Part 3

A savings bank like that of Vienna having at its command the powerful lever of the postal service, combining in a few years with singular ability, the centralization of the accounts of its depositors with the post office functions,--at once receptive and distributive, centripetal and centrifugal, cannot fail to appear one of the most ingenious, stable and perfect organs of modern circulation.

There is no need to discover in this functional evolution the realisation of any new principle--undeniable bonds of filiation attach it manifestly to the Bank of Amsterdam, whose system of clearing accounts Adam Smith has so admirably described, and in a still more distant past to the Bank of Venice, which, more perhaps than the Bank of St-George, served as a type to the Bank of Amsterdam; only like the most advanced modern institutions of credit and settling up, it has, over the primitive institutions, the advantage of perfections of means, of rapidity, and of an ever-growing importance in its operations, and of an ever increasing economy of money;--it has as its own peculiar features conditions of special expansion, valuable means of control and specially a capacity of adaptation to a system of credit institutions which can make it one of the instruments of the transformation of the monetary system.

The Austrian Imperial Government in carrying out the reforms which are the subject of this paper does not directly pursue the solution of the monetary problem, but is primarily occupied with the financial interest of the Savings Bank. As its able secretary, M. Tobisch, has explained, the law of May 28^{th} 1882, of which the text is given further on, in organising the Postal Savings Bank, caused no doubt a considerable number of deposits to be made, but their average importance was so feeble and they involved such general expenses, that the cost almost completely absorbed the results of the investments. In order to distribute these general expenses over a greater mass of monies and to realise a larger clear profit, that is to cause more considerable deposits to be made by especially interesting tradesmen and working-men to have recourse to the medium of the Savings Bank, a notice of the Minister of Commerce of Oct. 29 1883, authorised the depositors of over 100 florins to draw cheques on the Central Office at Vienna. Originally the depositor remained the holder of his account-book, but from Dec. 1 1886, the deposit of all such books at the Central Office in Vienna became obligatory for those who wished to take advantage of the cheque service. The institution of this service had a considerable influence on the progress of the amount of deposits; before the reform in 1883 the total deposits amounted to 8,176,889 florins, a year after in 1884, they reached 56,586,461 florins, of which 46,223,539 was connected with the cheque service.

The natural corollary of the centralisation at Vienna of the accounts of all those who adhered to the cheque-service was the organisation of the service of clearing accounts, for the more the number of its adherents increased, the more frequently it happened that one depositor drew a cheque in favour of another depositor. The cheque, up till then payable in specie, became a clearing cheque realisable by a simple transfer in writing. This complimentary service which is destined to become the principal one, was instituted Sept. 1 1884.

The Austrian institution is only at present an element in the vast modern system of credit and the balancing of accounts and no one is ignorant that the system entirely rests on metallic money, as Stanley Jevons, Francis A. Walker and Macleod have elsewhere clearly shown. Macleod makes the striking comparison of modern circulation to the movement of a peg top which spins round on a very fine metallic point.

The Postal Savings Bank, as it is organised and works, has not yet any kind of purpose of freeing circulation from its metallic basis, but like all other credit institutions, it contributes to this end by economising more and more the use of money; with extraordinary powers of expansion, it enables an ever increasing number of respectable persons, associations or bodies, to effect all their payments without the least risk, almost without loss of time and without having to keep any metallic money in their possession. And if one tries to conceive the future ideal evolution of an instrument so flexible as the Savings Bank, one may expect as I shall attempt to show in subsequent papers, that in combining its circulatory function with its function of investment it will be led into concurrence with the radical transformation sought by M. Solvay in the definitive elimination of the metallic instrument.

