Benjamin Franklin: American Economist, Diplomat & Entrepreneur

In 1790, the year United States founding father Benjamin Franklin died, John Adams wrote with biting sarcasm, "The history of our revolution will be one continued lie from one end to the other. The essence of the whole will be that Dr. Franklin’s electrical rod smote the earth and out sprung General Washington. That Franklin electrified him with his rod - and thence forward these two conducted all the policy, negotiations, legislatures, and war."

Today history may confirm that there was more truth to Adams’s "lie" than previously thought. Having updated Franklin’s Autobiography for modern times, including the remaining 33 years of his illustrious career, I conclude that Franklin can feel a certain degree of responsibility for America’s growth machine. Throughout his life and writings, he did more than anyone else to lay the groundwork for wealth creation in the emerging nation.

Moreover, the record seems to indicate that Benjamin Franklin’s diplomatic genius was indispensable in the American Revolution. Washington may have won the war at home, but Franklin won the war abroad. Without his brilliant diplomacy, the French might never have provided the military and financial aid - over one billion dollars! - essential to achieve American independence from the British. Finally, Franklin was played a vital role in fashioning the compromises necessary in creating the new constitution of the United State in 1787.

Benjamin Franklin anticipated the incredible material and technological progress since our founding. An incurable optimist, Franklin was always bullish on America, and life in general. At the end of the War for Independence, he predicted, "America will, with God’s blessing, become a great and happy country." The United States, he said, is "an immense territory, favored by nature with all advantages of climate, soil, great navigable rivers and lakes....[and] destined to become a great country, populous and mighty." He told potential European immigrants, that the country "affords to strangers....good laws, just and cheap government, with all the liberties, civil and religious, that reasonable men can wish for." (He underlined the word "cheap.")

Franklin might be considered the first dean of colonial America’s business school. He chronicled much of his business success in his Autobiography, creating the first "rags to riches" story in American history. Business luminaries from Andrew Carnegie to Lee Iacocca to Warren Buffett have publicly expressed their admiration of Benjamin Franklin. In his "Advice to a Young Tradesman," Franklin wrote, "In short, the way to wealth, if you desire it, is as plain as the way to market. It depends chiefly on two words, industry and frugality; that is, waste neither time nor money, but make the best use of both. Without industry and frugality, nothing will do, and with them everything."

Franklin knew how to succeed in business and became one of the wealthiest men of his day. He favored the entrepreneurial can-do spirit of Americans in his Autobiography and, in later writings, lambasted public offices of privilege and aristocracies by birth. In an open letter to European immigrants, he wrote, "I told them those bear no prices in our markets. In America, people do not inquire concerning a stranger, What is he? but What can he do?" The author of Poor Richard’s Almanac and "The Way to Wealth," Benjamin Franklin preached throughout his life the virtues of "industry, thrift and prudence" as universal principles of success. Undoubtedly he would castigate today’s Americans for indulging in undersaving, overspending and excessive debt. "No revenue is sufficient without economy," he warned. "A man’s industry and frugality will pay his debts and get him forward in the world.... Business not well managed ruins one faster than no business."

He made his fortune as an innovative publisher, producing the country’s best-selling newspaper and almanac and profiting from a chain of printing partnerships up and down the Atlantic seaboard. Franklin was also a practical inventor (Franklin stove, the lightning rod, bifocals, etc.), but being publicly minded never collected royalties or trademarks from these ventures. The maxims contained in the pages of his Poor Richard’s Almanac served to educate a nation of craftsmen, farmers, and shopkeepers as to how to succeed in business. For certain, he would be pleased with the state of higher education in America – especially our nation’s business and professional schools. Prior to Franklin helping found the University of Pennsylvania, the only colleges in existence were established for the purpose of training clergy. With Penn, Franklin promoted a more radical model of a public university where science and the professions were given their due. Since that innovation, professional schools turn out the talent that fuels and leads our nation’s economy.

In the Autobiography, Benjamin Franklin dared to declare his 13 principles of virtuous living essential to lasting prosperity. "Only a virtuous people are capable of freedom. As nations become corrupt and vicious, they have more need of masters," he warned. Nevertheless, he remained upbeat. "America is too enlightened to be enslaved." Franklin used his autobiography and maxims to promote such virtues as honesty, hard work, thrift, doing good to others, and the power of a good reputation. He more often than not utilized the power of reward in getting others to cooperate rather than relying on the power of punishment. "A spoonful of honey will catch more flies than a gallon of vinegar," said Poor Richard. As such, Franklin is an ideal role model for modern American entrepreneurs who constantly manage the tension to compete and cooperate in any given business situation. He counsels us to protect our interests and guard against foolish risks while at the same time helping others to succeed. Rather than counsel us to dominate the game like Machiavelli, Franklin shows us how to lift the boats of those around us – as well as our own.

