the Schulze- Delitzsch associations. The Credit was to collect savings and deposits, issue long-term bonds at 6 per cent, interest for terms not exceeding five years, cash and discount bills, grant loans, and all the rest of it. Its success was not very brilliant, but it was a success ; and it is all the more to be regretted that untoward circumstances, more particularly the locking up of too much money in loans not readily recoverable followed up by the disastrous war which, along with the empire, swept away a good many things which were much better worth preserving brought this particular phase of French credit co-operation to a close. Because, if French co-operators had been permitted to proceed upon such indigenous lines, thoroughly congenial to them- selves, it is likely that they would have produced some distinct and specifically French form of co-operative bank- ing, instead of simply borrowing from abroad, as they are now doing, entirely foreign systems. While it lasted, the Credit au Travail kept indisputably solvent, and did very good work. Its losses were trifling. It should be borne in mind that it was carrying on its business under a Go- vernment which, though outwardly coquetting with co-ope- ration, was in spirit so hostile that in the very year in which the Credit au Travail first became really strong that is, in 1867 the Emperor would not allow Schulze to come to Paris to take part in a co-operative congress at which he was expected as the hero of the occasion. By February 1867 the Credit an Travail had increased the number of its members to 1,500, and its capital to 250,000 CO-OPERATIVE BANKING IN FRANCE. 331 francs. Its annual business exceeded 10,500,000 francs. The smaller tradesmen and manufacturers speedily learnt to appreciate the advantages which it offered, and gladly availed themselves of them. So did unfortunately, as it happened the productive co-operative societies, not all of them sound. It was they who brought the institution to grief by failing to repay loans. So successful, in fact, was the Credit au Travail held to be, and so much satisfying a genuine want, that similar institutions, moulded upon the same model, sprang up in considerable number in various industrial towns of the empire Lyons, Lille, Nimes, Stras- bourg, Colmar, Bordeaux, Mulhouse, and elsewhere though the Paris institution itself did a great deal of provincial business. The Lyons Credit au Travail, founded in April 1865, with 50,000 francs capital subscribed in 500 francs shares, did exceedingly good business at a minimum of cost. The Credit au Travail of Lille had 389 members, and a capital of 105,700 francs ; the Saint Etienne Credit had 292 members and 32,000 francs. In Paris, as a rival institution, the Caisse d'Escompte des Associations Populaires, rose up, fathered by M. Leon Say, besides a Caisse des Societes Cooperatives, which were supported by philan- thropy rather than by bond fide co-operation. But concurrently with these more or less pretentious "Groupes a. institutions there grew up in France an entire little host of eux sous " small co-operative credit associations, formed by working men for working men, in the humblest of ways, but on genuinely co-operative lines, and answering well in their own modest sphere. I will not say much of the in- finitesimally small "groupes a deux sous " of Lyons, in which working men, never exceeding twenty, clubbed together to subscribe their penny a week in order to be able to borrow tiny sums up to 20 francs, repayable at the rate of 2 francs a month. That is not banking. But there was the Societe The | Society Mere of Paris, with its family of children, some seventy or offspring^ 332 PEOPLE'S BANKS. eighty in and around Paris, plenty more in the Provinces in Lille, and Saint Etienne, and Valence, and Lyons, and other places the Socie'tes du Credit Mutuel. They were all small, modest, in their way obscure. They had from twenty- five to fifty members each, meeting once a week or once a month in a private workshop, administering their own funds, doing their own work gratuitously. The same man would sometimes be president, cashier, and secretary all in one. In the year 1866 France possessed no less than about 300 such modest societies, all doing well, all supplying in a humble way a real want, readily and easily, at small cost to any one. They levied their weekly or monthly subscriptions, of from 50 centimes to 5 francs, and dealt with the money so provided not exactly cheaply for borrowers, for they charged interest at the rate of from 6 to 10 per cent, but beneficially. None of them disposed of large funds. The richest held a capital of 31,712 francs, with 750 francs of reserve, in all ; 1,300. The majority had very much less. Yet they did a large amount of lending, and lost almost literally nothing. The Societe Mere had in 1866 lent out 252,223 francs and lost only 5 francs. One of the most pretentious societies of this sort, established in the Faubourg Saint Antoine, had in six years' business, upon loans which amounted to about 6,000,000 francs, only two small losses to record. It was the very humility of the thing, the lively sense of responsibility, the rigour of" self-help," which made these small societies flourish and answer their purpose, while the millionaire enterprises of an emperor, of republics, and of capitalist associations failed. " The smallness of the losses," reports Mr Egerton in our Blue-Book, " proceeded from the members being well acquainted with each other ; for the societies were small though numerous. . . . Their main strength was in the mutual confidence from mutual knowledge of each other of their members" All this useful work was put a stop to by the war of CO-OPERATIVE BANKING IN FRANCE. 333 1870, which, entered into "with a light heart," ended by Effect of the leaving millions of very heavy ones, tearing associations Q^ n War asunder, breaking up circles and unions, and replacing union by isolation. It is a thousand pities that the good work of these little societies was not taken up afresh when times changed for the better. But by that time Frenchmen had forgotten the things that were behind, and were reaching forward to others which were before, more ambitious, and, may be, destined to become more useful. The first seed of this new crop, wafted across from the Influence of fruitful soil cultivated by M. Luzzatti, took root and ripened Example. 11 under the forcing sun of the Mediterranean littoral. The French Riviera had worn the blue tricolor instead of the green for thirty-six years, but the character of its population was not essentially changed when Providence selected it, no doubt in virtue of inherited aptnesses and old links with Italy, for the birthplace of an economic movement new to France, and destined to become of considerable benefit. One little experiment was first made on soil which had been French before, but it failed. In 1875, Francesco Yigano's First Vigano, the "father" of Italian co-operation, took in hand ^ the formation of a co-operative bank at Cannes. Cannes wanted such a bank, and wants one still, and, please God, will soon have one once more. The bank founded by Vigano he had first thought of Antibes grew up well, but after little time became a profit-mongering joint-stock undertaking, which in fact it was, without anything that could be called " co-operative " about it, at the time when Mr Egerton sent to Downing Street that glowing report about its success which figures in our Blue-Book of 1886. The lesson taught is an old and familiar one. It is not enough to found a People's Bank. You must watch and look after it. More satisfactory work was in store for Mentone. What- The Banque ever French annexation may have done for that little settle- 334 PEOPLE'S BANKS, ment, its conquest by the English has certainly made a more prosperous place of it. It used to be a quiet country town, living upon the produce of the surrounding olive gardens, and lemon groves, and flower beds. The advent of English visitors put new life into the place, and practically turned nearly every one among the 9,000 population into a specu- lator, building hotels and houses for them to live in, and laying out terraces and roads and gardens, for which nothing but credit could provide the funds. In 1882, one of the six joint-stock banks existing in the town, having lent out its money too recklessly, failed with 200,000 francs of deficit. The little community found itself thrown into a state of consternation. Nobody knew whom to trust, or to whom to turn for credit. M. Palmaro and a few more of the older residents kept cool heads upon their shoulders, and at once summoned a town's meeting to consider the condition of affairs. A proposal was made to form a People's Bank, after the example of the Italian banche popolari. It was agreed that the thing should be done if ,800 was subscribed. People had learnt so painful a lesson of joint-stock banking that every one jumped at the pro- posal. By the i8th February 1883, 150,000 francs was subscribed. According to the resolutions adopted, only 100,000 francs could be allotted. On 9th April accordingly the new bank opened its office doors, in the most modest of ways. Its office was a little room, taken at a half-yearly rent of 8. The furniture was of the scantiest and the cheapest. The management expenses were kept down to 2$ a month. But the bank buckled to its work in good workmanlike style, and, to create confidence, posted its balance-sheet outside its door every evening. Before the year was out business had assumed such considerable pro- portions that it became necessary to double the capital. At the present time the capital of the bank stands at 350,200 francs, with 54,850 francs of reserve fund laid up ; the CO-OPERATIVE BANKING IN FRANCE. 335 annual business figures at 41,648,798 francs ; and the bank is without exception the strongest and busiest bank in the town. It has lived through two or three more crises more crashes, seasons of cholera, earthquakes, &c. and has come out the stronger from every one of them. The Banque Populaire of Mentone is to all intents and purposes a bank of the Luzzatti type, and engages in pre- cisely the same class of business. It has 100 francs shares, for paying up which in exceptional cases it allows longer time than M. Luzzatti.* And in consideration of the reserve fund it issues its shares at a premium, which now stands at 1 5 per cent. Generally speaking it is " Luzzatti " to the core. Its director has shown so much propagandist ability and Its Propa- such sympathetic regard for the poorer among the popula- gan ' tion, that I feel justified in anticipating that, as the bank has already succeeded in planting offshoots in Marseilles, Xice, Bordeaux, Cognac, and other places-)- about a score in all, all of the same type, in addition to starting a little cluster of useful caisses rurales of the Wollemborg type all around it will end by becoming the centre of a well- developed federation of People's Banks, making available to French trade and commerce and agriculture the same facilities which have proved of such inestimable advantage in Italy. Nevertheless, I feel bound to insist that these banks, Its Defects, even the parent Bank of Mentone, are not in the highest sense co-operative, as we understand that term. The Bank of Mentone limits its dividend to 5 per cent, it dispenses as much as it can in " loans of honour " to the poor, it works for education, propaganda, charities. But look at its * I have heard of only one such case, in which twenty months was allowed. t There is now a propagandist society at work at Oran, in Algeria, which has, according to M. Rostand, founded one bank. 336 PEOPLES BANKS. members ! There are 39 proprietors of hotels, cafes, and restaurants, including the richest and most thriving hotel- keepers in Mentone. Among 427 members there are, in fact, only 84 artisans working for their own account jobbing operatives 97 small tradesmen, and 1 1 shopmen. It is no wonder that poor people are shy of going into this fine establishment, as I know from their own statements. They would be made heartily welcome and receive every consideration. But do you see people of the same class go freely into our great Joint-Stock Banks, or into the Army and Navy Stores ? Their money is as good as that of the rich folk. But they have a shyness which wants to be propitiated. The Mentone Bank scarcely does this suffi- ciently. And look at its office ! The first thing which meets your eye is a notice put up in English, French, German, and Italian, to the effect that circular notes are cashed and every kind of banking business is done. The bank, in fact, has, for the convenience of visitors, a branch office at Monaco, which has given the Monagasque con- cessionaire, Mr Smith, not a little trouble. There is, moreover, a reading room for visitors, as in Paris at the Credit Lyonnais. There is a money-changer's table. All these things can scarcely be called " co-operative." This outside trading is of course designed to benefit the mem- bers, reducing for them the terms of their own credit. But it does so, not by co-operative work, but by trading for profit. Some People's Banks, I admit, are compelled to resort to business with non-members, in order to secure them sufficient work to keep them going. Thus I find it to be at Marseilles, where there is a People's Bank formed after the model of Mentone. But that is a second-best, a reserve to fall back upon only in case of need. And the People's Bank of Mentone is scarcely in a position to plead in excuse the reason of need. Its advocates point in justifi- cation to the outside trading done by our British Co- CO-OPERATIVE BANKING IN FRANCE. 337 operative Stores. But that is a different affair altogether. That is advisedly and avowedly done to enable members who are, not too rich, but too poor, to take shares, to qualify for membership by accumulating their half-bonuses in the cash-box of the store. On the other hand, the People's Bank of Mentone, and M. Rayneri's its director, M. Rayneri, show themselves thoroughly co- operative in the zeal and goodwill with which they have thrown themselves into the work of forming in all the country round smaller People's Banks, and more especially, village banks of the Wollemborg type instructing the local people, advising them, and advancing them funds, or else taking their surpluses on deposit. There are seven such Wollemborg caisses in the neighbourhood of Mentone already at Castellar, La Turbie, Cagnes, Saint Laurent du Var, Sainte Agnes, Cabbe-Roquebrune, and Gorbio. I could wish that the item of " subvention from the State " did not figure so prominently in their accounts. It is unnecessary, and it corrupts the principle at the very starting. But, once started, these banks appear sound. And M. Rayneri encourages other forms of co-operation. At Castellar, the country of particularly good olives, we are promised an olive-pressing co-operative society we have a co-operative society already for combined pressing of the refuse. M. Rayneri is indeed full of energy and full of resource. At Cagnes the caisse rurale does little business. People do not take to the particular form of organisation, dreading unlimited liability, with which at present they con- siderately saddle the patient secretary, who takes it all upon his own shoulders. So in that place he proposes to set up a limited liability bank to see which of the two will thrive best. The little cluster of banks springing up under the instigation of M. Rayneri and his eloquent ally M. Rostand, Pere Ludovic has gathered some additional strength from a junction of ""catholic " forces with a small group of banks, the formation of which Banks. Y 338 PEOPLE'S BANKS. was begun about the same period, but on entirely different lines, and with totally different objects in view. The People's Bank of Mentone was formed with business aims. It was to assure to its members, alike rich and poor, cheap and safe banking. It has done so. Father Ludovic de Besse, a Capuchin friar, when, a second Barnabas of Terni, he resolved to combine the work of an economic reformer with that of a chosen preacher of the gospel, distinctly spurned the idea of business and profit. The study of financial gain was not for him. Warmly compassionate for the poor, he felt a sensitive spot in his heart touched by the present Pope's famous encyclical upon the condition of the working classes. " // faut adapter les corporations aux con- ditions nouvelles" That was to him what the "Tolle, lege" had been to S. Augustine. Forthwith he addressed himself to his work. Be it M. Rayneri's task to " serve tables " ; he would go forth preaching economic glad tidings to the poor. His aim was to moraliser les affaires , to infuse a Christian spirit into business, to make honesty take the place of fraud, to come to the rescue of the needy, gathering the elite of the working men around his banner, and steadily adding to his host by attracting new recruits all this avowedly not as une affaire, but as une ceuvre, not as a piece of economic business to bear profit, but as a noble work to be requited hereafter. Nobody that has seen or heard Father Ludovic can withhold from him hearty sympathy, affection, esteem. His sincerity is perfectly manifest. And his eloquence is a true propagandist power. So far from being narrow-minded or a bigot, he is, in fact, so large-hearted as to have incurred the serious displeasure of the ultra-orthodox, who deem it unmeet for the creature to imitate the example of his Creator in letting the sun of his favour, and effort at im- provement, shine alike upon just and unjust, upon orthodox and heretic. But unfortunately the Father is very little of a banker. When at Bordeaux I heard him lament in the CO-OPERATIVE BANKING IN FRANCE. 