Abstract: Microfinance: A Transatlantic Progressive Reform

David Hochfelder

Abstract

Before the late nineteenth century, many anti-poverty reformers blamed working-class poverty on personal character flaws like intemperance and improvidence. With the discovery of structural unemployment as an economic concept in the last quarter of the nineteenth century, Progressive reformers abandoned the shrill moralizing that characterized earlier efforts to alleviate poverty. Instead, during the Progressive Era, American reformers sought ways to build working-class wealth. They regarded thrift as a major component of this search for economic security among wage earners. However, few financial institutions catered to small savers and borrowers. Savings banks, formed in the 1820s, served mainly the northeastern United States and had little presence in other regions like the South. Savings banks, moreover, did not make personal loans. As a result, two institutions arose during the Progressive Era to reach the unbanked—the postal savings system and credit unions. This paper uses the records of the Post Office Department, Russell Sage Foundation, National Civic Federation, and the Credit Union National Association to examine the history of these microfinance institutions from an international perspective. Both institutions were European in origin and were elements of a broad transatlantic Progressive movement. In the American context, however, the postal savings system was largely a failure, while credit unions succeeded. This difference indicates an aversion to state action in preference to private efforts, a preference that explains a great deal about the history of anti-poverty efforts in the United States.