V | Franklin's Economic Views
An eighteenth-century colonial who wrote on paper money, interest, value, and insurance, who discussed a theory of population and the economic aspects of the abolition of slavery, who championed free trade, and who probably lent Adam Smith some information used in his Wealth of Nations, who was an empirical agriculturist, who was "half physiocratic before the rise of the physiocratic school"—such a colonial has, indeed, claims to being America's pioneer economist.
Franklin's hatred of negro slavery was conditioned by more than his humanitarian bias. It may be seen that his indictments of black cargoes were the resultant of an interplay of his convictions that economically slavery was enervating and dear and of his abstract sense of religious and ethical justice. One should not minimize, however, his distrust of slavery on other than economic bases. He was acutely influenced by the Quakers of his colony who, like gadflies, were stinging slaveholders to an awareness of their blood traffic, and by the rise of English humanitarianism. In his youth he had published (first edition, 1729; second, 1730), with no little danger to himself and his business, Ralph Sandiford's A Brief Examination of the Practice of the Times, an Amos-like vituperative attack on the "unrighteous Gain" of slaveholding. He also published works of Benjamin Lay and John Woolman.[i-180] Friend of Anthony Benezet, Benjamin Rush, Fothergill, and Granville Sharp, and after 1760 a member of Dr. Bray's Associates, he lent his voice and pen to denouncing slavery on religious and ethical grounds; and in England, after the James Sommersett trial (1772), he "began to agitate for parliamentary action" toward the abolishing of slavery in all parts of the British Empire.[i-181] Following the Sommersett verdict, Franklin contributed a brief article to the London Chronicle (June 18-20, 1772) in which he denounced the "constant butchery of the human species by this pestilential detestable traffic in the bodies and souls of men."[i-182] Losing his temperamental urbanity when observing "the diabolical Commerce,"[i-183] "the abominable African Trade," he recollects approvingly that a certain French moralist[i-184] could "not look on a piece of sugar without conceiving it stained with spots of human blood!"[i-185] Conditioned by Quakerism, by his deism, which suggested that "the most acceptable Service we render him [God] is doing good to his other Children," and by the eighteenth century's growing repugnance toward suffering and pain,[i-186] Franklin (although he took little part in legislating against slavery in Pennsylvania) became through his writing a model to be imitated, especially in France, by a people more intent on becoming humane than saintly.
His letter to Anthony Benezet (London, July 14, 1773), however, clearly indicates that for economic, as well as humanitarian reasons, he had sought freedom for slaves:
I am glad to hear that such humane Sentiments prevail so much more generally than heretofore, that there is Reason to hope our Colonies may in time get clear of a Practice that disgraces them, and, without producing any equivalent Benefit, is dangerous to their very Existence.[i-187]
Franklin's view of the economic disabilities of slavery is best expressed in Observations Concerning the Increase of Mankind, Peopling of Countries, Etc. (1751). Arguing against British restraint of colonial manufactures, he observed that "'tis an ill-grounded Opinion that by the Labour of slaves, America may possibly vie in Cheapness of Manufactures with Britain. The Labour of Slaves can never be so cheap here as the Labour of working Men is in Britain."[i-188] With arithmetic based on empirical scrutiny of existing conditions, resembling the mode of economists following Adam Smith, he charged that slaves are economically unprofitable due to the rate of interest in the colonies, their initial price, their insurance and maintenance, their negligence and malevolence.[i-189] In addition, "Slaves... pejorate the Families that use them; the white Children become proud, disgusted with Labour, and being educated in Idleness, are rendered unfit to get a Living by Industry."[i-190] Slaves are hardly economical investments in terms of colonial character. Looking to the "English Sugar Islands" where Negroes "have greatly diminish'd the Whites," and deprived the poor of employment, "while a few Families acquire vast Estates," he realized that "population was limited by means of subsistence,"[i-191] which foreshadowed the more pessimistic progressions of Malthus. Having just maintained that "our People must at least be doubled every 20 Years,"[i-192] and intuitively suspecting that the means for subsistence progress more slowly, he exclaimed, "Why increase the Sons of Africa, by planting them in America, where we have so fair an Opportunity, by excluding all Blacks and Tawneys, of increasing the lovely White and Red?"[i-193] He saw mere economic extravagance as the short-time effect of slavery; he feared that the long-time effect would be to create an aristocracy subsisting at the head of a vast brood of slaves and poor whites.[i-194]
It was inevitable in a state having no staple crop, such as rice, sugar, tobacco, or cotton, which offered at least economic justification for negro slavery, that abolition of slaves should be urged partially on purely economic grounds, and that Pennsylvania should have been the first colony to legislate in favor of abolition, in 1780. Although one may feel that economic determinism is overly simple and audacious in its doctrinaire interpretations, one can not refuse to see the extent to which economics tended to buttress humane and religious factors in Franklin's mind to make him a persuasive champion of abolition.[i-195]
