Edward Hadas

In the labour market, there is a fine line between inefficiency and wastefulness. “This place is so inefficient,” it is said, often with justification, especially in rich economies. “We could do everything we’re supposed to with a third fewer people.” Factories can be streamlined, high quality new equipment can save on labour, and offices are prone to the incubation of worthless bureaucracy.

It also said, sometimes by the same people, that “The unemployment situation is terrible. My young friends can’t get jobs and lots of not-so-old people I know are retiring early.” Such statements are also accurate. In many countries, the Lesser Depression has sharply worsened a longstanding problem of inadequate job creation. Spain’s official unemployment rate is 24 percent. Almost half of the young adults in Greece are jobless. And the employed portion of the working age population in the United States has fallen by three percentage points over the last four years.

Politicians and other leaders have watched the job destruction with something like horror. They shouldn’t have been surprised. The unending fight against inefficiency leads to a natural employment asymmetry. As technology advances, businesses and governments usually find it easier to cut than to add jobs. Some businesses can progressively expand headcount, but in tough times there are more employers looking for ways to use less labour.

Most politicians and economists believe that GDP growth is the cure. It is considered not only the highest economic good but also the best way to create jobs. In search of higher output, governments run huge deficits, while central banks pass out money for free. The policymakers often invoke the name of John Maynard Keynes. But they twist the great economist’s ideas. As Pavlina Tcherneva points out in a recent article in the Review of Social Economy, Keynes thought “the real problem” governments should address during the Great Depression was “to provide employment for everyone”. In Keynes’s view, output follows jobs, not the other way around.

Keynes’s own preferred solution was for governments to organise projects with a high “elasticity of employment”. “There are things to be done; there are men to do them,” he said. “Why not put the two together? Why not put the men to work?” The best way for governments to create jobs quickly is still to hire people directly. A look at the dilapidated infrastructure of the United States suggests that Keynes’ prescription is still relevant.

Enthusiasts for small government might want to privatise such programmes, but they should still agree with the true Keynesian principle: it is better to pay people to work than to pay them not to. Programmes which protect the unemployed and disabled serve a valuable social purpose and payments for early retirement may be defensible, but programmes which create jobs are far preferable to either.

This Keynesian message has largely been lost in the current official policy mix, which aims at growth and hopes for jobs. Policies which support the financial system, put money in consumers’ hands and cut bloated government bureaucracies may eventually encourage job creation. Four years into the Lesser Depression, however, these highly indirect methods are at best working slowly.

Employment asymmetry should be attacked more directly. Governments are even better placed to lead the charge than in Keynes’s day because their economic role has expanded so much. An eight-year experiment in Germany shows the power of relatively minor tweaks to the rules on jobs and benefits. Little more than tougher conditions for unemployment benefits and more helpful employment agencies have cut the number of people unemployed for more than a year from 1.7 million, about 4 percent of the potential workforce, to 800,000.

The precise German recipe is not applicable everywhere, but the principle is. The prime goal of government economic policy should be to fight the natural employment asymmetry of industrial economies. Lower taxes on workers’ income would make new jobs cheaper for employers and more lucrative for employees. In many countries, more stringent limitations on benefits would also help. Almost everywhere, the desire to establish and expand enterprises should be encouraged. In the United States, it would be helpful to find a way to give the rich a smaller share of the nation’s income. The money they don’t receive could be paid out to workers in newly created jobs.

The employment problems of the Lesser Depression are not grave enough to require a major reconsideration of the economy’s goals. A combination of short-term programmes and more gradual shifts in regulation and taxation should do the trick. But as the economy becomes more efficient, the surplus of labour is likely to become a more pressing social challenge. Keynes wondered “how to organise material abundance to yield up the fruits of a good life.” The answer is certainly not found in frequent periods of wastefully high unemployment.

On September 15, 2008 Lehman Brothers collapsed in a heap, a bankruptcy that was followed by a recession in most rich countries. As time goes on, the severity of the disruption becomes both more apparent and more puzzling.

When Lehman failed, it was reasonable to expect the pain to be brief and concentrated. While too many houses had been built in the United States, most of the world’s real economy (comprising factories, offices, retail outlets, construction projects) was doing well. The global financial sector was more distorted, even before investors took fright at the decision to let Lehman go under. But by the middle of 2009, governments and central bankers had agreed to provide bankers and brokers with anything needed to keep them healthy.

Optimism was not justified. Although the countermeasures stopped the deterioration, the rich world now seems stuck in a Lesser Depression – many years of poor economic results and a series of financial crises. In the United States, the euro zone, Japan and the UK, real GDP per person is still lower now than it was four years ago. In all of them, GDP growth is currently either slow or non-existent.

The consumption setback shouldn’t cause too much concern – it wasn’t so bad five or six years ago, when real GDP was last at today’s level. But the enduring recession in the labour market is another matter.