339 simplicity and the sincerity of his heart the " dangers " (ecueils) which he had found besetting co-operative banking in the shape of wicked men, who, while professing intentions of honest business, seek to defraud the bank, I was bound to be prepared for the catastrophe which happened only a few weeks after the collapse of his bank, the Credit Mutuel of Paris. Full to overflowing of good principle, Father de Besse entered upon his work without any very clear idea of a consistent method. His own " system " appears a medley of scraps, incongruous and incompatible among themselves, borrowed from other systems. At heart, of course, he is a devoted Raiffeisenist, altruistic to a degree. But pure Raiffeisenism for some reason or other would not serve his purpose. Accordingly he preaches "self-help" and yet makes an impassioned appeal to the homines riches to come to his aid with money for which they are to expect no return.* He adopts unlimited liability, lending on personal security only, to the poor, in consideration of the employment of the loan and yet makes his districts so large that that instinctive and automatic watching and checking which in the Raiffeisen banks ensures safety without causing invidiousness, becomes impossible, and he has to urge his members to undertake the repulsive task of playing the spy upon one another as a matter of " Christian duty." He is anxious to produce the close touch and community of in- terest of the Raiffeisen associations and yet he deliberately divides his members into two distinct classes, rich and poor fondateurs, who take up shares of 50 francs each, the more the merrier, but paying no interest ; and societaires, who pay only an entrance fee of 5 francs. In addition there are to be patrons chretiens. One cannot be surprised to find the results as M. Hubert Valleroux has called them, " poor " (faible}. The " Catholic Banks " have accomplished a certain Their Work. * See his articles in the Union economiqtie. 340 PEOPLES BANKS, amount of good. With what military men would call a skeleton army they have occupied a capacious territory, but their transactions are not imposingly large. The first bank was formed at Angers, Pere Ludovic's own city, under the auspices of the " Society of S. Joseph." It began with only thirty members tenfondateurs and twenty societaires. In 1889 it commanded a capital of 68,750 francs, which had, however, by 1890 attracted deposits only to the amount of 16,316 francs. That is very much less than what is usual in ordinary banking, \\sportefeuillt at the close of 1890 held bills worth 35,955 francs; the current accounts amounted to 15,261 francs; and the transactions balanced at 91,870 francs. That does not indicate a very active business. The Credit Mutuel of Paris, the principal establishment of this group, according to Father de Besse's own account, in 1888 had a turnover of 2,000,000 francs, on which there was 1,244 francs of loss. The "Catholic Bank" of Saint Chamond a bank of this connection, but managed in- dependently according to M. Courtois, discounts bills annually at the rate of 1,800,000 francs. There are, or were, other such banks at Arras, Cette, Limoges, Toulouse, and Rennes. At best all these institutions can be looked upon only as pioneers. They may be useful as preparing the ground. They cannot be regarded seriously as banks. Accordingly nobody who knows what co-operative banking should be will regard with regret the alliance struck up between these banks and the more businesslike institutions of M. Rostand and M. Rayneri, which has probably by this time already materially improved the " Catholic Banks," while setting the eloquent father free from the humdrum routine of office supervision for work for which he is very much better adapted, and fully liberating his powerful tongue for the oratorical advocacy of co-operative banking, for which no more effective pleader could be found. So officered, the Centre federatif du Credit Popidaire seems CO-OPERATIVE BANKING IN FRANCE. 34 1 destined to become in truth the centre of the co-operative banking movement of France. There is since some years another most fruitful centre M. Durand's of propaganda in France, for the benefit specifically of the country districts. If M. Rayneri drew his knowledge from his native country of Italy, M. Durand, of Lyons, learnt a lesson of a different kind at the feet of the Gamaliel of the Rhine. He is Raiffeisenist to his finger tips. He has studied the system, and like most who have studied it carefully has become enamoured of its principles and enthusiastic for its diffusion. For a brief period he was content to work in union with M. Rostand, P. de Besse, and M. Rayneri. However, his highly religious aims, strongly tinged with Romanism of the most pronounced type, soon drove him on a different path. With the personal differ- ences which have arisen between the -two parties I have here no concern. They have, unfortunately, grown fierce and bitter. Be M. Durand's chanty towards his dissenting fellow-workers what it will, his Raiffeisen rules are abso- lutely orthodox. His banks act less than one would wish to see them do as local savings banks. But that is not because M. Durand disapproves of such action, but simply because the French law imposes a tax upon savings, which makes it wasteful to deposit very small sums outside the recognised savings banks. These village banks have not been at work long enough to enable one to pronounce a definite judgment upon their merits. However, from the reports and balance-sheets which I have seen, I am bound to believe them to be good. And they have multiplied as co- operative banks have never multiplied before. M. Durand seems to stamp them out of the earth, as Pompey did legions. Under his zealous advocacy the difficulty which has in France so long stood in the way of Raiffeisen credit, in the shape of an assumed unwillingness on the part of the French peasantry to accept unlimited liability, wholly 342 PEOPLES BANKS. disappears. "Une c/tose me me irie tonne; cest la facilite avec laquelle nos pay sans francais acceptent Fidee de la solidarity on les a beaucoup calomnies en les representant comme refrac- taires a toute idee de pr ogres et a tout sentiment d ' association^ It is true, M. Durand has the Church working for him. His banks are not " Catholic " in name, like Don Cerutti's, but they are evidently so in fact. The very first year saw about 200 grow up in swarms. There are now close upon 500, and although enemies disapproving of their " Catholi- cism " are raising up obstacles which have made the rate of progress to slacken, the cause still keeps advancing. I could wish it to be less specifically " Catholic." But no one could improve upon M. Durand's rules. Thus in two of the three great propagating centres of co-operative banking in France we have the two foreign systems faithfully reproduced in their entirety, with no modification except that of language. The Syndicats The third great centre has a character altogether of its Agncoles. own, but that character is for the present little more than chaos. Ordering, regulating, developing forces are at work, but without any distinct aim or unity of purpose. Those who guide them are evidently anxious " to do something," but as to the " what to do," they cannot yet make up their mind. The agricultural syndicates of France, including the pick of the agricultural population of the country, have long since inscribed " agricultural credit " upon their pro- gramme. They could not do without it. All symptoms apparent in the diseased agricultural body plainly call for it. There has never been a force at work in France more serviceable to agriculture or attaining more rapid success than those agricultural syndicates. We may for our pur- pose consider them simply as co-operative societies, formed, generally, to promote all legitimate interests of farmers. When Professor Tanviray started the first institution of this kind at Blois, he did not think of the championship of CO-OPERATIVE BANKING IN FRANCE. 343 distinctive class interests in the arena of politics such as has afterwards been here and there foisted into the pro- gramme but simply of co-operative selling and buying, and a diffusion of instruction, to meet, on the one hand, the frauds and extortions of dealers, and, on the other, to lift a great national calling, peculiarly favoured by nature in respect of climate, soil, surroundings, and general condition of things out of the hopeless slough, not of depression, so much, as of ruinous backwardness, in which it lay embedded. He found French agriculture, in the graphic words of Count Rocquigny routiniere, arrieree, pauvre. " Backward, did you say," replied to me three years ago Professor Carrere, representing the Ministry of Agriculture, at Toulouse, when I remarked upon the lamentably undeveloped state of agriculture in that original " Pays de Cocagne," the sunny, fertile, Lauraguais ; " we are still living in the era of the old Roman plough." Edu- cation in their trade was what French cultivators wanted, and facilities for taking advantage of all opportunities favouring cheaper production. Professor Tanviray started his agricultural syndicate at Blois in 1883 5 an d within a decade the number of such syndicates in France grew to somewhere about 1,500. Every department now has some. United that is, for the most part, united they have become a power strong enough successfully to insist on redress of some of the most crying of agricultural grievances. They spread information and instruction. They have revolutionised the market, " democratising " the use of feeding stuffs and artificial manures. The quantity applied has been more than trebled, the quality improved, and the price at the same time lowered by 20, 30, and in some cases even 40 and 50 per cent. Cultivators have learnt to perform certain kinds of work in common, to thresh in common, to some extent to sell in common. In the Societe des Agriculteurs the syndicates have become the ruling power. 344 PEOPLE'S BANKS. They inscribe Fully to take advantage of all their opportunities, to Bankm^orT carr y consistently through the progress intended, the leaders their Pro- of the syndicates soon came to realise, they must with all this useful activity combine the creation of convenient " popular " credit The difficulty was, how to do it. None of the methods thus far, very empirically, adopted, can be described as approaching to perfection. The first idea was to " give " to open the purses of the rich for the necessities of the poor. There is some other banking. From the first, the Bank of France was willing to lend its support. If an agricultural syndicate would form, affording sufficient security, the Bank declared itself prepared to discount its paper, provided that there were, in all, three acceptable signatures. Acting on this offer in the most elementary manner, the Agricultural Syndicate of the Indre-et-Loire organised a system of agricultural credit which simply requires the applicant, being an elected member, to find one surety to endorse his acceptance, and the syndicate, adding its own, passes the paper on to the Bank of France. Some inquiries are, of course, made. But, in general, the security relied upon is that of the unlimited liability of all members. A., it is assumed, will not back B.'s bill unless he knows B. to be good. And B.'s neighbours, asked for information, will not give him a good character unless they feel sure that he deserves it. They might have to pay for their complaisance. Thus far or at any rate up to a short time ago, when I saw the President, M. Bossebceuf, at Tours this very rudimentary system had proved perfectly safe. However, as a rule, in the Agricultural Syndicates dealing in credit, care is taken to provide some stock of money, or some distinctly apparent security in the shape of the Objections to liability of wealthy men. In most cases there are two their Practice. c ] asses o f members -fondateurs, who take up comparatively large shares, act as patrons, do not borrow, but provide the security ; and socittaires or membres effectifs, who come to the CO-OPERATIVE BANKING IN FRANCE. 345 society as to a little Providence, which gives them what their self-help has not produced being required to take a small, often a merely nominal, share, being entitled to borrow and also to bank their savings, but having no voice, or as good as no voice, in the management. Although this system has made fair sums of money available for small cultivators, on which practically no losses are reported, it must be quite evident that in itself it is not good. I have the less occasion to criticise it since the gentleman most identified with the practice in by far the strongest syndicate of the kind, the Syndicate of Poligny, has frankly written to me that in his opinion the Raiffeisen system is preferable, and since I understand that the syndicate referred to is being gradually transformed into a cluster of Raiffeisen banks.* In many cases there is some rich man who helps with his Instances, money or his securities. Thus in the syndicate just spoken of, M. Bouvet, a rich timber-merchant, not only found money in shares, and induced some of his well-to-do friends to take up other shares, in order to provide the working capital required, but in addition he allowed the syndicate the use of his office and the service of his clerks free of charge, and undertook to pay interest at first it was at the rate of 4 per cent. on all deposits lodged. At Genlis, in Burgundy, Count Lejeas, likewise a very philanthropic large landowner, has placed a certain sum in marketable effects (close upon .500) at the disposal of his syndicate, which the latter is authorised to pledge to the bankers giving credit. * The Bulletin Mensuel de /' Union des Caisses Rurales et Ouvrieres of last April announces that the Credit Mutuel of Poligny has for- mally joined the Union des Caisses Rurales, the Union of Lyons, founded by my friend M. Durand, and constituted itself a central bank for the district embracing the departments of the Jura, Haute-Saone, and Doubs. It opens a credit of 600 francs (^24) to any caisse forming under approved rules, and takes its money on deposit, or else makes advances at the same rate, viz., 3 per cent. 346 PEOPLE'S BANKS. He secures himself by a general control of affairs, being one of the Council of the Syndicate, and by the right reserved to withdraw his effects in the event of the reserve fund of the syndicate dropping below a stipulated figure. How he could, under French law, withdraw what is actually pledged to the bankers, I cannot say. However, Count Lejeas assures me that he is fully secured, and satisfied that he incurs no risk. I have no precise particulars about M. Duport's experimental Credit Agricole of Belleville, but I believe it to be likewise founded on the " rich help the poor" principle. M. Meline's Credit Agricole of Remire- mont likewise has membres fondateurs. M. Josseau pre- sumably in virtue of his official position has managed to secure for his own Syndicat Agricole of Coulommiers a Government subvention of 6,000 francs (240), which no doubt would give a good start to any such society. More- over, he provides 30,500 francs to be increased to 200,000 francs in shares taken up by rich fondateurs, who may patronise but must not borrow. There are many similar methods, all more or less marked by the same defect. All this is not really co-operation. It is not self-help. It does not educate. It teaches small folk to look for favours. There is an unmistakable want *of "trust in the people" and trust in self-help, a halting and half-heartedness in it all, naturally bound to impair the success. The system fails to evoke that most necessary foundation of all self- help, a sense of responsibility, which is only to be awakened by a full share in the management and liability. It seems a matter of gift and condescension, a deliberate keeping of classes apart, instead of drawing them together. The whole thing presents itself as a palpable miss of a good aim. The best that can be said of it is, in M. Levasseur's words, that it represents " the infant germ " (molecule germinative] of sound agricultural credit. Practically the same thing is done in caisses in which, CO-OPERATIVE BANKING IN FRANCE. 347 not rich patrons, but large financial firms, such as the Savings Bank of Lyons, come to the support of poor cultivators. The foundation upon which the system of the Agricultural Credit Bank of Bessenay, organised by the Lyons Savings Bank, practically rests is this, that for every franc raised in share capital by the society, the Savings Bank is willing subject to the adoption of prescribed rules to advance two, considering the one franc self-raised adequate cover. M. de Fontgalland has in the Drome adopted yet another practice, which carries down the support given to fractional figures. Really it amounts to the employment of funds accumulated in the slender reserve fund of the syndicate to lending purposes. All this is mere tentative scouting, mere haphazard exploring of a country needlessly unknown, since experi- ence elsewhere has provided sufficiently clear and trust- worthy charts. At best it is only pioneer work, and pioneer work calculated to do as much harm as good in teaching people to look to crutches when they should be looking to their own legs. In course of time, no doubt, out of this chaos of dim and hazy notions will be evolved some clear and sound system calculated to bring relief in an educating way. The current of opinion appears gene- rally to have set in the direction of RaifTeisenism. In some modification or other presumably that will be adopted. And in course of time probably it will be supplemented in larger and more populous areas by the system of MM. Luzzatti and Ferraris, of the good effects of which in Italy I have already spoken. The French have thus far closed their eyes with curious persistency to the methods adopted for applying this practice specifically to agriculture. The " model rules " prepared by the late Italian Postmaster-General, M. Ferraris, ought to be dis- tinctly useful for this purpose. 