Panelists Take On ’Creative Capitalism’
Yesterday, I attended a panel discussion entitled “Creative Capitalism: Can It Meet the Needs of the World’s Poor?” The panel of experienced practitioners and academics was convened to respond to Bill Gates’ recent speech at Davos where he encouraged “an approach where governments, business, and nonprofits work together to stretch the reach of market forces so that more people can make a profit, or gain recognition, doing work that eases the world’s inequities.” A big thanks to The Bradley Center for Philanthropy and Civic Renewal at the Hudson Institute for bringing together the panelists and hosting this timely discussion.
With an interesting assortment of panelists, and a variety of interpretations of Gates’ speech, the discussion included a little bit of everything – from economic theory and political ideology to technological developments and field results. The central contention that seemed to emerge was whether or not market-based solutions are a viable method of poverty reduction, given that existing markets are not already targeting to poor, and have, in fact, exacerbated inequalities in many instances.William Easterly, distinguished scholar in the development field and well-known for his book The White Man’s Burden: How the West’s Efforts to Aid the Rest Have Done so Much Ill and So Little Good, was the first to take on ?creative capitalism.’ He voiced the opinion throughout the debate that traditional capitalism has been the single successful driver of true poverty reduction and that, while it may not function as fast or as equally as we would like, it is the only solution that will work. In Easterly’s mind, Gates was proposing a ’new’ capitalism where corporate philanthropists would be recognized for supplying goods to the poor – a solution with weak incentives and a low likelihood of success.
Al Hammond, WRI’s Vice President for Innovation and Special Projects and a writer here on NextBillion.net gave a very different interpretation, which he also elaborated in a recent posting on Nextbillion. Hammond maintained that Gates was expressing interest in multi-sector efforts to use capitalist mechanisms in order to make markets work better for the poor. He offered numerous examples of field research and pilot projects that have identified markets where lack of information and of choices have allowed markets to function inefficiently and perpetuate vast inequalities.
The third speaker, Eugene Steuerle of The Urban Institute, brought up an important point that approached Gates’ speech less from a theoretical or technical perspective and more from a practical one. He put it this way: “With money, there are only four ways to spend it: wisely on oneself, foolishly on oneself, wisely on other people, or foolishly on other people.” Although Gates has a huge amount of money, he’s still only a small piece of both the ’pie’ that encompasses all actors: government, corporate and philanthropic. To Steuerle, Gates’ speech expressed his own musings about how to spend his money ($56 billion-plus at last count) in order to really catalyze change that remains elusive in many areas of the world despite decades of international economic growth and development work.
My opinion is that all three speakers contributed something here. Easterly reinforced the idea that BoP market-based solutions must be driven by capitalistic mechanisms if they are truly going to scale and lift people out of poverty, permanently. Hammond illustrates cases where markets exist but are not operating under the competitive forces that make capitalism an effective and self-perpetuating driver of development. Steuerle’s comments opened the discussion more broadly to question how each sector can spend better and engage with each other, whether they be driven by capitalistic motivations or not.
As for what Bill Gates really meant, maybe he’s not even crystal clear about exactly what ’creative capitalism’ will look like. What’s more important, though, is that Gates did an admirable job of reminding everyone that “the genius of capitalism lies in its ability to make self-interest serve the wider interest.”