In April 2008 the unemployment rates in the United States, euro zone and UK were respectively 5, 7.3 and 5.3 percent. In April 2012, the corresponding percentages were 8.1, 10.9 and 8.4. More refined indicators – youth unemployment, involuntary part time work and disaffected ex-workers – are even more discouraging. The post-Lehman economy is failing a significant number of people in a fundamental way.

Some economists argue that this real suffering is the necessary price to pay to bring order to the financial world. That’s a dubious argument, since people are more important than money and credit. But the ethical debate isn’t necessary. Despite the real economic pain and the official aid, the financial world looks as ill as ever. On the monetary side, policy remains in shock territory – buyers of safe government debt receive negative real returns. Fiscal positions are equally alarming. Deficits everywhere remain at levels more suitable for wartime mobilisation than for a sputtering economy.

The puzzle is why a relatively small problem in the real economy has led to this Lesser Depression, especially when the authorities have followed expert advice throughout. Surely, if the counsel were sound, the depression would have lifted by now.

The experts offer several excuses. One is that the euro zone’s special problems have delayed recovery. That’s probably true, but European politicians and central bankers are following the best advice on how to compensate. Another is that the authorities should have been even more aggressive in their support for the financial system. Maybe, but even larger fiscal deficits and even easier money would create other distortions. Yet another claim is that governments should have cut back their spending faster. Possibly, but that would hit consumption harder and further increased unemployment.

The problem is actually the experts. Recent history provides a good reason to doubt their competence. Five years ago, economic gurus saw no end to the pre-Lehman “Great Moderation” – steady GDP growth, shrinking unemployment and rising asset prices. They were wrong about that, and they are still making two basic mistakes.

The first concerns the real economy, in particular the highly productive modern economy. Economists underestimate the difficulty of keeping unemployment down. It is much easier to destroy jobs, with labour-saving devices and more efficient procedures, than to create them by starting up enterprises, finding customers for new services or creating new bureaucracies. The employment asymmetry accounts for the persistent pain in the labour market. The jobs shed at the beginning of the Lesser Depression are not easily replaced, nor are the jobs currently being cut by governments searching for austerity.

The second mistake is financial. Economists underestimate the danger of debt. Whether the money is owed by companies, households or governments, the disadvantages of debt financing increase as the ratio of liabilities to income rises. Heavily indebted borrowers are less eager to take economic risks and more likely to default. In a highly leveraged and financially interconnected economy, one default often leads to other bigger collapses. In short, massive debts almost invite economic paralysis. It’s hardly surprising that the increase of debt-financed government spending has done so little good.

So what should be done? New ideas are required – and I’ll offer my contributions over the next few weeks. Without a fundamental change in the thinking, the global economy won’t reach its goal of steady growth and low unemployment.

From a narrow economic perspective, the art world is working brilliantly. But the success shows just how narrow that perspective really is.  

Start at the very top end of the art market: last week’s sale of Edvard Munch’s “The Scream” for $120 million, a record for any artwork sold at auction. It may seem bizarre for an icon of cultural despair to become a token of financial exuberance, but the transaction reinforced the social meaning of art among the elite.  

Sociologists talk of positional goods: possessions and activities which express social standing. A normal skiing holiday is like a sign saying, “I’m solidly middle class”. A mansion states, “I’m rich.” A multi-million dollar painting tells the story of money to burn. And a $120 million pastel screams out, “I’m at the top of the heap, and cultured besides.”  

The industrial economy has changed and developed, but it has consistently supported the positional value of artworks and other so-called collectibles. Demand has expanded along with the number of wealthy people. Prices have risen along with the quantity of money available for ostentatious spending. The recent increase in the share of global income and wealth taken by the very rich has accelerated that trend.  

Prices would be even higher if the supply of positional art had not also expanded. That growth is puzzling. The number of worthy artworks from the past available for purchase is actually decreasing, as museums expand their collections. Contemporary art isn’t an obvious substitute, because there’s no scarcity and no way to know what’s really good. The possession of something of uncertain quality that is readily available should bring little social status.  

But collectors have overcome this supply problem with a tacit agreement to assign high values to just enough stuff to keep prices up. I can’t explain how this arrangement is made – the formation of social consensus is always a mysterious business – but for some reason a preserved shark by Damien Hirst is deemed worthy of a high price, while a stuffed tuna signed by his cousin probably would not be.  

High priced art gets most of the headlines, but the industrial economy has also successfully turned artistic production into a mass product, much like food, clothing and medicine. From the normal economic perspective, art looks like another consumer success story.  

Sure, paintings aren’t really suitable to modern economic treatment (although high-quality digital photographs of Munch’s works can be sent anywhere for about $200). But other art forms, both new and old, do fit in. The technology needed for mass production does no harm to the quality of books, recordings, photographs, cinema and anything on the Internet. Copies are identical to the original.  

