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Thursday, January 24, 2008

"Bill Gates Issues Call For Kinder Capitalism"

The last few days have been full of surprises. Bill Gates has "has grown impatient with the shortcomings of capitalism":

Bill Gates Issues Call For Kinder Capitalism, by Robert A. Guth, WSJ (Free): ...Bill Gates ... will call for a revision of capitalism. In a speech at the World Economic Forum in Davos, Switzerland, the software tycoon plans to call for a "creative capitalism" that uses market forces to address poor-country needs that he feels are being ignored.

"We have to find a way to make the aspects of capitalism that serve wealthier people serve poorer people as well," Mr. Gates will tell ... the forum...

Mr. Gates isn't abandoning his belief in capitalism as the best economic system. But in an interview with the Journal last week..., Mr. Gates said that he has grown impatient with the shortcomings of capitalism. He said he has seen those failings first-hand on trips for Microsoft to places like the South African slum of Soweto...

In particular, he said, he's troubled that advances in technology, health care and education tend to help the rich and bypass the poor. "The rate of improvement for the third that is better off is pretty rapid," he said. "The part that's unsatisfactory is for the bottom third -- two billion of six billion."

Three weeks ago, on a flight home from a New Zealand vacation, Mr. Gates took out a yellow pad of paper and listed ideas about why capitalism, while so good for so many, is failing much of the world. He refined those thoughts into the speech he will give today...

Among the fixes he plans to call for: Companies should create businesses that focus on building products and services for the poor. "Such a system would have a twin mission: making profits and also improving lives for those who don't fully benefit from market forces," he plans to say. ... Mr. Gates sees a role for himself spurring companies into action...

But Mr. Gates's argument for the potential profitability of serving the poor is certain to raise skepticism. "There's a lot of people at the bottom of the pyramid but the size of the transactions is so small it is not worth it for private business most of the time," says William Easterly, a New York University professor...

Key to Mr. Gates's plan will be for businesses to dedicate their top people to poor issues -- an approach he feels is more powerful than traditional corporate donations and volunteer work. Governments should set policies and disburse funds to create financial incentives for businesses to improve the lives of the poor, he plans to say today. "If we can spend the early decades of the 21st century finding approaches that meet the needs of the poor in ways that generate profits for business, we will have found a sustainable way to reduce poverty in the world,"...

In the interview, Mr. Gates was emphatic that he's not calling for a fundamental change in how capitalism works. He cited Adam Smith, whose treatise, "The Wealth of Nations," lays out the rationale for the self-interest that drives capitalism and companies like Microsoft. That shouldn't change, "one iota," Mr. Gates said.

But there's more to Adam Smith, he added. "This was written before 'Wealth of Nations,'" Mr. Gates said, flipping through a copy of Adam Smith's 1759 book, "The Theory of Moral Sentiments." It argues that humans gain pleasure from taking an interest in the "fortunes of others." Mr. Gates will quote from that book in his speech today. ...

To a degree, Mr. Gates's speech is an answer to critics of rich-country efforts to help the poor. One perennial critic is Mr. Easterly, the New York University professor, whose 2006 book, "The White Man's Burden," found little evidence of benefit from the $2.3 trillion given in foreign aid over the past five decades.

Mr. Gates said he hated the book. His feelings surfaced in January 2007 during a Davos panel discussion with Mr. Easterly... To a packed room of Davos attendees, Mr. Easterly noted that all the aid given to Africa over the years has failed to stimulate economic growth on the continent. Mr. Gates, his voice rising, snapped back that there are measures of success other than economic growth -- such as rising literacy rates or lives saved through smallpox vaccines. "I don't promise that when a kid lives it will cause a GNP increase," he quipped. "I think life has value."

Brushing off Mr. Gates's comments, Mr. Easterly responds, "The vested interests in aid are so powerful they resist change and they ignore criticism. It is so good to try to help the poor but there is this feeling that [philanthropists] should be immune from criticism."

A core belief of Mr. Gates is that technology can erase problems that seem intractable. ... Describing himself as an "impatient optimist," Mr. Gates said he will ask each of his Davos listeners to take up a "creative capitalism" project in the coming year.

And he vows to keep prodding them. "I definitely see, once I'm full time at the foundation, reaching out to various industries -- going to cellphone companies, banks and more pharma companies -- and talking about how...they can do these things," he said. 
[Full, much longer article - free - here]

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