Building Societies and the Workers in Melbourne in the 1880s

The rise and fall of the Melbourne building societies were a spectacular part of the boom and bust of the 1880s and early 1890s. The standard interpretation of the effects of the growth and decline of building societies on ordinary wage-earners during this period has been influenced by the impressions of one of the more acute contemporary observers, T. A. Coghlan.1 He states that building societies were formed to gather worker savings and to lend these, again to workers, to finance house purchase or construction for owner-occupation. During the long period of economic expansion to the end of the 1880s, the building society offered the prospect of self-improvement to the people Coghlan called 'the industrious and thrifty amongst the working classes'.2 The building society was a place in which savings were kept until enough money was available to buy land or to put a down-payment on a house, and it was a place from which to borrow the balance of the purchase money once this stage had been reached. Historians have accepted without qualification Coghlan's judgment about the source of building society funds. N. G. Butlin describes the growth of building societies as savings institutions that, like the savings banks, tapped a stream of 'working-class savings'.3 Michael Cannon writes that most of the public's money held on deposit in the building societies came 'from the wage earning classes'.4 And W. A. Sinclair notes that from the 1870s 'the building societies increasingly attracted the direct deposits of small savers and became a popular alternative to the savings banks'.5 On the lending side, matters are seen to have been more complicated, for N. G. Butlin has shown that a significant proportion of the money lent by building societies in the 1880s went to finance speculators or landlords rather than owner-occupiers.6 Even so, building societies are generally regarded as having been an important factor in the spread of individual home ownership. Graeme Davison, for example, uses the records of the Modern Permanent Building Society to draw the conclusion that this society concerned itself principally with financing working-class owner-occupiers.7 The building societies and urban land companies were the first prominent financial institutions to fail in the series of crises that shook the Australian financial system and culminated in the bank crashes of 1893.8 By the end of 1891 even well-managed building societies had suspended payments to depositors and were either going into liquidation or were in the process of trying to reconstruct in ways acceptable to their creditors. The collapse of the building societies, according to Coghlan, 'greatly aggravated'

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