The sources from which the materials of this account have been drawn, are the laws, regulations and instructions of which the translation is appended, the statistics of the cheque and clearing service in the last official report (Zwölfter Rechenschaftsbericht des postsparcassen Amtes) the remarkable studies of M. Tobisch, secretary of the Savings Bank, and finally direct observation. Guided by one of the most enlightened officials of the Savings Bank, Inspector L. Kotschy, I have been able to penetrate into the inner life of this admirable institution. The Vienna Central Postal Bank occupies the old palace of the University; there, distributed in its antique halls, a population of 1,300 employés, among them 150 ladies, working after a skilfully organised plan, pursue silently now for thirteen years, with inflexible method, an experiment of very great interest for science and for the economic life of societies. Bound by invisible threads to more than four thousand secondary organs:--the post offices, which plunge directly into the torrent of the exchanges,--the Central Office records each day with extraordinary precision the minutest changes that the ever increasing number of its adherents accomplish in the social movement of wealth.

All the operations of which it thus fixes the traces arrange themselves into two great classes which recur as the two essential aspects of the rhythmic movement of a central organ of circulation; one joins in the formation of the property of every adherent of the system, in the constitution of his credit at the Central Bank; the other leads to different modes of disposing of his property and to the formation of his debit.

The services of cheques and account-clearing[H] of the Austrian Savings Bank enable on the one hand every person to make, under conditions fixed by law, in any Post Office in the Austrian Empire, payments on account, or to the profit of all those who participate in the service; on the other and they enable every adherent to assign by means of a payment cheque, a part of his property to anyone, physically and morally, or by means of a clearance cheque to cause the transfer to be made to the account of another participator in the service.

The Austrian terminology bristles with difficulties, the name of _cheque verkehr_ is here given to the first of these services, _circulation of payment cheques_ resulting in the end in the use of metallic money, and to the second service, the name of _clearing verkehr_, circulation of _clearing cheques_, which resolves itself, as far as the Savings Bank is concerned, into the transference from one account to another, in the substitution of one creditor for another.

The cheque service may exclusively be adhered to, or the cheque and _clearing_ service.

For affiliation to the cheque service it is necessary to request the Office of the Postal Savings Bank in Vienna to open an account, to send a cheque book and a book of _certificates of receipts and deposits_, of which we are now about to speak. The cheque book costs 1 florin 50 kreutzers, the certificates of deposit 1 kreutzer a piece.

The Post Office can refuse the request without having to give any reason. If an account is opened to the grantee, he receives cheque books and certificates, but he is bound within a month to effect a deposit of 100 florins as security. Neither the law nor the regulations fix any maximum of deposit. The minimum of 100 florins will remain in the hands of the administration, without the person entitled to it being able to dispose of it as long as he has an account open in the Post Office. The adhesion to the _clearing_ circulation is at once requested by the Post Office, of adherents to the cheque service.

The number of adherents to the cheque service is not identical with that of adherents to the service of _clearing_. For the thirteen years that these services have been instituted the first has always taken precedence of the second, but the divergence which exists between the two numbers is being reduced and the number of adherents to the _clearing_ service tends to blend and will finally blend with the adherents to the cheque service.

The geographical distribution of those who have accounts in the two services is of much interest. In 1895, out of 28,363 adherents to the cheque service there were 27,820 in Austria, 353 in Hungary, and 190 abroad,--163 in the German Empire, 5 in England, 1 in France, 3 in Holland, 5 in Italy, 3 in Switzerland, 2 in Belgium--an interesting fact.

The twelfth report: _Zwölfter Rechenschaftsbericht des postsparcassen Amtes_, insists on the important number of Hungarian commercial firms, affiliated to the Austrian Bank, all of whom have an account open in the Post Office Savings Bank instituted in 1887 at Budapest; it announces the approaching inauguration of a direct and regular service of account-keeping between the two Banks, a service to which the traders in both countries attach great importance. It will mark a new phase in the evolution of the institution; and form as it were the preface to its internationalisation.

It is curious to note that out of 543 residing in Hungary and abroad who have cheque accounts, there are 434 who are affiliated to the _Clearing_ at Vienna, that is 79.9%, a proportion very much larger than is seen in all those in the various Austrian provinces.

