The following is part three of “Mormon integralism,” a series on learning from the institutional success of the LDS church. Click here for part one and here for part two.

We left off by observing the origins of the LDS Church in both the religious reform movements of the Second Great Awakening, and in the mutual aid societies and fraternal orders that formed in response to the industrial revolution. Before returning to the LDS case, a digression is therefore necessary to understand the subsequent growth and decline of mutual aid societies more generally.

After peaking in the late 1800s, fraternal societies and other informal providers of mutual aid began to face new competitive pressures from the booming commercial insurance industry. The rapid diffusion of actuarial science in the century prior revealed enormous profit opportunities for insurers that knew how to properly price risk, and pool said risks across a large population. As I discuss at length in It (Still) Takes a Nation with reference to the British friendly societies,

The emergence of commercial insurance in the nineteenth century changed everything. The knowledge of how to accurately price risk and adjust claims gave commercial insurers the competitive advantage of lower premiums. With competition came financial instability, and traditional friendly societies struggled to retain members. For example, according to a comprehensive survey of friendly societies in Oxfordshire, England, between 1750 and 1918, 29 percent of all societies whose start and end dates are known failed within ten years of their establishment, and the absolute number of such societies began falling from 1890 on (Morley 2011). Those that didn’t fail competed by adopting the very same actuarial rigor as the insurance companies, thus blurring the distinction between friendly societies and a normal mutual insurer. As the insurance industry boomed on newfound profit opportunities, the number of both for-profit insurers and friendly societies grew. In the race to build national networks that took advantage of economies of scale, many friendly societies were forced to discard the pretense of being a tight-knit social club.
As the insurance industry scaled, however, so too did its competitive instability. Adverse-selection effects created a dual problem. If customers had information about their true health or mortality risk that insurers lacked, selection effects caused the insurance pool to separate or “de-pool.” Yet the main antidote to adverse selection—better risk classification—created its own problems, namely “cream skimming” for low-risk types, and thus the potential for re-creating the very same de-pooling behavior. As Henry C. Lippincott put it in his tract The Essentials of Life Insurance Administration (1905), “[I]f the medical examiner did not stand at the entrance gate, the weakest and least desirable lives would be surest and soonest to come in” (qtd. in Ericson and Doyle 2003, 261).

In the U.S. context, the competitive instability of the commercial insurance market was mirrored by the cyclical instability induced by modern credit markets, implicating many of the largest insurers in the perennial boom- and bust- cycles of the 19th century. Following the Panic of 1819, many U.S. states imposed stringent regulations on joint-stock insurance companies to reduce their leverage and ensure they had the reserves necessary to pay-out policyholders.

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In search of Social Security

The increased startup costs of chartering a new insurance company drove the subsequent growth in mutual insurance. On the supply side, mutual insurers faced lower capital requirements, both by law and by the nature of their ownership structure. And on the demand side, the dividend payments offered to policyholders and the ability to use life insurance policies as vehicle for precautionary savings were extremely attractive to the burgeoning American middle class. In fact, prior to the growth in national banking, life insurance companies represented some of the country's largest financial institutions. As the historian Tony Yang notes,

Insurance policies became much more prolific after the advent of mutual insurance. Not only was the dividend feature attractive, but the increasing number of companies forced down premiums and made insurance available to a wider segment of society.

Despite these features, mutual life insurers were unable to fully insulate themselves from the vicissitudes of the broader economy. Flush with capital, many of the largest insurers became entangled with investment banking and financial speculation. The financial crisis panic of 1873 triggered a severe economic depression in Europe and North America that then rendered many U.S. life insurers insolvent.

The insurers that survived the 1873 crash all had one thing in common: they sold tontines. Tontines were investment funds that doubled as a pension scheme, allowing subscribers to pool the risk of outliving their savings. In essence, the capital raised by a tontine was invested in projects to earn a rate of return. Each subscriber was then entitled to an annuity payment that increased in size as subscribers passed away. This deferred payout structure allowed insurance companies to hoard cash, protecting them from financial shocks, but also helping to fund a great deal of political graft. By 1905, two-thirds of life insurance policies held in the U.S. were in the form of tontines. With rumors swirling that subscriber funds were being misused, the New York State Legislature launched the Armstrong Commission to investigate insurance companies based in New York. The corruption the Commission uncovered was vast, leading to legislation that restricted the sale and structure of tontines, rendering them effectively illegal. Similar statutes were quickly adopted by numerous other states.

Yang speculates that the provisional success of tontines as a private alternative to a public pension helped delay the growth of the modern welfare state in the United States. Nonetheless, with the start of the Great Depression in 1929, poverty among the elderly grew dramatically and millions of working age adults were thrust into unemployment. The need for a more stable source of economic security had by that point become self-evident, leading some thirty states to institute public pension schemes, culminating in the Social Security Act of 1935. The Act created a national, compulsory pension program in the form of Old Age Social Security, as well as the federal-state unemployment insurance system.

Between the rise of commercial insurance, the regulations provoked by its competitive instability, and the crises confronting mutual insurers, the emergence of modern social insurance represented a welcome reprieve. And yet with each step the insurance function of traditional mutual aid societies became increasingly anachronistic, rendering many into little more than glorified social clubs. As the scholar of mutual aid, David T. Beito, notes,

By the 1920s, fraternal societies and other mutual aid institutions had entered a period of decline from which they never recovered. The many possible reasons for this decline included the rise of the welfare state, restrictive state insurance regulation, and competition from private insurers.

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The Mormon exception

Against all odds, the LDS Church was not only able to avoid the declines experienced by mutual-aid and fraternal societies, but passed through the tumultuous New Deal era with rapidly growing membership. How?

