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Edward Filene: Pioneer of Social Responsibility

Yankl Stillman
October 1, 2004

This is the fifth article in a series that celebrates the 350th anniversary of Jewish emigration to the U.S. by profiling prominent American Jewish social activists.
Photo of Edward Filene
AN IMPORTANT Jewish social reformer of the early 20th century was a capitalist, known today mostly for his retailing acumen. Edward Filene's family was among the central European Jews — usually known as "German" Jews — who immigrated to the United States during the period from 1840 to 1860. During these two decades, the Jewish population in the U.S. rose from 15,000 to 150,000. Two thirds of the new immigrants came following the revolutions of 1848, the failure of which ushered in a period of reaction in central Europe, accompanied by the abuse and persecution of Jews, particularly those who had participated in or sympathized with the revolutions.
Among the immigrants in the late 1840s was Wilhelm Katz, a young man from Posen, in Prussia (an independent kingdom until 1870). One source about him quotes a story told by Edward Bernays, the public relations pioneer, who worked briefly for Filene's: When Katz arrived at Boston customs, Bernays recounted, he wanted to substitute his surname Katz with the synonym, Feline. It was misspelled, and thus he became William Filene.

JEWS WERE OFTEN merchants and traders in the old world and gravitated to the same occupations in the new. While many did not have the capital for opening shops, they did not need too much money to become peddlers. The Yankee traders who had dominated peddling in the 18th and early 19th centuries had generally settled as shopkeepers in the small towns in which they had been peddling, leaving the field without much competition for the German Jews who followed them. It is estimated that by 1860, there were some 16,000 country peddlers, overwhelmingly German Jews — about 10 percent of the Jewish population! They would make their way to the hinterland from big cities like New York, Boston, Philadelphia or New Orleans following new canals and roads to upstate villages and western farms where concentrations of German immigrants lived.
As a peddler, chiefly of womens' apparel, William Filene traveled through Connecticut, where he was introduced to a young Jewish woman, Clara Ballin, whom he married after a brief courtship. During the next 30 years, they had four sons and a daughter. Two of the sons entered their father's dry goods business: Edward Albert (1860-1937) and Albert Lincoln (1865-1957). At that time, the business consisted of several small retail shops. In 1881, a department store in Boston, William Filene's Sons Company, was founded.

WHEN HIS TWO SONS took control of the business in 1890, they introduced novel retailing techniques such as complete and honest descriptions of their merchandise and offers of "money back if not satisfied." Customers from outlying areas began to flock to the store, but since the trip into Boston was wearying and time-consuming, they demanded a wider variety of goods. The Filenes obliged them by stocking greater and greater varieties of wares under the same roof — thus, a modern department store was created. (The Filenes were not the first to come up with customer-oriented retailing techniques and the department store model; these had already been launched a few decades earlier by Adam Gimbel with his stores in Vincennes, Indiana.)
Edward served as president of Filene's Sons Co. from 1908 until his death in 1937. He was an innovative merchandiser and introduced the bargain basement concept in the downtown Boston department store, the construction of which he supervised. Later, he introduced the concept of the "automatic basement," in which goods left on the shelves for over a week were reduced 25 percent in price, over two weeks, 50 percent, over three weeks, 75 percent, and after four weeks, the goods were donated to charity. The brothers brought in an experienced merchandising partner, Louis Edward Kirstein, in 1911, and a capable lawyer, future Supreme Court Justice Louis Dembitz Brandeis (1856-1941). Social critic Lincoln Steffens (1866-1936) was used by the Filenes to provide analysis of Bostonian society.
The Filene brothers, particularly Edward, were also innovative in employee policies. They were instrumental in forming the Filene Cooperative Association, perhaps the earliest American company union, in which employees played a significant role in collective bargaining. They could determine their own wage scales and resolve, independently, controversies such as the firing of employees, even to the point of reversing dismissals.
Edward Filene was a progressive thinker for his time. He played a pivotal role in passing the America's first Workmen's Compensation law in 1911. He favored paying workers a "buying" wage instead of a marginal "living" wage. He initiated profit-sharing, health clinics, paid vacations, and welfare and insurance programs. He also established minimum wages for female workers and introduced a five-day, 40-hour work week. In the early 1900s, ideas like these were revolutionary. Edward was also a founder of both the U.S. and International Chambers of Commerce.
In 1910, there was a major strike in the clothing industry. Recognition of the preponderance of Jews among both workers and employers made the strike a matter of Jewish communal concern. Social worker Dr. Henry Moskowitz (1879-1936), at that time associate leader of the Ethical Culture Society, Albert Lincoln Filene, and lawyers Louis Marshall (1856-1929) and Brandeis were called upon to mediate the strike. Financier Jacob Schiff (1847-1920) joined the group, which then pressured the employers association, as a matter of Jewish responsibility, to return to the bargaining table to arbitrate differences. Julius Henry Cohen, attorney for the manufacturers, agreed that the arbitration system was an application of the traditional Jewish way of settling disputes.

