It was a small town, in the early 1900's. Everybody knew everybody, including the kids - who freely roamed the town when not doing chores or such.
I'd agree that it was very good for the kids' social development...but "foster a sense of community", in the present-day context, sounds like an express ticket to expecting far too much from it.
Our peers are more than people our age. They are the people older and younger than us too.