A Modest Enquiry into the Nature and Necessity of a Paper Currency[i-196] has been appraised as "by far the ablest and most original treatise that had been written on the subject up to 1728 and was probably the most widely read work on paper currency that appeared in colonial America."[i-197] That Franklin's interest in paper money was not unique, one may gather from the fact that between 1714 and 1721 "nearly thirty pamphlets appeared" on this subject in Massachusetts alone.[i-198] One of the 1728 theses at Harvard, answered in the affirmative, was: "Does the issue of paper money contribute to the public good?"[i-199] "Since there was a scarcity of circulating medium, caused by the constant drain of specie for export," explains Mr. D. R. Dewey, "it is not strange that projects for converting credit into wealth should have sprung up in the colonies."[i-200] Franklin argued in his Modest Enquiry[i-201] that (1) "A plentiful Currency will occasion Interest to be low," (2) it "will occasion the Trading Produce to bear a good Price," (3) it "will encourage great Numbers of labouring and Handicrafts Men to come and settle in the Country," and (4) it "will occasion a less consumption of European Goods, in proportion to the Number of the People." Thus he saw paper money as a "Morrison's Pill," promising to cure all economic ills.[i-202] It has been suggested that as a printer Franklin naturally would favor issues of paper money. In view of his later apostasy one should note that in this essay Franklin apparently accepted the current mercantilist notions, best expressed here in his conviction that paper money will secure a favorable balance of trade. Demands for emissions of paper money were inevitable in a colony in the grip of such a restrictive commercial policy as British mercantilism. It must be observed, however, that Franklin differed from the proper mercantilists to the extent that simple valuable metals were not to be measures of value. Deriving his idea from Sir William Petty, Franklin took labor as the true measure of value,[i-203]—a position later held by Karl Marx. In his preoccupation with the growth of manufactures and favorable balances of trade, Franklin gave no suggestions that at least by 1767 he was to become an exponent of agrarianism and free trade. One wonders to what extent his warnings against the purchase of "unnecessary Householdstuff, or any superfluous thing," his inveterate emphasis on industry and frugality, were conditioned by his view that such indulgence would essentially cause a preponderance of imports, hence casting against them an unfavorable trade balance.[i-204]
In 1751 Parliament passed an act regulating in the New England colonies the issue of paper money and preventing them "from adding a legal tender clause thereto"; in 1764 Parliament forbade issue of legal tender money in any of the colonies. As a member of the Pennsylvania assembly, Franklin had successfully sponsored issues of paper money; in London, following the 1764 act, he urged that one of the causes breeding disrespect for Parliament was "the prohibition of making paper money among [us]."[i-205] Economics blends into politics when we remember that the 1764 restraining legislation was "one of the factors in the subsequent separation, for it caused some of the suffering that inevitably follows in the wake of an unsound monetary policy whose onward course is suddenly checked."[i-206] In 1766 Franklin was yet an ardent imperialist, who sought politically and economically to keep whole "that fine and noble China Vase, the British Empire." His Remarks and Facts Concerning American Paper Money (1767), in answer to Lord Hillsborough's Board of Trade report circulated among British merchants, is an ardent plea for legal tender paper money. He argued that British merchants (since yearly trade balances had regularly been in their favor) had not been deprived of gold and silver, that paper money had worked in the Colonies,[i-207] and that British merchants had lost no more in their colonial dealings than was inevitable in war times. Franklin concluded that since there were no mines in the colonies, paper money was a necessity (arguing here very shrewdly that even English silver "is obliged to the legal Tender for Part of its Value"). Hence, at least for colonies deserving it, the mother country should take off the restraint on legal tender. What Franklin seems not to have known and what the merchants had actually felt (they had their accounts staring at them) was that in the past, especially after 1750, much of the legal tender was in effect nothing but inconvertible fiat money. Mr. Carey quotes from an uncollected item, Franklin's "The Legal Tender of Paper Money in America," in which he threatened that "if the colonies were not allowed to issue legal-tender notes there was no way in which they could retain hard money except by boycotting English goods."[i-208] Franklin suggested (to S. Cooper, April 22, 1779) that depreciation may not be unmixed evil, since it may be viewed as a tax: "It should always be remembered, that the original Intention was to sink the Bills by Taxes, which would as effectually extinguish the Debt as an actual Redemption."[i-209] Not a little Machiavellian for one who was not blind to the sanctity of contracts!