348 PEOPLE'S BANKS. The Bank of To return to co-operative banking in towns, there is an Productive^ instructive speciality to be seen profitably at work at Paris, Associations, which ought to interest our co-operative associations, since the wants of co-operative associations are sure to be more or less alike all the world over. Like our own productive associations, the French are, for the most part, not over- strong in capital. In their isolated condition the credit of every one of them has not proved sufficient to purchase for it much in the way of goods, or to help it to obtain contracts for which known solvency is needed. It occurred to the intelligent leaders of the co-operative productive movement, that they would be placing themselves in a very much better position if their associations were to join together to become their own bankers. The result has fully justified their expectations. The Banque de /' Union des Associations Ouvrieres in the Boulevard St Martin has already rendered admirable services, and promises to render such even more largely. It is composed of productive co-opera- tive societies only, who take shares and elect the Com- mittee of Management. Liability is, of course, limited. Of course, also, no association which has a good case for borrowing to show, hesitates to apply for a loan. Equally of course, no association in the opposite position dares to do so. As a last " of course," associations, under such cir- cumstances, repay honestly and punctually. The bank is by its rules restricted entirely to business with its own members. Beginning with a modest share capital of only ,2,000, it found that even so it could make the united resources of the individual associations go considerably farther than they would without union. Being stronger than each of them severally, it could obtain credit else- where, and thereby multiply their small funds for working purposes. A happy accident substantially increased its power for work. M. Moigneu, a wealthy philanthropist, much interested in co-operation, read of its useful doings, CO-OPERATIVE BANKING IN FRANCE, 349 and handed over to it, in various instalments, a sum of ^20,000, as a gift, to form part of its capital. Thus endowed, the Banque has not only found itself strong enough to extend materially its useful ministrations to its shareholder associations ; it has also been enabled to put the Verrerie aux Verriers of St Etienne, taken over as the result of a strike by the trade unions interested in the glass trade, on a sound business footing, advancing to it funds for keeping up work in slack times, to sell produce in brisk. And, lastly, it has actually proved the salvation unfortunately, only for a time of the Wholesale Stores of Charenton. Those stores, weak in capital, were entirely dependent for their work upon credit given to them by dealers, who took bills which joint-stock banks discounted. The stores redeemed the bills when the money for the goods distributed to local societies came in. At the insti- gation of discontented traders, one day, the banks declined to discount further Charenton paper. Bankruptcy stared the Wholesale Stores in the face. By the letter of its rules the Productive Associations' Bank was not empowered to step in to help, but its members agreed that they would be fully carrying out their spirit by doing so. They did. They discounted the Wholesale acceptances. Being themselves strong, they could pass them on to other banks. Nobody was one penny the worse. The traders' trick had failed, and the \Vholesale Society was saved.* The management of the Banque de V Union des Associations Ouvrieres, I may add, is very good and businesslike, and its practice deserves to be recommended for consideration to our Productive Federation, which is trying to arrive at the same end by means which appear to me more hand-to-mouth. * The salvation effected was unfortunately, as observed, only tem- porary. The Wholesale Society had started too weak in capital, and has since gone into liquidation. 350 PEOPLE'S BANKS. The Credit There are two more French forms of co-operative credit, f r whkh l mUSt find S P aCe " The fifst f theSG reall y HeS geographically outside present France. But in its essence it is French to such a degree that probably no one except ultra-patriotic Germans will object to my classing M. Prevel's Credit Cooperatif de Lorraine under my present head. The Credit Cooperatif de Lorraine is in essence a Schulze-Delitzsch bank with limited liability and accord- ingly with rather substantial shares, viz., of 10 each, payable by instalments of not less than 35. a month. In respect of organisation M. Prevel has departed from Schulze- Delitzsch traditions. He has made his Council or Committee larger, viz., consisting of six unsalaried members and the two salaried officers ; and has, on the other ha'nd, kept the con- trolling body small, consisting of three reviseurs only. The organisation has amply approved itself in practice, and the rapid growth and expansion of the Credit shows how much such an institution was wanted, though the need was at first distinctly denied. It began in 1 892 with only 90 mem- bers and 7,000 share capital. At the close of the year 1 895 it had 1,143 members,* and 35,860 share capital, of which 15,721 was paid up. It had in the twelvemonth lent out, to members only, 375, 395, for the most part by cash credits, to supply which amount it had not found it neces- sary to pass on more than 13,378 of its bills for discount. The entire business of the year amounted to 635,959, just about twice as much as had been done in 1894. The Credit held 26,287 ^ n savings. The annual expense did not amount to more than 694. In fact the bank is grow- ing so strong that the question of the hour has come to be * By the middle of March the number of members had further increased to 1,255, holding 1,992 shares. Of the 1,143 members enrolled at New Year, 407 were tradesmen, 28 small manufacturers, 219 farmers, 125 rentiers, 115 public employees, 137 surgeons, teachers, &c., 25 persons employed in the military service, and 87 unclassified. CO-OPERATIVE BANKING IN FRANCE. 351 how to keep down the capital. Like their German fore- runners, these Lorrain Schulzists have failed rightly to estimate the abundance of their resources, and have been over-greedy in seeking to attract share capital. [The Ger- man law appears to be adverse to the application of a corrective found very useful elsewhere, viz., the issue of shares of a smaller denomination concurrently with the larger.] The Credit Coqp/ratiffaas already begun starting branch offices. Its development and business are most encouraging, and the losses have proved insignificant. The last place in this chapter I have reserved for a The Paris modest little institution which to my mind is the most genuine People's Bank of all in France. What is the object for which People's Banks are formed ? Surely not to save banking expenses to the rich and swell the ranks of capitalist institutions, but to provide easy and cheap credit for the poor, to whom by other means it is inaccessible. Striking out a different path altogether from that taken by the flourishing business banks of Mentone, and Nice, and Marseilles with which he does not wish his own bank to be placed on a level M. H. Rouzes, when starting his humble little Banque Populaire du Cinquieme Arondissement at Paris, decided to confine himself to the business of small people, to follow truly co-operative lines in making his members give that which they could in exchange for that which they wanted. Their right to credit could only be rendered effective by close touch, community of interest, frequent meeting, and sufficient knowledge of one another. They must become more than a bank. They must be a society. It was in accordance with these principles that he laid down his rules. Liability must be limited, of course. But election must be careful and searching. The value of the share was fixed at 50 francs, payable by instalments. There were to be three officers, as in the Schulze-Delitzsch banks. But the real administrative body must be the 352 PEOPLES BANKS. Council, consisting of from five to fifteen unsalaried mem- bers, thoroughly representative, giving up much time to the work, and reinforced by two trustworthy commissaires de surveillance. And the members generally must be brought together at least once a quarter. Still further to maintain touch and knowledge among members, M. Rouzes proposed that the names of all shareholders should be posted up in the office of the bank, where in fact the list may now always be seen. The result has fully proved the wisdom of such organisation. The bank formally constituted itself on 23rd December 1890, with only sixteen members, all selected, taking up among them 3 1 shares, which gave the bank a " guarantee capital " of 62, but only 6. 45. in cash. That was insufficient for beginning work upon. The bank must wait until at least 100 shares were taken up. This was done by ist July 1891, and on that day the bank opened its office. Its business has throughout been small. There is none of that tossing gold about by the shovelful which may be witnessed, figuratively speaking, in some banks in Italy and the Riviera. And there are no rich hotelkeepers to bring their substantial accounts to its counter. It is a poor man's bank. Accordingly it has to be circumspect and particularly prudent. In the first three months of its practice it discounted 262 acceptances to the value of 24,453 francs only about 3. 153. apiece. But it lost nothing. In the second quarter the figures rose to 445 and 29,857 respectively, which is actually a diminution of average amount, viz., to not quite 543. per loan. So the figures kept growing, slowly but steadily. On 3 1st December last the bank numbered 190 members. It held 60, 1 co francs in paid-up capital, besides 1,601 francs in the reserve fund. In the course of the year it had lent out 627,478 francs in 5,258 loans, averaging only 119.34 francs (4. 1 53.) apiece. Its annual expenses amount to somewhere about 190. It was enabled to declare a dividend at the CO-OPERATIVE BANKING IN FRANCE. 353 rate of 4 per cent. it is true with the help of a subvention of 500 francs (J per cent, on the capital) awarded by the State. In France, it seems, even into what is otherwise a model little bank the State must needs intrude its corrupting aid, to weaken the power of self-help. All the business has proved safe. And the members feel drawn together as if by ties of a family. They canvass for membership among their own friends, carefully avoiding to admit doubtful characters. The frequent meetings of members are very largely accountable for this effect. Nobody keeps away from such who can attend. " It is at these gatherings that the prosperous condition of our bank has been made clear ; it is thanks to them and to the publication of the figures, showing a steady increase, that confidence in the future of the society has been confirmed. The first members have become ardent advocates of our work ; they bring their friends to us, they invite their dealers to become members. If we had facilities for rediscount we should grow rapidly, but we do not complain of the want of that. We have all along made it our study to be prudent, and we adhere to that rule." So says M. Rouzes. Obviously these are the lines upon which people's bank- ing should be carried on. " I should wish to see France covered with such little banks," so M. Rouzes remarked to me ; " every arrondissement should have one, serving it alone, but serving it effectively. And then, among them, these local institutions should form a strong central bank all their own." I heartily echo that wish, and would carry its realisation far beyond France. The success of People's Banks should not be measured by " business " and riches. That is a false standard altogether. As it happens, there is a very forbidding "Tom Idle" to be instructively placed by the side of M. Rouzes' exemplary " Frank Goodchild." M. Rouzes founded a second bank in Paris, on precisely the same lines, in the Third Arrondissement. Of course he z 354 PEOPLES BANKS. could not officer the two. M. Thouvenin was supposed to be an able manager. He took charge of the bank. He pushed it on. His aim was, to rival the big banks of the South. In little time he had in outward appearance distanced the older bank of the Boulevard de Saint Germain. But a few months ago his body was found in the Seine. He had landed his bank in a deficit of nearly 60,000 francs, and had in consequence committed suicide. I earnestly commend his fate to the attention of those in this country who are more anxious to " get on " and make a show of many banks started, than to proceed on safe lines and start none but good ones. Hopeful It is the profit-hunting of the big People's Banks, it is the Movement tne glowing talk of successes and the counting up of colossal in France. sums at People's Banks Congresses which is answerable for such results as M. Thouvenin's death. Once you make " business " the standard, everybody as a matter of course strains after it. But the object for which People's Banks are formed, I repeat it, is not business. It is the filling up of a gap which requires filling. You cannot do people's banking well without minute care, without inquiry into small cases, which inquiry requires minute machinery penetrating into small nooks and corners. The poor man's distinctive friend, the man to whom he opens his heart and confides his troubles, is not the bishop in his gilded coach who preaches an eloquent charity sermon, nor the Lord Mayor who acts as chairman to a charity fund, but the visiting curate who looks up the sick and needy in their hovels, who judges from his own observation what sufferer deserves and requires help, and dispenses it, and the distributing officer who proceeds with similar discrimination in dealing out the fund to which the Lord Mayor's appeal has attracted sub- scriptions. People's Banks want to help the poor. They can do it only by adopting machinery, homely and humble, qualified to answer such purpose, and by giving themselves CO-OPERATIVE BANKING IN FRANCE. 355 up thoroughly to that service. To my mind the People's Bank of M. Rouzes, with its modest lendings and its slender dividend, is as a People's Bank as vastly preferable to all those flourishing business establishments whose success is paraded in periodicals, as was the poor widow with her two mites to the rich alms-givers of the Gospel. It does its work and it keeps itself safe. Its money chest is small. But, to quote M. Luzzatti "La cooperazione e un affare sorretto da tin' idea morale. Tanto vale V affare quanta splende quella idea'' France has in the last few years made very considerable progress in the extension of co-operative banking. It looks as if my hope expressed when I wrote the first edition of this book were to be realised, and on the foundation built up by the sinking of so much costly and well-intended rubbish in an apparently insatiable " Chat Moss " were to rise up a substantial and enduring fabric. The architectural lines have been laid down, and there is ample material to com- plete the structure. If Frenchmen will but break with their timid want of faith in themselves and in their own powers, and learn to trust to what they themselves can do, rather than to the State with its subventions and the rich with their " founders' shares " and patron management, and go to the bottom of the principle, thinking of that rather than of mere technical rules with their remarkable aptitude for common work, their quick wit, and ready ingenuity, they can scarcely fail to make the desideratum of at least fifty years a reality, and provide for their small tradesmen, their humble cultivators, their artisans seeking for freedom and independence in co-operative workshops, a source of financial support proving as widely useful as M. Luzzatti's work has proved in Italy, and Schulze's and Raiffeisen's in Germany. CHAPTER XIV. A Summary of what has been told. The Economic Result. CONCLUSION. SLIGHT and sketchy as must of necessity be the drawing which, within the compass of a moderate-sized book, I have been able to present of the fruitful new economic force rendered available for practical service by the labours of Schulze and Raiffeisen and their pupils, I think that I must have said enough to show that the praises bestowed upon it by such competent observers as MM. Leon Say, E. de Laveleye, Held, and Von Dobransky are in no way over- strained, and that here in truth is a power raised up capable of accomplishing an inestimable amount of good, alike economic and educational, the story of whose past work I have by no means misdescribed in terming it, on my title- page, " A Record of Social and Economic Success," or in comparing it in respect of its potency to steam. Reckon up the mere volume of money which this co-operative mint has drawn from the capitalist market, to place it at the service of small producers cultivators, traders, and wage-earners distributing it judiciously at the very points at which there was greatest need for it and at which it promised to prove most productive, dividing it according to the require- ments of each case, watching over its employment, and then, after having given bread to the eater and seed to the sower, gathering it all up again with scarcely any loss and with adequate interest ! That sum, we know, must now tell up to many hundreds of millions. We have not, unfor- tunately, very full statistics of what has been done. But we CONCLUSION. 