Second Memoir on Pauperism, Post 10

The savings banks are an excellent means to cultivate in the poor the idea of thrift and to profit from interest on their savings.  But these banks cannot safely and indefinitely be the only place for the poor to deposit their money.

Let us succinctly examine these two questions.

I do not pretend to search for and certainly not indicate all the improvements that could be introduced into the savings bank system.  It would go beyond the limits of this article.  I only want to point out the general principle which, it seems to me, should be adpoted and one of the easiest applications of this principle.

The government, instead of trying to attract as much of the yield of the savings banks towards the Treasury and the public funds, should try as hard as is in its power to place these public funds, under its own guarantee, to local use, which minimizes the state's exposure to universal and sudden recourse.  That is the principle.

As for the implementation, here is what I have to say:  There exist today in all the cities of France, pawnshops that offer loans on collateral called "monts-de-piete".  These pawnshops are very usurious establishments because they generally lend without risk at 12% rates.  It is true that the money that they accumulate in this way serves to finance hospices, in such a way that these pawnshops could be considered as charitable establishments in which one ruins the poor in order to prepare for him a refuge from misery.

This simple situation is self explanatory.  It is obvious that, in the interest of the indigent classes and in the interest of order and public morals, we must make haste to find different sources for hospital funds.

From the moment when the tie that binds the pawnshops and the hospitals together is broken, nothing is more natural than to connect the pawnshops to the savings banks and to make of these two things one and the same enterprise.

In this system, the administration will receive savings on one hand, and receive remittances on the other.  The poor that have money to lend will deposit it into the hands of an administration that, requiring security, will disburse it to the poor who need to borrow.  The administration will only by an intermediary between the two groups.  In reality, it will be the poor thrifty person who will lend his savings with interest to the poor spendthrift or unfortunate.

Second Memoir on Pauperism, Post 9

It is evident that as the enlightenment of the people increases and the habit of finding ways to make their savings work spreads throughout the poor classes of France, the small landowner, instead of slowly amassing savings he needs to increase his land holdings in some corner of his home, accumulating a small unproductive fortune through many years, vulnerable to a thousand accidents, it is evident, I say, that the small farmer will bring his savings to the nearest savings bank with the idea of withdrawing it to buy the land he wants.  The savings banks form the only convenient place for the money of these people, who, not wanting to buy land that is not in the immediate vicinity, and in small portions, need to always have their capital available in order to always be in the position to take advantage of the rare opportunities that present themselves.

The French peasant’s taste for land therefore does not prevent, or scarcely prevents the growth of deposits made at the savings banks.  In reality, these deposits are only limited by the capacity of the poor man to save and in his ability to understand, more or less clearly, that it is not in his interest to leave his savings unproductive and vulnerable to risk.

This is what we must understand, because peoples, like individuals, gain nothing by hiding from the truth.  Both must, on the contrary, face the truth squarely in order to see if, next to the evil, one does not perceive, by chance, a remedy.

What is the result of all this?

In sum, I am far from saying that the savings banks, with the constitution we have given them, offer a real danger:  they have none.  I also believe that, even if one cannot find a way to make the risk of future peril disappear, we must still create savings banks.  The physical and moral ills that improvidence and pauperism cause are present and immense, the evils that the remedy would bring are far off and will possibly never take place.  This consideration is enough for me to decide.

All that I wish to say is that it would be imprudent to believe that we have found in the savings banks, such as they exist today, a foolproof solution to the problems of the future and that it is important to avoid thinking that their existence is some sort of universal panacea.  Instead of falling asleep on this false security, the economists and statesmen of our day should try on the one hand to improve the constitution of the savings banks, and on the other to create other ways to use the savings of the poor.