Does a Culture of Thrift Cultivate Generosity?

My answer to the question is yes.  A powerful and reciprocal relationship between thrift and generosity can exist, and has existed at key moments in our past.

Beginning with Benjamin Franklin, the great popularizer of thrift, we can trace the development of thrift as a complement and spur to generosity in American thought and practice.

The high point of this development came in the early decades of the twentieth century when a mass culture of thrift provided the rationale and resources for a culture of organized mass philanthropy. To be sure, the practice of thrift has not been consistent across the centuries.  Americans have often been notoriously unthrifty.  But the broad tendency over time has been to tie thrift and generosity together in a new and expansive view of giving.

Over much of the world, the practice of giving freely and sacrificially of one’s time, talent and treasure has been rooted in the religious obligation to offer tithes to one’s own faith community and to give charity to the poor and needy.

Franklin broke with this tradition.  He recast the philosophy of giving from a religious obligation to care for the poor to a secular rationale for doing good while doing well.   Central to his thinking was the connection between thrift as a means to individual betterment and generosity as a means to social betterment.

Franklin saw thrift as way to wealth for “middling” people who were not born to great riches but who could gain wealth through persistent hard work and frugal living.  However, his notion of thrift was never narrowly conceived as wealth-building for its own sake or for the sake of one’s heirs, much less for the establishment of a permanent class of wealth and privilege.  Indeed, in Franklin’s view, riches passed on to future generations only bred idleness and dissipation.   Those who gained wealth, he believed, had the responsibility to give their time and talents to serve the public and the common good.

At the same time, Franklin was opposed to traditional charity.  Instead, he argued, one’s gifts should be directed toward projects of self-help and mutual aid.  He believed that generosity, like thrift itself, should produce growth.  Its beneficiaries should multiply.  Funds should be replenished and made available to others.  Putting this idea into practice, he bequeathed a substantial fund to provide loans for young married tradesmen who pledged to repay the loan at five percent of the principal each year.

Franklin also rejected the notion of generosity as painful self-sacrifice.  He believed that giving brought rewards to the giver as well as the receiver.  As Poor Richard said, “When you are good to others, you are best to yourself.”

If Franklin laid the philosophical foundations for thrift-based generosity, the great nineteenth century philanthropists put the idea into practice. Industrial magnates like Andrew Carnegie, John D Rockefeller, Johns Hopkins, Leland Stanford, Charles Pratt and John C. Wanamaker used their immense fortunes to build universities, hospitals, public libraries, museums, and vocational training schools.  Importantly, the institutions they founded were for the social benefit of the public and not for their own private pleasures.   With the founding of these educational and cultural institutions, they expanded and enriched the civil society and the common good.

A ‘Gospel of Wealth,’ A Culture of Thrift

To a remarkable degree, these philanthropists echoed Franklin’s philosophy of giving.   Like Franklin, most came from humble beginnings and credited youthful habits of thrift for their rise into great wealth.  Like Franklin, they saw their wealth as a trust to be used for the benefit of improving opportunities for aspiring Americans.  In his famous 1889 essay, “The Gospel of Wealth,” Andrew Carnegie restated Franklin’s principles of philanthropic giving.  In it, he argued that a person of wealth should live modestly; provide moderately for those who depend on him; and use the surplus as trust funds to produce “the most beneficial results for the community.” He also underscored another hallmark of Franklin’s thinking: namely, that the aim of giving should be to “place within reach the ladders on which the aspiring can rise . . . “

The close relationship between thrift and generosity reached its high water mark in the early twentieth century with emergence of an organized and institutionalized culture of thrift.   National organizations like the YMCA, National Education Association, American Bankers Association, and the General Federation of Women’s Clubs mobilized to celebrate Thrift Week, to encourage thrift education for schoolchildren, and to promote the habit of savings among urban workers and new immigrants who might otherwise turn to loan sharks and salary lenders for financial help.   Building and loans, mutual savings banks, and later credit unions offered cooperative savings opportunities for wage-earning Americans as a ladder to economic betterment.

The national thrift culture not only encouraged personal savings.  It provided the impetus for a culture of mass giving, or what the historian Olivier Zunz, echoing thrift advocates of the time, has termed “public thrift.”

Public thrift rested on the principle of self-interest rightly understood.  As Americans faced public health threats or natural disasters, they realized that they could not protect their families from such catastrophes on their own.  But they could pool their nickels and dimes to wage a collective fight to search for a cure.  In short, their small savings could have big effects on the entire society.  Their time and talents could be pooled to provide volunteer armies of fundraisers to fight tuberculosis or to support the Red Cross.

Thus, mass savings and mass giving had a reciprocally reinforcing effect on the public.  Thrift leaders promoted popular giving, and philanthropic leaders praised the popular habit of saving.   Economists devised family budgets that included a line item for household giving, thus establishing generosity as an economic norm for families of all income levels. In this fashion, thrift provided the resources for giving, and giving inspired greater thrift as the two were increasingly linked in popular health, and later, World War I fund-raising campaigns.

