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WILL CREATIVE CAPITALISM CONQUER POVERTY? PDF Print E-mail
Written by Jim Jordal   
Monday, 29 December 2008

WILL "CREATIVE CAPITALISM" CONQUER POVERTY?

By Jim Jordal

Blessed is he who considers the poor: Yahweh will deliver him in the day of evil.  Yahweh will preserve him, and keep him alive, He shall be blessed on the earth, And he will not surrender him to the will of his enemies.  Yahweh will sustain him on his sickbed, And restore him from his bed of illness.

Psalm 41:1-3 WEB

In a Time magazine article (Aug. 11, 2008) entitled "How to Fix Capitalism," recently-retired Microsoft CEO Bill Gates defines what he terms "creative capitalism" and calls for the corporate world to embrace the concept of acting for the social good as well as for their own bottom line.

Gates cites the historical role of capitalism as a growth engine that has brought economic betterment to huge sectors of society. That’s the positive side. But he also mentions that "it [capitalism] has left out billions more. They have great needs, but they can’t express those needs in ways that matter to markets."

What Gates is saying is that the market mechanism alone cannot satisfy basic requirements of the world’s needy billions because free markets allocate goods and services only to those able to afford them. Thus, those persons or groups owning productive factors (resources, labor, capital, management) get rewarded for their input to the productive process, while those lacking access to these productive resources (or being unable to organize sufficiently to demand more for their services) largely fail to benefit from the overall distribution of goods and services. Thus we have a billion people living on less than $1 per day, and a second billion, on $2 daily. The simple truth is that they don’t own anything the market values, so they receive no rewards in a market economy.

Since the underdeveloped world is transitioning rapidly from self-contained subsistence economies to market economies operating in the global context, the poor are left out. Their only options are to endure abject poverty, capture the attention of charitable groups so as to receive subsistence, overthrow the governments they view as oppressive, or to re-develop local subsistence economies to replace what they have lost to globalization.

But Gates sees another alternative: creative capitalism. He asks, "How can we most effectively spread the benefits of capitalism and the huge improvements in quality of life it can provide to people who have been left out?" He answers his own question by admitting that, while charity is helpful, it is too limited and too slow in reacting to human suffering. What is needed is an alliance between government, non-profits, and corporations to better channel the efforts of businesses and innovators into the area of relief for the world’s economically marginalized billions.

Gates believes corporations can be recruited to this goal if they have the incentive of making money at it. The problem is, of course, that corporations often believe their only goal is to make profits for their shareholders, so altruistic efforts become lost in the consuming drive for increased profits. None other than the great guru of the Chicago school of free market economics, Milton Friedman, said that the only business of corporations is to make money. Any other considerations like social responsibility would have to go elsewhere for solution.

By its very nature, capitalism seeks to maximize profit by purchasing and combining the factors of production as cheaply and efficiently as possible. This creates a conflict between corporate efficiency and social responsibility—one usually resolved in favor of efficiency no matter what the cost in human terms. Thus we sometimes have massive environmental degradation, wages not sufficient to provide a decent living, and little care paid to worker health—all in the interests of producing as cheaply as possible.

Gates is doing what many advocates for human betterment do not do: He is putting vast resources from his own charitable foundation into the struggle. He also on occasion takes the bully pulpit provided by his position as one of the world’s richest persons to speak for aiding the oppressed people, especially in the Developing World.

Gates is a persuasive speaker who puts his money where his mouth is. But more is needed. While I’m persuaded that increased social responsibility by business will help with the problems associated with poverty, I’m equally sure that business is not yet ready to put its full efforts behind Gates and his proposals.

So we will have more charity, but still no serious advocacy to address the reasons why poverty still remains an unsolved world dilemma.