Bill Gates Issues Call for Kinder Capitalism

Thursday, January 24, 2008

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.
“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.

Mr. Gates isn’t abandoning his belief in capitalism as the best economic system. But in an interview with the Journal last week at his Microsoft office in Redmond, Wash., 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, and discussed them with dozens of experts on disease and poverty. He has voraciously read about those failings in books that propose new approaches to narrowing the gap between rich and poor.

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 at the annual Davos conference of world leaders in business, politics and nonprofit organizations.

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’s Davos speech offers some insight into his goals as he prepares to retire in June from full-time work at Microsoft — where he will remain chairman — and focus on his philanthropy, the Bill & Melinda Gates Foundation.

Mr. Gates sees a role for himself spurring companies into action, he said in the interview. “The idea that you encourage companies to take their innovative thinkers and think about the most needy — even beyond the market opportunities — that’s something that appropriately ought to be done,” he said.

His thoughts on philanthropy are closely heeded because of the business success that made Mr. Gates one of the world’s richest men. His eight-year-old charity is expanding rapidly following the 2006 decision by Warren Buffett to leave his fortune to the foundation. That donation, at the time valued at about $31 billion, increases to some $70 billion the hoard Mr. Gates says will be given away within 50 years of the deaths of him and his wife.

Serving the Poor

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 and former World Bank economist.

Others may point out that poverty became a priority for Mr. Gates only after he’d earned billions building Microsoft into a global giant.

Mr. Gates acknowledges that Microsoft early on was hardly a charity. “We weren’t focused on the needs of the neediest,” he said, “although low-cost personal computing certainly is a tool for drug discovery and things that have had this very pervasive effect, including the rise of the Internet,” he said.

Although Microsoft has had an active philanthropic arm for two decades, only in 2006 did it start seriously experimenting with software in poorer counties in ways that would fit Mr. Gates’s creative capitalism idea. Under that 2006 program, handled by about 180 Microsoft employees, the company offers stripped-down software and alternative ways of paying for PCs to poorer countries.

With today’s speech, Mr. Gates adds his high-profile name to the ranks of those who argue that unfettered capitalism can’t solve broad social problems. Muhammad Yunus, the Bangladeshi economist who won the 2006 Nobel Peace Prize for his work providing small loans to the poor, is traversing the U.S. this month promoting a new book that calls capitalism “half developed” because it focuses only on the profit-oriented side of human nature, not on the satisfaction derived from helping others.

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,” Mr. Gates plans to say.

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.

Talk of “moral sentiments” may seem surprising from a man whose competitive drive is so fierce that it drew legal challenges from antitrust authorities. But Mr. Gates said his thinking about capitalism has been evolving for years. He outlined part of his evolution from software titan to philanthropist in a speech last June to Harvard’s graduating class, recounting how when he left Harvard in 1975 he knew little of the inequities in the world. A range of experiences including trips to Africa and India have helped raise that awareness.

In the Harvard speech, Mr. Gates floated the idea of “creative capitalism.” But at the time he had only a “fuzzy” sense of what he meant. To clarify his thinking, he decided to prepare the Davos speech.

On Jan. 1, following a family vacation, Mr. Gates boarded a commercial flight in Auckland, New Zealand, and during the 21-hour, two-layover journey back to Seattle he started writing his speech.

Continue reading “Bill Gates Issues Call for Kinder Capitalism

Source: Wall Street Journal (link opens in a new window)