357 know quite enough to be able to say that an estimate of 1 50,000,000 a year of money, I should wish to be under- stood, not created, but made available by credit for produc- tive purposes must be very well within the mark. In the various chapters relating to different countries I have given figures taken from authoritative sources, which bring the total, absolutely certain, very near to the point named, and leaving a wide margin to make up the balance. And thus M. Jules Simon's words have been made true to the very letter, and " the greatest banker of the world " has been proved to be he " who disposes of the mite of the poor." And, as well as the greatest, he has also proved the safest the man to whom rich and poor alike may without fear of loss intrust their deposits, well assured that, since he has no inducement to incur risk, he will incur none. That is not the result in the creative work accomplished The Moral upon which I should wish to lay greatest stress. I should Result - be disposed to set an even higher value upon the quality, than upon the mere quantity of the work done upon the reaching down to the very humblest and necessitous, whom nothing else would help, and raising him by education and by training to business ways, in addition to providing him with means for turning such ways to account. To the application of this power it appears, moreover, in truth impossible to set any limit. Its raw material abounds wherever there is opportunity for work. Its opportunity for converting that material into money's worth, by the specific expedient of making it men's interest to be business- like and honest, exists wherever there is need. To my mind there has never been a more prolific source of potential temporal good placed at the disposal of those who are dependent upon labour. For to them co-operative banking means, if they choose to profit by its gifts, not democratisa- tion of credit only, but, by the help of democratised credit, the democratization of production also, the securing to the 358 PEOPLE'S BANKS. toiler of the full reward for his labour and emancipation ! Do not let us quarrel over the .legitimacy of such a change ! It will never do away with capitalist enterprise. It will never bring about the establishment of an economic ochlo- cracy. But it may open a fair field for capacity and industry, and the proverbial " career " to " talent " in the very poorest. It would unbuckle the knapsack of the soldier in the great in- dustrial army, in which, according to tradition, lies concealed the marshal's baton. To a nation it must mean much more. It means or at any rate, it may mean concurrently with democratisation, an indefinite increase of production, a whole- sale mobilisation of productive forces, fuller satisfaction to the toiler without additional taxation of any one, diminution of want, a diffusion of prosperity, to a very great extent the disappearance of economic strife, education, elevation, the making the entire community richer, happier, better. Before proceeding to consider whether this beneficent agency, which has already rendered such invaluable services elsewhere, has any gift in store for ourselves, it may be well very briefly to sum up the lesson which Continental experi- ence has taught us, and try to arrive at its gist. The Under- If I have done anything like what I desired to do, I aiplf Prm have shown that at bottom the force at work in co-operative banking is all one, and that at any rate among the best of the systems reviewed I will not now speak of any other there is no fundamental difference of principle. There are differ- ences of application. Necessarily so. You cannot serve a densely populated district as you would a country parish. You cannot provide for a tradesman trained to business in precisely the same way in which you provide for an un- trained rustic. Again, there are differences of the spirit in which the principle is applied. There are those whose aim ends in the pocket, who would, so to speak, take their ticket in co-operation as they take it in a railway train, which runs for many, but in which every one travels for his own profit. CONCLUSION. 359 There are those, again, who through the pocket wish to reach the heart, who co-operate as do joint-settlers in a new colony, in which each has his own gift to bring to the common stock for his own, but at the same time also for the common, good. I feel bound here to interpolate a general caution, begging students of co-operative banking not to take for gospel all the charges which they may hear advanced by champions of different systems against one another. All those indictments have their home in Germany, where recent experience, of which we have been the victims, must have made us aware that nicely weighed scruples about the truth of an accusation do not necessarily stand in the way of its being made, when the opponent is considered deserving of castigation, which a rival is sure to be. I take a special interest in these charges. I like to hear of supposed weak points in a s)^stem not from any malice or 7rixo-i/3KaK:ta, but simply because, obviously, it is by its weak points that to a great extent a system ought to be judged. It is its weak points which are most instructive, determining its strength, as the weakest link determines the strength of a chain. I have investigated all those charges. Most of them are pointed against the RaifTeisen system by men who appear never so much as to have seen a Raiffeisen bank, but to take their evidence at second-hand, and who pass it on without adding Swift's saving clause, " If it is a lie, I have it as cheap as you." So far as these charges apply to systems as distinct from specific cases of maladministra- tion I have found them all unfounded. I will not enter into them now. I would sooner efface all record of them. If my tale of what has been done teaches anything as it ought, it teaches that there is good in all the principal systems applied that, in fact, " system " is of very much smaller account in this matter than " principle " ; and that the good done by any system is precisely proportioned in degree to 3<5 PEOPLES BANKS. Strength and Weakness of the Several Systems. the fidelity with which it is made to adhere to the co- operative rule of self-help, vigilance, strictness in enforcing engagements, abstention from profit-seeking, from over- taxing the borrower for the profit of the lender, to the rule of subordinating every other consideration to that of providing, without after-thought or by-end, the cheapest possible and the most accessible credit to all. Each system is good in its own sphere, and subject to the observance of its own proper safeguards. No other system has produced equally large, equally truly imposing results as that of Schulze-Delitzsch. And provided that sufficient touch can be maintained among members, and that conscientious and capable officers can be secured, none, I may add, is more " co-operative." Among populations less submissive than the Germans to unlimited liability, and practically to the oligarchic rule of three officers, the Italian system of M. Luzzatti and the cognate adaptation of Schulze - Delitzschism, which has found a home in Belgium, supply in the more businesslike strata all that is required always supposing that their principle be kept pure. For the very poor and the dispersed in the country there is absolutely no system to place into competition with that of RaifTeisen. There is a peculiar charm attach- ing to that system, which makes those who become thoroughly acquainted with it prize and love it like none other. It stoops so low. It helps so much with the heart as well as with the hand. " Our banche cannot attempt to do for the poor what the Raiffeisen casse do." This is what the Marchese Scati, himself a sindaco of an excellent Luzzatti bank, admitted to me at Turin. " They look after their members as a shepherd looks after his sheep, they watch over them, they check them, they educate them." How- ever, though no other system accords to the moral educating element the same prominence in its programme, it is an entire mistake to suppose that the Raiffeisen banks possess CONCLUSION. 361 a monopoly of kind feeling. It is impossible to assert this to state one instance after the resolution adopted at the last meeting of Austrian Schulze-Delitzsch associations, on the motion of Herr Siegl. "It is true," so Herr Siegl re- marked to me some weeks before, " that we have neglected the philanthropic, educating side of co-operation. We can cultivate it as well as the Raiffeisen co-operators, and we must cultivate it." His motion, giving effect to that desire, was adopted at Gablonz by acclamation, without a dis- sentient voice. Indeed, the various systems are drawing nearer and Co-operation nearer together every year, and M. Luzzatti's recent declara- 1 tion in favour of a direct union of systems, calling upon the banche popolari to raise up around them clusters of casse rurali, and support such with their funds, is nothing more than the logical outcome from a gradual mutual approach which shows itself, among other things, in the practice becoming more and more common in the banche of inquiring into the employment of loans asked. M. Luzzatti himself, with his warm heart beating for every one who is in need, goes in respect of that " philanthropy " which rigid economists at Berlin affect to deride even beyond Raiffeisen, and, indeed, beyond co-operation as is evidenced by his suggestion that the huge reserve funds accumulating in the coffers of excessively prosperous Italian banks, should be employed to buy up the share capital, and create, so to speak, impersonal corporations, disposing of money to which no individual has a claim, and which is to be dispensed in loans to the poor. It is the peculiarly good practice of the great Italian Savings Banks which has suggested this unfortunate idea. But what jobbery there would be in England under such a system ! Loans would be distri- buted, like official patronage, according to party favour. Every redeemed bank would in fact become a Legs RampaL That proposal starts from a wrong principle altogether, and 362 PEOPLES BANKS. shoots far ahead of co-operation, which does not aim at setting up Little Providences to make exertion unnecessary, which does not mean the taxing of the present generation of members for the creation of an " unearned increment " to benefit their children ; but the provision of machinery enabling the poor to place themselves, by an effort made in combination, for certain purposes on an equality with the rich earning, working for all that they get, and securing for themselves collectively it may be, but still for themselves whatever they do earn. Abuses. In truth, the proposal put forward places in bold relief a gross abuse practised one of those abuses that co- operative banking is liable to, and which we ought to take into consideration amounting to a distinct deviation from the co-operative path, only less reprehensible than the payment of those huge dividends of 40 and 56 per cent, which used to be declared in Germany. Italian banks have in some instances entirely perverted the use of reserve funds, making that which ought to be a means the end, and neglecting the tree for the sake of its prop. A reserve fund is, as its name implies, not intended to take the place of the share capital, but to stand as a support behind it. There ought to be no such huge reserve funds at all, as M. Luzzatti points to more especially while dividends are declared at the rate of 10, 12, and 14 per cent. These things mean, that the banks which accumulate such funds and declare such dividends, lose sight of the co-operative principle ; that they do not study the cheapening of credit, for which they were created, but profit ; that they overtax the borrower, for whose sake they were in fact set up. Excess profits in co-operative banks clearly belong to the borrower, just as in co-operative supply societies they belong to the purchaser. There is no word of protest too strong which can be employed against those unconscionable dividends which CONCLUSION. 363 are doing a terrible amount of mischief, and acting as a very dangerous example. M. Luzzatti has frankly owned to me that he did not at the outset limit the dividend, simply because he did not anticipate that there would be much profit to divide. We know at present what co-ope- rative banking has it in its power to accomplish, and we should be careful to avoid falling into the same error into which, to his own great present regret, M. Luzzatti has allowed his older banks to stray. Those large dividends mean the letting in of the corrupting principle of greed and self-seeking. Those huge reserve funds, which embody the same gain-hunting principle only in another form, mean a premium upon shares, which makes the supposed poor man's friend and helper difficult of access to the poor. Very rightly now is M. Luzzatti exerting all his authority and influence to induce co-operative banks in Italy strictly to limit divi- dend. And in somewhat fainter tones, though evidently intended to be equally earnest, is Dr Schenck insisting upon the same thing in Germany. It is for us iTriyovot to learn from our forerunners' mistakes. There are other abuses which this aping; of joint-stock trading has unfortunately brought in its train, and such new founders of People's Banks ought accordingly to study to steer clear of. The small attendances at general meetings in Schulze-Delitzsch and Luzzatti banks, where out of 1,000 or 17,000, only 150 or 250 members put in an ap- pearance, betoken a want of interest, and unquestionably represent a peril. What is, for instance, to prevent the 100 employees of the Banco, Popolare of Milan who are all required to be shareholders from constituting them- selves a Praetorian guard, electing their " emperors," not according to the best interests of the bank, but according to their own particular convenience ? Every system has, in fact, along with its peculiar ele- ments of strength, also its own peculiar besetting weak- 3^4 PEOPLE'S BANKS. Necessity of Strict Adher- ence to the Co-operative Principle in its Purity. Is there Room for Co-opera- tive Banking among Our- selves ? nesses. The Raiffeisen banks, being small, strictly local, giving very wide scope to personal influences, are no doubt liable to abuse for personal or partisan ends, which only strict adherence to the sound principle originally laid down, enlisting the general interest of members against possible encroachments by individuals, can successfully keep out. That is why relaxed or adulterated Raiffeisenism such as I have had occasion to speak of in some connections, and such as some of our English advocates of co-operative credit, ignorant, from inexperience, of the danger with which it is beset, are calling upon their neighbours to adopt should be most carefully avoided. It is much easier credit to start, I grant, but experience has shown that it has no soundness or stability in it. Gathering up once more the lesson to be learnt from the failures and abuses alluded to, we come back to the point which I have thought it necessary so often to insist upon, that it is of imperative importance that the co-operative principle accepted should in all applications of the bank- ing system be adhered to in its absolute purity, with unbend- ing fidelity. Every deviation, every relaxation, must mean peril. And it is better to have no bank at all than a bad one. There should be strict enforcement of rules, merciless discipline, and rigid maintenance of the safeguards required, so as to keep the institution entirely true to self-help, avoiding adventitious supports, rejecting speculative gains, evoking vigilance, interest, control, responsibility, keeping the association true to the " one for all and all for one." It is time now to consider the question which natu- rally suggests itself Has this richly creative institution, which has proved so abundantly useful abroad, no gift for ourselves ? I consider that there can be no doubt that it has. It has been disputed. It has been objected that the thing is " foreign." It is exactly as " foreign " as was capitalist banking before it was introduced here from pre- CONCLUSION. 