Benefit Societies in America; M. Probst

These societies are of interest to free market proponents for several reasons. First, the benefit society tradition honored the free-market ideal of voluntary exchange. Sec ond, mutual aid societies were mostly suc cessful at avoiding social problems that charMr. Probst is a freelance writer in Auburn, Alabama. acterize the present welfare state-rising illegitimacy, broken families, rampant drug abuse, and pervasive violent crime. Finally, the mutual aid tradition declined dramatically about the same time the welfare state began its rise. This deterioration lends support to a common argument made by classical liber als-that as the state assumes responsibility for economic relief, private assistance dimin ishes. Economic Functions of Benefit Societies 1. Life Insurance The primary and most widely offered fra ternal serviceswere death and burial benefits, which provided a proper burial for the de ceased and relief to the surviving family members? The insurance was priced within reach of a typical worker. In terms of today's prices, the benefits could be purchased for about the cost of a single movie ticket per week. Besides providing the death benefit, the societies also commonly offered sickbenefits,3 which were similar to today's unemployment insurance. These benefits provided relief for a member during periods of inability to work due to accident or illness.

Fraternal insurance could also be used to self-insure against poverty. A member ar ranged such protection by appointing the charitable institution in charge of his care as 287 288 THE FREEMAN • MAY 1997 the beneficiary of his policy. Moreover, many societies also made provisions allowing for loans to be taken out against the value of a life insurance certificate. 4 2. Medical Services In the early part of the twentieth century many fraternal organizations began to make medical care available. They created some thing similar to the HMOs of today by con tracting out for the services of doctors who agreed to provide care for members. The fees were as low as $1 per year and coverage could be extended to members' families. This pro tection allowed for visits to the doctor's office and for house calls on request. 5 3. Education Other services to which the benefit societies devoted considerable resources included ed ucation and job training. This was especially true among the black fraternals. The broad range of education opportunities is indicated by one society's advertisement offering tute lage in "kindergarten, English, normal, col lege preparatory (classical), college course (classical), industrial, sewing, cooking, fancy work, bicycle, umbrella and furniture repair ing, mattress making and upholstery."6 Immigrants, too, used the benefit society as a tool for education. Because many of the new arrivals spoke only their native language, lessons in English were essential.7 Immigrant societies played an invaluable role in this respect, helping to educate and acclimate new arrivals.

Social Functions of Benefit Societies Most fraternal societies did not confine their activities to mutual aid. Through the use of economic sanctions, the societies typically worked to encourage the practice of high moral standards as well. For example, the Boston African Society stipulated that per sons whose misfortunes resulted from their own intemperance thereby forfeited all ben efits. The Odd Fellows were also diligent in this respect, allowing membership only to those of "undoubted probity" and specifically denying access to known gamblers.8 This moral encouragement not only helped bring members the advantages of living more wholesome lives, but it also served to help keep the payment of benefits in check. Because the benevolent societies were formed along the lines of mutual aid, mem bers had a direct interest in the health and wellbeing of their fellows. The desire to keep benefit payments low created an incentive for members to monitor each other's behavior in order to minimize the "moral hazard." In effect, peer pressure was used to check the conduct of members, thus allowing everyone to reap both social and economic advantages.

Fraternal societies also helped to foster pride and self-respect among members. The source of this pride lay in the very nature of their relief system. Because the societies were self-supporting, the benefits they dispensed were not considered charity, and this, of course, helped preserve the dignity of the recipients of its aid. Even the poorest of the poor did not want to be on public relief. When benefits were dispensed by the fraternal so ciety, the recipients were able to view them as an entitlement earned, something they them selves had helped to finance with their pre vious contributions. 9 Problems While the benefit societies were viewed favorably by most, they were not without their critics. The most fundamental charge against them was that the aid they delivered was inadequate. As historian David Beito points out, however, the concept of relief has changed in recent history. The only benefit now taken into account is the number of dollars spent. Before the emergence of the welfare state, however, the adequacy of sup port was measured in other ways. Satisfactory assistance also implied ideas such as the building of "character, self-respect, and inde pendence.,,10 Interestingly enough, some of the most ardent supporters of the welfare state are coming to terms with the apparent inability of state-run forms of relief to provide the non material benefits associated with voluntary BENEFIT SOCIETIES IN AMERICA: THE WAY IT USED TO BE 289 aid. Even in mainstream policy discussions, the consideration that government welfare programs may, in fact, be unfit to encourage these values is not uncommon.