The number of those having accounts has successively been:

In the In the cheque service clearing service In 1883 167 » 1884 2,520 1,283 » 1885 6,877 4,733 » 1886 10,553 7,274 » 1887 12,981 8,758 » 1888 14,296 9,836 » 1889 16,046 11,025 » 1890 17,808 12,200 » 1891 19,391 13,331 » 1892 21,365 14,955 » 1893 23,471 16,197 » 1894 25,834 18,250 » 1895 28,363 20,750

From the above it is seen that the proportion per cent of the number of adherents to the service of clearing rises gradually in the later years;--after having from 1890 to 1893 been nearly uniformly from 69 to 70%, it rises in 1895 to 73.2%.

The classification of the adherents from the point of view of conditions and profession reveals the elasticity peculiar to such an institution. Advocates, notaries, doctors, even professors appear in great numbers. Manufacturers and traders united represent nevertheless more than half the total number of members; 339 bankers and money-changers, 362 associations for savings and loans, 220 private savings banks, 1,490 associations or corporations,--public establishments of which 185 were communes and administrative bodies,--271 benevolent associations, funds, establishments and foundations, 175 agricultural and forestal associations and 175 religious associations, 266 assurance societies, and 204 journals or periodicals serving as media for the Savings Bank. The administration of the State forests and domains have recourse to the Savings Bank in order to bank the produce of the forestal sales, and the administration of taxes is now experimenting as to its intervention for the getting in of duties. This institution thus presents a marvellous flexibility, invading by degrees the whole domain of exchange and enveloping one by one all the organs of the collective life.

Let us first explain the modes of operating payments to the profit of every member affiliated to the cheque and clearing service. In the first of these modes, the instrument employed is the _certificate or attestation of receipt and of deposit_ (_empfang erlag scheine_). (Fig. 1.)

Books containing blank certificates are issued by the Central Office at the low price of a kreutzer the piece, to every person adhering to the cheque and clearing services; these are books of 10, 20, 50 and 100 pieces, and to meet the needs of various holders they are drawn up either in German or in some other of the tongues spoken in the Empire. All these certificates bear the number of the account to the operations of which they are destined and carry the name and the address of the account holder.

Each of the certificates presents three parts which are separated one from the other in the course of the operation: the first, the counterfoil, remains attached to the book and in the hands of the holder of the account; of the two others, one, the attestation of the payment, has to be returned by the Post Office receiver to the person who makes the payment; the third the certificate of the deposit has to be transmitted to the Central Office at Vienna, which returns it to the holder of the account. To make a payment it is necessary to fill in the certificate of receipt and the certificate of deposit, and to present them at a Post Office with the sum to be paid into the holder's account. The receiver of the Post Office will bank the sum, and will sign the receipt, imprinting on it the stamp of the office, and will remit it to the person making the payment; he will then detach the certificate of the deposit and will send it to the Central office at Vienna with the daily account of his operations. The central administration will immediately credit the person in whose favour the payment is made, in the account that it has opened for him, and it will then transmit to him the deposit certificate with an extract of his account.

Such is the series of operations which result from _empfang erlag schein_.

Suppose for example that the holder of an account is a merchant who has furnished supplies to a customer in the provinces to the amount of a hundred florins, net. He fills up a leaf of the account book, bearing a certain number, on which he indicates the amount payable, and which payment is to be placed to his account; he sends this leaf to his customer, keeping the counterfoil with the customer's name written on it: the customer forwards the leaf to the Post Office where he lives with the sum due: the postal receiver separates from the leaf the certificate of receipt (_empfang schein_), which he signs and returns to the customer, he sends the certificate of deposit to the Central Office at Vienna, where the sum is carried to the account of the merchant. After which the deposit certificate bearing the name of the person making the payment is forwarded to the merchant with an extract from his current account, enabling him thus to exercise strict control.

Deposits can be made by the intermediary of rural postmen to the extent of 500 florins. In this case the receipt and deposit certificates must be remitted to them with the sum; a provisional receipt is given which is replaced at the next round by the official receipt of the district post-office.

It will be interesting to show the importance to which this mode of arranging deposits has now attained.

