Ed Miliband - a rising tide of folly?

"Now the rising tide just seems to lift the yachts", said Ed Miliband in his conference speech.  It marks another step in the progress of Labour's criticism of Coalition economic policy.  First austerity would kill growth; then when growth returned it was the wrong sort of growth; now it is growth which is making the rich richer but not the rest of us.  Living standards are not rising, goes the complaint, gilded with a little class war to get the faithful's juices flowing.

There are several things to say about this.  Firstly, the economy has only been growing modestly.  Secondly, it's only been growing for about six months or so.  Thirdly, real living standards haven't been growing for some time, and in fact for young workers started to fall about ten years ago, when Labour was in power.

But it's the fourth point that's the most important.  Why does Miliband (and everyone else) assume that living standards must rise inexorably?

If we have learned anything from the credit crunch it is surely that the West has used debt to plug the gap left by reduced national income. In Britain, manufacturing industry went overseas - more than a million jobs in manufacturing lost during the Blair years - to people that were willing to work for a dollar a day.  These people had far, far lower living standards than we did (although, interestingly, they still thought it better to live in poor conditions and work in a sweat-shop than labour in the paddy fields all day - Apple's critics please note).

Here, our living standards carried on rising, defying gravity, but only because government, house buyers and consumers took on eye-watering quantities of debt.  In Britain the level of personal debt when Labour came to power was about £500 billion.  In the following fifteen years it trebled to £1.5 trillion.  That's £1,500,000,000,000.  There is a limit to how much more we can take on (although surely we will try).

Actually it's possible to argue that we got into difficulties precisely because we wanted higher living standards.  In the post-war years this demand made our wage costs higher, and our industries less competitive. The newly rich economies of the Far East, looking for somewhere to park their money, were happy to lend it back to us so we could carry on buying their goods.

So I don't expect to see living standards rising much any time soon.  And I wonder whether they would be a good thing anyway. Consumerism is shallow, and its devotees boring.  I used to think that prosperity would make people cultured and civilised, but it actually just makes them go out and buy the stupid tat they fetishised before they had money.  Perhaps that's capitalism's fault.

Moreover, the higher wages are in Britain, the more difficult it will be for us to keep the manufacturing jobs we have and perhaps even make new ones.  I would much rather see living standards stagnate but more people have jobs, and I sometimes think the best hope for us is that people in the Far East have living standards which gently rise while ours gently fall to meet somewhere in the middle.  It might mean that people would turn their faces away from consumption a little.

But falling living standards is the cri du jour.  Expect to see many more cries for higher wages from the economically illiterate before 2015.