365 cisely the same regions, more particularly from Lombardy and Venetia. But, then, it is contended that we have no " small trade," and the question seems never to be asked Arguments on whether democratised credit has proved useful to anything ^Affirmative besides " small trade." We have seen how useful it has shown itself in rural districts, among working men gene- rally, and among factory hands one may say of the Eng- lish type at Verviers. In truth, however, we have more " small trade " than many people are aware of ; and we have plenty of underpaid labour which, for want of capital, cannot rise to the dignity of "small trade." We have the " sweated " artisan, who would be only too thankful to raise himself to the status of a small trader. We have the co- operative workshop which now seeks the financial support which there is no People's Bank to lend, in the deposit department of the less efficient " Productive Federation,"* as it has previously sought it in the questionable assistance given by the "Aid Association" of the " Wholesale Society," happily defunct. It is not everywhere that co-operative producers find the stores of their own locality ready to help them in their struggles. As a rule, our productive associations have had to raise themselves to prosperity before they could successfully appeal for the help which had at that stage of their life become almost unnecessary. There are plenty more workmen who would like to enrol them- selves in productive societies did they see their way to obtaining the means. People's Banks could provide such. We have, moreover, the costermonger and his class-mates of precarious itinerant trades, among whom small credit on usurious terms is a valued, but still only insufficiently developed, institution. There is many a hundred pounds now lent out in this small way, the use of which coster- * I have tried to make clear this point in Labour Co-partnership of April 1895. 366 PEOPLES BANKS, mongers are so thankful to buy, even at a high price, that they have been known to give complimentary suppers to small money-lenders retiring from business, as if they had been public benefactors. A grade higher there is the small householder, who purchases a good many things "through the nose " on the hire-purchase system from dealers who would willingly sell their goods more cheaply for cash. We should not have our Civil Service Share Purchase Advance and Investment Societies if there were no want of credit even among our salaried fellow-citizens. In one of these societies I have heard of loans asked, on the security of well-known railway shares, which a joint-stock bank offered to grant at an exorbitant rate, but which were afterwards obtained through the society, on precisely the same security, at the ordinary bank charge. It was co-operation which secured the reduction. One well-known bank, formed on a quasi- co-operative basis, avowedly for the use of small folk who cannot afford an ordinary banking account, regularly charges 10 per cent, for advances even on first-class securities. That is, to my mind, an abuse under which those are made to suffer who can least afford it, and which, if it be at all possible, should be remedied. Then look around in our country districts ! We are trying to increase the number of allotment holders. What are they to do with their bare land, let, as a rule, at a very high rental ? They must have their cow, their pig, their implements, their manure, their seed, and all else. With the help of these things they can make their allotments pay. In my book " Agricultural Banks " I have quoted the case of a tenant of the famous " three acres" who, with the help of money rendered available, kept, not one cow, but seven, and made them pay. Give the men the means for turning their land to account, and Mr Collings's reproach of " 38,000,000 sent abroad every year " for produce, which we might well raise at home, will become a by-word without a meaning. CONCLUSION. 367 But the men cannot raise tomatoes and peas with their hands only, nor buy without money that cow which, once got, will easily repay its value out of its milk. I have already spoken elsewhere of the needs of larger agriculture,* so need not here repeat my argument. But is there no call for the extension of other co-operative practices such as co-operative banking would facilitate co-operative pur- chase, co-operative dairying, co-operative sale of produce ? Abroad these things have "grown out of" co-operative banking, as a matter of course, in thousands of establish- ments, against which we have only dozens to show. With- out co-operative banking they would have been impossible. I have already related the barren result of an attempt which I myself made in this direction in Sussex.! And is there not Ireland with its " gombeen man " and its starva- tion alike of soil and of body ? And is there not India, to quote M. Leon Say's words, " literally devoured by usury," with its famished ryots who pledge their children unborn to the usurer, and cultivate the land, which the usurer has practically seized, at starvation wages for his sole benefit ? And, all the empire over, is there not the poor, not only the occasional poor, who annoys other people with requests for a loan to get him out of some temporary difficulty which loan a People's Bank could grant more easily and to much better purpose but the genuinely poor whom we are told that we shall have with us always the unemployed, clamorous, or else submissively silent, who sighs for labour which without money to pay his muscles is not to be obtained ; and the helpless poor whom we quarter upon our workhouses ? " Whoever sets up Raiffeisen banks," so says a German couplet, " pulls down workhouses." + He makes them superfluous. * Chapter V. t See page 64. | " Wer Raiffeisenvereine baut Reisst Armenhauser nieder." 368 PEOPLES BANKS. Evidence in Support. Our Cognate Rudimentary Institutions. Slate Clubs. Loan Societies. Surely there can be no disputing the existence of a want of people's credit ? The whole ground is crying out for it. Else, what keeps our pawnshops and our usurers busy ? What has called our Slate Clubs, and Funding Clubs, and Money Clubs, and Loan Societies, and Self-help Societies, and Civil Service Share and Purchase Societies into being? What has led so many of our Friendly Societies to avail themselves of the power given them of lending to members? What has prompted the Irish to set up their "Loan Boards," which in their elementary way are doing not a little good ? Here we have the proof of a need and a demand actually evidenced in the existence of rudimentary institutions which supply it in a more or less inefficient way. For the most part these institutions are very insecure, often avowedly temporary institutions, which minister to need in a hand-to-mouth fashion. As a rule they have no funds of their own. They deal out the money which comes in by subscriptions, and which may be withdrawn to the last farthing any day. Hence their instability. They can grant no long loans, which are the most useful loans for men who, let us say, wish to set up in business, to purchase articles for agricultural use, or to pay off an old debt. When money is flush, everybody pays in, and the societies are at a loss how to invest their funds. I have known ^"500 and 900 accumulated in the hands of a single society, whose officers were at their wits' end how to lay it out When money is scarce, everybody draws out, and the society perishes just when its help is most needed. Let us very briefly look at the best known of these institutions. The Slate Clubs are, of course, very insignificant and merely temporary concerns, but widely diffused. The Loan Societies, I am glad to say, are going altogether out of favour, and their number is rapidly dwindling. Last year CONCLUSION. 369 only six new societies of this order were registered. The Act under which they are formed is a very inconvenient Act, and deservedly unpopular, alike with the Treasury and with the magistrates, whose assistance is appealed to to call in bad debts. They are so organised as to create no touch or mutual control among members. No borrower wishes it to be known that he has borrowed. As a matter of fact, nearly the entire management is committed to the Secretary, who in many cases draws a substantial salary. Rates of interest are high, though disguised in the shape of commissions and special contributions tacked on to the usual 5 per cent, for forty weeks, equal to 6J per cent, per annum, payable in advance. There are still about 350 of these societies in the kingdom, and it ought to be pointed out that they are composed of just the class of men who abroad group themselves together to much better purpose in People's Banks. As they die out, their places are taken by " specially authorised " societies, formed under the Friendly Societies Act, which are at any rate rather better organised, and by " Lending Societies" constituted "Lending under the Industrial and Provident Societies Act. There Societies -" are about 245 of the former, and a very much smaller number (but doing a comparatively larger business) of the latter. The number of both is increasing. At best, these institutions are imperfect. Their prototypes, the original Loan Societies, formed under the Act of 1840, were authorised as " Friend of Labour Loan Societies." How- ever, since their rules do not, like the rules of People's Banks, prescribe a supervision over the employment of the loan, and money is accordingly generally borrowed for improvi- dent purposes, which leads the borrower into enduring mischief, they richly deserve the nickname, by which in fact they have become known, as " Enemy of Labour Loan Societies." Under their faulty organisation very much money has to be called in by legal proceedings. 2 A 370 PEOPLES BANKS. In 1890 there were no fewer than 3,052 summonses issued. "Self-Help The Self-Help Societies, which are as yet peculiar to Middlesex, are very much better institutions, but mainly so, because there is in them more democratic management, and an approach in respect of organisation to People's Banks. Members are elected. Applications for loans are more openly dealt with than in the Loan Societies, and members are to a larger extent put upon their responsi- bility. These useful little societies teach us two lessons very valuable for our present purpose. In the first place, they make it clear that there is no insuperable aversion, such as has been sometimes assumed to exist among our smaller folk, to u going bail " for one another. Money is, as a rule, lent on personal security only, supported by two sureties, which to a man known as honest are always forthcoming. In the second place, they show what very trustworthy borrowers labouring folk are, here as elsewhere. The Self-Help Society of St Pancras, being composed mainly of costermongers, railway hands, and other small folk, in 6\ years lent out 8,462, and lost, in all, only 75. The Self-Help Society of Ealing lent out in six years 5,028, and did not lose a penny. It is true that in respect of not quite 11 the sureties had to be called upon to make good their principals' default. But of that sum 6 was guaranteed by the Vicar, who is considered fair game for robbing, and who has in consequence very pro- perly been disqualified for serving as surety again. I take it that these are very satisfactory results. And even in this elementary form the resort to self-government and quickened responsibility is found to have a directly educating effect. One member borrowed 2 from the Vicar, which he appar- ently never thought of repaying. He joined the Self-Help Society, borrowed from it, and paid punctually. " How is it that you don't think of repaying me?" one day asked CONCLUSION. 371 the Vicar. " Ah, you're the Vicar, you don't want it," was the reply. That shows the difference between private lending and co-operative lending, as it were, in a nutshell. And here, in this society, obviously, we have all the elements of a People's Bank in germ, and a People's Bank, I hope, the Self-Help Society will one day become. The " Share Purchase Advance and Investment Share Societies " are more fully developed institutions, which ^J^* and deserve to be better known than they are. Their good Societies, management and satisfactory results are of course in part owing to the fact that they have a peculiarly trustworthy constituency to deal with in the persons of civil servants, who could not afford to fail in their duty to the society. Ostensibly, their primary object is, to purchase shares and other investments for members. But the societies are really, I believe, to a much larger extent credit banks, making advances on security which elsewhere would involve a much higher rate of interest. The United Service Share Purchase Society in 1894 lent out as much as ^9,488 ; the Civil Service Society, having a paid-up share capital of ,23,742, in the same year advanced 1 7,296. These societies raise funds by the issue of shares of varying amounts, generally speaking from ^5 to ^20, the value of which may be paid up by instalments of ios., but not the whole of which need be accepted by the Society, should it not be required. Loans are granted at moderate rates, for varying terms, generally up to three years, repayable by instalments. Scotland possesses a far more democratic Co-operative The Credit Institution in its " People's Bank" of Edinburgh, a $ very useful society, formed to enable working folk to Bank." purchase their own " flats." Hence the security which is pledged, generally speaking, consists of realty though the Society has taken power to lend on personal security also, and to a very small extent avails itself of that power. It 372 PEOPLE'S BANKS. raises its money by i shares, payable at the holder's option by half-crown instalments. Beginning its work in a very modest way in 1889, it has in six years crept up to a share capital subscribed of 2,604 (only 1,348 paid up), with a reserve fund of 150. On 3ist December last it had 12,598. us. 8 Jd. outstanding in advances to members, besides 886. 193. nd. on overdrafts, and 71. is. lod. advanced on bills, therefore 13,536. 135. 5jd. lent out in all. Its lending is done at varying rates, ranging now from 3i to 5 P er cent., according to the quality of the security given. The business has proved steady and safe, and unquestionably a convenience to the members who apply for loans. A fact particularly deserving of notice is this, that, according to the testimony of the Secretary, the whole of the money advanced was lent out to people " who would not have approached the larger banks, which are gene- rally looked upon as aristocratic institutions" This makes thoroughly good what Chambers s Journal wrote in 1883 : "There is a great blank or want of intermediate banks between the large Joint-Stock Banks and the Savings Banks. We have no banks to correspond with the People's Banks of Germany, or the moderate- sized National Banks of the United States. There is a large, indus- trious, and respectable class of small-farmers, tradesmen, shopkeepers, and others who are left out in the cold. There should be popular banks and banking facilities provided for the numerous class of small customers who require a bank to deposit their savings in, and at the same time to turn their little money to the best account ; also, on the other hand, to accommodate those who may want to borrow small sums occasionally for stocking their farms or their shops." There should be such banks. The instances quoted con- clusively prove the want of them, and they also show that Nature, making its bidding heard through the unerring voice of instinct, leads those among us, who are in want of money, to seek relief, in principle, by precisely the same methods by which foreigners have found it. Every one of the societies described may be considered a People's Bank in CONCLUSION. 