The result of mixing art with industrial production is much like applying industrial techniques to agriculture or sewing: finished products that are readily available in a wide variety at reasonable prices. The gains are impressive. The pre-industrial peasant who might never read a book or see a professional work of visual art has been replaced by a jaded internet surfer who can choose among millions of books and images. Mass production has been complimented by mass distribution, so even people with unpopular tastes can find the art they like.  

Most economists would stop the discussion there, but I think something more needs to be said. Art should be different from food and clothing. Works of art are supposed to offer something more valuable than social status or pleasing entertainment. They are supposed to strive for the beautiful, to make manifest something greater than the petty comforts and regrets of everyday life. For all its cleverness, efficiency and popularity, the modern art market does not serve this higher master well.  

That claim is controversial; contemporary art, both elite and popular, has articulate defenders. Still, even champions of the new rarely claim that the modern search for greater material prosperity has been accompanied by an equally intense search for beauty.  

The failure is not precisely economic. The social decision to make art either exclusive or popular, but not necessarily beautiful, is not motivated by any sort of economic shortage.  There’s certainly enough wealth around to fund another Renaissance. If the production of beautiful works of art were deemed an important social goal – like education or sexual equality – who knows what masterpieces could be produced?  

The money is available, but the will is missing. For that, the industrial economy might bear some blame. Perhaps a culture which is dedicated to efficient mass production cannot also give beautiful art its due.  

In 1802, William Wordsworth complained about the coarsening effect of the Industrial Revolution: “getting and spending, we lay waste our powers”. “The Scream”, painted almost a century later, is almost a picture of that despair over the modern world. Perhaps it is fitting that after another century the work should attract such a high price.

Thomas Carlyle’s fulminations against the spiritual damage wrought by factories are almost two centuries old, but the sentiment is current wherever industrialisation is rampant. “The huge demon of Mechanism,” he wrote, “smokes and thunders, panting at his great task, oversetting whole multitudes of workmen … so that the wisest no longer knows his whereabout.”

In China, today, government leaders and dissidents alike worry that, as one commentator put it, “frenzied competition for a better life [has] lobotomized the people of inherent values like common decency, compassion and feelings of fellowship”.

A century ago, Max Weber described the process as “disenchantment”. The German sociologist thought the transition from a culture of faith and farming to the narrow-minded and bureaucratic “iron cage” of modern civilisation required the destruction of a spiritual worldview. He saw a modern society made up of “specialists without spirit, sensualists without heart”.

Weber was certainly on to something: industrialisation does break down old religious ways. In pre-industrial societies, the transcendental and the everyday were closely woven together. Social rituals couldn’t be separated from ethical expectations. Such unity is impossible in a world of material plenty, big cities, and high technology.

Vast increases in wealth, consumption and education create opportunities for personal expression and eliminate the economic rationale for many socio-religious restrictions. Urbanisation brings people physically closer, but often as anonymous neighbours rather than in communities with shared values. Omnipresent media, telecommunications and transport erode the borders between the ‘us’ of family or village and the ‘them’ of the outside world. The old religious and spiritual ways cannot survive this transition.

But Carlyle, Weber and many modern social observers make bolder claims: common religious belief and shared moral values are gone forever; modern society has no room for old-fashioned certainties; there is no exit from what the philosopher Charles Taylor calls “A Secular Age”.

Are they right? In a rich economy, the grim fight for survival is eased and there is more time for emotional and religious exploration. Modern scientific knowledge invites speculation and wonder. As Weber noted, spiritual discipline is required for the “worldly asceticism” which makes modern economies so productive. Prosperity and urbanisation might engender greater spirituality.

Karl Marx condemned religion and shared morality as “illusory happiness of the people”. His case is weakened by the failure of his alternative. Marxists in opposition were often idealistic, but in power their rule was both inefficient and cruel. Their promise of an economic justice which would make life satisfying now sounds like a bad joke.

While Marxism has been an outstanding failure, its more successful modern counterparts have failed to convert everyone to secularism. Democracy is desired, but is hardly inspirational, and there’s no need to travel to China to hear complaints about excessive materialism, selfishness and shallowness. In less restrictive nations, praise for freedom is often matched with complaints about the tyranny of the media, the government and society in general.

Relatively few people seem to make prosperity serve spiritual ends. Industrialisation and secularisation have come together, mostly, as inseparable elements of the turn from the transcendental to the worldly. The modern package of high consumption and individual freedom appears irresistible, even if the loss of old ways is sometimes regretted.

But the facts do not support the case for permanent radical secularity. While religion is down in many parts of the world, it is hardly out. In many countries, industrialisation and prosperity seem to nourish Islam. Even Christianity, the religion first threatened by industrialisation and urbanisation, is not doing badly outside of increasingly atheistic Europe. In China, the lamentations over the loss of a moral compass should be set against the rapid growth of indigenous and imported spiritual teachings. The new middle class there seems to be particularly enthusiastic.