The reciprocal relationship between private and public thrift, saving and giving, persisted into the early years of the Great Depression and later helped to drive popular participation in the hugely successful World War II savings bond campaigns and the post-war March of Dimes effort.

Giving in an Age of Spending

By the 1960s, however, the coalition of national organizations promoting thrift ceased their activities.  Schools gave up their savings programs.  And American households increasingly turned to consumer debt rather than savings to finance their wants and needs.  The savings rate, which stood in double digits as late as the early 1980s, fell to near zero in 2005 and has since rebounded to a still anemic 4.4 percent.

As a consequence, thrift has lost much of its cultural force.  Few schoolchildren today have even heard the word, much less are able to say what it means.  A teacher of my acquaintance reports that her students, rich, poor and in-between, customarily throw their loose change into the trash along with their lunch leftovers.  Apparently, they are clueless as to the value of their nickels and dimes when their customary medium of exchange is the “swipe” card.

Yet the relationship between thrift and giving has not died out.  It persists in the philanthropic work of men like Warren Buffet and the late Sir John Templeton who exemplify the tradition of living modestly and giving generously of their wealth for the betterment of the larger community.  And public thrift – in the form of mass giving campaigns – continues to be a part of American life and culture.  Indeed, Americans are famously generous in their response to natural and health disasters, both here and across the world. We continue to join walk-a-thons and fundraisers to combat breast cancer, diabetes, Alzheimer’s and other diseases. We continue to volunteer time to help others in need.

Still, it may be too optimistic to expect generosity to flourish as its cultural and economic wellsprings run dry.  Indeed, public thrift may not be sustainable without the renewal of the value of private thrift.

In light of that possibility, I invite readers to offer their thoughts and comments on the following questions, (or on any other relevant point one might wish to raise).

Questions for Discussion:

  1. In the past, resources for mass giving have come from Americans’ household savings.  Will today’s low level of household savings contribute to lower levels of giving in the future?
  2. Likewise, widespread prosperity in the past has helped to foster generosity.  Will Americans become less generous and less oriented to public thrift in these difficult economic times?
  3. A mass thrift culture fostered collective action in service of a common goal.  What kinds of social and institutional incentives today would generate a similar spirit of cooperation for the common good?
  4. Finally, what can we do to help young people learn about and practice thrift, given their use of new technologies that foster speed, instant gratification, and the magic of plastic over the magic of compound interest?

Discussion Summary

In this concluding reflection, let me take the opportunity to say more about thrift itself and to speculate on why it has fallen into cultural disfavor today.

It’s fair to say that thrift has had a lot of bad press over recent decades. Some have derided thrift as stinginess, hoarding, and joyless self-denial.  Others have ridiculed it as an obsolete “Victorian” value and mischaracterized it as the antithesis of spending.  Still others have blamed thrift for standing in the way of a robust economic resurgence.  Even the friends of thrift have worried about its survival in a consumer culture where Americans are enjoined to help their country by going to the mall.

These views of thrift reflect a common assumption that thrift is a “money behavior.”  At least, this has been my experience in talking and writing about thrift.  Mention thrift to those concerned with macroeconomics, and talk turns to tax, monetary and fiscal policy.  Mention thrift to those concerned with household economics, and talk turns to managing, budgeting, saving, and investing of money.

To be sure, this commonsense view of thrift is not exactly wrong.  Thrift does bear on the uses and misuse of money in economic spheres both big and small.   But in a more fundamental sense, thrift is not an economic doctrine – at least not in the modern sense of economics.   It is an ethical principle.

Classically defined, thrift is the “ethic of wise use.”  It encompasses three aspects of ‘wise use:” useful and productive work; prudent use of natural and material resources; and stewardship of resources for the use of others and for the use of future generations.   Briefly stated, thrift is “industry, frugality and stewardship.”

Understood in its full and rich sense, thrift has powerful appeal and ethical relevance for us today. It organizes productive energies to ends that are not self-serving or self-aggrandizing but aim at serving others.   For example, it connects to the grassroots movements for land, water and energy conservation; for community gardening and farmers’ markets in low-income areas; for recycling and reusing resources.  It fosters cooperation and coalition-building among organizations engaged in “pubic thrift.

At the same time, however, it must be acknowledged that thrift has lost much of its ethical meaning.  For many Americans today, thrift is a consumerist value.  It is associated with being a shrewd shopper. A thrifty person is someone who clips coupons and hunts for the best deals.  In short, thrift has been redefined as mere economizing.

Tellingly, too, thrift has vanished from the set of character virtues we seek to instill in children at home and school.  Thrift was once among the virtues taught to schoolchildren.  In the first two-thirds of the last century, many schoolchildren participated in thrift essay contests, school savings banks, and Thrift Week celebrations each January on Benjamin Franklin’s birthday. (I had the high honor of collecting money for our sixth grade thrift bank at Franklin Elementary School.)

