The Economics of Les Miserables
I just recently saw the new Les Miserables film and realized the important economic lesson that is largely ignored in the story. In the story, Fantine, like many women of the 19th century, worked in awful factory conditions for numerous hours while making a wage that could hardly be considered a “living wage.” A normal reaction would be to ask why didn’t the government do something to help these women? Wouldn’t these women have been better off with regulations mandating maximum hours, minimum pay, and safety codes? Moreover, why didn’t Jean, a moral man, provide better conditions for his workers?
Such questions can be answered by the fatal circumstances that met Fantine when she was fired from the factory. No longer employed by the factory, Fantine was thrown into complete poverty and forced to take desperate measures like selling her hair and prostitution just in hopes of earning enough to take care of her daughter.
When you understand the fatal circumstances that Fantine was forced into after being fired, it becomes obvious that the factory, despite its awful conditions, was an opportunity for Fantine to escape poverty. Fantine would have been happy to work all those hours in horrible conditions for a small wage because it offered her a better chance of prosperity as to living on the streets.
Why then didn’t Jean offer more? The simple reality is that there was not enough wealth to offer anything more. By wealth, I don’t mean money. Money is merely a tool for exchanging wealth. Wealth is the actual goods and services created that satisfy our needs and wants. In the 19th century, there was little wealth, not because it was hoarded by a few, but because people were very unproductive. It would take a tremendous amount of time and resources just to make a single shirt. In contrast, we now can make a numerous amount of cheap shirts in a very short amount of time.
Once you understand that it took an incredible amount of time and resources to create wealth in the 19th century, no one could afford to work fewer hours or demand more pay. Government regulations would not have fixed this problem. No matter how much they were paid or hours worked or conditions mandated, if enough wealth was not produced to satisfy needs and wants, poverty would have remained. Eating money won’t provide you with any nutritious value nor can money be utilized as clothing. That is why folks like Fantine, despite the working conditions, fled to the factories. And that it is also why Jean could not offer more.
What does raise the standard of living of everyone is not government mandates but improvements in our ability to produce wealth. As we produce more wealth in less time and with fewer resources, we are able to increase the net amount of wealth in the economy. As the net amount of wealth in the economy increases relative to the amount of money exchanging the wealth, prices fall. This continual creation of wealth along with falling prices is what permits workers to demand better wages and working conditions. Because of the creation of more wealth, workers can afford to avoid working in the factories without a better offer for their employment.
That process of creating new and additional wealth relative to a stable amount of money is the key to growing prosperity. The process requires leaving savings in the hands of those who can invest it into creating better tools and technology for production. The process also requires that the money supply be regulated by market forces and not manipulated by the government. Both of these requirements have been under attack for a century, and as a result, like Fantine, it is becoming more and more difficult for us to get ahead of life.
In the above picture, you case see that prices slowly deceased during the 20th century except for the Civil War. The 21st century is a different story. Prices have been rising despite our technological improvements and increased production. Understanding the attack on savings and money is the key to learning why the story has changed. To learn more about that attack and how to end it, start following this blog.