More fundamentally, questions of religion and morality are questions of human nature. How strong and how universal is the desire to find something that is higher and more certain than anything offered by the physical world?

The answers are not changed by the onset of industrialisation. Religious practices organised around old economic patterns, social relations and folk beliefs will wither away, but that decline could be followed by the growth of spiritual organisations and the development of moral standards which fit with urbanised, industrialised, societies. In the words of a Chinese investment banker, “The desire to make sense of life doesn’t go away just because I’m rich”. He has been spending more time at a Buddhist temple.

What’s the goal of development? A standard answer is higher gross domestic product. A few specialists prefer to talk about building capabilities. I have another idea: development should be about suzhi, a Chinese word usually translated as quality.

China has been worrying about development for a long time. Reformers in the 19th century wrestled with how to overcome the people’s backwardness without losing what was truly great and distinctive about the Middle Kingdom. They saw that development, as it’s now called, involved a major reworking of culture and society. It encompassed the economy, education, law, politics, the military, the arts and medicine.

Today’s international community has adopted a much narrower understanding. Leaders of poor countries and experts in the field pay often think of development as being centred on economic growth. Social and cultural changes are treated as little more than tools to help increase GDP.

A more sophisticated alternative is the “capabilities approach”. Amartya Sen, a philosophically minded economist, argues that the poor countries should develop whatever capabilities are needed for their residents to be free. His idea of freedom is multifaceted: it includes freedom from starvation, premature mortality, illiteracy, political disenfranchisement and censorship.

But the capabilities approach has some flaws. First, it assumes that the final goal of development is an individualistic, secular and democratic welfare state, as found in Europe and the United States.

That’s presumptuous; there could be other ways to be civilised in the modern world. Second, the emphasis on freedom misses the fact that it often takes a bit of coercion to overcome ignorance, superstition and squalor. Finally, it leaves no place to go once all of those capabilities have been reached.

That’s where Suzhi comes in, a word made up from characters meaning ’essential’ and ’nature’. Encompassing wealth, health, education, sophistication and nobility of character, it has become a key concept in Chinese discussions about society.

To have low suzhi is to be backwards – to think and behave like a peasant. The government has tried to raise China’s suzhi by limiting births and promoting breast feeding, healthy exercise and less exam-centred education. Individuals try to raise their own suzhi by doing well at exams, becoming modern consumers and seeking spiritual self-improvement. Having high suzhi is close to what Westerners would describe as “being a good person”.

The concept develops indefinitely as incomes increase and horizons broaden. Suzhi can always rise higher. In this fight against backwardness, prosperity is not the end goal, though it does provide the means to increase suzhi.

Andrew Kipnis of the Australian National University gives the example of Harvard Girl, Liu Yiting: A True Chronicle of Suzhi Cultivation. This Chinese best-seller – 2 million copies sold, according to the publisher – explains how one girl’s suzhi was so thoroughly cultivated that she was accepted as a Harvard undergraduate. Her suzhi-building exercises included memorising classic poems at age three, holding ice cubes for 15 minutes at a time and learning the right moral attitude.

Not everyone in China is keen on the quest for suzhi. Kipnis also mentions a book called I am Average but I am Happy. The government attempts to moderate the fanaticism of suzhi-seeking Chinese parents.

Meanwhile, some see the focus on suzhi as a Chinese trick for excusing authoritarianism. Popular blogger Han Han stirred up controversy with his argument that China’s suzhi is not yet high enough to support a successful and stable democracy.

Other observers complain that the emphasis on suzhi is shallow and materialist. It can be socially divisive if some people are thought to have higher suzhi by nature, or if the rich seem to have more opportunities to cultivate it.

But these aren’t really arguments against suzhi itself, more criticisms of how we measure it, or strive for it. And they don’t change the sense that suzhi is what China’s leaders and people want from development. It’s hard to think of another guiding principle that takes in material and social ambition, governmental guidance and individualistic spirit, confidence in self-improvement and a complex relationship with traditional values.

While suzhi has been specifically Chinese up to now, the basic idea – becoming a better person – is universally applicable. Each poor country should find its own suzhi. And even rich countries could do with a debate about values and aspirations. An Asian word seems appropriate for this global concept, as that region is likely to be centre of development for generations to come.

Economists might not be happy if suzhi were to became the centre of study. Their simple measure, GDP, would receive less attention. Besides, economists like to measure things, and suzhi is not a quantity but a changing collection of qualities. But then, development is far too important to be left to economists.

As a slogan, the Three Represents was puzzling. It was in 2000 that Jiang Zemin decided that the once revolutionary Chinese Communist Party would represent the private sector, which he called “advanced productive forces”; along with its traditional constituencies of intellectuals (“advanced culture”) and workers (“the overwhelming majority of the people”).

