Guest Commentary: Les Leopold Draws Historic Parallels Between Dickens' Time and Today

Wednesday, May 20, 2009

As I am busy researching the real financial situation of my home country Austria - which appears to find itself in the eye of the debt hurricane that has added a few more Beaufort in the last 18 months - I am proud that Les Leopold, author of the book "The Looting of America: How Wall Street's Game of Fantasy Finance Destroyed Our Jobs, Pensions, and Prosperity-- and What We Can Do about It," which will be in your bookstore next month has offered a very witty comparison of Charles Dickens' master piece "Little Dorrit" with today's debt situation. Little Dorrit describes the life in debtors prisons during the Victorian era in the heydays of the now defunct British empire.
Regular readers of The Prudent Investor know my love for history. If there would only be more witticisms like this, drawing from history and concluding that experience shows that man never learned anything from experience.
Lean back and enjoy as Treasury secretaries testimony on Capitol Hill sounds like all his other appearances before: he does not have a solution to the problem (but at least his Wall Street buddies get trillion after trillion which the Fed creates with a few mouseclicks, making future hyperinflation a certainty.

Little Dorrit Gives Wall Street a Haircut
by Les Leopold
While watching Little Dorrit with my PBS-addicted wife, I was struck by Dickens's stinging critique of finance capital. It's obvious that Dickens attacks the cruelty of poverty, the stupidity of debtors' prisons, the idleness and conceit of the upper classes, and the inefficiency of government bureaucracies (which he so wonderfully calls the "Circumlocution Office"). But also, he goes after financial elites with a vengeance. Like Adam Smith, he draws a sharp distinction between those who put money, skill and energy to productive uses and those who simply move money around, or waste it by living lavishly, while doing nothing except collecting dividends and rents. 
In the story, Amy Dorrit grows up debtor's prison, the Marshalsea, with her impoverished father. (Dickens's real father also was sent there.) After many Dicksonian twists, it turns out that the Dorrit family actually has an enormous inheritance which gets the father out of prison and allows them to hobnob with the elite. After more twists, the Dorrits loose all of its newfound wealth by investing it Mr. Merdle's bank, which had been all the rage of London until its Ponzi scheme blew up. (Bernie Madoff could have studied at Merdle's feet, except that Dickens's Merdle graciously committed suicide with a pen knife while enjoying a public steam bath.)
Although the Merdle Ponzi scheme destroys the Dorrits' wealth, the real economy allows Amy Dorrit to save and then marry her one true love, Arthur Clennam. When the bank collapsed, Arthur also lost all the capital of the business enterprise he and Daniel Doyce owned and operated. Arthur is sent to debtor's prison and is a broken man. The angelic Amy nurses him back to life, but then, out of male pride, Arthur refuses to let her pay off his debts to get him out of prison. (This is not a feminist story.) Amy then discovers that her inheritance also is lost to Merdle, so now she and Arthur are free to marry.... except that Arthur is still stuck in debtor's prison. 
Enter the real-economy-as-savior in the form of Daniel Doyce. While away in St. Petersburg, Doyce perfects one of his inventions. As a result, their bankrupt company is about to boom again. So Arthur, his debts paid, leaves prison and marries Amy. True love and the real economy conquers the deceit of finance capital and the spend-thrift classes. If only. 
There's one more scene that could have been written yesterday -- a perfect parody of the Obama-Chrysler debt-holder negotiations. As we know, certain hedge funds and investment groups are whining about getting only 30 cents on each dollar of the Chrysler debt they hold. (In financial-speak, they are getting "haircuts".) Dickens takes this literally. Denks, who is a rent collector for a Mr. Casby, sleuths around the slums while, under Casby's orders, squeezing the poor tenants for every last penny owed. Meanwhile, Casby, who hides the origin of his wealth, is well known as a philanthropist, walking the same slums giving out alms to the poor, while winning the adulation of the very people he is ripping off. At the end of the PBS version, Denks can take no more. After being dressed down again by Casby for not squeezing the poor hard enough, he accosts his boss who is on a jaunt through the slum, waving to his admirers and patting the heads of impoverished children. Denks, before all, blows Casby's cover. Then to the jeers and amazement of the angry crowd, Denks says, among other things, "You are a driver in disguise, a screwer by deputy, a wringer, and squeezer, and shaver by substitute. You're a philanthropic sneak. You're a shabby deceiver!'
Then Denks "whipped out a pair of shears, and swoooped upon the Patriarch from behind, and snipped off short the sacred locks that flowed upon his shoulders." I kid you not.
About the author:Les Leopold directs the Labor Institute/Public Health Institute in New York City and is one more loud voice that knows this financial mess is far from over.


Wikinvest Wire