Professor Beito cogently argues that those who required help before the modern welfare state might verywell have envied the material aid the disadvantaged presently receive housing, food, and income-all guaranteed by the state. But if traits such as self improvement, self-respect, pride, family and community cohesion, and relatively safe neighborhoods are considered, today's disad vantaged class might be verywillingto change places with those who depended on mutual aid.11 The success of the benefit societies is that their mutual aid function helped them provide relief to those in need while largely avoiding the social breakdown so evident in our current welfare state. Decline So what happened to the benefit societies and their practice of mutual aid? There are various explanations, some accounting for the disappearance of specific services the societ ies once provided, others accounting for their decline in general. For instance, Beito reports that the provision of medical care by the fraternals came under attack shortly after the turn of the century by physicianswho viewed the fraternals' contracts with doctors as "a threat to traditional fee-for-service medi cine." By the 1920s these efforts had largely succeeded, and the loss of medical services in particular is considered a major cause of the organizations' rapid decline.

Probably the best and most complete ex planation for the decline of the fraternal societies, however, is the rise of the modern welfare state. Simply put, government bene fits have replaced the need for the provision of the fraternals' mutual aid.12 Anecdotal evidence of government welfare activities displacing mutual aid abounds. For example, when workers' compensation was launched in the 1910s and 1920s,employees' mutual aid organizations withdrew" en masse from providing industrial accident insur ance." Further evidence is that by 1931,most states provided mothers' pensions, and in the 1930s,Social Security and Aid to Dependent Children were introduced. These increases of government involvement in economic relief paralleled decreases of mutual aid activities.13 While it is possible that such parallels were only coincidental, it seems much more likely that state benefits replaced the need for ones provided by the fraternal societies.

Conclusion For persons concerned about the plight of the disadvantaged in the United States today, the experience of the past may provide the best guide for the future. Comparing the American tradition of mutual aid to the modern welfare state seems to confirm F.A. Hayek's ideas regarding progress and the human social order. Hayek believed that human achievement was not the result of conscious,collectiveplanning. Instead, Hayek argued, progress emerges from a trial-and error process wherever people are free to copy behavior that has proven successful for others. Maybe it's time we abandon the cen trally planned welfare state and return to a model developed through successful experi mentation-a model based fundamentally on the concept of voluntary mutual aid. 0 1. David T. Beito, "Thy Brother's Keeper," Policy Review, Fall 1994, p. 56. 2. Ibid., p. 55. 3. Howard W. Odum, Social and Mental Traits of the Negro: Research into the Conditions ofthe Negro Race in Southern Towns (New York: Columbia University Press, 1910), p. 115.

4. Richard DeRaismes Kip, Fraternal Insurance in the United States (Philadelphia: College Offset Press, 1953), pp. 114-129. 5. Beito, p. 56. 6. Odum, pp. 113-114. 7. Beito, p. 58. 8. Leonard P. Curry, The Free Black in Urban America, 1800-1850: The Shadow of the Dream (Chicago: University of Chicago Press, 1981), p. 211. 9. Beito, p. 58. 10. David Beito, "Mutual Aid for Social Welfare: The Case of American Fraternal Societies," Critical Review, Fall 1990, p. 720. 11. Ibid., pp. 723-724. 12. Beito, Policy Review, pp. 58-59. 13. Beito, Critical Review, pp. 726-727.