The 2000 strategy of Jiang, then the General Secretary of the CCP, did help bind the peculiarly Chinese political system into promoting the common good. The challenge was to ensure that the nation’s single political force did not lose touch with the country’s increasingly diversified economy. The inclusion of bourgeois businessmen and grasping capitalists has kept the Party credible and effective in a poor and ideologically scarred country. But as China leaves impoverishment behind, its leaders need to worry about more than mere material prosperity. The time has come to plan for a broader national agenda – a move from the Three Represents to the Five Responsibilities.

First, China must honour the responsibility to its past. For the past two centuries many Chinese leaders have seen their homeland as backward. They enthusiastically cast aside ideas and ideals which – until about 1700 – had made Chinese culture so sophisticated, its philosophy so profound and its government so impressive.

A visit to the new “Road of Rejuvenation” exhibit at Beijing’s National Museum of China suggest that the naively Marxist narrative of class conflict and revolutionary heroism lives on. Of course, such propaganda should not be taken at face value, but a more honest and helpful view of the past is both possible and desirable. The government will struggle to maintain intellectual legitimacy if it relies on such a narrow vision of history.

Second, the government has the responsibility to develop a more consistent attitude to the West, as the Chinese often call everything that has emerged from European traditions. Having cast out so much of the Chinese past, the CCP often accepts the West as the standard-setter in technology, law, education and culture. As the country becomes more successful, it will need to copy less and develop more of its own version of modernity.

The most urgent aspect of this responsibility is to rethink a Western idea which has been abandoned in its homelands. Communists believed that an advanced State had no need to allow political opposition or organisations which are not closely aligned with the government. The Party need not remain enslaved to this bad idea. Even if the one-party government remains sacrosanct, the distrust of civil society, which makes it difficult for activists, artists and religious groups to flourish, deserves reconsideration.

Third, the CCP has a responsibility to develop its non-economic elite, Jiang’s “advanced culture”. While the CCP discarded most old ideas, it continued the pre-Communist Chinese belief that intellectuals and spiritual leaders should play an important role in setting the national agenda. But in the last decade, the Chinese elite seem to have decayed. Money-grubbing and technical thinking have triumphed, at the expense of imagination and moral example-setting.

Fourth is the responsibility to the common people, Jiang’s “overwhelming majority”. The CCP does a pretty good job for the people, especially on economic issues. Still, there is substantial work to be done, and not just in further increasing wealth. The government should make education less mechanical, step back from enforced family planning and enliven the mostly drab new urban expanses.

The final responsibility is to the environment. This has been largely neglected in the rush to increase living standards. Now, though, China is rich enough that cleaner air and water would do more for those standards than increased production. Care for the environment can be seen as the culmination of the other four Responsibilities. Respect for the natural world was crucial in traditional Chinese religion. Reinvigorating that legacy could help China improve on the West’s techniques for integrating production with environmental concern. It would require support from a committed and honest elite and a disciplined people.

The transition from Represents to Responsibilities can only be made by facing what a Marxist might call the internal contradiction of the CCP. It cannot develop much further without abandoning its founding principle, a narrowly materialist world view. ’Harmonious development’, the slogan of Jiang’s successor, Hu Jintao, has a vaguely spiritual ring to it, but doesn’t overcome the contradiction.

The CCP was clever enough lead the recovery from Maoism and avoid the decay of the former Soviet Union. Despite much corruption, it still garners levels of respect and trust from the people that would render any Western political party green with envy. Perhaps Xi Jinping, set to succeed Hu later this year, will define a Party which is responsible enough to give China not only more prosperity but also the better society its people deserve.

“Charity is a cold, grey, loveless thing. If a rich man wants to help the poor, he should pay his taxes gladly, not dole out money at whim.” Clement Attlee wrote that in 1920. As British prime minister after World War Two, Attlee turned thought into policy. The welfare state that he helped create has decimated private charities for the poor.

It’s much the same in all rich countries. Governments now take the prime responsibility for the care of the poor. Even in the United States, where the charitable (voluntary) sector is relatively large – twice as high a share of GDP as in the UK, according to the charity Philanthropy UK – the share of GDP taken by federal and state welfare programmes, as measured by the OECD, is 10 times higher.

But Attlee’s judgment has been proved wrong. If organised charity was cold, the carefully calibrated payments and entitlements of the welfare state are icy. The welfare state has many aspects but in terms of the alleviation of misery it has not worked as intended. The decline of hunger and voluntary homelessness – and the spread of electricity, telephones and the like – might suggest otherwise. But the increase in overall prosperity and the establishment of the principle of a “living wage”, rather than the mechanisms of government entitlements, have wrought these changes.

