Benjamin Franklin and the Invention of Microfinance

Bruce H. Yenawine

• Publisher: Routledge
• Year: 2015
• ISBN:
  9781317323945
• Edition: 1
• Topic: Economics
• Subtopic: Economic Theory
• Index: Economics

In life, Benjamin Franklin sought to manage debt, organize credit, build capital and promote virtue. After death, he continued this work by leaving a codicil to his last will and testament, bequeathing £2, 000 to Boston and Philadelphia. This study examines Franklin's codicil and the financial history of America over the 200 years since his death.

1 FRANKLIN’S INTENT: THE AUTOBIOGRAPHICAL ORIGINS OF THE CODICIL

In 1789, Benjamin Franklin added a codicil to his Last Will and Testament.¹ He bequeathed a total of £2,000 sterling to the cities of Boston and Philadelphia and to the Commonwealths of Massachusetts and Pennsylvania with explicit instructions as to how they should utilize and dispose of the sum over a span of 200 years. Conscious of the vicissitudes of human nature, Franklin anticipated problems in execution of these provisions: ‘Considering the accidents to which all human Affairs and Projects are subject in such a length of Time, I have, perhaps, too much flattered myself with a vain Fancy, that these Dispositions, if carried into execution, will be continued without interruption and have the Effects proposed’.² Franklin’s recognition that his testamentary instructions might not be honoured or remain effective, conveyed a quality of humility and vulnerability that he frequently feigned but rarely internalized.³

The Founding Fathers of America, including Franklin, held strong opinions about civic virtue forged by the trials and triumphs of their illustrious lives. They believed that good citizens, whether tradesmen in the cities or farmers in the country, exemplified such virtues as ‘thrift, industry, prudence, self-reliance, independence, and civic concern’.⁴ Franklin, however, stood alone in his extraordinary ability to personify and command public attention for these virtues. He utilized his extensive printing business and his literary skill to profoundly influence his generation. Franklin was not content with eminence in his own age. He expressly designed his codicil to actively promote his views on civic virtue for at least 200 years after his death in 1790. It has done so to some degree.⁵

The language of Franklin’s codicil is clear and direct. Its terms are precise, and its provisions are carefully drawn. Throughout his life, Franklin advocated certain personal and societal paradigmatic virtues, especially industry and frugality. These virtues, he believed would produce an enlightened citizenry, the prerequisite for a vital republic. They also informed his personal code of conduct. In his ‘Advice to a young Tradesman, written by an old One’, Franklin says:

In short the Way to Wealth, if you desire it, is as plain as the Way to Market. It depends on the two Words, INDUSTRY and FRUGALITY; i.e. Waste neither Time nor Money, but make the best Use of both.⁶

The attainment of wealth for Franklin was of little value unless it allowed the wealthy to serve a higher public purpose. Franklin had an instrumentalist view of property, i.e. he saw material gain as a means to an end. Moreover, Franklin believed that with citizenship came responsibility to improve living conditions and promote opportunities for gainful employment.⁷

Foreshadowing his codicil, in 1748, Franklin had advised: ‘Remember that Money is of a prolific generating Nature. Money can beget Money, and its Offspring, can beget more, and so on’.⁸ The ethos of thrift and the stewardship of money was consistently evident in Franklin’s thoughts and actions throughout his life: in a callow youth’s juvenilia,⁹ in a contending young printer’s work ethic,¹⁰ in a recurrent theme in Poor Richard’s Almanack,¹¹ and especially in advice in his essay ‘Rules Proper to be Observed in Trade’.¹² The prescription within the codicil was Franklin’s prophetic version of long considered opinion.

Franklin intended the codicil to his last will and testament to serve as a vehicle, delivering his beliefs to generations of Americans. He perpetuated the structure of his own success by institutionalizing the virtues of industry, frugality and the value of civic involvement. Franklin’s scheme required the creation of two strategically designed philanthropic trusts whose executors and beneficiaries would be carefully constrained to fulfil his explicit instructions.