373 embryo a People's Bank in the rough, hewn out of the same material, but not yet properly squared and put together, answering its purpose as does a log -hut as compared with a well-constructed building in a partial, elementary, and temporary way. All things considered, it can scarcely occasion surprise Why our that in our gropings for a remedy we have thus far failed ^J^J* fully to seize the idea of co-operative banking. For our sought to own co-operation runs all the other way. It is co-operation admitted want, which begins with the possession of money or earnings ; not co-operation which, like people's banking, leads up to these things. One may be said to begin where the other ends. They are cast on different lines, though the principle at bottom is identical. Slaves to habit and fixed rules, we have adhered to our traditional notion that " co-operation " must needs mean " stores," and that " credit " must needs be objectionable as meaning the illegitimate, improvident credit, which is just what People's Banks are intended to stamp out What our neighbours are doing ought to open our minds to wider views. I think it is beginning to do so. I have more telling evidence than I have yet put forward to quote in support of the applicableness of People's Banks to our circumstances. We have them actually among us now, and, in their humble way, they are thriving. I must confess that three or four years ago, when I first set my hand to the work, I did not look for anything like such rapid results. I am now able to point to them in support of my pleading. Before I do so, however, perhaps it may be well to explain our exact position in the matter, on what points our peculiar circum- stances differing in many respects from those of our neighbours assist the work, on what points they hinder it. There is no denying that the more limited amount of Our Hin- small trade and small cultivation which we possess though drances - I hold the proportion of the difference in respect of the 374 PEOPLES BANKS. former to be generally exaggerated more or less adversely affects our recruiting ground. Moreover, the populations of our rural parishes are, as a rule, smaller and more scattered. Again, the more vigorous among our working populations appear to have their minds far more set \xpys\fighting) than upon creating and acquiring, capital, as a means of bettering the condition of their class. In addition, it is said that our working population are more improvident. But that remains to be proved. I dispute it as a general proposition. We have some working men, no doubt, who compare un- favourably in respect of thrift and forethought with their classmates abroad. But we have a good many others who could serve as excellent examples in any part of the globe. Our Advan- These are the cons. We have someflros, fortunately, to pit against them. If our organised working classes are more pugnacious than foreigners, they undoubtedly also know their own mind very much better, they are more practical and businesslike, and much better accustomed to combined action. Once they take up a matter, they are sure to go on with it in a practical spirit, without losing sight of their main aim. " You compliment us upon our co-operative production," so said to me a year or two ago the Chairman of one of the Parisian Productive Associa- tions, who has worked a long time in London ; " were your countrymen to take up the same method of united action, they would succeed very much better. For they are more businesslike. They respect the decision of the majority, and abide by resolutions once passed. Our men are perpetually reopening old questions, always trying to upset what has been settled, restlessly shifting and changing about." More- over, we have friendly and provident societies such as have in Italy proved the very parents of People's Banks better organised, stronger, larger, more numerous than anywhere. We certainly have more and very much cheaper money than our neighbours, circulating far more freely in channels CONCLUSION. 375 which are always open. We have a much more fully developed banking system, into which co-operative banking could very well be made to fit in as an auxiliary and sup- plement, and a more diffused knowledge of banking and business. And, in the last place, we have more men of the leisured, and even the busy class, willing to devote time, labour, and, if need be, money, to the service of their fellow- men. Thus far, therefore, circumstances cannot by any means OurLawisnot be said to be unfavourable. And I think I may add that unfevourable. our law likewise lends itself fairly enough, if not altogether readily, to the proposed practice, at any rate so far as is required for a beginning. For co-operative banks to be formed with limited liability only banks, that is, to carry on their business in towns and among medium and larger farmers, people who can take up fairly substantial shares we have an Act, the Industrial and Provident Societies Act, which is really more liberal than any foreign co-operative law now in force. It allows us to do actually anything that we are at all likely to desire to do bank, discount, take deposits from any one ; only, we must not issue withdraw- able shares. That restriction certainly appears jto me a matter for regret. For, from a co-operative point of view, withdrawable shares are decidedly preferable to non-with- drawable, and they would go some way towards warding off the " un-co-operative " practice, always apt to creep in, of levying toll upon incoming members, at a progressive ratio, in the shape of a premium upon shares. The beau-ideal of shares in a co-operative concern is what the French call parts sociales, fixed contributions, which do not vary in issue value. On this point, without a doubt, the associations of Schulze-Delitzsch have remained truer to the "co-operative " ideal than the banks set up by his disciples. However, the restriction is not fatal. We can manage without withdraw- able shares, and the successful provision made against the 376 PEOPLE'S BANKS. sale of shares at a premium in some of our best co-operative associations for instance, in that of Hebden Bridge shows that, even as our law stands, shares may be kept at an unvarying level. In respect of limited liability banks, really, our estab- lished banking custom is productive of more inconvenience I will not call it worse than our law. No doubt the method universally adopted abroad by banks of this descrip- tion, of making the bill of exchange or " acceptance " the recognised medium of loan transactions, offers many advan- tages.* There is no law to prevent our doing just the same thing. We may, if we so choose, employ bills of exchange or promissory notes in exactly the same way. The legal provisions with respect to the two are precisely the same, except in respect of one or two trifling particulars.! Pro- missory notes are fully as " negotiable " as bills of exchange; and there is no reason why bills of exchange should not be used for the purchase of cash as they are for the purchase of goods. However, we are not in the habit of employing these instruments in such a manner. We are not in the habit of discounting promissory notes or of taking bills of exchange for money. Possibly our banking market may adapt itself to the new requirements. Otherwise we shall have to, and we can, do without the more convenient prac- tice. A sound bank ought always to be in a position to secure a sufficient overdraft. And after some time, probably, as security for such, ordinary banks will be content to take acceptances and promissory notes as pledges, even if they decline to discount them. In any case, the Industrial and Provident Societies Act enables us to proceed at the outset with sufficient freedom. * See page 202. t See M. D. Chalmers, "A Digest of the Law of Bills of Exchange," Fourth Edition, 1891. CONCLUSION. 377 There are more serious hindrances to be faced in pro- ceeding with the formation of banks which do not limit the liability of members, such as are those of the Raiffeisen type. For in this work we are compelled to fall back upon the rather inconvenient Friendly Societies Act, which limits the power of societies forming under it far more narrowly because that is the only Act available which permits un- limited liability. Even so, the hindrances presenting them- selves are not actually insuperable, or nearly as great as some would-be pioneers, who have not taken the trouble to study either co-operative banking or Provident Society legislation, choose to give out. I will begin by dealing with two objections which have The Bogie of been raised without any good reason. In the first place, " there is the law of " distress," which has staggered some of our novices. Well, no doubt the law of "distress" con- stitutes a hindrance to credit of any kind, in any case in which the proposed borrower is a tenant. But it is least so, by a long way, in the case of co-operative banks, because such banks rely on different and very much more effective means, both for informing themselves upon their borrowers' title to credit and for enforcing repayment, than other credit institutions. Their strength lies in the mutual knowledge of and influence upon one another maintained among mem- bers, which have been found a good deal more efficacious than any pledge or writ. It is their business to find out before granting a loan, whether a distress is to be appre- hended. If it is, and if they lend all the same, or if they do not take care to ascertain, they richly deserve to lose their money. " Distress " has proved no hindrance abroad. There is a law of " distress " in force in Italy, every bit as stringent as our own, and more rigorously enforced. It does not stand in the way of co-operative banking. In some cases, as I have shown, landlords are appealed to, and consent to waive their preferential right in respect of a par- 3 ;8 PEOPLES BANKS. ticular loan. Otherwise banks take the trouble of finding out about their applicants, and secure themselves accord- ingly, and no inconvenience whatever has been found to result. The Taking of In the second place, it is made a complaint that under Deposits. t j ie F r { enc jly Societies Act our Village Banks must not take deposits from persons who are not members. That is so, undoubtedly. And unquestionably it constitutes a draw- back a drawback mitigated, possibly, by the fact that if Village Banks were, nevertheless, to collect deposits from outsiders, probably very little would be heard about their violation of a legal precept which, in Bishop Butler's termino- logy, is " positive " only, and not " moral." The complain- ants to set the law in motion against offending Village Banks are the local bankers. Are they likely to do so ? The amounts taken are not likely to be very large. People'sBanks The question of taking savings from the general public * S) ^ am rea< ^y to admit, a matter of very considerable importance, and calculated very materially to affect the utility of People's Banks in this country. It is by no means least as convenient receptacles for people's savings that I expect to see People's Banks showing themselves deserving of public favour. In the matter of arrangements for collecting public savings we appear to be approach- ing something of a crisis. Requirements and appliances evidently no longer fit into and fully answer one another. The child for which in 1861 we made what then seemed adequate provision has outgrown its narrow cradle, and those who are appointed to watch over it are becoming seriously alarmed, and appear not unwilling, like a second Procrustes, to lop off the limbs embarrassingly protruding which they themselves have deliberately stimulated into growth, without apparently realising what remarkable A Flaw in our fecundity there is in thrift. " Certain it is," says the Times of 2Ist A P ri l> " tnat they (Consols) are at famine price, and that CONCLUSION. 379 continued purchases on account of the Government must tend still further to reduce the available supply. The purchases for the Post Office are the largest and most important factor. We hope that the contemplated re- duction of interest on the savings bank deposits will tend to diminish them." What does that mean but that the Times and those for whom it speaks indulge the hope that, since poor people's thrift is by our own fault growing troublesome to us, who have constituted ourselves the sole authorised custodians of its fruits not, we shall make more ample provision for collecting those incoming savings, the welcome sign of prosperity, but that our poor will reduce their economies, and lay by less, out of consideration for us, because we have not sufficient Consols to sell. For thirty- five years we have been priding ourselves upon our admirable savings banks system. Even now the Times takes credit for a " loss to the State "* the existence of which the Post Office authorities deny, with which we are said mag- nanimously to be burdening ourselves in our generous effort to stimulate poor folks' thrift. However, that system is not proving equal to the strain put upon it. Our model baby of 1861 now proves something of a Franken- stein, and we are haunted by the fear to which, very rightly, and the first statesman of note to do so in England, Mr Goschen, gave expression some sessions ago, when in effect he said "Here you have ; 120,000,000 of other people's money, every farthing of which is withdrawable at the depositor's pleasure." By the present time the sum has grown to nearly 150,000,000. That is the spectre which is causing us such grave misgivings, and driving us into all sorts of inconsistent practices, at once stimulating and restricting, encouraging and forbidding. Our boasted system, it is now found, is far less perfect than has been * Times, I3th April 1896. 33o PEOPLE'S BANKS. assumed. If there are, on the one hand, all the advantages to be got out of it for the State in the shape of a constraint, which to all intents and purposes raises a forced loan of unfixed amount from our savers adding to our credit, driv- ing up the price of Consols to an unheard-of figure there is, on the other, as a dangerous set-off, the risk of sudden and large withdrawals, which we could not forbid, but which would be most embarrassing. Hence those clamours for reduction of interest, hence that limit to deposits, only slightly relaxed three years ago with a provision added which undoes much of the good unquestionably effected.* * I refer to the "Automatic Investment Clauses" insisted upon by the Treasury, which provide that whenever a deposit grows so as to exceed the maximum limit allowed of ^200 by any sum not less than .5, unless the depositor directs otherwise, the excess shall be invested in Government Stock. This provision has led to the withdrawal of a large number of what are to the Savings Banks the most profitable accounts. Poor folk do not like Consols, which may vary in price. They do not want more than their i back for i deposited. But they will not run the risk of receiving less. Accordingly very little use indeed has been made of the power given to depositors to accumulate ,500 in Consols in addition to ^200 which they may accumulate in deposits. The Inspection Committee, in its Official Report for 1896, expresses itself as follows on the "Automatic Investment Clauses" : " It is reported to us that the feeling of the banks is adverse to the provisions which the Regulations were framed to give effect to. Written communications to depositors respecting the state of their accounts are said to be opposed to the traditions and practice of Trustee Savings Banks, and to be liable to cause domestic trouble. Instances have occurred where the notices sent to the depositors under the Regulations, calling on them to deal with sums in excess of ^200, have led to withdrawals of large sums and even to the entire closing of some of the large accounts^ which, being more remunerative to the banks, meet in part the cost of the smaller accounts. The Regulations further affect the income account of the banks by bringing about the withdrawal of the amounts in excess of ,200. On these amounts the trustees receive interest and pay none, owing to the statutory provisions by which balances bear interest only up to the amount of ,200. This CONCLUSION. 381 The object of the limit, it is said, is, to keep out depositors of classes for whom the savings banks were not intended. The danger of such persons taking advantage in any con- siderable number of the facilities given for depositing is really not serious. In the Post Office Savings Banks it may be difficult to classify depositors. In our Trustee Savings Banks, on the other hand, we have adequate means of ascertaining to what classes depositors belong, and our books show that the number of accounts opened to persons who might be considered illegitimate depositors is very small. It is sheer nonsense to assert that for genuine work- ing men the limit of ^100 in all would be sufficient. We have many accounts of larger amounts standing to the credit of thoroughly bond fide working men, the fruits of twenty, thirty, forty, even sixty years' savings.* It is at these, the very men whom we ought to wish to see increas- ing in number, that the restriction advocated by the Times would strike. I will tell the Times and its friends how, to my knowledge, that " limit," so plausibly insisted upon by people out of touch with working men, has acted in practice. In the Trustee Bank of which I have just been speaking, provision is no doubt sufficient to guard the limit of ^200 from any considerable infringement. The sums in excess of ^200, though small in themselves^ have been sufficient in the aggregate to act as a material set-off against the uninvested balance necessarily retained in hand to meet current requirements. The clerical labour involved is a further ground of complaint, and one that also applies to the trouble of credit- ing stock dividends to depositors' accounts quarterly instead of yearly only, as is usually the case with interest credited by the banks to depositors." * I can speak positively with regard to one Trustee Bank in which the average of deposit accounts stands at about ^35, which is a high figure. In that bank there were, at New Year, out of 2,050 accounts of individuals, 238 exceeding ; 100(102 exceeding ^150 and 21 exceed- ing j20o), nearly every one of which stands to the credit of a genuine working man. 382 PEOPLE'S BANKS. and of which I myself was for a time one of the " Managers," established in a town of 12,000 inhabitants, we held about ;ioo,ooo in deposits. But for the "limit," we might have held ^"300,000. Where did the balance of ,200,000 go to ? For the most part it went into the Balfour companies and other similar specious concerns whose promoters knew how to take advantage of the Government restrictions on saving where it was lost, to the severe distress of the poor people. That is the result of a law which says : Up to a certain, very moderate, figure we will " paternally" take your savings out of your hands. You shall not be educated into knowing how to employ them yourselves. We insist upon receiving them. Beyond that sum you may gamble, speculate, trade, do whatever you like and whatever, in view of your want of training for the business, you are likely to do ; but you shall not " save." Is that a desirable state of things ? Obviously, if we really wish to benefit the poor people in whom, as we say, we desire to stimulate thrift if we are really thinking more of the community, which is sure to be benefited by an extension of saving, than of the Treasury anxious to keep its credit abnormally high, the proper remedy for the predicament into which we have got is, not to prohibit further saving, but to make more liberal and more convenient provision for the receipt of savings, since the old receptacle has " grown too strait " for them. There was very much to be said for the arrangement which we came to when passing the Savings Bank Act at a time when our working classes were a totally different set of people from what they are now less educated, less in- dependent, less capable of managing their own affairs. And up to a certain point unquestionably it is right that the State should provide means for the safe keeping of popular savings, at a low rate of interest, but absolutely CONCLUSION. 