In any case, Attlee and his allies thought the welfare state could do much more than merely keep wolves from doors. They thought it could destroy what Oscar Lewis would later call the “culture of poverty”. The anthropologist talked of “a strong feeling of marginality, of helplessness, of dependency, of not belonging”.

But while the decline of proletariat and peasantry has reduced the proportion of the population of rich countries who live in that culture of poverty, the welfare state has tended to increase both the marginality and the dependency of those who do. They live in their own world, dependent on the government programmes and rewarded for irresponsibility.

I have heard the children in a welfare-dependent family talk about “getting paid”, as if their mother’s indolence were a sort of job. That family, like so many in the system of poverty-relief, had no father. The rise of such single-parent families cannot be attributed entirely to the availability of welfare, but such payments make antisocial behaviour that much easier.

Attlee accused charity of being loveless, but the recipient of government money experiences a profound alienation amid the welfare state’s bureaucratic structures. Care professionals have forms to fill, quotas to meet and regulations to obey. However good their intentions, they cannot avoid treating their clients as administrative ciphers. The two sides are not tied by charity, but separated by a cold wall of impersonality.

For society, the result is disastrous. Too many children of welfare families end up as welfare-dependent adults, or in prison. Too many people on benefits cannot emerge from semi-permanent unemployment, or from substance abuse.

It’s time to give voluntary help, the free spirit of charity, a new chance. If the state would withdraw, there would be fewer rules; more opportunities to develop personal relationships with the needy; and more space for organisations motivated by a higher calling, be it religious or philanthropic.

It won’t be easy to reduce the government’s role in what has been an age of expansion. But the collapse of state economic control after the fall of Communism can serve as a helpful precedent. The trauma and corruption of that transition need not be repeated. What is required is a slow and carefully planned privatisation of anti-poverty programmes.

The first step would be to make the various government agencies more like state-funded not-for-profit companies. A new legal and administrative status would make a full separation from the government easier.

A gradual withdrawal would follow. Donations would replace taxation over a decade or so. People would be generous; they would be paying less in taxes and could be persuaded that their gifts would help those in need. That is a much more attractive prospect than feeding a bureaucratic system. On the allocation side, the rules could be loosened in proportion with the advent of private funding. Competition should also play a role. As the state’s flow of money dwindled, outsiders might well take over from the former state agencies.

In the end, charitable arrangements might offer less money and less certainty than the State’s blanket coverage. But that would not necessarily be a bad thing. The culture of poverty will be less appealing if it is less comfortable. And while a modestly funded culture of charity will not be able to afford the carefully calibrated assistance of Attlee’s dreams, it can offer the poor more of what they really need: the burning fire of charity. And charity, after all, is another word for love.

The euro zone debt crisis shows that something is seriously wrong with Europe. But what is it?

Most financial professionals think the problem is economic. They have long considered continental Europe something of a mess – slow GDP growth, inept governments, smothering regulation and a culture that doesn’t “get” markets. European residents seem equally gloomy, especially about the economy. In the most recent Eurobarometer survey, 71 percent of respondents did not expect the crisis to be over two years hence.

The economic worries of both financiers and citizens are misplaced. Even if the slow patch does last a few more years, the European economy will continue to do what a modern economy is supposed to do. European consumers are basically as well off as Americans after adjusting for longer European holidays and different lifestyle choices. There is probably greater justice in the distribution of incomes and consumer goods in Europe than in the United States. The euro zone’s low trade deficits – less in total since 1990 than the United States ran in the last six months – suggest that Europe is globally competitive. Europe probably has a worse unemployment problem than the United States, but national governments are belatedly trying to remedy that.

Where Europe is really weak is not in economics but politics. A lack of political cohesion turned relatively minor financial problems – one small reprobate government (Greece) and two small careless ones (Portugal and Ireland) – into a disproportionately large struggle to avoid a devastating financial meltdown. Despite the risk, politicians and bureaucrats spent years bickering. They may have finally found the necessary toughness and solidarity, but there are enough unanswered questions to suggest that further crises are a lively possibility.

The indecision and discord needs to be kept in proportion. Politically, Europe is far more stable than it was a century ago, when a much smaller trigger set off the First World War. It is more unified – fiscally and financially – than it was in that war’s aftermath, when the anti-solidarity policy of reparations and the anti-flexibility of the gold standard wreaked havoc.

Still, Europe could do better. I suggest a three-pronged effort to make the region stronger.

The first is supposedly underway: balanced national budgets in normal economic times. An earlier effort to mandate this, the Stability and Growth Pact, failed, but the intervening crisis may have concentrated minds and strengthened resolve. If it hasn’t, then the euro project is liable to topple over as soon as economic challenges arrive.

