Edward Hadas

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.

Has finance become a “false divinity in the world”? Pope Benedict XVI thinks so. “We see that the world of finance can dominate the human being,” he has said.  “[It is] no longer an instrument to foster well-being… [it] becomes a power that oppresses, that almost demands worship.”

As well as warming the hearts of banker-haters everywhere, the Pope’s criticism is well aimed. Not only did the finance industry’s arrogance help spur crisis and recession, but there’s something dangerous at the core of finance. The human good can all too easily be lost when people’s past work and future hopes are expressed in purely monetary terms.

In the Old Testament, the ancient Israelites were warned that too rigid a view of financial obligations is cruel and socially divisive. Aristotle added another essential objection. The ancient Greek philosopher pointed out that monetary wealth can keep on increasing forever — unlike our appetite for the things that money can buy. Yet while the worldly infinity of finance is alluring, it is ultimately false. Money has no human meaning on its own, but only when it serves a meaningful purpose.

The risks of inhumane finance may be eternal, but the Pope is also alluding to a more modern problem – the treatment of finance as a sort of god, and financiers as its priests. Consider four manifestations of the quasi-religious approach.

First, the magical expectations of finance. Too many people, and too many governments, imagine that some arrangement of the financial system — this monetary and fiscal policy mix, that sort of mortgage, this stock market, that collection of derivatives — will generate durable wealth or economic justice.

Second, think of the awe which surrounds the industry. The economic forecasts of financial professional are rarely right, but they receive the sort of respect once given to (equally inaccurate) oracles of divinity. The pronouncements of leading financiers, from George Soros to Warren Buffett, are taken seriously simply because these people have made lots of money in the financial markets.  Political leaders tremble at the judgements of financial markets.

Third, consider the treatment of central banking as an activity beyond normal human understanding. A few decades ago, these financial practitioners were considered too elevated to be politically accountable. More recently, faith in central bank independence has been shaken: but it has not been destroyed by their abysmal record before the financial crisis. Indeed, Ben Bernanke and his peers have been given more power — and only a little more supervision from the mere mortals who have won elections.

Finally, despite much anti-banker rhetoric, the world continues to shower its own rewards on the high priests of finance. Thomas Philippon, a professor at New York University, has shown that the share of U.S. national income dedicated to finance has fallen only slightly since the crisis, when it was at its highest since records began in 1865. The profession’s leaders are amazingly well paid. The average income per head at Goldman Sachs in 2011, a grim year for the leading investment bank, was $354,000, or about nine times higher than the national average. Philippon estimates that about a quarter of the financiers’ total income is unmerited. I suspect he is much too kind to the financial world.

In an ethical economy, none of this is right. Money can seem to make money for a while, but no amount of financial alchemy can generate real wealth. Financial professionals and financial markets are fallible. Central banking is inherently political. And the temple offerings to finance, in the form of inflated salaries, are excessive.

Still, finance should not be condemned as entirely evil. The modern industrial economy relies on money, credit and the hurly burly of investment to function. For all its flaws, the current financial system is more efficient and flexible than alternative means of gathering and allocating economic resources such as barter or rationing. At its best, and when it works, the business of banking and investment promotes the common good: it creates solidarity among savers and borrowers and rewards both daring and prudence. Lloyd Blankfein, chairman of Goldman Sachs was not entirely wrong to claim that his firm did “God’s work”.

Indeed, at the bottom of the economic ladder, people need more, not less, finance. Financial inclusion of the sort endorsed by the G20 finance ministers last week is desirable. But at the top of the ladder, the industry needs what students of religion call desacralisation.  The modern incarnation of the Israelites’ golden calf should be stripped of the trappings of holiness. It is better for finance to serve the genuine economic good on earth than to aspire to an unmerited place in heaven.

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.

Nothing stimulates anti-capitalist feelings like large sums of money changing hands in the hope of huge profits. A recent example: the prospect that Facebook could be worth some $100 billion to its shareholders. The website’s users might prefer less advertising and a lower valuation. But no one asked them. This inspired my Reuters colleague Paul Smalera to suggest that Facebook go co-op. Smalera won’t get his way, but he’s right to wonder whether the hunt for shareholder profits makes the world a better place.

In modern economies, most companies are supposed to be run for the benefit of the providers of equity capital, the shareholders, considered co-owners. Cooperatives and mutuals are owned by and supposed to be run for different groups: customers (the Cooperative Wholesale Society in the UK and American credit unions), suppliers (Sunkist citrus growers in the United States) or workers (the Mondragon group of companies in Spain and the UK retailer John Lewis).

The original thinking behind almost all these organisation was idealistic, even utopian: greedy capitalists had polluted the economy. Their exclusion would help promote the best aspects of human nature.

The idealism has not borne rich fruit. Co-ops and mutually owned enterprises (another name for this type of organisation) do not play a big role in the industrial economy. In the United States, the 100 largest employee-owned companies now account for only 0.5 percent of all workers, according to data from the National Center for Employee Ownership. Mutuality is doing less badly elsewhere – the largest dairy in India is a cooperative – but around the world, the movement’s boosters are losing their power.

