The Keynesianism of Scrooge

Now that Christmas is over the time has obviously come to examine Scrooge analytically from a Keynesian point of view. That is what Lee Erickson, professor of English at Marshall University in Huntington, West Virginia, did in an essay first published in 1998. It was reprinted in Open Democracy on December 18. Erickson died in 2008. This is an edited version of his essay.

The traditional interpretation of Scrooge is of an avaricious miser graced by visitations that convert him into an enthusiast for Christmas. From a Keynesian point of view, Scrooge is a hoarder with an obsession for maintaining almost complete liquidity in deflationary times like the early 1840s. Even then, Dickens recognized the problem and understood the cure.

Dickens’s description of Scrooge bespeaks distasteful personal experience with money-lenders. We know from the first pages that Scrooge is the most cold-hearted of penny-pinchers. Further, although Scrooge has inherited a fortune as Jacob Marley’s business partner and sole surviving heir, he is still living in Marley’s old chambers in a building where all the other rooms are being rented as commercial offices and where a wine merchant has stored his casks in the cellars.

Scrooge has changed nothing about the rooms, added nothing to them, and spends almost nothing on his own creature comforts. He has only a low fire for himself on a bitter winter night and takes only gruel for his cold. Further, as we later discover, his scavenged belongings would bring only a few shillings and pence from the rag-and-bone shop man. Indeed, although Scrooge is a rich man, he has spent almost nothing of his wealth but instead apparently has hoarded his money as liquid capital for his firm, which has a place on the Royal Exchange and evidently handles foreign exchange and discount bills. That is, he deals in private and commercial credit.

His financial practice is represented by the “cash-boxes, keys, padlocks, ledgers, deeds, and heavy purses wrought in steel” that weigh down old Marley’s Ghost, and which the Ghost says are also weighing down Scrooge. To remain financially sound, Scrooge has remained extremely liquid so as to have cash and to meet any bill presented to him for immediate payment. However, as John Maynard Keynes remarks in his General Theory of Employment Interest and Money, “of the maxims of orthodox finance none, surely, is more anti-social than the fetish of liquidity.” The worst thing an individual can do in financial crises and the thing that, according to Keynes, has the most “disastrous, cumulative, and far-reaching repercussions” is not to spend one’s income on either investment or consumption, but to hoard it, as Scrooge has done, under lock and key.

As Scrooge’s fiancée, Belle, rightly points out, the psychological motivation for Scrooge’s economic behaviour is fear. In particular, Scrooge worries about losing his reputation for being a financially sound businessman. In this regard, like others of his time, Scrooge feared not just the Sprit of Christmas Yet to Come but the financial future, which seemed likely in the deflationary moment of December 1843 to be very bleak. On Tuesday, December 19, 1843, the day that A Christmas Carol appeared… the prices of goods in England had been falling for the past four years and had fallen during that time a total of 22.72 percent. During this period, the rate of deflation had thus been 5.68 percent a year and, in particular, retrospective price indexes show that prices had fallen and the purchasing power of a pound had risen by five-and-a-half percent from the end of 1842 to the end of 1843. As a consequence, those with income in excess of their needs were spending no more at present than they had to spend, since they expected that tomorrow their pounds would likely buy more. Further, demand for borrowed money was historically low since most businessmen feared that they would not only have to pay back their debts in more valuable pounds but also that the demand for goods would continue to decline and reduce the return on any new investment….

By thinking that things will get worse, Scrooge has profited in the declining market that had prevailed since Marley’s death seven years before on Christmas Eve, in 1836. Indeed, his constant discovery that every pleasant thing is “humbug” represents his immediate discounting of any present pleasure against future pain. This general fear of the future felt by the English financial markets in 1843, and especially by Scrooge, is symbolically transmuted by the Ghost of Jacob Marley and the Spirits of Christmas, who, like the Fates, offer progressively more frightening consequences of not spending one’s money and who allow Scrooge to imagine a fate worse than his own bankruptcy and death.

In this atmosphere of business pessimism, there were more goods being produced than there was effective demand to consume those goods. As the Spirit of Christmas present shows Scrooge, the stores and shops are overflowing with good things to eat on Christmas Day.

The very amplification of Dickens’s catalogue attests to the abundance available, even begging, to be consumed. Indeed, the English were ironically in the midst of a Malthusian glut.

If the Bob Cratchits of England cannot possibly afford to buy the prize turkeys in the local shops, those with incomes like Scrooge can. For this reason, A Christmas Carol in both its message and its physical appearance as a book was aimed at wealthy readers and sought to create an atmosphere of cheerful consumption. As Keynes remarks, in his proposal for curing the crises of confidence that afflict the economic life of the modern world, “a large proportion of our positive activities depend on spontaneous optimism rather than mathematical expectation, whether moral or hedonistic or economic.”

Scrooge’s transformation is also signalled by the bubbling over of his sudden access of good humour after he has impulsively and extravagantly spent his money and has ordered the cab to Camden Town: “The chuckle with which he said this, and the chuckle with which he paid for the Turkey, and the chuckle with which he recompensed the boy, were only to be exceeded by the chuckle with which he sat down breathless in his chair again, and chuckled till he cried.” It is certainly the impulsive, spontaneous character of Scrooge’s new beneficence that Dickens emphasizes.

Dickens explicitly counters the gloomy Malthusianism that had previously informed Scrooge’s first response to the gentlemen raising charitable donations: “If they would rather die…they had better do it, and decrease the surplus population.”

What matters from the Keynesian perspective, however, is not so much Scrooge’s new-found generosity to the gentleman who had solicited him earlier on behalf of the poor but his extravagance in spending his own money. Not only does he have the little fellow standing outside his window fetch the poulterer’s man with the prize turkey but he also promises him half a crown if he returns with the man in five minutes. Scrooge is suddenly willing to pay two and a half shillings to a boy for five minutes’ work, which is what Bob Cratchit, working six days a week, was paid for a whole day’s labour. On top of that, Scrooge is eager to send the poulterer’s man with the turkey by cab to Camden Town, more than five miles from the City of London, in order to deliver the turkey to the Cratchit family. So, while we don’t learn how much Bob Cratchit’s new, increased salary will be, we do recognize that Scrooge is quickly learning how to take pleasure in spending his money.

Scrooge obviously is in accord with Keynes’ thinking, for as he wakes up from the visitation of the Christmas Spirits (and I can’t help but think here of Alastair Sim playing the role in the 1951 film, A Christmas Carol), he declares, “I am as light as a feather, I am as happy as an angel, I am merry as a schoolboy. I am giddy as a drunken man. A merry Christmas to everybody! A happy New Year to all the world! Hallo here! Whoop! Hallo!”


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