WHILE TRAVELING in India near Calcutta in 1907, Edward Filene observed a village credit union in operation and was immediately interested. Back at home, he began to read about credit unions, which are worker cooperatives, often sponsored by employers, that are funded by their members and provide consumer and mortgage credit to them. Credit unions can be a critical source of lending for low-income workers who are often denied credit by banks and would otherwise have to resort to high-interest loan sharks in order to buy a house or deal with a medical emergency or other financial burden. Today in the U.S., employers often arrange for payroll deduction savings plans through credit unions, and more than 71 million people are members.
In 1908, Filene helped launch the U.S. credit union movement by working with the Massachusetts Bank Commission to get a credit union law enacted. In 1914, he joined other business leaders to form the Massachusetts Credit Union Association and coauthored an enduring statement of credit union principles. To speed the development of credit unions, he established the Credit Union National Extension Bureau, to which he contributed over $1 million between 1920 and 1934. Filene also gave $1 million to the Consumers Distribution Corporation to organize a national chain of cooperative retail stores. He was founder and president of the Credit Union National Association, which still thrives today. Under his leadership, credit unions in America multiplied from 48 to over 1,000 between 1915 and 1930, which freed thousands of American workers from usury.
Filene, says the Credit Union National Association website, "had a deep social conscience and was disturbed by the extreme poverty and social dislocation surrounding him in the early 1900s. Having seen credit unions at work in Europe and India, he believed that they would allow the masses to have a stake in, even significant control over, the distribution of money. He had little use for charity, but deep faith in the capacity of people to improve themselves as long as they had good information and the discipline to use it effectively."
All his life, Edward Filene was active in the world peace movement. In 1915, he joined the League to Enforce the Peace. After World War I, he backed the League of Nations. In 1919, he established the Twentieth Century Fund (now known as the Century Fund), a foundation with the goal of investigating social and economic problems with the objective of finding solutions. Albert Lincoln Filene became chairman of the board and treasurer of Filene's in 1941, four years after Edward's death. In 1937, he established the Lincoln and Therese Filene Foundation, which in 1955 funded the first educational television station in Boston.
Both brothers were social reformers who believed that capitalism had to be more humane and advance the welfare of the individual or it would face radical reform. They both actively supported Franklin Roosevelt's New Deal at a time when most American capitalists were attacking the president for being too radical. Edward maintained that "his social and economic views represented enlightened self-interest of a businessman rather than altruism" (Encyclopedia Judaica).

LOUIS EDWARD KIRSTEIN became vice-president of Filene's after years of business experience with E. Kirstein Sons Company, the Rochester Optical Company and the Stein-Bloch Company, all in Rochester, New York. One of the country's outstanding retailers, Kirstein served on numerous commissions such as the National Labor Relations Board and the industrial advisory board of the National Recovery Act. In 1930, he contributed generously, in memory of his parents, to create the Kirstein Memorial Library in downtown Boston, one of the first business libraries in the U.S.
He was also an outstanding Jewish leader and fundraiser. At one time or another, he was chair of the executive committee of the American Jewish Committee, honorary chair of the United Jewish Appeal, and national director of the Jewish Welfare Board in short, a dedicated and beloved, public-spirited figure. His non-Jewish civic posts included being president of the Boston Public Library, vice-president of the Better Business Bureau, and director of the Legal Aid Society. (It is worth noting that Kirstein's son, Lincoln [1909-1996], persuaded George Balanchine to come to the U.S. and establish the American Ballet Company, which eventually became the New York City Center Ballet. Lincoln Kirstein also helped conceptualize New York's Lincoln Center.)
None of the references I have used mention either the Filenes or Kirsteins being aware that the credit union concept that they fathered was only a few steps away from the gmilas khesed, the traditional Jewish interest-free loan that was enshrined by Hebrew Free Loan Societies, landsmanshaftn and other self-help credit networks among Jews in the U.S. According to Dr. Henry Feingold, editor of The Jewish People in America series published by Johns Hopkins Press, "the most important Jewish asset" in the early 20th century "was the credit lines that permitted capital to be transferred from one generation to another and from one group to another within the community.... By 1927 there were in existence 509 loan societies... [and] 2,367 mutual benefit societies." Feingold also notes that there was significant overlap between the Jewish and non-sectarian credit union movements: "In 1927," he notes, "Boston had 139 credit unions, 75 percent of them managed by Jews."
Today, the credit union movement is alive and well and controls many billions of dollars in lending assets. Oddly, Jewish involvement in this movement, despite the role of Jewish pioneers like Edward Filene, has dwindled. During the past ten years, however, The Shefa Fund, a progressive Jewish foundation in Philadelphia, has been working to convince Jewish federations, foundations and other institutions to invest in the credit union movement once again. The legacy of Edward Filene is being renewed for a new generation.

Yankl (Gerald) Stillman, a member of the Jewish Currents editorial board, is a Yiddish translator and editor of Mendel Mokher-Sforim: Selected Works in Translation.