The idealism and the lack of success are related. Cooperatives were designed without much thought about what would happen when managers and workers lose their initial energy and enthusiasm. Outside oversight was scanty. The founders promoted corporate cultures which became more complacent than collaborative. Managers were weak, and companies stagnated.

Yet the limited success of the cooperative movement does not equate to a resounding triumph for its ideological opposite – the shareholder value cult. If profits were all that mattered for the economy, then more than a quarter of all American workers would not be employed by enterprises that function, often quite well, without profit motive – 17 percent by governments and another 11 percent by private, not-for-profit, organisations.

Indeed, something like the cooperative spirit can thrive within profit-seeking companies. Workers think more about doing a good job for their team, and for their customers, and don’t obsess about the bottom line. They may behave this way for unselfish reasons. But self-interest can also make them focus on the opinion of bosses, who like teamwork, more than on returns to shareholders.

So neither cooperatives nor shareholders hold the secret to modern economic success. Profits for shareholders are less important than either their enemies or their fans would like to believe.

But shareholders do matter. Facebook is a case in point. Without the ability to raise money from outsiders, the company wouldn’t have developed so fast. Without the discipline provided by the search for profits, its workers could have spent too much time developing user-friendly features, for example, at the risk of leaving the website clever but broke.

Still, Smalera has a point. Exaggerated profit maximisation has made social networking less social. Facebook founder Mark Zuckerberg seems to be aware of the danger of too much profit-seeking. Like many media magnates before him, he will take super voting-rights, in his case to ensure the company stays loyal to its “social mission – to make the world more open and connected”.

A more cooperative corporate structure might be preferable to the trust-Zuckerberg arrangement. But the need for less aggressive shareholders is greater in finance than it is in media. Mutuality is the most natural structure for banks and insurers. Since their funds come directly from depositors, they don’t need to raise capital from outside shareholders. Arbitrating the conflicting desires of savers and borrowers should be enough to keep management busy, honest and efficient. As recently as three decades ago the financial system in Europe was mostly not-for-profit, and mutuals also played a major role in the United States.

Promoters of demutualisation said private shareholders would bring capital and discipline, but there was no good reason to change the old structures. Indeed, the introduction of the culture of profits into formerly mutual institutions was a significant contributor to the recent financial crisis. Such banks proved easy prey to the schemes of greedy schemers.

In organising the economy, greedy schemers and utopian dreamers are not the only alternatives. Like well-run government agencies and prudent shareholder-owned companies, well-designed cooperatives can be efficient servants of the common good. Hard-headed bankers and regulators should catch on.

The financial markets rejoiced last week because the U.S. unemployment rate fell to 8.3 percent in January, 0.8 percentage points lower than a year earlier. Back in the real world, the gain looks less impressive. The proportion of the adult American population with a job has hardly changed since January 2011 – it is up from 58.4 to 58.5 percent. That number peaked in 2000 at 64.4 percent.

The decline in American so-called “participation rate” is a serious economic problem. Many blame the cyclical downturn or inadequate GDP growth, but they are too focussed on output. The real issue is input: the supply and the need for labour. This is not just an issue for the United States. But the current shortage of jobs in most rich countries is the latest leg of a long race between technological forces that lead to job destruction and socio-economic forces which provide new kinds of employment.

Over the last two centuries, the contest has been fairly even. The labour savings in field, factory and home have been nothing short of amazing. Imagine that today’s technology and labour skills were available when Adam Smith wrote The Wealth of Nations in 1776. If people today worked as many hours a week as they did then, and for as many years of their lives, and if they consumed roughly the same quantity of goods and services, the unemployment rate would more like 70 than 8 percent.

But the forces of job creation have been equally amazing. The work has been spread out. People work less – they have weekends and holidays off, and more years of education and retirement. They also consume much more, and this creates employment. And although rampant consumerism raises some ethical questions, increased leisure and consumption constitutes basically good news.

There have been periods both of labour shortages and excess unemployment, but up to now balance has always been restored. We are now in a new period of imbalance in rich countries. The job-destructive forces of technology have pulled ahead of the rebalancing mechanisms. That should be interpreted as a call for action on jobs.

Luddite calls to stop or reverse technological progress provide no answer. Even if mobile phones and the Internet destroy more jobs than they create – no one really knows – they certainly do much more good than harm. And every job lost in a dangerous mine or on a boring assembly line is a gain for humanity.

But many jobs could be created if the economic arrangements were more favourable. For example, the United States has dilapidated highways and an army of unemployed construction workers, but it has not been able to match the two. Such stalemates in the labour system can be broken, although rarely without changes in taxes, benefits, wage laws and training arrangements. But it worked for Germany. Thanks largely to some tinkering with the unemployment rules, its participation rate is higher now than in 2000.