In the codicil, Franklin established these elaborate trusts in Boston and Philadelphia. Franklin described the purpose of the Boston Franklin Trust first. Later in the codicil Franklin placed the same constraints on the mangers of the Philadelphia based Franklin Trust with the instruction: ‘All the directions herein given respecting the Disposition and Management of the Donation to the Inhabitants of Boston, I would observe respecting that to the Inhabitants of Philadelphia …’¹³ Franklin set forth his philanthropic purpose as follows:

The said Sum of One thousand Pounds Sterling, if accepted by the Inhabitants of the Town of Boston, shall be managed under the direction of the Select Men, united with the Ministers of the oldest Episcopalian, Congregational, and Presbyterian Churches in that Town, who are to let out the same upon Interest at five per Cent per Annum to such young married Artificers, under the Age of twenty-five Years, as have served an Apprenticeship in the said Town; and faithfully fulfilled the Duties of their Indentures so as to obtain a good moral Character from at least two respectable Citizens, who are willing to become their Sureties, in a Bond with the Applicants, for the Repayment of moneys so lent, with Interest, according to the Terms herein after prescribed … And as these Loans are intended to assist young married Artificers in settling up their Business …¹⁴

The primary beneficiaries of the Franklin Trusts, between creation in 1790 and distributions in 1890 and 1990, were married artificers. In the codicil, the term ‘artificers’ was used synonymously with ‘artisans’. Franklin used these terms to refer to a class of manual workers who practised skilled trades.¹⁵ Other popular synonyms for ‘artificer’ used in the eighteenth and nineteenth century included craftsman, tradesman, mechanic or leather apron man. Although ‘artificers’ described a type of occupational group, it also referred to a middling class of citizens with social status inferior to the merchants, clergy and professionals but superior to the unskilled labourers, apprentices, slaves and servants. Skilled craftsmen, builders, small scale manufacturers and other producers were considered artificers.¹⁶ Considering this variety of occupations, the artificers that Franklin sought to assist in the codicil constituted a large segment of the population. According to Boston and Philadelphia Inventories from 1685–1775, artificers (in the Retail Crafts, Building Crafts and Industrial Crafts occupational categories), represented 29 per cent and 38 per cent, respectively, of the urban populations. In the Philadelphia tax list of 1772, artificers in the same categories constituted 47 per cent of the population.¹⁷

The original principal of the bequest was to be loaned to married artificers who had completed their apprenticeships in amounts ‘not to exceed Sixty Pounds Sterling to one Person’¹⁸ and ‘upon Interest at five per cent per Annum’.¹⁹ Although the principal was to be loaned out, Franklin established additional restrictions that virtually assured the full repayment. He expected that the requirement of two prominent guarantors for each loan would prevent default and enable the trustees to return the appreciated principal (i.e. aggregated repaid principal with interest) to the corpus of the trust.²⁰ Having written a policy position regarding paper currency and its inflationary effects and having admonished Congress about the dangers of printing too much paper money,²¹ Franklin also insulated the principal by requiring that the surety bonds were to be ‘…taken for Spanish milled Dollars, or the value thereof in current Gold Coin’. Ever the careful businessman, in his codicil, Franklin detailed the types of records that should be maintained and limited the maximum and minimum amounts of the individual loans. Perhaps fearing misapplication of the funds by misfeasance, he specified that the ‘Managers shall keep a bound Book or Books wherein shall be entered the Names of those who shall apply for and receive the benefit of this Institution and of their sureties together with the Sums lent, the Dates, and other necessary and proper Records …’²²

Franklin planned a powerful demonstration of magnanimity made possible by the careful stewardship of money on the first centennial anniversary of the Franklin Trusts. He estimated that ‘the Sum will then be one hundred and thirty-one thousand Pounds …’²³ The enlarged principal after the first one hundred years was to be divided. A 3/13th portion was to be held in trust for another hundred years and loaned to married artisans on the same basis as it had been during the first term. The balance of principal, a 10/13th portion,²⁴ was to be distributed to two cities for civic improvements. The codicil describes this plan as follows:

… I would have the Managers of the Donation to the Town of Boston, then lay out at their discretion one hundred thousand Pounds in Public Works which may be judged of most general utility to the Inhabitants, such as Fortifications, Bridges, Aqueducts, Public Buildings, Baths, Pavements or whatever may make living in the Town more convenient to its People and render it more agreeable to Strangers, resorting thither for Health or a temporary residence. The remaining thirty-one thousand Pounds, I would have continued to be let out on Interest in the manner above directed for another hundred Years, as I hope it will have been found that the Institution has had a good effect on the conduct of Youth, and been of Service to many worthy Characters and useful Citizens.²⁵