Although not a church-goer, Benjamin Franklin supported a pragmatic religion that favored good works and charity more than simple faith and hope. "I mean real good works, works of kindness, charity, mercy, and public spirit; not holiday-keeping, sermon-reading or hearing, performing church ceremonies, or making long prayers, filled with flatteries and compliments, despised even by wise men, and much less capable of pleasing the Deity." Franklin was famous for engaging in innumerable civic and charitable causes throughout his adult life--and into the afterlife, with his perpetual fund for young tradesmen in Boston (as established in his will).

On the dark side, Franklin, ever the opportunist, was never above seeking government privilege for him and his relatives. He printed currency for several states, "a profitable job." In 1753, he landed a lucrative position as the Crown’s deputy postmaster general of North America. While in England, he convinced the British leaders to appoint his son William royal governor of New Jersey. After Franklin left for Paris in 1776, he appointed his son-in-law to take over his job as postmaster of the United States. For years, he actively sought a land grant from the Crown in Ohio. But the American Revolution soured his attitude toward public privilege and corporate welfarism. He failed to obtain a land grant. His royalist son abandoned him during the war and they never reconciled. He trained his grandson Benny to be a printer rather than a government agent, telling a friend, "I am of the opinion that almost any profession a man has been educated in is preferable to an office held at pleasure, as rendering him more independent, more a freeman and less subject to the caprices of superiors."

The rift between father and son is one reason Franklin often said, "There never was a good war or a bad peace." It destroyed forever his close relationship with his son William, as well as his friendships with many other British and American confidants. Another reason why Franklin considered wars at best a necessary evil is that it kept him from his first love: his inventions and scientific pursuits. He constantly complained in England and France how little time he had to correspond with fellow scientists and to pursue his own creations. When the war was over, he immediately tried to pick up where he left off, working on several inventions, such as the long arm to withdraw books from high up on a shelf. But he felt the war cut short his dreams of technological revolution, and his ability to discover and create innovations.

What were Benjamin Franklin’s politics? He was no social libertarian, despite his image as a libertine and religious free thinker. While he is famous for reading books in the nude, frequenting the salacious Hell-Fire Club in London, and flirting with French ladies in Paris, he wrote stern letters to his daughter Sally chastising her for wanting to wear the latest fashions while a war was going on, and refused to buy his grandson Benny a gold watch while in France. He dressed plainly and constantly preached economy. He promoted at all times frugality and industry in both public and private life. Readers might be surprised by Franklin’s attack on the growth of taverns in Philadelphia upon his return from England in 1762. He hated mobs of any kind, and though a defender of free speech, railed against scurrilous newspaper reports.

In many ways, he was politically ahead of his time among founding fathers. That he was a radical democrat is clear from his support of a unicameral legislature. Actively involved in the creation of the three major documents of American government (the Declaration of Independence, the Articles of Confederation and US Constitution), Franklin was an advocate of a limited central government. "A virtuous and laborious people may be cheaply governed," he declared. He was a disciple of Adam Smith and free trade, and was enamored with the laissez faire policies of the French physiocrats (Turgot, Condorcet, et al.). "Laissez nous faire: Let us alone....Pas trop gouverner: Not to govern too strictly."

He defended the rich, and worried about how incentives for the poor would be affected if the state adopted a welfare system. He opposed a minimum wage law, and wrote in favor of free immigration and fast population growth (he was no Malthusian). He rejected any form of state religion or mandatory religious oaths of office, and demanded that slavery be abolished in the new nation - in 1789. And he learned by sad experience (through his son and grandson) that public service is less rewarding than private business. His foreign policy anticipated George Washington’s farewell address by nearly 20 years, when he wrote in 1778: "The system of America is to have commerce with all, and war with none."

Yet Franklin was no free-thinking anarchist. In economics, he favored paper money and an inflationary monetary policy beyond specie, though "no more than commerce requires"; easy money would stimulate trade, he wrote, and even rapid inflation during the war paid for itself through its power of indirect taxation. (His likeness on the $100 bill - the highest denomination - of an irredeemable American paper currency would greatly please his vanity.) He was a strong supporter of central banking and an investor in the Bank of North America. He argued that the state should be actively engaged in the free education of youth and other public services, and in dispelling ignorance of public fads and superstitions. From several sources, it appears that Franklin was in league with Jefferson in emphasize the theme of "life, liberty, and the pursuit of happiness" as the goal of government, downplaying the Locke’s inalienable right to property. Property, he wrote, is purely a "creature of society" and can be legitimately taxed to pay for civil society. He was quite critical of Americans unwilling to pay their fair share of society’s "dues."

Finally, Franklin was ahead of his time in financing good causes with his business profits. He was civil minded early in his career, helping to finance the first fire company, the nation’s oldest property insurance company, and Philadelphia’s own hospital, library and militia. "America’s first entrepreneur may well be our finest one," concludes John Bogle.

Business executives would do well to live up to the epitaph Benjamin Franklin once described to a friend: "The years roll round and the last will come; when I would rather have it said, He lived usefully, than he died rich."

Regards,

Mark Skousen
for The Daily Reckoning Australia
 

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