Tinkering may be enough to get employment back in balance, but jobs could also be created in areas long seen to be of marginal importance, or no importance at all. This idea goes against the professional grain of most economists. Adam Smith wrote disapprovingly of “unproductive” labour and his followers have cheered whenever workers use less effort to produce more.

But economists have an inadequate understanding of what is really productive. They ignore the reality that many jobs in a modern economy are useless – or close to it. The vast bureaucracies of government, finance, and marketing employ many people who add to GDP but whose work does little or nothing to make life better.

Pointless jobs could be created by making the tax code more complicated, by requiring teachers to do more paperwork, by developing new financial instruments. The possibilities are endless. If these ideas fail, we could emulate some of the bad habits of the past masters of full employment, Soviet-style communists. They excelled at wasted effort.

But there is a better way. And that is to rethink the value of jobs that economists have traditionally considered useless. Take a look at Smith’s collection of “frivolous professions”. He includes “churchmen, lawyers, physicians, men of letters of all kinds; players, buffoons, musicians, opera-singers and opera-dancers”.

Arguably, most of these bring spiritual richness to life while lawyers – in theory at least – make the world a fairer place. So let’s have more of them (well, maybe not more lawyers), and more employment in similar professions. Let’s have more people in the caring professions too, improving the lives of children, the old and the troubled.

A desirable shift in employment needs change in social attitudes and some technical ingenuity. But the recent fall in participation rates should be considered an opportunity. We could make the economy more genuinely productive and society more humane.

President Barack Obama thinks taxes can help the government achieve a precise policy objective. In last week’s State of the Union address he outlined a complex set of tax adjustments  to discourage companies from moving American jobs to foreign parts.  In the same speech, Obama also suggested that taxes can be made simple and clear:  “No side issues.  No drama”, he said. He applied that description to the extension of the cut in the U.S. payroll tax rate. It was followed by pushing for “common sense” on a minimum tax rate for the rich. “Washington should stop subsidizing millionaires”, the president said.

The rhetoric may not be entirely contradictory, but it points in quite different directions. If the tax code is written to reflect particular concerns, whether of the government or of influential taxpayers (and non-payers), it will never be simple. And if simplicity is the guiding principle, it is hard to understand why the president wants to add to a U.S. law which already has 9834 sections. 

The current president is not the first person to dream of improving a complex, arbitrary, inefficient and unjust tax system. On the contrary, the history of taxes in every country is replete with efforts at reform, although they come along far less often than desperate measures to squeeze more money out of unwilling subjects. Governments’ consistent need for more revenue and the governed’s equally consistent reluctance to pay helps explain why reformers find progress so difficult.

Obama’s inability to support simple tax principles for even the length of a single speech suggests another reason: irresistible temptation. Politicians love to give favours, to redress particular wrongs, to promote special rights. Obama and other would-be tax-reformers are more likely to succeed if they base their proposals on principles which are both idealistic and pragmatic.

First, the primary goal of tax systems should be justice. In one sense, that’s obvious; injustice has few defenders. But in discussion of taxes, justice is often sacrificed for expediency or the pursuit of efficiency.  This results in exemptions for important cases or special measures that promote  good causes — say home ownership or American jobs.

How does this fit with the principle of tax justice? In our social market economies, taxes should primarily serve the social side of the system. A just tax system will follow what Pope Benedict XVI called the “logic of public obligation”. He says that the compulsion of the law should be used to support the social fabric by making people do what they would want to do voluntarily — if they were perfectly good. Taxes should help but not pamper the poor and discipline but not break the rich.

This principle of justice will not end all arguments about tax policy. It can be used to argue for flat or rising tax rates; for levying taxes predominantly on wages or on prices; and for countless other arrangements. But if those who write the tax rules keep to this principle, the tax system is more likely to be just.

A second goal of tax systems should be to prefer imperfection to complexity. In this convoluted world, even a basically fair tax system will be unjust to some people. But additional rules designed to help the maltreated almost inevitably have unintended consequences. A common effect is the creation of loopholes through which the privileged quickly move, managing to pay less tax than they would otherwise. If a Save American Jobs tax benefit becomes law, companies will undoubtedly go through contortions to show they qualify. Obama would be more likely to do good if he dropped his own tax contortions to focus on simplicity. 

Third, taxes should not be used to guide social policy. Taxes are too crude and indirect to be effective for that. If bosses are paid too much, it is better to pay them less than to tax them more. If ordinary wages are too low to support families, raise the pay rather than cut the taxes. If governments want to subsidise investment, culture or some other public good, they should do so with grants rather than tax breaks.

Fourth, vigilance. From the tax exemptions of monasteries in medieval Europe and 11th century China to the “carried interest” of today’s private equity managers, the powerful have always twisted tax rules to their advantage. They should be held in check. More pertinently, since lawmakers are usually representatives of the elite, they should hold themselves in check.

In that respect, President Obama deserves praise for admitting that it’s “not right” when “I get a tax break I don’t need”. If his Democratic followers and Republican opponents showed some of the same humility, a better U.S. tax system might become more than an idle dream.