Since it’s Christmas Eve, let’s use this opportunity for a holiday-themed economics lesson.
I did a version of this back in 2012 by sharing a remake of Christmas songs. This year, we’re going to look at A Christmas Carol by Charles Dickens.
Let’s start with an analysis of the story from Jacqueline Isaacs.
Many communist and socialist leaders have looked to Dickens as a champion for their cause. Even Karl Marx was a self-professed fan. …many have labeled Dickens a socialist and have used his ever-popular seasonal classic A Christmas Carol, as a condemnation of capitalism and consumerism. …I would challenge anyone…to notice the decidedly non-socialist themes Dickens presents. …First, Dickens never condemns capitalism, decries the success of business owners, nor denounces the trading by which they amassed their wealth. …When the character has gone through his revelatory experience and come out a better man, he does not then become poor. Instead, the new Scrooge uses his wealth to help those around him. …Secondly, Dickens seems to go out of his way to point out the inadequacies of government anti-poverty programs. …If the government takes over the responsibility of caring for the poor, then we will all be Scrooges. …Lastly, Dickens takes a relatively narrow view of community. The New Ebenezer did not set forth to save all of England, but he took care of those needy people whom he encountered every day. …Socialism and communism take very large views of community. They require large numbers of people to participate in the system so that the more productive members of society can fully support the less productive.
Senator Phil Gramm and a former aide, Mike Solon, pointed out in the Wall Street Journal last year that Scrooge may have been an unhappy miser, but his frugality generated benefits for everyone else.
Scrooge is a distilled caricature of a businessman in the Victorian era: a rich, obsessive wealth hoarder. …It does not appear that Dickens seriously considered the possibility that Scrooge and Marley’s business contributed to the common welfare of mankind. Like Scrooge, Marley created and accumulated wealth, leaving it to Scrooge, who continued to invest and accumulate. When Dickens has Scrooge’s nephew say his uncle’s wealth “is of no use to him” because he doesn’t spend it, it is made clear that Dickens never considered who Scrooge’s wealth was useful to. …For all Dickens knew or could envision, the only hope for the poor was charity. Yet unknown to him and his contemporaries, a revolution was beginning at the moment “A Christmas Carol” was published. The Market Revolution, funded by the thrift of Britain’s Scrooges, was already enriching mankind. …the period from 1840-1900 to have been the beginning of a golden age for workers. Wages, stagnant for more than 600 years, exploded during the Victorian era—rising from less than $567 a year in 1840 to $1,216 in 1900 (expressed in 1970 dollars). Life expectancy rose by 20%. Literacy rates soared. …Who then benefited from the accumulated wealth of Scrooge and Marley? First Britain and then all mankind. Since Scrooge and Marley never consumed the wealth they created, its use was a gift to all. It funded the factories and railroads, the tools and jobs that fed and clothed millions of British subjects and then billions around the world. Their unspent wealth was of no use to them, but it was of sublime use to humanity.
Gary North then explains how the thrift of rich people is good for the rest of us, as well as how free enterprise translates self interest into the common interest.
Dickens was living in the second generation after the Industrial Revolution began. Sometime around 1780, an economic revolution like no other in history had begun. It was marked by compound economic growth… The driving force of this revolution was specialization — specialization funded by capital, itself the product of thrift, by double-entry bookkeeping, and by attention to detail. In short, it was men like Ebenezer Scrooge who were the architects of capitalism. …The spread of capital is the basis for men’s increased productivity. The spread of the bookkeeper’s mindset is the basis of net retained earnings, which in turn finance additional capital. Taking care of business reduces poverty as nothing else in man’s history ever has. …without Scrooge and men like him, who are devoted to the details of their businesses, the shops of London would not be filled with cornucopias — at Christmas or all year round. …The heart of capitalism is service to the consumer. In serving the consumer, the producer must pay attention to what the consumer wants, at what price, when, and where. But the same is true of the producers’ attitude toward his employees. They, too, must be served… The free market does not make men good. It does encourage them to serve the consumer. It forces losses on them if they are less efficient in their service than their competitors. The free market society is not a dog-eat-dog world. It is dog-serve-master world. The consumer is the master.
Jerry Bowyer then puts Dickens’ work in context, noting that it could be viewed as a debunking of Malthus.
Thomas Malthus. Malthus’ ideas were still current in British intellectual life at the time A Christmas Carol was written. …What was Dickens really doing when he wrote A Christmas Carol? Answer: He was weighing in on one of the central economic debates of his time… Malthus famously argued that in a world in which economies grew arithmetically and population grew geometrically, mass want would be inevitable. …Jean Baptiste Say…argued on the other hand…that the gains from global population growth, spread over vast expanses of trading, trigger gains from a division of labor which exceed those ever thought possible before the rise of the market order. …If Scrooge has modern counterparts, they’re more likely to be found among those sad, self-sterilizing minimizers of carbon footprints than in the circles of supply-side entrepreneurs. …The debate between Say and Malthus, between Scrooge and the Ghosts, continues to this day. Is the market economy a source of abundance or shortage? Is each new little boy or a girl mostly mouth, or mostly mind? Is it a Say/(Julian) Simon/Forbes/Wanniski/Gilder world, or is it a Keynes/Ehrlich/Krugman/Gore world?
In other words, three cheers for capitalism.
P.S. Another famous character this time of year is George Bailey, the lead character in Frank Capra’s classic, It’s a Wonderful Life.
In a 2019 column for the Wall Street Journal, Gramm and Solon highlight the film’s main economic lesson.
The film’s antagonist is the banker Henry Potter (Lionel Barrymore), who epitomizes the Democrats’ caricature of unredeemable capitalism. Peter Bailey (Samuel Hinds) defends capitalism in an often overlooked dialogue when he asks his son George (Jimmy Stewart) to join his building-and-loan business. …George…wants no part of “this business of nickels and dimes and spending all your life trying to figure out how to save 3 cents on a length of pipe.” His father, being older and wiser, responds: “I feel that in a small way we are doing something important. Satisfying a fundamental urge. It’s deep in the race for a man to want his own roof and walls and fireplace, and we’re helping him get those things in our shabby little office.” By squeezing nickels and dimes, the Baileys made limited resources and labor go further, producing “dozens of the prettiest little homes you ever saw, 90% owned by suckers who used to pay rent” to old Potter. …Peter Bailey’s insight reflects a vision originating in the Enlightenment, which set people free to promote their interest, and in the process, through Adam Smith’s invisible hand, promote the interests of mankind. …Capitalism alone respects life’s greatest gift: the freedom to choose how you live your life, where you discover meaning, and what you sacrifice for.
P.P.S. If you still need to do some last-minute shopping, here’s a gift for your left-wing friends, another for your right-wing friends, and a lot of options for your libertarian friends.
———
Image credit: Ronald Searle, in Life Magazine, 1960 | CC BY-NC 2.0.