383 secure. However, depositors and those who administer their moneys for them should be given a choice. In Italy the great corporate bodies not interfered with by the State do not complain of inconveniently large receipts. They dispose of their moneys as they choose on mortgages, on acceptances, on improvement loans. And they make no losses. Their excellent administration and the safety with which they conduct their business excite the admiration of economists who visit them.* For those who do not care to go to these institutions, there are the Post Office Savings Banks, the same as here, but doing only about one-fourth of the collective business. In Germany, the communal, district, and provincial savings banks do not propose a limit on savings. They have proved absolutely safe. And so far from bringing about an embarrassing accumulation of money, such as alarms the Times, thanks to the freedom of employment allowed to them, they are providing the means for materially counteracting the mischievous hoarding which is going on under the Old Age Pensions Law. They borrow the money from the Pension Offices and deal it out in loans to the public. Surely we do not now want forced loans to raise our credit ! We have more useful employment for the over- abundant money resulting from savings, than by a method which creates a plethora in one place balanced by anaemia elsewhere. And we have administrators as efficient as any that Italy or Germany, or in its " autonomous " banks France can find, for the custody of savings. There is more than this. The Post Office Savings Bank is a safe money-box. But to the poor it is nothing more. To them it is a brick building with a slot in its wall to receive their pennies and a bit of blue paper sent out to * I commend more particularly the great Savings Banks of Milan and Bologna, and the Monte dei Paschi of Siena, to the notice of students of this question. 384 PEOPLE'S BANKS. tell, often enough to the wrong people, who the depositors are. The Trustee Bank has ears, as well, with which to listen to questions, and a mouth wherewith to give advice, and in many cases also a heart to make that advice more than judicious, to make it kind. The fact that deposits average very much higher in Trustee Banks than they do in Post Office Banks generally speaking about 26 to less than 15 proves that of the two kinds they are the more popular. However, they are not in official favour, and, under the application of modern legislation, under the effects of control which they find irksome, and interference which debars them from rendering as good service as some of them otherwise might render to the public, both their number and their business are declining. People's Here is an opening into which it appears to me that 10 ' People's Banks are peculiarly well fitted to step in. Expe- rience shows them to be safe ; experience shows them to be popular. As I have been able to state, in Prussia law courts allow trust moneys to be deposited into their keep- ing. As I have likewise explained, in the words of M. Rostand and other witnesses, in Italy the counters of the Post Office Savings Banks stand decidedly second in public favour to those of People's and Village Banks, officered by men of the depositors' own choice, and therefore trusted by them local popular institutions, in which each inhabit- ant knows that he has a direct interest, and of which he is jealous and proud. It might be the same thing among ourselves. And in all probability People's Banks would be able to allow a higher interest than the Post Office, and, under its dictation, the Trustee Banks. Under the Indus- trial and Provident Societies Act we can take what savings we please, and all that is wanted is to convince the public of the safety of the People's Banks to be created. In rural parishes, where there is really much greater call for such a supplementary institution, we cannot yet, under the Friendly CONCLUSION. 385 Societies Acts, do the same thing. Very probably before very long we shall be permitted to. Meanwhile, so far as the interest of village banks themselves comes into question, we can very well do without the right which we covet. In France, as I have shown, under a similar legal disqualifica- tion, many village banks take as good as no savings (as distinguished from larger deposits). In Parma, the village banks take no savings at all. No more does the little bank of Belleville. And there is many a village bank in Germany which actually takes no savings, or only very few, but nevertheless does well. As an instance to pit against the case of a village bank in England, which ignorant wiseacres have prevented from doing any work for just eighteen months on the ground of its assumed inability to procure sufficient funds for successful work without the taking of savings though it had 250 guaranteed to it in a drawing credit I should wish to state what was done at Metzels in Saxe-Meiningen, a poverty-stricken little village, on high, barren ground, overlooking that castle of Lands- berg which was built when the Saxe-Meiningen Princess Adelaide was our queen. The poor peasantry are such as Lady Verney was in the habit of portraying with apparent gusto when writing down peasant properties. In the summer of 1893 eighteen of these poor men clubbed to- gether, with the minister for nineteenth, to start their Raiffeisen Loan Bank, with only a few shillings coming in as first instalments on the small shares of, I believe, 55. each. There was no man of any means to lend his help. The cash available at starting was, accordingly, practically nothing at all. However, the minister scraped together 12. I os. to advance to the bank, with which money the latter acquired a $o share in the Central Bank of Neu- wied, the managers of which opened to it a drawing credit for 250. In respect of initial resources the two cases were accordingly almost exactly on a par. In the course of 2 B 3 86 PEOPLE'S BANKS. the eighteen months during which our English bank did nothing, the Metzels bank lent out to its members ^155 in money, and purchased for them ^439 worth of goods a service very much appreciated laying up meanwhile a reserve fund of 6. 2s. 5d., and increasing the number of its members to fifty-seven all without the collection of any savings to speak of, either from outsiders or from members. Difficulties in There are really provisions a great deal more incon- venient for our present purpose than the prohibition of taking savings from non-members for members are free to make deposits in the Friendly Societies Act. One is, that we cannot make the Reserve Fund indi- visible after the dissolution of the society, as the Raiffeisen principle in its purity demands. That defect we must simply put up with until there is a likelihood of our Act being amended. For some time to come no inconvenience is likely to arise. Meanwhile we may effect by understand- ing what we cannot assure by law. The other drawback is more serious. Our object is to lend, without having any money of our own, and to accumu- late our own fund out of the profits accruing from the lending. However, the Friendly Societies Act lays it down that we must positively not lend out 3 without having at least 1 of our own to include in the sum. I have got over this difficulty by introducing a new feature, cash credit to be guaranteed on behalf of the bank by some acceptable sureties. That gives us precisely what the credit at the Central Bank gave to the little village bank of Metzels, and gives to other banks in Germany. It is quite sufficient for our purpose, and the authorities allow it to serve in substitution of funds. But care should be taken to make absolutely sure that it is advanced only as a loan, to be scrupulously repaid, and meanwhile to be steadily reduced as the fund belonging to the bank itself CONCLUSION. 387 grows up. Not under any circumstances should it become a gift* Generally speaking, then, circumstances are not un- favourable ; and even the task of convincing bankers that we do not come into the field as their rivals, and the work of bringing home to the public interested that here is an institution offered deserving of adoption and encourage- ment, have proved very much lighter than I had any reason to expect when four years ago I addressed myself to pro- pagandist work. My first article, written in 1892, I had to hawk about from Review to Review. The subject, I was told, was bound to fall flat. It has not fallen flat. My book was sold out in little time. I have been asked to explain the principle of co-operative banking before a gathering of members of Parliament at Westminster, before two Royal Commissions, before Chambers of Agriculture, before so representative a body as the Irish Agricultural Organisation Society, which is now actively turning that explanation to account, and elsewhere. I have not wanted for encouraging messages from persons of accepted judg- ment. One banker has written to say that what I am trying to do really existing banks should have done, but have not, from pure selfishness. The Duke of Argyll has written to say that " your system of strict payments and watching the loan is admirable." I have even had that sincerest of all compliments paid me : counterfeit People's Banks and a counterfeit RaifFeisen Association have sprung up to turn what was becoming a popular cause to account * Unfortunately our authorities will not allow us to say anything whatever about this in our rules. Both in the short the original, not the present rules which I drew up for the Agricultural Banks Association, and in the fuller rules which I prepared afterwards for publication, the clauses which I put in relating to guarantors and their safeguards have been mercilessly struck out by the Chief Registrar. 3 88 PEOPLES BANKS. Our Pioneer Banks. Newport. in a way for which it was certainly not intended just as has happened in Germany, in Belgium, in Italy. Beyond all this, we have now some pioneer banks at work, the story of whose first experiences may be worth the telling. And first, for town banks co-operative banks of the system of Commendatore Luzzatti, with small shares and limited liability. We have two such. The first, at Newport in Monmouthshire, was started in November 1894. Mr Thomas Jones, who had read my book, asked me to go down and explain the system. I found both Mr Jones and his active ally, Mr Charles L. Barfoot severally subse- quently the chairman and the unpaid secretary of the bank very zealous in the' matter. And the people whom they had invited to hear me manifested unmistakable interest. The bank did not really begin business until April 1895. Work at first proved very uphill. By the 1st of May, seventy members had been enrolled, subscribing among them ^387 in i shares. But only ,147 was paid up. Only two men had applied for and received loans, of respectively 20 and 30. However, a local " Discount Company," alarmed at the appearance of its new, popular, competitor on the scene, had discreetly taken warning and shut up shop. For a little while the bank was rather embarrassed with a plethora of cash. A little time after, when its advantages came to be understood, and loans were rather freely applied for, its embarrassment proved the other way. The borrowers' promissory notes, which abroad are employed as a means of raising cash by being discounted, could not be so passed on, because they were made repayable by instalments. However " you will be glad to hear," so Mr Barfoot wrote to me on 8th June, " that we have got hold of the right class of borrowers. Two of the ^30 loans have been to assist members in starting in business on their own account, and ^30 to assist a working man to extend his small business," CONCLUSION. 389 and so on. Eventually money came in in the shape of deposits, and then a local bank accorded an overdraft. By the end of the year (April to December) the number of members had risen to a hundred, holding collectively 425 shares. Four non-members had deposited 295. ros. The bank had advanced in all 624. i/s. in twenty-eight loans, ranging from i. los. to 70. The committee, in their annual report, confess themselves thoroughly convinced that the bank is satisfactorily meeting a real existing want, and that it promises to prove of great utility to the poorer population in the town, and can be worked on sound businesslike principles. Among the loans granted was one of ^"50, to get a man out of the clutches of a Bristol usurer, who was on that amount bleeding his victim to the tune of ^30 a year. Unfortunately, owing to a forgery (which might have been guarded against^ and which, under , proper safeguards, is not likely to be repeated), the first year's working closed with a loss. That does not, however, touch the principle of the system, which is now so well appreciated that business has grown considerably brisker (between 1st January and 25th February about 200 was granted in loans). The committee is now very properly proposing to extend its work by including cash credit to members among its operations.* The founders and managers of that bank may well take credit for having set a bright example in their pioneer institution, which is sure to serve as a good teacher to others. Our second urban bank is more modest. 'It was started Finsbury at Finsbury Park, a suburb of London, on 23rd February Park * 1895. But some time elapsed before it got really to work. At New Year it numbered thirty-five members, holding among them eighty-three i shares, upon which 62. is. * This has, meanwhile, I understand, been satisfactorily provided for. 39 PEOPLE'S BANKS. Our Village Banks. Doneraile. had been paid up. Payment on such shares may be made at the easy rate of 6d. per week, which renders the bank accessible to every working man. Some small deposits made had enabled the bank to lend out in ten months 79. 1 75. in forty loans, which are being steadily repaid, some by instalments of 6d. a week. In all, at New Year 4.1. us. 6d. had been thus recovered. As in the Newport Bank, borrowers are found to observe their repayment terms well. The loans are all considered to have been rightly placed, and to have done good. " One was to get a member out of difficulties in a County Court case. This has been repaid. Another, to assist a coster to buy his donkey 5. Another, ^10, to buy a greengrocer his horse, for which he had been paying ten shillings a week on hire. Another, to a small painter and decorator, to enable him to proceed with a contract he took with a loan in view, but which he could not otherwise have undertaken." All this I consider to be very satisfactory work, upon which the founder, Mr J. E. Carver, may well congratulate himself. The record of our village banks is, on the whole, at least as encouraging. We have, as might almost have been expected, thus far fared best in Ireland. There is greatest need there, also much greater quickness of apprehension in respect of new ideas, than in England. And in addition the task of forming banks has there fallen to unquestionably capable men. The pioneer bank in Ireland, in Doneraile, has already shown itself distinctly useful and businesslike. It was founded on the personal initiative of the Hon. H. Plunkett, M.P. It was opened early in 1895. On the 1st of August, Mr Anderson, Secretary of the Irish Agricultural Organisation Society, wrote to me as follows : " You will be glad to hear that the Doneraile bank is doing very well indeed, and we are so much encouraged by the experiment, that we are determined to push the system wherever we find an opening for it." CONCLUSION. 