With the Revolution and the attendant depreciation in currency, Franklin tended to warn against over-issues.[i-210] Like Governor Hutchinson, who said that "the morals of the people depreciate with the currency," Franklin confessed in 1783 "the many Mischiefs, the injustices, the Corruption of Manners, &c., &c., that attended a depreciating Currency."[i-211] There is no evidence to show that Franklin dissented from the conservative prohibition in the Constitutional Convention of 1787 against issues of legal tender paper.[i-212]
Deborah Logan (in a letter in 1829) stated that Franklin "once told Dr. Logan that the celebrated Adam Smith, when writing his 'Wealth of Nations,' was in the habit of bringing chapter after chapter as he composed it, to himself, Dr. Price and others of the literati; then patiently hear [sic] their observations, and profit by their discussion and criticism—even sometimes submitting to write whole chapters anew, and even to reverse some of his propositions."[i-213] James Parton observed that the allusions to the colonies which "constitute the experimental evidence of the essential truth of the book" were supplied by Franklin.[i-214] But Rae reasonably counters: "It ought of course to be borne in mind that Smith had been in the constant habit of hearing much about the American Colonies and their affairs during his thirteen years in Glasgow from the intelligent merchants and returned planters of that city."[i-215]
In general, we may conclude that Franklin and Smith were exponents of free trade in proportion as they were reactionaries against British mercantilism. Each in his reaction tended to elevate the function of agriculture beyond reasonable limits. Unlike the physiocrats and Franklin, however, Adam Smith did not hold that, in terms of wealth-producing, manufacturers were sterile. Even if Franklin saw only agriculture as productive, he was not blind to the utility of manufactures, especially after the break with the mother country, when he realized that home industry must be developed to supply the colonial needs formerly satisfied by British exports.[i-216]
Finally, each was, in varying degrees, an exponent of laissez faire.[i-217] Since we shall discover that politically Franklin was less a democrat than is often supposed, we may feel that his belief in free trade led him to embrace reservedly the principle of laissez faire, rather than that free trade, an economic concept, was but a fragment of a larger dogma, namely, that government should be characterized by its passivity, frugality, and maximum negligence. V. L. Parrington quotes[i-218] from George Whately's Principles of Trade, which contained views congenial to Franklin:
When Colbert assembled some wise old merchants of France, and desired their advice and opinion, how he could best serve and promote commerce, their answer, after consultation, was, in three words only, Laissez-nous faire: "Let us alone." It is said by a very solid writer of the same nation, that he is well advanced in the science of politics, who knows the full force of that maxim. Pas trop gouverner: "Not to govern too much!" which, perhaps, would be of more use when applied to trade, than in any other public concern. (Present editors' italics.)
Laissez faire in Franklin's as in Whately's view tended to be synonymous with free trade. Laissez faire was suggested by his insistence on free trade, as he progressively expressed his antipathy for mercantilism, rather than that free trade was simply a natural deduction from a more inclusive economic-political dogma.