Embodied in this prescription is the essence of civic republicanism. Franklin believed that thrift and industry would yield profits which could and should be employed to improve the community and promote the good ‘conduct of Youth’ as well as help the ‘worthy’ and the ‘useful’. Just as the collective good was served by the achievement and prosperity of each individual citizen, so also was each individual invigorated and supported by the benevolent spirit of the socially and politically engaged citizenry. Franklin was firmly committed to the marvellous reciprocity of rights and obligations.²⁶

In the codicil Franklin explicitly provided for loans rather than gifts. By this method, he underscored the need for young citizens to establish credit and earn self reliance through timely repayment. The loans were to be provided to married artificers in establishing their own business. Franklin believed that marriage stabilized the young tradesman and contributed to sound business practices.²⁷ He wrote that:

A Man does not act contrary to his Interest by Marrying; for I and Thousands more know very well that we could never thrive till we were married; and have known well ever since; What we get, the Women save; a Man being fixt in Life minds his business better and more steadily; and he that cannot thrive married, could never have throve better single; for the Idleness and Negligence of Men is more frequently fatal to Families, than the Extravagance of Women.²⁸

Franklin also promoted young marriages for the sake of the country as well. In his essay on population growth, Franklin predicted rapidly expanding economic strength would result from the settlement of America’s vast tracts of arable land.²⁹ Franklin’s forecast of the population of America doubling every twenty years turned out to be very accurate.³⁰ The matrix of growth depended on early marriages and large families. Franklin also believed that urban artificers would be better served by young marriages while acknowledging the higher cost of living in the city. Early marriage was especially virtuous for urban dwellers as it would tend to discourage luxury, profligacy and undercut the demand for servile domestics.

Paralleling his own life, Franklin also thought that early marriage set up the proper chronology for a ‘useful’ life. He explains: ‘Marriages are generally in the Morning of Life, our Children are therefore educated and settled in the World by Noon, and thus our Business being done, we have an Afternoon and Evening of cheerful Leisure to ourselves …’³¹ So convinced of the efficacy of marriage, Franklin states in the same letter An odd Volume of a Set of Books, you know is not worth its proportion of the set; and what think you of the Usefulness of an odd Half of a Pair of Scissors? It cannot well cut anything’.³²

As for his own marriage, Franklin sustained a long partnership with his wife Deborah. For the first twenty-seven years of their marriage, Franklin’s businesses thrived and his family grew in dynamic Philadelphia thanks in large measure to Deborah’s careful stewardship and keen management ability.³³ Franklin described his soul mate, Deborah, in his autobiography as follows:

… it was lucky for me that I had [a wife] as much dispos’d to Industry & Frugality as my self. She assisted me chearfully in my Business, folding & stitching Pamphlets, tending shop, purchasing old Linen Rags for the Paper-makers, &c. &c.³⁴

Women as wives constituted an important part of the formula for economic independence and consequently, marriage appears as a prerequisite in the language of the codicil.

Despite his reputation for infidelity, and, notwithstanding his florid and, on occasion, passionate love letters to other women, Franklin maintained the highest respect and gratitude for Deborah’s dutiful affection. Although Franklin’s correspondence with Deborah during his many years in England and France usually discussed practical matters, Franklin felt forever grateful to his wife for her assistance in maintaining his private affairs allowing him to lead a preeminent public life. Deborah’s intellectual limitations, lack of sophistication and fear of travelling abroad prevented her from sharing mo...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Table of Contents
• Acknowledgements
• Biography of Bruce Yenawine
• Introduction
• 1 Franklin’s Intent: The Autobiographical Origins of the Codicil
• 2 Franklin’s Intent: The Sources of Political and Economic Concepts
• 3 Boston: The First Century
• 4 Philadelphia: The First Century
• 5 The Centennial in Boston and Philadelphia
• 6 Boston: The Second Century
• 7 Philadelphia: The Second Century
• 8 Bicentennial: Boston and Philadelphia
• Conclusion
• Appendix A: Transcription of the 1789 Codicil
• Appendix B: Boston Artisan List
• Appendix C: Philadelphia Artisan List
• Appendix D: Summary of Litigation and State Laws
• Appendix E: Chronology
• Appendix F: Franklin’s Calculation and Actual Value
• Notes
• Works Cited
• Index