Bill Gates’ Softer Capitalism Is Better

Big business should work toward making quality-of-life upgrades affordable for the poorest people of the developing world. Pro or con?

Pro: Fold in Some Altruism

We need a “kinder capitalism,” according to Bill Gates. In his speech at the World Economic Forum in Davos, Switzerland, the Microsoft (MSFT) founder discussed the need for “another level of innovation” to make improvements in science, technology, and medicine extend to the most impoverished citizens of the globe. Below are some excerpts from Gates’ comments.

“Profits are not always possible when business tries to serve the very poor. In such cases, there needs to be another incentive, and that incentive is recognition. Recognition enhances a company’s reputation and appeals to customers; above all, it attracts good people to an organization.”

“Sometimes market forces fail to make an impact in developing countries…because we don’t spend enough time studying the needs and requirements of that market.”

“When the World Health Organization tried to expand vaccination for meningitis in Africa, it didn’t go straight to a vaccine manufacturer. It first went to Africa to learn what people could pay. They found out that if they wanted mothers to get this vaccine for their babies, it had to be priced at under 50 cents a dose. Then they challenged the partners to meet this price, and, in fact, Serum Institute in India found a new way to make the vaccine for 40 cents each.”

“Another approach to creative capitalism includes a direct role for governments.… Under a U.S. law recently signed by President Bush, any drug company that develops a new treatment for a neglected disease like malaria or TB can get a priority review from the FDA for another product they’ve made.”

“…[H]elp the businesses in the poor world reach markets in the rich world. Tomorrow morning I’ll announce a partnership that gives African farmers access to the premium coffee market.”

“Finally, one of the most inventive forms of creative capitalism involves someone we all know very well. A few years ago, I was sitting in a bar here in Davos with Bono…talking about how we could get a percentage of each purchase from civic-minded companies to help change the world…. That was how the Red campaign was born, here in Davos. Red products are available from companies like Gap (GPS), Motorola (MOT), and Armani. Just this week, Dell (DELL) and Microsoft joined the cause.… Red has generated $50 million for the Global Fund to Fight AIDS, tuberculosis, and malaria.”

Con: Spread the Traditional Capitalism

Bill Gates says we need a new capitalism.

Whether you read Ayn Rand or The Nation, you have to admit it’s kind of funny. Imagine Bobby Fischer petitioning to change the rules of chess. Or Tom Brady telling the NFL commissioner, “Look, football’s not a bad sport, but I have a couple suggestions.”

Gates, last seen declaring the world “flattened” by the spread of capitalism, now says capitalism fails the poor. He’d like to see the invisible hand turn into a helping hand by encouraging companies to seek “recognition”—or socially responsible reputations—over profit in a system he calls “creative capitalism.”

The first problem with creative capitalism is that Gates’ suggestions aren’t very creative. What he calls “recognition” is really just a cipher for marketing.

Consider the ubiquitous Product Red campaign Gates praised in his speech. Many philanthropists have slammed Red as a sanctimonious vehicle for profit that raises only a fraction of its marketing overlay and acts as an inferior substitute for real charity. “I could give to the Red Cross,” someone might think, “or I could just buy this tank top, and Gap will give for me.”

Gates says companies should respond to “need” rather than “demand” in poor markets. But inserting altruism into capitalism is bad for both the U.S. and Africa. At a time when U.S. jobs are going overseas because of the natural growth of capitalism, how would average Americans—who need their jobs—feel about directing more money away from U.S. markets to places where there isn’t even demand?

The problem in Africa isn’t that our capitalism lacks kindness. The problem is that Africa lacks capitalism. In a 2007 Heritage Foundation ranking of economic freedom, half of the bottom 50 countries were in Africa. While African causes have served as the darlings of artists, corporate do-gooders, and government coffers for decades (a record $4 billion from the U.S. in fiscal year 2006), real economic growth on the continent has been mostly stagnant.

Africa will get on its feet when we stop thinking of it as a welfare continent, and start finding places to make real long-term investments rather than stoke a fleeting sense of charity. That’s the capitalism Gates used to laud, and it’s improving the quality of life from Belgrade to Bangalore. It’s the kind of economic revolution that socially responsible Americans should demand and African countries truly need.

Opinions and conclusions expressed in the BusinessWeek< Debate Room do not necessarily reflect the views of BusinessWeek, BusinessWeek.com, or The McGraw-Hill Companies.

Reader Comments

William

Capitalism and altruism can meld together, but not overnight.

Andy

For example, Africa is lacking everything. Colonialism is still the prevailing attitude, and Microsoft is no exception. Nothing is given for free by Microsoft, not even in poorest Africa.
The poorest people are milked by the very richest man in the world. I can only say, walk as you talk Mr Gates, or shut up.

Adam Smith

It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.

Jerry

Capitalism and altruism are antithetical; they lie at opposite poles. Don't confuse altruism with benevolence. Benevolence is not possible to those who are consistent altruists.

