Thursday, January 24, 2008

Creative Capitalism

In today's Wall Street Journal, Bill Gates previews his speech on "creative capitalism" that he will give at Davos later today.

An excerpt and video...

Free enterprise has been good to Bill Gates. But later today, the Microsoft Corp. chairman 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.

Outgoing Microsoft Chairman Bill Gates talks to The Journal's Rob Guth about his concept of creative capitalism. (Jan. 23, 2008) "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 world leaders at the forum, according to a copy of the speech seen by The Wall Street Journal

If I were at Davos and had a chance to chat with Bill, here is what I would ask...

By calling for "creative capitalism," aren't you implying that we now practice something else? Perhaps "shock capitalism" a la Naomi Klein, or "indifferent capitalism?"

If "creative capitalism" is not something entirely new, but really a wider application of the moral order of market forces, why discredit it by pretending it's something new?

In the 1960s, policy makers and intellectuals thought they could lift poor countries out of poverty by building big infrastructure and industrial projects like airports, steel mills and highways. Most of these failed. It was an expensive lesson. While technology is certainly important, have you considered the possibility that proposing technology as the first step to reduce poverty may be making the same mistake? Are there other issues that should be addressed first?

You've read Hernando de Soto's book The Mystery of Capital, yet you don't mention legitimizing property rights of the poor as the first step towards prosperity. Do you disagree?

You say the rate of improvement for the poor is very slow, while the rate of improvement for the well-to-do is very fast. However, from 1970 to 2000, 250 million people in China moved above the poverty line. During the same period in India, 140 million people escaped poverty. The rapid success at reducing poverty in these countries didn't come from technology, foreign aid, charity or philanthropy. It came from reducing internal controls that prevented an economy ordered by market forces rather than one ordered by mandarins and technocrats. Have you considered this in your philanthropic planning?

In the developed world, businesses that serve the poor are often vilified as greedy exploiters, e.g., pawn shops, payday lenders, check cashing services, and auto-title lenders. Why do you believe for-profit businesses operating in poor countries would be viewed favorably, when those kinds of businesses are often denounced as "predatory" when they are successful? Isn't the real problem a gross misunderstanding of the morality of exchange, not the lack of market opportunities for that exchange?

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