Second, national politicians and the European Central Bank should agree – and state it publicly in no uncertain words – that the fiscal compact implies that the cost of future national fiscal failures will be shared between debtor and creditor nations. There will always be disputes about how to apportion the losses, but those can be resolved if everyone accepts the principle of shared responsibility. A bad loan is a sign that both sides messed up. A multi-country currency union cannot survive without solidarity among its members.

Third, Europe needs to make the economy the servant of something greater, something with more political resonance than a prosperity pact. A merely materialist agreement will always be vulnerable to economic downturns.

Half a century ago, when the predecessor to the European Union was founded, there was a good reason to emphasise economic unity: other sorts of multi-national convergence were much more challenging. Europe is not like the United States, which can boast of a single “American way of life” both culturally and politically. (U.S. states’ rights were effectively crushed 150 years ago in the Civil War.) Nor is Europe like China, which established a national language and culture three millennia ago.

On the contrary, European nations have basically been moving apart for centuries, developing their own national languages and cultures. The nations often behaved like teenage gang members, convinced of their own superiority and always up for a mutually destructive fight.

After the biggest fight, World War Two, the peacemakers followed their profession’s best practice: build trust by focusing on a common effort in the least controversial area – the economy. It has worked, although almost every step has been difficult. The last step, the merger of monetary and fiscal policies, proved traumatic.

But after 60 years of economic success, it should be clear that greater unity need not destroy national diversity. Italians may never be as much like Germans as New Yorkers are like Californians, or as Shanghainese are like Beijingers. But Europeans should be able to find enough common ground – if only as an entity able to hold its own against the United States and China – to give the EU stronger support than mere economic self-interest. If not, there really will be something wrong with Europe.

The first anniversary of Japan’s nuclear disaster is a good time to take stock. Opponents and proponents of nuclear power are doing so, and they have come to the same conclusion: “We were right all along.”

The meltdown at the Fukushima power plant is certainly grist for the mill of the anti-nuclear crowd. It forced the evacuation of 300,000 people and will cost as much as $250 billion to clean up, according to the Japan Center for Economic Research. If a natural disaster can trigger such a dangerous, disruptive and expensive crisis in a country as advanced as Japan, then it’s impossible to guarantee safety anywhere. Efforts to do the impossible will make nuclear power even more expensive and, by some analyses including that of the Worldwatch Institute, it already costs more than solar energy.

The technical and economic data, though, may offer less support for the anti-nuclear brigade than the images from Fukushima, including explosions, mass evacuations to escape the deadly and invisible threat of radiation, and workers in white safety suits. The pictures reinforce the visceral fear that radioactivity is just too hot to handle.

Proponents of nuclear plants haven’t exactly been comforted by Fukushima, but they argue that a cool look at the situation actually supports their case. After all, the damage from a near worst-case scenario at a badly managed, ageing plant is proving to be quite bearable. This case is strengthened by the Japanese government’s minimum estimate of direct clean up costs – something like $15 billion, spread out over several years. That’s less than 10 percent of the highest estimates of damage, and of the expected non-nuclear cost of the earthquake and tsunami which overwhelmed the Fukushima plant.

Besides, the pro-nukes say, the affected plant was too old to be relevant for future investment decisions. New plants are safer by design. Fukushima won’t significantly alter the result of the studies promoted by the World Nuclear Association, which conclude that atomic energy is relatively cheap. Enthusiasts, who have always dismissed atomic phobia as illogical and exaggerated, are quick to point out that Fukushima has nothing to do with Hiroshima. The chain of activities required to generate, say, coal-fired power can be shown to cost more lives, too.

What Fukushima really teaches is that the gap between the two sides of the nuclear argument is too wide to be bridged by evidence. Whatever happens, many opponents will always see an intrinsically dangerous technology which people should not try to tame. And however expensive the last plant or accident, most proponents will continue to believe that nuclear power is a wonderful technology, needed for humanity’s long-term comfort, and with risks that can be managed.

I think the factual arguments hide a deeply philosophical disagreement– about just how much control man can and should have over the hidden forces of nature. The same fundamental discord embitters arguments about global warming, biotechnology, assisted reproductive technology and the population the earth can durably sustain. In such heartfelt debates, facts and pseudo-facts are sought largely as weapons to be thrown at the other side. Fukushima seems to provide a fair supply.

The philosophical issue is important. There are surely technologies which really do cross a fairly clear moral line, and the natural world should not be exploited blindly. But nuclear power is no longer an appropriate field for this ideological combat.

That was not always the case. In the 1950s, the destructive power of atomic fission was clear, while the human ability to make it beneficial was not. After more than a half-century of operating nuclear plants with only a few accidents – none of them killing as many people as the 1984 explosion at the Bhopal chemical factory in India – it’s no longer appropriate to consider this technology as beyond the moral pale.

On the other hand, nuclear costs have consistently failed to plummet as predicted for the past 50-plus years. So the technology cannot be considered a potential wonder-cure for energy woes. It is never going to live up to a U.S. promoter’s 1954 dream that it would be “too cheap to meter”.

