The Public Purse and State Finance: Government Savings Banks in the Era of Nation Building, 1867-1900

Abstract

The Dominion Government Savings Banks were a national system of thrift banks that began in 1867 when the federal government inherited government savings banks from the four founding provinces. Along with the new post office savings banks, the Dominion Government Savings Banks entered into a period of expansion with the passage of the first bank act in 1871. Not surprisingly, the establishment of a considerable bureaucracy to run these institutions created significant debate about the state’s role in the savings deposit business. Despite increasing conflict by the 1880s with the private chartered banks, the government was unwilling to quickly abandon the banks. Not only was the readily accessible pool of capital embodied in the savings banks essential to the completion of the Canadian Pacific Railway but the jobs available at savings banks were an important aspect of late nineteenth-century patronage. Many politicians, particularly in the Maritimes, regarded with hostility any policies that served to reduce either the number of positions or their role in filling them. The article discusses the political and economic realities that conditioned the formulation of government finance policy, and how that policy affected the relationship with chartered banks. Some putative effects on the economy of the Maritimes and Canada are then posited and critically evaluated. It is suggested the government’s role may have exacerbated the decline of regional banks in the Maritimes, and may have contributed indirectly to problems with industrial development and credit allocation during the 1870–1900 period.