Charles Dickens on Compound Interest

By Grinder, Brian; Cooper, Dan | Financial History, Spring 2014 | Go to article overview

Charles Dickens on Compound Interest


Grinder, Brian, Cooper, Dan, Financial History


London. Michaelmas Term lately over, and the Lord Chancellor sitting in Lincoln's Inn Hall. Implacable November weather. As much mud in the streets as if the waters had but newly retired from the face of the earth, and it would not be wonderful to meet a Megalosaurus, 40 feet long or so, waddling like an elephantine lizard up Holborn Hill. Smoke lowering down from chimney-pots, making a soft black drizzle, with flakes of soot in it as big as full-grown snowflakes - gone into mourning, one might imagine, for the death of the sun. Dogs, undistinguishable in mire. Horses, scarcely better; splashed to their very blinkers. Foot passengers, jostling one another's umbrellas in a general infection of ill-temper, and losing their foot-hold at street-corners, where tens of thousands of other foot passengers have been slipping and sliding since the day broke (if the day ever broke), adding new deposits to the crust upon crust of mud, sticking at those points tenaciously to the pavement, and accumulating at compound interest.

- Bleak House (1852-53)

As I (Brian) read the opening paragraph of Bleak House by Charles Dickens, I was struck by his unusual use of "compound interest" as a description of how mud accumulates on the streets of London. In introductory finance texts, compound interest is often described as the "ninth wonder of the world" (Cornett, Adair and Nofsinger), not as an accumulation of mud. According to Dickens biographer Claire Tomalin, "Dickens makes this the most powerful beginning of all his novels as he rolls out the dark, dirty English earth and sky to set the theme of the book." And there in the mud lies compound interest. What is it about compound interest that made Dickens use the term in such a derogatory way?

In 1824, Dickens's father, John, was arrested and thrown into the Marshalsea debtors' prison for failing to pay a local baker £40. Although this incident is well-known today, it was a "sad and shameful secret" that Dickens usually kept to himself during his lifetime. The 12-year-old Dickens was forced to quit school and go to work at a boot blacking factory. The embarrassment of his father's imprisonment and his own humiliation at having to quit school and work at a mindless factory job had a profound influence on the rest of his life.

Dickens later wrote of the Marshalsea prison in his novel Little Dorrit (1855-57). In the novel, he describes a prisoner in the facility who bears a striking resemblance to his father. In the passage below, note how the term "compound interest" is used to describe the prisoner's increasing confusion over the financial situation that landed him in debtors' prison:

The affairs of this debtor were perplexed by a partnership, of which he knew no more than that he had invested money in it; by legal matters of assignment and settlement, conveyance here and conveyance there, suspicion of unlawful preference of creditors in this direction, and of mysterious spiriting away of property in that; and as nobody on the face of the earth could be more incapable of explaining any single item in the heap of confusion than the debtor himself, nothing comprehensible could be made of his case. To question him in detail, and endeavour to reconcile his answers; to closet him with accountants and sharp practitioners, learned in the wiles of insolvency and bankruptcy; was only to put the case out at compound interest of incomprehensibility. The irresolute fingers fluttered more and more ineffectually about the trembling lip on every such occasion, and the sharpest practitioners gave him up as a hopeless job. "Out?" said the turnkey, "he'll never get out. Unless his creditors take him by the shoulders and shove him out."

Unlike the prisoner in Little Dorrit, luck played a role in getting John Dickens released. After more than three months in prison, Dickens's grandmother died, leaving his father an inheritance of £450. His father was free but would continue to be an embarrassment and a drain on Dickens's finances until his death in 1851. …

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