How does nuclear power look once it is freed from the weight of ideology and dreams? Neither clearly better nor clearly worse than gas, coal or solar. It’s certainly competitive, thanks largely to low operating costs – uranium is much cheaper than coal or oil – but comparisons that consider all types of associated expenses are inevitably highly subjective. The problem is ignorance of the future.

Nuclear plants last four to six decades, far too long for accurate predictions of fuel prices and technological developments. They are a diversifier away from coal, oil and gas generation. But there’s no way to foresee, let alone calculate with anything like precision, whether nuclear power will prove more or less expensive, safe, clean or reliable than its rivals.

In the face of this uncertainty, a reasonable policy choice is to temporise. The Chinese, who have made a serious commitment to nuclear power and several other technologies, paused to learn the lessons of Fukushima, and now look set to go on as before. That sounds about right.

An American, a Frenchman and a physicist were talking about some unusual weather. “It was twice as hot this afternoon as this morning”, said the American, “the temperature went up from 40 to 80 degrees.” The Frenchman interjected: “That’s in Fahrenheit. In Celsius, it was six times hotter.” The physicist was scornful. “On the only really scientific measure, the Kelvin scale, the increase was a piffling 5 percent.”

Who’s right? Well, all the measures are accurate and it certainly was hotter. But no single ratio – whether twice, six times or 5 percent – captures just how much hotter it actually felt. The feeling of hotness, like the feelings of pain or anger, cannot be measured with genuine precision.

It is the same for the feeling of prosperity – any measure will be arbitrary and quite possibly misleading. Consider gross domestic product, the most common index of economic success. GDP is the sum of spending on everything in the economy, from shoes to shoe-shines, from cars to child care. In comparing countries with each other or over time, GDP is usually adjusted for inflation to calculate what is ambitiously called “real GDP”. It is then often divided by the population, creating “real GDP per person”. This is usually measured in “constant dollars” and, for 2011 in the United States, becomes $43,149 of 2005 dollars.

Economists recognise that GDP is far from perfect. In 2009, a French government commission suggested that it should be augmented by measures of the distribution of wealth, environmental sustainability and “quality of life”. The Human Development Index, which is widely used by the United Nations, combines GDP with life expectancy and years of schooling.

These modifications are welcome, but they fail to correct GDP’s main weakness – that is what might be called the fallacy of precision. The human meaning of prosperity simply cannot be reduced to numbers. Supposedly exact measures generally confuse more than they illuminate.

My rejection of quantification is anathema to most economists, who fancy themselves to be hard scientists. It also goes against utilitarianism, economists’ favourite philosophy, which claims all decisions can be reduced to numerical comparisons.

But consider an example: real GDP per person in the United States is up 103 percent since 1971. That sounds basically right: overall, Americans are substantially richer than they were four decades ago. The improvements include a 12 percent increase in life expectancy at birth, the shift from clunky black-and-white to sleek colour television and the introduction of the Internet into more than 70 percent of households. The gains far outweigh the losses, such as a 26 percent fall in the number of highway miles per resident.

The exact number, though, is a fiction. There is no way to assign a weight to each of the gains and losses, and no reason to assume that GDP, which measures the inflation-adjusted price of the various goods and services, is a particularly meaningful summation.

Happiness economists try to dodge the problem by looking for a measurable and meaningful number in people’s feelings. They claim subjective satisfaction can be counted up, simply by asking people to rate their happiness on a scale of, say, 1 to 5. The approach has many problems, one of which is that it doesn’t make any sense to say happiness has increased by, say, 12 percent.

Emotions just don’t work that way. George may love his current girlfriend more than his ex, but it’s only a figure of speech to say he loves her twice as much. Similarly, it makes no sense to say we are twice as happy as our parents or 12 percent happier than we were a half a decade ago.

GDP and similar measures can be quite helpful rough indicators, especially for poor countries. For example, the Chinese government aims at 8 percent annual real GDP increase – that rate creates jobs without putting excessive strain on society. But the authorities in Beijing should be careful, for the precision is spurious. Sometime soon, the right GDP growth number will be lower. And when China gets rich enough, no measure of wealth will provide much insight.

Look at the International Monetary Fund’s calculation that GDP per person was 27 percent lower in France than in the United States in 2011. The exactitude is ridiculous and the basic conclusion, that Americans are substantially richer than French people, is silly. The countries are both rich and modern, just in somewhat different, incommensurate ways. France has cheaper medical care, longer holidays and better mass transit and bakeries. The United States has bigger houses and more cars per person.

Numbers are seductive, so economists, politicians and pundits tend to fret over every tenth of a percentage point of GDP. But it is easy to exaggerate the importance of incremental changes in measures of this sort. It would be better to stop striving for precision. Or at least to cut back by 92.4 percent.