Capitalism engenders prosperity and benevolence. It is why people like Buffet and Gates can become prosperous and then give their wealth away in charity.

You don't hear Burma or Bangladesh benevolently offering millions (or even thousands) in foreign aid. It's because they don't have anything to give. The apparatus of wealth-creation does not exist in these places. Capitalism produces prosperity (like it did in East Asia, India, China, Botswana, etc.), and subsequently, engenders benevolent charity.

random

Altruism and capitalism are not contradictory. In fact, management gurus like Drucker strived for businesses to be altruistic and use their profits not just to enrich themselves or shareholders, but for the public good as well. There's more than $100 trillion (yes, with a T) worth of things in this world and about 2 billion poor people. It's hardly possible not to have enough money for projects designed to help the poor and returning only token profits from nominal fees.

Let's remember that when we invest in developing nations, they in turn gain wealth and start demanding some of the fine goods we produce, paying us for new cars, electronics, medical equipment, infrastructure construction planning, and even aerospace expertise. When countries like China and India become wealthy in their own right, their demands will fuel our economy and create more jobs. It won't happen overnight, but eventually it will.

A little kindness and altruism in our capitalism can pay off in a big way when the people with no money and in dire need of our help become self-sufficient and start buying all the wonderful and pricey stuff we make. Globalization is a two-way street, and we can't expect to gain all the benefits of foreign markets without investing into other nations.

RnBram

Altruism is to capitalism as arsenic is to health.

In any culture where altruism becomes the driving force, the success and happiness of its citizens has declined, or never risen.

One need only look at Communist and socialist nations, or at the failed Israeli kibbutz, to see its destruction.

Scotland and the U.S. once showed the world that rational individualism and capitalism (banning coercion and with proper contract laws) have brought mankind further in 100 years than altruism has in a 1,000.

Bill Gates should know that, but where he did due diligence in business, he did not do so in morality. He could even see that Kenya is doing better than any other African nation because it is relatively more capitalist. But altruism requires a certain dishonesty in its adherents.

Donna

Bill gates you are wrong. Philanthropy is not some "cost center" reflecting a "white man's burden." You're thinking zero sum.

John R.

If ya' want to lead, then lead. We're in the middle of lots of people losing their homes in this country. What kind of leadership is that? The rich and the corporations are sucking the very life out of the people of this nation. How does that set a good example? Our forefathers told us not to get involved with foreign countries, but to lead by example. When everyone in the USA can enjoy the same benefits (and I mean all of them) of the wealthy in this country, then we should start considering, and I do mean considering, helping out the others. But history shows the populace has to see the value of doing something before it starts doing it, too. We need to focus on bettering our system before we start using their system for our benefits, whether they be money or recognition.

Jeff Mowatt

This is no new concept. Replacing greed with compassion has been advocated for many years and has been variously described as social, moral, and conscious capitalism and as people-centered economic development.

Such a model was deployed in a U.S. AID bottom-up microeconomics initiative in Siberia following the top down approach of the Defense Enterprise Fund.

It is also the fundamental strategy of a 21st-century Marshall Plan aimed at alleviating poverty in Eastern Europe and sowing seeds for sustainable business to prevent recurrence.

In Africa as in many parts of the developing world, they've had plenty of traditional Western capitalism, served up with corrupt deals. It leaves the poorest living in shacks without land to till, access to irrigation, and tools to cultivate. Our corporate-style Western capitalism is at odds with a society where taxation from business fails to recirculate back into development through the actions of corrupt regimes.

Progressive African economists advocate an African solution engaging traditional African economics, which are family-centric. We exclude them from our international systems of online payment, making all independent initiatives dependent on the predatory. This is no "free market" system of economics worthy of the title.

We keep people poor in Mexico, making craftwork for a pittance because they are at the bottom of a distribution model that suits the greedy capitalist.

Finally, we prevent people from creating businesses to become self-sustaining inside our Western economies because they have limited access to seed funding and information technology.

We are those who've been screaming for kinder more inclusive capitalism for more than a decade, and now even the wealthiest seem to acknowledge the need.

Robert Taylor

Altruism is an indirect result of true laissez-faire capitalism (emphasize the word "true"). The wealth created by even crypto-capitalism (i.e., fascism) creates sufficient surplus to allow individuals to be generous (gracious).

The problem is, and this is continually ignored in these discussions, that we never achieved true laissez-faire status that would result in "hands-off" by both the politicos and the corporations to partnering.

Pure capitalism would mean separation of economy and state just as we have with church and state. Any disputes in that scenario would be resolved through the courts.

All our Constitution calls for is "the cop on his beat," "the judge on the bench" and "the military on our borders and international sea and flight lanes."