391 By the end of the year there were fifty members (there were fifty-six by the end of February), taking no shares, but subscribing only their liability, and paying an entrance fee of 6d. each. Deposits had been received to the amount of ^"75, and thirty-seven loans had been granted, to the amount of ^174, collectively, at 6 per cent, interest. The money is being repaid by instalments, with scrupulous promptitude. And notwithstanding the fact that the first year's transactions were burdened with the initial expenses, account balances with a surplus of I is. ojd. Experience has, indeed, shown things to be so satisfactory, that in future the committee propose to allow 4 per cent, instead of 3 on deposits. " The business done by the Doneraile bank is likely to increase very largely in the near future," so wrote to me Mr Anderson, on the 1 2th of February, "as both the loans to the bank and the applications for loans from it have increased very considerably since the end of the year." " The borrowers," says the report, " especially those of small sums, expressed satisfaction at the low rates at which they could obtain loans." " Your bank," so writes the public auditor, Mr Thomas Scott, in his report, " has made its way amongst the people without solicitation or advertisement. It was an experiment. Your proceedings were of necessity of a tentative character, and I am bound to say they have been conducted with marked intelligence. Your pioneer bank can now be taken as an example over the country. It illustrates clearly the unspeakable benefit which may be conferred on the honest poor by co-operative banks. Without them co-operation is to hundreds of thousands of the people an impossible thing. It is therefore not extravagant to say, that the modest and unpretentious co-operative village bank ought to be regarded as the mainspring of the whole movement." "There are many noticeable good results already," wrote to me the secretary, Mr D. Lascelles Roche, on the 24th of February, " among the borrowers, and members generally ; some have borrowed who possessed small savings, but, as they stated by way of explanation, were afraid to disturb the money, fearing inability to replace it again, and by borrowing and repaying in small instalments to the bank they 392 PEOPLE'S BANKS. succeeded in obtaining property which otherwise they would not have done. I have this year received i deposit from a labourer who was a borrower last year ; and in a case where the widow and her little family were partly dependent on charity, she was enabled to purchase a donkey and cart and earn a living by drawing water. In one or two cases horses have been purchased by carriers, and small public con- tracts have been taken and completed by tradesmen, who could not have done so except for the money they obtained from the bank. Houses which were very unfit for human habitation have been made comfortable. Labourers have been enabled to provide manure and seed for potato gardens, and farmers purchased pigs, sheep, cattle, &c." " I am sure," so the same correspondent has written me since, " that Agricultural Credit Societies will grow up quickly in this country after the system has stood the practical test in a few districts. I have had letters and applications from almost every county in Ireland on the subject." And, again, on 22nd April : " The more I see of the movement, the more I am convinced of its adaptability to this country." It is not surprising that the system is spreading. There are five village banks now established in Ireland at Doneraile, Kyle, Urlingford, Belmullet, and Johnstown. And the number promises to increase. Scawby. In England we have not gone on quite so fast, but we have some good beginnings to show. Our first English village bank was formed at Scawby, in Lincolnshire, in June 1894, at the instance of the squire of the parish, Mr R. N. Sutton Nelthorpe, a devoted champion of the idea of co-operative banking. However, owing to bad advice, for which others than Mr Nelthorpe and myself are respon- sible, the bank did not actually begin business till October 1895. It promptly took some deposits and lent out two loans. One of 30 was to a small tenant of 53 acres, simply to provide him with working capital for his farm, which he wanted. Without the bank to do this, he says that he would have had no choice but to sell his lambs, which, in fact, he sold in spring for so much more money as to leave him, as I understand, about 20 in pocket. And for that CONCLUSION. 393 loan he paid 233. The second loan was one of 20 to the village blacksmith, to enable him to buy stock with, when he had keep and stock was cheap. Without the bank he would have had to let his keep run to waste or else wait till he had money, by which time stock would have been dear. He is likewise satisfied with his bargain. Unfortunately the members of the bank insisted upon the money being lent out at 5 per cent, instead of 6 per cent. Accordingly the transactions of 1895 have resulted in a loss of i8s. /d. That is not a very serious deficiency, and if it teaches members of such banks that in any case a sufficient margin is absolutely necessary in their dealings, it will not represent money wasted. Next, we have a good little bank at Pembury, in Kent, Pembury. started in the autumn of 1894, with only a dozen members, by Mr Walter Maiden, the medical man in the parish. He had read my book, and, upon the basis of what he had there learnt, so he writes to me, he had quite independently formed his organisation on true Raiffeisen lines, asking for no shares (but taking an entrance fee of 55.), selecting his members with care, and insisting upon very rigid checking of the committee's work by the council. The bank has only recently been registered. Its work has been humble, but extremely useful and encouraging. There were in March thirty-one members (twenty-eight men and three women). Within a little more than a twelvemonth had been lent out in loans varying from ,4 to " for purchase of cows, manure, seed potatoes, c. We have made it a rule that all stock bought with borrowed money must be insured. At present we are dealing with a large London company, but we hope to start an insurance branch of our own before long. Up to the present time we have had every instalment paid on the day it was due. It is rather early to be able to trace any distinct results ; but the borrowers all speak of the immense convenience of being able to command necessary cash on such easy terms. At present we have not taken any deposits, but we hope to do so during the present year." 394 PEOPLES BANKS. The bank started with a loan interest rate of 5 per cent., but has had to increase it to 6 per cent, to cover working expenses. Like the Doneraile bank, the village bank of Pembury closes its year's work with a small balance on the right side. " Personally," writes Mr Maiden, " I am convinced that in time our bank will do a larger and more useful work ; also that the principle is sound, and only requires to be more widely known to be largely adopted in agricultural villages." Co-operation begets co-operation. " We are working out a scheme for dealing with produce, dairy, poultry, fruit, and vegetables. It will, I think, take the form of an association as a limited company, with a depot in the village for col- lection of all produce, and perhaps a shop in Tunbridge Wells." The society has already taken up a farm of 120 acres, and divided it into seven small holdings. " We hope to develop a Producers' Association in connection with this." I think this result, which is again traceable to the zealous initiative and judicious guidance of one good worker, who readily finds people to range themselves under his lead, is distinctly satisfactory. Laxfield. There is the young bank of Laxfield, in Suffolk, started in the same way by the active local doctor, Mr Charles W. Biden, upon the ground of what he had read in my book. Laxfield is rather a large parish, almost entirely agri- cultural, with a population slightly exceeding 900 in Dr Biden's words, " just the place where a bank could do much good." However, there is that ingrained suspiciousness to hinder the work, of farmers on the one hand, and labourers on the other, each apprehensive that they may be put to use for the other's benefit. I have found in many parishes that the farmers look upon village banks as nothing more than a preparative for the expropriation of their best bits of land by the parish councils, to be parcelled out in allot- ments. Without money, the farmers clearly see, these CONCLUSION. 395 allotments could do the labourers no good. And so they argue that these banks are designed specially for the pur- pose of providing an excuse for cutting the little bits of Goshen out of their own holdings for the benefit of labourers at the farmer's expense. It is not the banks that the farmers oppose, but the ulterior use to which they persuade themselves that the banks are intended to be put. One farmer in Lincolnshire plainly admitted this. Mr Biden could at the outset find only eight men to join him. In his rules he disallows shares, and limits the entrance fee, which is to provide the funds for initial expenses, to 2s. The number of members now stands at eleven ; and some useful loans have already been granted one to enable a hawker to buy a pony, another to help a man to buy a cow, a third to enable a man to keep his litter of pigs and rear and fatten them for sale. The beginnings are small, but Mr Biden hopes for an early development. Lastly, there is the village bank of Grandborough, in Grand- Warwickshire, started in May 1895, with only eight members, borou g h - by that indefatigable co-operator, Mr Bolton King, who, like Mr Plunkett, has thoroughly grasped the idea of co- operative village banking. It is too early still to say anything very definite about this bank, but Mr King writes that he is " very hopeful of its future." Thus far it has " done well." I understand that there are some other banks for the other Banks, good practice of which I can in no wise answer, and about which I am all the more wishful to say little, since there seems at the present time reason for hoping that what has indisputably, and very unfortunately, been done amiss, will after all be set right. At one or two places in this book I have had occasion to refer to some most unsound, absolutely mischievous, rules, and to some very bad practices, which have found their way into the work of an association of which I was one of the founders, but 39 PEOPLE'S BANKS. Generally, Prospects are promising. The Outlook in England. Ireland. Wales. India. Australia. New Zealand. from which, in consequence of the errors committed, I have, like some other members, felt it my duty to retire. The temp- tation to such deviation from the right path, as has been indicated, is strong on new ground and among persons used to politics. The mischief sure to result is equally great so great that no pains ought to be spared to avoid it. Otherwise things are certainly progressing favourably, and we may make sure that in the end the good principle will triumph, as it has triumphed elsewhere. Generally speaking, interest has been awakened, the principle is being every day more widely approved and appreciated. We are making headway in Ireland, we have encouraging promises in England. Before long, please God, we shall set up our banks in the overcrowded, famished, " sweated " poor folks' quarters in our great cities. Sir John Brunner is having my rules translated into Welsh, with a view to spreading co- operative banking in Wales, as it is becoming diffused in Ire- land. And there is promise of good work being done in India, where the want of Raiffeisen banks is acknowledged, among others, by Mr F. A. Nicholson, who concludes the preface of his excellent official report with the two words, which he says sum up all that he has to say, "Find Raiffeisen."* Australia, likewise, is to have its People's Banks probably of the Luzzatti type to guard against a repetition of calamitous bank crashes. And even from New Zealand I have had inquiries. The work is going on, then, and promises to prosper. * Many influential men in India, to whom I have explained the system, appear strongly favourable to its adoption, and disposed to assist such with their support or countenance. The Salvation Army has taken the work practically in hand, with every promise of success, of supplying the oppressed ryots with a network of Raiffeisen Banks. Colonel Langercrantz, late of the Swedish, now of the Salvation Army, has recently gone out to direct operations. From his energy and ability good results may be expected. CONCLUSION. 397 Once we take it up in earnest, I believe that we shall succeed with it even better than our neighbours, for we are made of more businesslike stuff. God speed its progress ! There is no work, in my opinion, which is likely to prove more helpful to our poor, and even to those who are not altogether poor in the conventional sense of the term, but still in want of that support which combination can secure. I ought not, however, to conclude without just one word A Word of of warning which, unfortunately, appears needed. I am far Warmn g- from recommending co-operative banks as a panacea. Wherever they are required they may do mucrT~good. Where there is no call for them, it would be folly to set them up. Where there is use for them, if they are to do any good they must be good themselves, and they must be of the system suited for their particular work. A bad bank, badly organised, in which the co-operative principle is corrupted or diluted, can only do mischief not very serious mischief, perhaps, but work which is bound to end in disappointment and to discredit a good institution. Therefore it is of the utmost importance that we should hold fast by the sound principle. The introduction, for instance, of politics such as has actually been tried or else attempts to make the banks instruments for securing to one class of members undue influence over others, ought to be most carefully avoided, as bound to result in fatal mischief. We ought also to be careful to make clear to ourselves exactly what we intend a bank to do. I find that there is still a great confusion of ideas on this score. I find, moreover, that commonly far too great importance is attached to rules as a matter of specific regulations. I want to point out that rules, however desirable it is that they should be good for bad rules cannot fail to prove mischievous really rank only second in significance. We are addressing ourselves to the work of applying a principle amply approved elsewhere on new and untried ground. Our 398 PEOPLES BANKS. circumstances differ in many particulars from the circum- stances of those whom we are proposing to imitate. Accordingly it is only by practical experience that we can ascertain precisely what rules are best suited to our case. I have, with the kind help of the Chief Registrar of Friendly Societies, prepared rules which I think contain all that is wanted, and which I believe certain to work well.* However, I shall be the last to grumble at their modification in points of purely practical application, wherever circumstances appear to demand such treatment, so long as the principle is loyally maintained. Master the principle, adopt it loyally, and you may allow the rules to take care of themselves. That principle is that the institution should be absolutely based upon self-Jielp, that its government should be democratic, that the quality of its work should be assured by a quickening of the sense of responsibility, by checking, and union, and control. No gift from " honorary members " such as I have had to refer to, no patronage can have a place in these banks. Every dallying with greed, every yielding to the spirit of patronage, foreign experience has shown, adds a toe of clay to the huge brazen Colossus, and thereby threatens to overthrow it in spite of its size. And the thing must grow up from out of its own self, from the bottom to the top. None of the systems which have succeeded abroad have been organised from above. They have all risen from below. Nowhere, moreover, has this work been " good fairy " work. Every shilling's worth of success has been purchased by unremitting application, by economy, gratuitous labour (so far as gratuitous labour was possible), zeal, and caution. And experience has shown that it is not otherwise to be obtained. There may be hindrances, * i. "Village Banks or Agricultural Credit Societies: How to Start them, &c." P. S. King Son. 6d. 2. " A People's Bank Manual." P. S. King Son. 6d. CONCLUSION. 399 and progress may at first appear slow, but in the end the work is bound to succeed wherever there is call for it. I must warn founders of co-operative banks, no matter of what kind, that in the first year they may very likely find themselves working at a loss. There will be outlay which business may not at once be sufficient to cover. If there is shown to be want of a bank in the locality, if it be found to develop healthily, that deficit ought not to frighten any one ; it will soon be wiped out. But, generally speaking, if we address ourselves to the work in the right spirit, it is bound to succeed among ourselves as it has succeeded among Teutons, Slavs, Latins, and Turanians, under every variety of European sky, under the most diverse conditions, bring- ing good wherever it has taken root, raising the poor where A Prize worth other educating methods have failed, teaching habits of strivin s for - business, thrift, sobriety making the drunkard sober, the spendthrift saving, the ne'er-do-weel well-conducted, turning the illiterate into a penman and at the same time stimu- lating, with its magic wand, as M. Leon Say has put it, commerce, industry, and small husbandry, substituting plenty for want and happiness for misery, raising, enriching, emancipating the working classes, and flooding the whole country, economically speaking, like the waters of the Nile, with fertilising influences. Here is a work, in view of the magnificent results attainable by it, for the benefit of millions of fellow-countrymen, which ought to have attractions for statesmen, philanthropists, and ministers of religion. Please God, we shall some day see a rich crop growing up from the seed now being sown, and our country the richer, the happier, and the more contented for its growth. For, applying the words of M. Ernest Brelay, we may truly say I think my narrative must have shown that that the resources of this beneficent creative power are " illimitable." Printed aty&i^ S)^IEN BRE^, Edinburgh. 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