But today, even the word “thrift” has dropped out of the character development vocabulary.  Indeed, in reading the popular and social science literature on character development, I am struck by how frequently thrift disciplines – deferred gratification, future-mindedness, impulse control, ability to plan, and generosity to others – have been redefined as “noncognitive skills” or more narrowly still, as “financial literacies.”  It is as if the social scientists have been charged with rewriting Poor Richard’s Almanac – without ever using the word “thrift.”

What a society seeks to pass on to its children reveals what a society values.

Consequently, if I set out to renew a 21st century culture of thrift, I’d begin would by teaching thrift to every child – and I would not flinch from using the word.  But of course, I could be wrong.

Therefore, I offer the following Two New Big Questions:

1. Given all the misconceptions about thrift, why not substitute the word “thrift” for another word or words?  Would anything important be lost if we were to do so?

2. Is it possible to foster generosity without any notion of stewardship?

2 Responses

  1. James Laird says:

    I agree that thrift encourages generosity, and the reason is straight forward; in order to give something away, you must first have it. If a person is carrying a heavy burden of debt, they simply don’t have extra money to give generously to others. Instead, their priority is to repay lenders.

    The economic system within the United States currently contains extraordinary levels of debt, and I believe the fundamental reason the debt exists is also straight forward.

    Before the Federal Reserve was created in 1913, economic business cycles were controlled primarily by the net sum of decisions made by millions of private borrowers and private lenders. When borrowers as a whole determined that they had borrowed enough money for purposes of consumption and they could no longer service additional debt, they reduced their borrowing. In a similar manner, when lenders as a whole perceived that borrowers could no longer service additional debt for purposes of consumption, they reduced lending. When viewed from a big-picture perspective, the combined decisions of those millions of borrowers and lenders naturally caused a subsequent downturn in the business cycle (i.e., less consumption –> therefore less production –> therefore lower employment –> therefore default on non-serviceable debt) followed by renewed growth and an upturn in the business cycle.

    The creation of the Federal Reserve effectively changed the natural sinusoidal process described above, because the FR learned how to influence the business cycle from a higher level – the government level. Their newfound control was exciting, and they intended to create continuous economic growth going forward (i.e., our leaders had good intentions). However, due to mankind’s inability to achieve balanced growth (i.e., we’re only capable of sensing limited forces) and mankind’s limited intelligence, the FR placed inappropriate emphasis on achieving short-term goals, wherein whenever the business cycle began to naturally turn downward, the FR reduced interest rates thereby stimulating more borrowing for purposes of consumption.

    Over a long period of time, and after repeatedly manipulating interest rates lower to prevent downturns in the business cycle (to a depth that would have been sufficient to wash out unserviceable debt loads), the actions of the FR have effectively launched the United States into a “super-cycle” of debt, thereby increasing overall debt and reducing overall net savings to extremes never experienced before. The FR has effectively created a *HUGE* imbalance within the economic system, and the FR is now desperately trying to balance large forces of deflation against large forces of inflation – and if that balance gets slightly out of hand in one direction or the other, the FR will rapidly lose its control.

    To summarize; an extremely large amount of value has effectively been borrowed over a long period of time from citizens who have saved, and that value has been *consumed* – the value is completely *gone* and it’s no longer available to be generously given away by anyone. Generosity has become more difficult.

    So what’s the solution that will allow US citizens to return to generous giving? I believe that a large percentage of the debt that’s been accumulated during the super-cycle must be liquidated (i.e., defaulted upon and never repaid). The debt is simply too large to be serviced, and if the U.S. economic system were to reduce spending to the level required to repay the debt, the depth of the resulting downturn in the business cycle would be devastating. In other words, it’s too late to repay the debt and default is required.

    So how will the default occur? Here’s my best guess: Sometime in the future, the U.S. Government will likely devalue the U.S. currency significantly (probably on a Friday afternoon after U.S. markets have closed, or perhaps on a Wednesday like 11/21/12), which will effectively repudiate a significant portion of all debt denominated in U.S. Dollars. That process of sudden devaluation may occur more than once – it may be realized in several separate steps over time. Yes, the people who are trusting the system and are holding debt denominated in U.S. Dollars are going to lose a large percentage of their savings; it’s simply the path forward and there’s no way around it at this point.

    After going through a difficult financial metamorphosis, the global financial system will eventually improve tremendously; the standard of living will rise for everyone across the globe in a more uniform and fair manner; mankind will learn an important lesson whereby governments will stop influencing the business cycle; attitudes of entitlement will change into attitudes of productivity; and thrift will lead us back to generosity.

    • Barbara Dafoe Whitehead says:

      As James Laird notes, a traditional incentive for small savers, the chance to earn a decent return on their savings, does not currently exist.  This makes it less likely that people who are not savers will become savers.  For people who have been saving over much of a lifetime and are now relying on their savings as a source of retirement income, it means a near zero rate of return.  Thoughts from others on this situation are sincerely sought – particularly with respect to what can be done in the shorter-term to foster thehabit of savings among Americans who are not saving anything at all.