By Jason Zweig | Feb. 7, 2012 2:40 pm ET
Image credit: William Powell Frith, “Charles Dickens” (1859), Victoria and Albert Museum
Today, as Google’s homepage doodle reminds us all, is the bicentenary of the birth of Charles Dickens.
The inexhaustible writer wasn’t merely the greatest novelist of Victorian England. He was also an astute essayist with a keen interest in finance. In 1842, Dickens — already renowned on both sides of the ocean as the author of Oliver Twist and The Old Curiosity Shop — arrived in the U.S. for a lecture tour. Naturally, as Mark Twain would do in later decades, Dickens turned that tour into an occasion for compiling a book on what he saw and experienced.
The result was American Notes, a travelogue in which Dickens pulled no punches about America the financial basket-case. In the middle of the night in Philadelphia, he gazed across the street at a grim apparition:
That was the Second Bank of the United States, which had gone bust in early 1841 under the weight of lousy loans, years after Pres. Andrew Jackson had sought to terminate it.
Today, Americans and Europeans alike have forgotten the early 1840s. The U.S. was in one of the deepest economic depressions in its history. A reckless, debt-fueled real-estate bubble had burst in 1837. Many of the investors in the bonds that had leveraged up American real-estate were British. After pumping millions of tax dollars into “improvement schemes” like canals and banks specializing in financing land, nine U.S. states defaulted on their municipal debt — and five repudiated their debts, refusing to pay their creditors.
According to an outstanding new book, America’s First Great Depression: Economic Crisis and Political Disorder after the Panic of 1837, by historian Alasdair Roberts, the British were enraged by America’s fiscal recklessness. A British diplomat, Lord Ashburton, called the U.S. a “mass of ungovernable and unmanageable anarchy.” The Times of London thundered in May 1842: “the plainest truths of political economy are disdainfully denied by the Legislature…the most obvious interests of the community are sacrificed to the passions or prejudices of the people.” The great investment banker James de Rothschild declared that America had been so irresponsible that it would be unable to “borrow a dollar, not a dollar.”
After touring the mid-Atlantic states, Dickens headed west. He visited Cairo, Ill., the city on the confluence of the Ohio and Mississippi rivers that in 1836 had been promoted as a future industrial and trading metropolis. British investors had snapped up millions of pounds’ worth of Cairo development bonds — which all defaulted and took the state of Illinois down with them.
In Chapter XII of American Notes, Dickens described Cairo as only an author with friends who had invested in defaulted bonds could:
“…we arrived at a spot so much more desolate than any we had yet beheld, that the forlornest places we had passed, were, in comparison with it, full of interest. At the junction of the two rivers, on ground so flat and low and marshy, that at certain seasons of the year it is inundated to the house-tops, lies a breeding-place of fever, ague, and death; vaunted in England as a mine of Golden Hope, and speculated in, on the faith of monstrous representations, to many people’s ruin. A dismal swamp, on which the half-built houses rot away: cleared here and there for the space of a few yards; and teeming, then, with rank unwholesome vegetation, in whose baleful shade the wretched wanderers who are tempted hither, droop, and die, and lay their bones; the hateful Mississippi circling and eddying before it, and turning off upon its southern course a slimy monster hideous to behold; a hotbed of disease, an ugly sepulchre, a grave uncheered by any gleam of promise: a place without one single quality, in earth or air or water, to commend it: such is this dismal Cairo.”
Source: WSJ.com, Total Return blog, http://blogs.wsj.com/totalreturn/2012/02/07/a-dickens-of-a-reminder/