There is at the Central Office at Vienna a printing office which permanently employs 16 workmen, exclusively engaged in printing cheques and certificates of receipts and deposits. Six million of the latter kind of certificates are now annually printed and the number of them printed since the setting up of this system in 1883 amounts to 107 millions. An office for the verification and control of the printed matter is connected with this workshop. As to the amount of payments made through these certificates to the accounts of holders the 12^{th} Report enables us to give the statistics.

At the opening of the year 1883 the sums paid into the funds of the account holders, by means of the _Empfang erlag schein_ amounted to 322,284 florins.

They rose successively:

In 1884 to 43,748,349 florins. » 1885 » 217,109,144 » » 1886 » 361,466,434 » » 1887 » 442,138,414 » » 1888 » 446,874,084 » » 1889 » 517,734,775 » » 1890 » 592,089,250 » » 1891 » 663,221,494 » » 1892 » 731,325,411 » » 1893 » 811,318,663 » » 1894 » 889,793,808 » » 1895 » 969,479,217 »

The annual growth has been during the later years about 70 to 80 millions of florins. It moves at a regular pace.

I have shown by the example above how by aid of the _empfang erlag scheine_, the trader can by means of his responsible agent, the Savings Bank, receive at once the amounts of his invoices, without the money passing through his own hands. Numerous other applications of the system are before us: commercial travellers can deposit to the account of their employers, the sums they have collected in their rounds; they can even add at the back of the certificate such helpful notes as they think necessary; the commercial firm which employs them being regularly and immediately informed of payments by account extracts and the certificates of deposit being successively forwarded to the firm by the Central Office at Vienna.

Associations of every kind having accounts at the Savings Bank can by the same means gather subscriptions from the members: it is enough to send their members _certificates of receipt and deposit_; each one makes his payment at the neighbouring post office; the associations receiving, as the merchants, extracts of their accounts.

Assurance societies can in like manner, effect the payment of their insurers' premiums without any formality beyond that of sending to these insurers the _empfang erlag scheine_. And in like manner subscriptions to journals and all kinds of periodical payments can be received.

_Secondly._

Post Office orders issued to the benefit of any person affiliated to the cheque-service can, at his request be placed to the credit of his account. He gives to this end, on forms required by the regulations, an authorisation at his district post office. On its side the Central Office of the Savings Bank puts itself in relation with the post office. Ingenious combinations which are indicated in the instructions reproduced in the appendix to this paper, cause the order to be transmitted to the Money Order Office of the Viennese Post Office, which in paying the amount to the Central Office of the Savings Bank will at the game time inform of this transmission, the person in whose favour the order is made out.

The Post Office Orders only take a very secondary position in the accounts of the _cheque_ and _clearing_ service.

In 1884 their amount rose to 851,514 florins » 1885 to 6,399,576 » » 1886 » 14,197,234 » » 1887 » 17,702,424 » » 1888 » 17,853,284 » » 1889 » 18,967,659 » » 1890 » 22,349,594 » » 1891 » 25,614,771 » » 1892 » 26,271,893 » » 1893 » 27,230,128 » » 1894 » 28,252,117 » » 1895 » 29,241,933 »

It is stated that the progressive movement is at once slower and more regular since 1891, than it was previously.

_Thirdly._

The Postal Savings Bank receives in like manner for the benefit of holders of cheque-books, dividend warrants due from the Austrian public funds. It records the amount of them to the credit of the holder's account and receives a fee of 1 kreutzer a piece.

It is the least important of the agencies which feed the credit of the adherents of the system.

In 1884 the amount received was 3,310 florins » 1885 44,056 » » 1886 114,684 » » 1887 134,588 » » 1888 147,833 » » 1889 131,944 » » 1890 148,104 » » 1891 167,199 » » 1892 165,139 » » 1893 176,524 » » 1894 223,757 » » 1895 254,497 »

_Fourthly._

The amount of claims to debts and bills rendered payable at the post office can in like manner be placed to the credit of the adherent to the cheque and clearing service in favour of whom these bills have been drawn.

The importance of this agency is more considerable, but its progressive development is said to move at an irregular rate.

Introduced in 1886, it was absolutely insignificant during the first two years.