Writing to the pro-colonial Jonathan Shipley, Bishop of St. Asaph, whose "sweet Retirement" at Twyford he had long enjoyed, Franklin, seeing no hopes of a reconciliation between the colonies and Great Britain, uttered what marked him as the first American disciple of Quesnay's school of economic thought: "Agriculture is the great Source of Wealth and Plenty. By cutting off our Trade you have thrown us to the Earth, whence like Antaeus we shall rise yearly with fresh Strength and Vigour."[i-219] Upon learning of the colonists' "Resolutions of Non-Importation" he wrote to "Cousin" Folger that they must promote their own industries, especially those of the "Earth and their Sea, the true Sources of Wealth and Plenty."[i-220] Learning that the colonists had threatened to boycott English manufacturers by creating their own basic industries, Franklin demurred in a letter to Cadwallader Evans: "Agriculture is truly productive of new wealth; manufacturers only change forms, and whatever value they give to the materials they work upon, they in the mean time consume an equal value in provisions, &c. So that riches are not increased by manufacturing; the only advantage is, that provisions in the shape of manufactures are more easily carried for sale to foreign markets."[i-221] Positions to be Examined, Concerning National Wealth[i-222] affords a succinct statement of Franklin's agrarianism. "There seem to be but three ways for a nation to acquire wealth. The first is by war, as the Romans did, in plundering their conquered neighbours. This is robbery. The second by commerce, which is generally cheating. The third by agriculture, the only honest way, wherein man receives a real increase of the seed thrown into the ground, in a kind of continual miracle, wrought by the hand of God in his favour, as a reward for his innocent life and his virtuous industry."[i-223] Dupont de Nemours, as early as 1769, had written: "Who does not know that the English have today their Benjamin Franklin, who has adopted the principles and the doctrines of our French economists?"[i-224] Before attempting to appraise the real indebtedness of Franklin to the physiocrats, it is well to seek to learn how he came in contact with their ideas, and especially why by the year 1767 he was acutely susceptible to their doctrine. In the summer of 1767, in the company of Sir John Pringle, Franklin went to Paris, not an unknown figure to the French savants, who were acquainted with his scientific papers already translated into French by D'Alibard. That he was feted by the Newtons of the physiocrats, François Quesnay and the elder Mirabeau, as "le Savant, le Geomètre, le Physicien, l'homme à qui la nature permet de dévoiler ses secrets,"[i-225] we are assured, when to De Nemours (July 28, 1768) he writes regretfully: "Be so good as to present my sincere respect to that venerable apostle, Dr. Quesnay, and to the illustrious Ami des Hommes (of whose civilities to me at Paris I retain a grateful remembrance)...."[i-226] Having missed Franklin in Paris (1767), De Nemours had sent Franklin "un recueil des principaux traités économiques du Docteur Quesnay" and his own Physiocratie (1768), which cast him in the role "of a propagandist of Physiocratie doctrines."[i-227] Franklin admitted, "I am perfectly charmed with them, and wish I could have stayed in France for some time, to have studied in your school, that I might by conversing with its founders have made myself quite a master of that philosophy."[i-228] That Franklin was not before 1767 unacquainted with the Économistes we learn when he tells Dupont de Nemours that Dr. Templeman had shown him the De Nemours-Templeman correspondence when the latter was Secretary of the London Society for the Encouragement of Arts, Manufactures, and Commerce. A second trip to Paris (in 1769) to confer with Barbeu Dubourg, an avowed physiocrat, concerning his forthcoming translation of Franklin's works, served to acquaint him still further with the doctrines of the new school.
Franklin's agrarianism[i-229] is congruent with physiocracy[i-230] in as far as he observed that agriculture alone, of the many industries, produced a surplus of wealth after all of the expenses of production had been paid.[i-231] Each laborer produced more than enough to satisfy his own needs. This surplus the Économistes termed the produit net. A worker in manufactures, it was assumed, consumed foodstuffs and other materials in proportion to the value he created in his manufacturing process. Hence there obviously could be no produit net accruing from manufactures. Like the physiocrats, Franklin felt that manufactures were sterile, to the extent that no new wealth was created. The physiocrats believed, however, that laborers in manufacturing industries could create a produit net if they stinted themselves in consuming foodstuffs, et cetera, but it was argued that this prudential asceticism was not a characteristic habit. To this extent at least the physiocrats were empirical.