Pranay Gupte

Bill Gates now wants corporations to urge its executive to swap sweat pants for Savile Row suits and trek through the backwaters of developing countries to teach the natives a thing or two about creative capitalism.

It's a laughable notion: Imagine, if you will, pudgy options-protected defrocked CEOs like Citigroup's Chuck Prince turning up in Ajman to instruct the sheikhs. Or Merrill Lynch's wunderkind, Stanley O'Neal, landing in Sri Lanka to spread the good word about smart use of dollars (euros?).

No, thanks. Capitalism--"creative," "catalytic," "smart," whatever the modifier you want to attach to the noun--is alive and well. That's because at its core is human enterprise. And the enduring ethos of human enterprise--economic cycles and recessions notwithstanding--is the simple, central thesis: We, all of us, want to lead better lives. Not in some vague future, but in the here and now.

Subprime mortgage crisis? The declining dollar? Stock-market volatility? This, too, shall pass. There will always be entrepreneurs and there will always be entrepreneurship, regardless of the cultural context and environment. Catalytic capitalism is wired into all of us. Some tap into that electricity, and some don't. As along as the cohort of the former is larger than of the latter, we're all going to do all right.

Aleksandre Asatiani

I think what Gates is doing is more of an effective marketing campaign rather than intentions of charity. I agree with Derek Thompson that Africa has luck with capitalism and other institutions that are necessary for the normal development, and just giving them money or cheap products is worthless in a long run. To be honest, stories about cruel capitalism remind me more of Soviet propaganda.

jose gamez

This is a joke. People in developing countries want to eat good food and drink clean water, not surf the Net or play video games. Bill only wants another country to expand his monopoly of computers.

Richard Dowell

I think the idea of Creative Capitalism has considerable merit. Governor Mark Sanford has repeatedly said that the greatest barrier to economic development in South Carolina is the high school dropout rate.

HBinswanger

Altruism is self-sacrifice. Since full sacrifice means death, altruism is, as Ayn Rand showed, a morality that holds death as its standard of value. Capitalism means production, profit, self-betterment. It is contradictory of self-sacrifice. Capitalism reflects the morality whose standard is life.

Gates is recycling the old idea of making the economy serve "need"--as Marx put it: "From each according to his ability, to each according to his need." That altruist slogan received its appropriate epitaph in the fall of Soviet Russia.

The world is slowly, slowly turning to the idea of freedom, which implicitly rests on a morality of rational self-interest, the antithesis of altruism. It's either/or: egoism or altruism, life or death.

chris macrae

Dr. Yunus is the world's happiest banker? Why? Because he has invested in helping more people to be their most entrepreneurially productive, and sustained more communities than anyone?

He is quite probably the last chance we will get to escape being ruled by the dumbest mathematical mistake ever, a system error that will end human sustainability. Maximizing how much money you take out of a system each passing quarter does not compound value for anyone--least of all long-term investors, societies, and our children. Only compounding service purpose does. Anyone who opposes Yunus or Gates is mathematically inept.

haylee

Bill is a good leader, and he shouldn't be criticized.

Don Lovvorn

It is my hope that Bill and Warren get the sand oil flowing. Bill promised to bring crude down to $35 a barrel. Boy that would screw the good old boys in Washington. You go Bill and Warren.

Universitek

"Creative capitalism" that delivers profits and helps the poor can be the alternative for a system that became a deadlock.

TomasC

Adam Smith already in 1776 identified the major and most important force that moves the whole economy of mankind forward: individual egoism.

I am surprised that since Adam's times an incredible development and level of living has been reached, but his definition is still, after so many years, valid.

Hence, it seems that everything around is changing but people and their characteristics and values. Therefore, for me, it seems rather impossible to suddenly switch to a new capitalism with all those great ideas...

Greed, egoism – they are in us. We'd better acknowledge that and not pretend that they don’t exist. Instead of denying, let's channel this all into a more controllable form.

Pat

Global capitalism works for everyone who doesn't have the prevailing attitude of "customers like us, employees like us."

When moving beyond the "us syndrome," the killer appears to be the exploitative attitudes of people to sell or service people "not like us," by offering substandards that lack the ethical code that engenders loyalty, and care --"reserved for us."

Could such a marketing plan ever work as anything but exploitive pandering?

manos

Some people in here can't distinguish between altruism and charity. Charity is very different in that you don't go out of your way to help someone else. For instance, Bill Gates donates a lot of money and etc., but he himself lives unbelievably luxuriously. He doesn't lack anything or goes out of his to help anyone. That's charity. Altruism is when you go out of your way to help others. Say, I make 50,000 a year. And I want a car which costs 20,000. If I keep the 30,000 and instead of buying the car that I want with the 20,000, I donate them to a charity organisation - then that's altruism. Cos I make myself less happy and others more.

God damn it, I'm not even an English speaker and I still understand the fundamental differences between charity and altruism. Ayn Rand would be horrified by the comments in this page...

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