Little Capitalists: The Social Economy of Saving in the United States, 1816-1914 Nicholas Osborne Submitted in partial fulfillment of the requirements for the degree of Doctor of Philosophy in the Graduate School of Arts and Sciences COLUMBIA UNIVERSITY 2014 © 2014 Nicholas Osborne All rights reserved ABSTRACT Little Capitalists: The Social Economy of Saving in the United States, 1816-1914 Nicholas Osborne In the early nineteenth-century United States, many social reformers, public commentators, and legislators argued that workers must engage in prudent financial planning in order to remain independent in a capitalist economy. Their belief that personal mismanagement was the primary cause of poverty led some of them to create the first financial institutions to help Americans of limited means save and invest their earnings: savings banks. From this modest start rose both a widespread ideology that related personal financial practice to personal virtue and a multibillion dollar industry that used the savings of millions of American workers to finance government, business, and personal debt. "Little Capitalists" charts this evolution from the philanthropic savings banks of the early-nineteenth century to the myriad commercial, cooperative, and public financial institutions for the working classes of the early-twentieth century. It shows how conceptions of individual and civic responsibility interacted with actual savings practices to integrate American workers into the national economy, building the financial apparatus that funded the expansion of wage-labor capitalism by harnessing the capital of wage laborers themselves. American institutional savings pioneers sought to address increased poverty wrought by urban growth and the creation of a wage-earning class in the first half of the nineteenth century. These reformers organized the country's original savings banks on the premise that all workers were capable of saving some of their earnings—no matter how little—so that they could remain financially independent in times of unemployment, injury, or old age. Their institutions tried to teach workers how to save money by providing secure facilities in which they could do so in the small amounts that no other financial institutions would handle. They also offered depositors a chance to earn a small profit from interest paid on deposits. Because this interest derived from investing those deposits in securities, mortgages, and other loans, savings banks brought millions of nineteenth-century wage earners into the American economy as investors. In this way, these institutions promoted the idea that working-class depositors could be their own "capitalists." As more Americans saved growing amounts, legislators, political economists, social reformers, and other observers took it as evidence that any worker who exercised virtues like thrift and self-denial could save money. Because generations of Americans viewed these personal attributes as the bases of moral civilization, they increasingly looked to savings institutions to foster a better citizenry and nation. The US Congress chartered the Freedman's Savings and Trust Company after the Civil War not only to provide financial services to former slaves but also to train them for a life of citizenship grounded in the principles of free labor ideology. Likewise, a nationwide movement beginning in the late-nineteenth century brought together governments, educators, and bankers to create a system of school savings banks to inculcate virtue in children by teaching them how to save pennies and nickels. In both cases, the point was to mold a working class steeped in the social, political, and moral values that would make them amenable to the emerging system of wage-labor capitalism. Even as some savings institutions attempted social indoctrination, workers' growing deposits also demonstrated their financial power. From the 1870s to the 1910s, this motivated entrepreneurs and legislators to design and encourage new institutions to collect savings deposits and invest them widely, including: industrial life insurance firms, employee thrift plans, trust company and commercial bank savings departments, and a postal savings system. Meanwhile, organizations like building and loan associations slowly added the extension of working-class credit to the collection of working-class savings. These new institutions gave many Americans increased discretion over how to save (and spend) money. But as they began to utilize them, workers also became a significant component of the nation's for-profit finance economy as both creditors and debtors. In the process, they assumed new financial risk. "Little Capitalists" outlines this history. It shows how a group of social experiments designed to foster an independent working class in the early-nineteenth century spawned, by the second decade of the twentieth century, both an ideology of saving at the center of popular perceptions about good citizenship and a small finance industry that was indispensable to the American economy. Little Capitalists: Table of Contents List of Figures iii Acknowledgments v Dedication xi Introduction 1 Chapter One Saving Capitalism: The Rise of Savings Banks, 1816-1860 20 Chapter Two Savings in War and Peace: The Multiple Meanings of Thrift, 1861-1877 80 Chapter Three Saving the Race By Saving Its Money: The Freedman's Bank and the Meaning of Freedom 132 Chapter Four Assets for a New Era: Reshaping National Finance Through Mass Saving, 1873-1914 165 Chapter Five The Thrift of Nations: Savings Institutions and National Progress, 1873-1910 245 Chapter Six The Littlest Capitalists: School Savings and Social Economics, 1878-1914 295 Epilogue 360 i Little Capitalists: Table of Contents (Cont.) Bibliography 365 Appendi ces 402 ii List of Figures Figure 1.1: "Number of US Savings Banks, 1820-1860"..............................................................22 Figure 1.2: "Number of Open Accounts in US Savings Banks, 1820-1860"................................23 Figure 1.3: "Aggegate Deposits in US Savings Banks, 1820-1860".............................................23 Figure 1.4: "Accounts Opened and Closed, Bank for Savings in the City of New York, 1819- 1860"...........................................................................................................................61 Figure 1.5: "Number of US Savings Banks, 1820-1865 (by state)"..............................................62 Figure 1.6: "Cities in New York State with One or More Savings Banks, 1830"..........................64 Figure 1.7: "Cities in New York State with One or More Savings Banks, 1840"..........................64 Figure 1.8: "Cities in New York State with One or More Savings Banks, 1850"..........................65 Figure 1.9: "Cities in New York State with One or More Savings Banks, 1860"..........................65 Figure 1.10: "Cities in Massachusetts with One or More Savings Banks, 1840"..........................66 Figure 1.11: "Cities in Massachusetts with One or More Savings Banks, 1849"..........................66 Figure 1.12: "Cities in Massachusetts with One or More Savings Banks, 1860"..........................67 Figure 2.1: "Deposits of Savings Banks With and Without Capital, By State, Average for the Six Months Ending May 31, 1875"............................................................................86 Figure 2.2: "Resources and Deposits in Massachusetts Savings Banks, 1849 and 1874".............94 Figure 2.3: "Massachusetts Bureau of Labor Statistics Study of Deposits, According to Types of Depositor Occupations, 1874"..............................................................................124 Figure 3.1: "Deposits, Withdrawals, and Balance in Freedman's Bank, 1866-1871 and 1873".........................................................................................................................148 Figure 4.1: "Aggregate Deposits in Mutual Savings Banks, 1867-1914"...................................171 Figure 4.2: "Number of Open Accounts in Mutual Savings Banks, 1883-1914"........................172 Figure 4.3: "Number of Mutual Savings Banks, 1875-1914"......................................................173 iii List of Figures (cont.) Figure 4.4: "Number of Mutual Savings Banks in Massachusetts and New York, 1873-1914"................................................................................................................177 Figure 4.5: "Number of Open Accounts in Mutual Savings Banks in Massachusetts and New York, 1873-1914".......................................................................................177 Figure 4.6: "Aggregate Deposits in Massachusetts and New York Mutual Savings Banks, 1873-1914"................................................................................................................178 Figure 4.7: "Number of Stock Savings Banks, 1888-1914"........................................................180 Figure 4.8: "Number of Open Accounts in Stock Savings Banks, 1888-1914"..........................180 Figure 4.9: "Aggregate Deposits in Stock Savings Banks, 1888-1914"......................................181 Figure 4.10: "Number of Iowa Banks, 1875-1915 (by class)"....................................................185 Figure 4.11: "Mutual Savings Banks (1895): Percentage of Resources, By Type".....................188 Figure 4.12: "Stock Savings Banks (1895): Percentage of Resources, By Type".......................188 Figure 4.13: "Mutual Savings Banks (1905): Percentage of Resources, By