Free trade no less than agrarianism characterized physiocracy. Although Franklin indicated his antagonism toward governmental restraint of trade, internal and among nations, in his antipathy toward British mercantilism, it was not until after he became impregnated with French doctrine that he began to express very fully his advocacy of free trade. After Connecticut imposed a 5% duty on goods imported from neighboring colonies, Franklin wrote to Jared Eliot in 1747 that it was likely that the duty would devolve on the consumer and be "only another mode of Taxing" the purchaser. In addition he recognized that smuggling, virtually a colonial art, would cause the "fair Trader" to "be undersold and ruined."[i-232] He urged that the import duty might suggest selfishness, and might also tend to deter Connecticut commerce. Here, it must be admitted, Franklin did not sanction free trade with a priori appeals to the "natural order," the key in the arch of physiocracy. He rather appealed to the instincts and observations of the prudential tradesman. His Plan for Regulating Indian Affairs (1766), unlike his 1747 letters, suggested (if it did not express concretely) inviolable laws of commerce in the words: "It seems contrary to the Nature of Commerce, for Government to interfere in the Prices of Commodities.... It therefore seems to me, that Trade will best find and make its own Rates; and that Government cannot well interfere, unless it would take the whole Trade into its own hands... and manage it by its own Servants at its own Risque."[i-233] To Dupont de Nemours he admitted that British mercantilism had not achieved "that wisdom which sees the welfare of the parts in the prosperity of the whole."[i-234] To Sir Edward Newenham, representing the County of Dublin, he expressed admiration for Irish efforts to secure freedom of commerce, "which is the right of all mankind." "To enjoy all the advantages of the climate, soil, and situation in which God and nature have placed us, is as clear a right as that of breathing; and can never be justly taken from men but as a punishment for some atrocious crime."[i-235] Three years before he met Quesnay (though after he had read Dupont de Nemours's letters to Templeman), Franklin sanctioned free trade through appeal to other than utilitarian prudence: first he admitted that British restraint of colonial commerce, for example with the West Indies, will tend to prevent colonists from making remittances for British manufactured goods, since "The Cat can yield but her skin." Then with a suggestion of philosophic generalization he hoped that "In time perhaps Mankind may be wise enough to let Trade take its own Course, find its own Channels, and regulate its own Proportions, etc."[i-236] Restraint of manufactures "deprive[s] us of the Advantage God & Nature seem to have intended us.... So selfish is the human Mind! But 'tis well there is One above that rules these Matters with a more equal Hand. He that is pleas'd to feed the Ravens, will undoubtedly take care to prevent a Monopoly of the Carrion."[i-237] Glorifying the husbandman and suggesting that trade restrictions disturb a natural order, Franklin wrote to David Hartley in 1783 that Great Britain has tended to impede "the mutual communications among men of the gifts of God, and rendering miserable multitudes of merchants and their families, artisans, and cultivators of the earth, the most peaceable and innocent part of the human species."[i-238]
That Franklin was not without his influence in eighteenth-century economic thought we may gather from Dugald Stewart's opinion that "the expressions laissez-faire and, pas trop gouverner are indebted chiefly for their extensive circulation to the short and luminous comments of Franklin, which had so extraordinary an influence on public opinion in the old and new world."[i-239] Mr. Carey maintains that Franklin, unlike the physiocrats, inveighed against trade regulations because they led to smuggling rather than because to any important degree they violated the "natural order." The physiocrats are tenuous, amorphous, and ambiguous when they seek to define L'Ordre naturel. At times Dupont de Nemours seems to identify it with a primitivistic past.[i-240] Quesnay, on the other hand, says: "Natural right is indeterminate in a state of nature. The right only appears when justice and labour have been established."[i-241] Again, he asserts: "By entering society and making conventions for their mutual advantage men increase the scope of natural right without incurring any restriction of their liberties, for this is just the state of things that enlightened reason would have chosen."[i-242] Natural order is a "providential order": "Its laws are irrevocable, pertaining as they do to the essence of matter and the soul of humanity. They are just the expression of the will of God."[i-243] According to the physiocrats, the laws of the natural order are "unique, eternal, invariable, and universal."[i-244] Now it is true that nowhere did Franklin assert that his advocacy of laissez faire and agrarianism was neatly dependent on these a priori bases. Even though this is true, there are references (quoted above) which seem to suggest that trade restrictions are violations of the very nature of things. It is not wholly fanciful (bearing in mind Franklin's adoration of a Deity who is the creator and sustainer of immutable, universal physical laws which together present the mind with the concept of a vast, wonderfully harmonized physical machine) to conjecture to what extent this matchless physical harmony tended to challenge him with the possibility of discovering a parallel economic machine operating according to immutable laws capable of proof and human adaptability.
O. H. Taylor has shown that "The evolution of the idea of 'laws' in economics has closely paralleled its evolution in the natural sciences."[i-245] In searching for these economic constants, "the economic mechanism was regarded as a wise device of the Creator for causing individuals, while pursuing only their own interests, to promote the prosperity of society; and for causing the right adjustment to one another of supplies, demand, prices, and incomes, to take place automatically, in consequence of the free action of all individuals."[i-246] After giving due weight to the fact that Franklin saw in the doctrine of the physiocrats trenchant arguments to buttress his attacks on British mercantilism, one has cogent evidence for at least raising the question, To what extent may his apprehension of a demonstrable physical harmony have suggested to his speculative mind an economic analogy?[i-247]