Bill Gates’ Softer Capitalism

 

Business Week Debate Room

 

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

by Derek Thompson

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.

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