What David Cameron can't - and won't - tell you

The country is seeing a lot of belt tightening just now, and some suggestions of even worse to come.  We are, quite correctly, complaining about it and objecting to many of the reductions in our standards of living that it will bring.

Now part of this, undoubtedly, is because of the measures that had to be taken to deal with the last financial crisis.  But I wonder if there is a more fundamental truth that our government dares not admit to us.

Note: I have essentially no knowledge of economics.  That puts me on a par with the average Daily Mail columnist, but means that I may be talking complete nonsense.  Indeed, I would be delighted if someone would tell me why the things I postulate below are wrong.

Over the past twenty years or so, we in the West have had it so good.  Poorly paid people in China have manufactured things for us, and those of us able to retain a job have been able to buy things amazingly cheaply.  Manufactured things - TVs, DVD players, computers, washing machines etc - have fallen in "real terms" price to an extraordinarily low price.  This is joly nice for us.

Meanwhile, the Chinese (and Indians, Brazilians, Russians etc) have become very good at not only manufacturing, but also computer programming, administrative tasks, and many other things that we do in life and get paid for.  The massive advances in telecommunications have made it possible for us to use these people to do work for us, and they get paid a pittance.  Isn't it wonderful?

Well, no.  It really isn't.  I have been to China, and met some damned fine engineers out there.  Is it reasonable that they get paid less in real terms (i.e. how many hours per week they need to work in order to feed their family) than I do?  Given that both of us produce product that gets shipped out over the public internet, and so there is no transportation cost to worry about, I cannot see why that would make sense.

Somewhere there is going to have to be a huge levelling of living standards between East and West.  And by that I mean that if a Chinese engineer has to work for ten hours per week to feed his family, I too will have to work for ten hours to do the same.

It will mean a rise in living standards in the BRIC (Brazil, Russia, India and China) countries (and others), but it will also mean a fall in our living standards... and I think that that is what we are starting to see now.

Perhaps some kind economist will tell me why an hour of my work is worth three hours of a Chinese engineer's work... but I don't think that that is going to happen.