It was by no means a foregone conclusion. By 1940, the popularity of FDR's reforms caused Mormon leadership to believe “the secular influence of the LDS Church was at an all time low among Mormon voters,” and that “the traditional authority of charismatic church officials had waned,” as one historian puts it. The disruptions created by the Great Depression and New Deal reforms thus required the LDS Church to adapt in real time. The era was a make-or-break period for the LDS Church, motivating its conservative leadership into fierce but strategic opposition to the New Deal.

Despite opposition at the top, Utah’s rank and file Mormons were predominantly pro-New Deal Democrats. A poll conducted in 1936 found 63 percent of Utahans planned on voting for Roosevelt; the highest popularity outside Democratic bulwark states in the South. Church leaders were thus compelled to evolve their institution from within. Critically, however, the Church’s institutional development was largely bottom-up, driven by members and lower-level community leaders who engaged in policy experimentation that was then evaluated, feeding up into higher-level policy decisions.

In short, rather than stand athwart history yelling stop, leaders in the LDS Church recognized the reality of the economic problems the New Deal reforms sought to address and embarked on an effort to build their own series of alternatives. As Randy Powell explains,

Latter-day Saint leaders firmly believed that their eschatological destiny was to save the Constitution from unchecked government power. They therefore stridently fought New Deal programs and spending within their community, which, according to FDR’s increasing vote share in the state, only grew more popular among the laity. They expressed their opposition to Roosevelt’s programs by launching an alternative welfare system, which Mormon leaders subsequently advertised to the nation as the better, more American, more constitutional way out of the Depression. By helping Mormons find work, food, and shelter through church resources, conservative leaders hoped to alieve (sic) suffering but also limit the reach of the federal government into Latter-day Saint communities.

These initiatives were embraced by the conservative press at the time as a forceful rejection of the New Deal, yet this is too simplistic. While the New Deal catalyzed Mormonism’s longer-term political alignment with American conservatism, LDS leaders at the time were primarily focused on their own self-preservation. They thus took a pragmatic rather than ideological approach to the reforms of the era, creating some substitutes to New Deal programs, but also some supplements. Put differently, while opposing the New Deal in law, the LDS Church embraced the New Deal in spirit, making version of their own programs and using the Church to mediate and supplement those programs they would or could not replicate on their own.

This work began in earnest in 1935, when then-president of the LDS Church's Pioneer Stake in Salt Lake City, Harold B. Lee, was called upon to become the managing director of the new Church Security Program. With more than half of the LDS Church’s members out of work, Lee had recently helped establish an aid program for his local members, including the construction of the Pioneer Stake bishop's storehouse. The bishop’s storehouse functioned as a central repository for produce and other basic foodstuffs, disbursed to needy members alongside other services. The success of Pioneer Stake made it a template for Lee and the Church’s General Welfare Committee, which in 1938 and 1939 oversaw the construction of a large storehouse in the center of Salt Lake City, henceforth known as Welfare Square.

Welfare Square grain silo, Salt Lake City

The LDS Church’s parallel New Deal was more comprehensive than just poor relief. FDR's New Deal included credit extension programs to support farmers with long-term, low interest loans, particularly those settling new lands. Thus the Church Security Program did so as well, instigating a resettlement program that provided seeds, implements and direct aid to young members seeking to purchase a farm. Utahan Mormons rallied around the American Farm Bureau, the independent farm insurance company and staunch opponent of the New Deal’s nationalized agricultural programs. Yet far from embracing a notional “free market” alternative, Mormon farmers saw national agricultural policies as an encroachment on their co-operative, community-driven ideal — what might be thought of as distributism with Mormon characteristics. In 1935, the LDS Church lobbied for legislation to create Utah’s Self-Help Cooperative Board, which channeled state appropriations and federal matching funds into cooperative organizations, including cooperative farms, lumber mills, and coal mines. To this day, much of the food that fills Church storehouses comes from farms, ranches and orchards owned and operated cooperatively by members of the LDS Church.

In some cases, the Church pushed for a fulsome rejection of New Deal proposals. When the Utah legislature passed legislation to allow local communities to take advantage of U.S. Housing Authority facilities in 1936, for instance, Governor Henry Blood vetoed the bill under the pressure brought by then-LDS Church President, Heber J. Grant.1 In other cases still, the influence on New Deal reforms flowed from the LDS community to Washington D.C. rather than the other way around.

Nowhere was the Mormon influence on the New Deal more apparent than in the adoption of work-based relief programs, including the Works Progress Administration (WPA) and Civilian Conservation Corps (CCC). The LDS Church had developed a reputation for emphasizing the importance of work to self-sufficiency, drawing upon the Doctrine and Covenants’ scriptural commandment that “Thou shalt not idle away thy time.” As Heber J. Grant put it in a 1936 speech, the mission of the Church Security Plan was to see to it that the “curse of idleness would be done away with the evils of a dole abolished and independence industry thrift and self-respect be once more established amongst our people.” Harry Hopkins, administrator of the WPA, acknowledged this Mormon influence on the New Deal in 1936, at one point even crediting the conceptual origin of work-relief to Brigham Young.

The LDS community in Utah took full advantage of the WPA and CCC work-relief programs, helping to build new and improved infrastructure across the state’s many rural communities. But rather than stop there, the Church believed it was incumbent to create a work-relief program of their own. That’s the story of part four.

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1

Darrell Greenwell, Letter to Robert H. Hinckley, 5 April 1939, Robert Hinckley Papers, Box 28, Special Collections, Marriott Library, University of Utah, Salt Lake City.

A new faith, a New Deal | Mormon integralism…