No Growth – or “Creative Capitalism”?

Yesterday Bill Gates gave the keynote address at the World Economic Forum in Davos, calling for a better kind of capitalism. And yesterday I got an e-mail from an economist friend who was urging the cessation of economic growth. Neither message was particularly new and they both represent authentic efforts to save the world from a terrible fate. But the two positions could hardly be further apart. One cannot coherently accept them both. And I know where I stand, though most of my friends would take the opposite side.

One of my friends said the other night that “we cannot solve global warming until we have changed our economic system.” I did not hear her complete message but I know she meant that capitalism should be abolished before addressing the other global economic problems. The occasion was not appropriate for a debate, so I did not take issue with her analysis, but I disagree completely.

And so does Gates. Having changed the world and reached middle age, he is quitting his full-time work at Microsoft and will spent the rest of his life on his extraordinary philanthropic projects. From other interviews with him, I have learned that he has sought advice about effectiveness in disbursing development aid. Some of the leading scholars in these fields — notably William Easterly — irritate him by claiming that most of the aid previously donated to poor countries has been wasted. Yet Gates himself knows that even Microsoft’s donations of two billion dollars have not panned out. He intends to spend his money on projects that will make a real difference.

So far, he has focused on ways of lifting the poorest third of the human population — which means primarily spending on health issues. Health spending almost always pays off, whereas other contributions often do not. He has formed partnerships with numerous pharmaceutical companies, putting up the money to buy vaccines and other medications, but asking them to assign their most innovative staff the task of developing new treatments that can be sold in vast quantities and with varying prices to “tiered” populations. He sets out by determining how much, say, a poor African mother can afford to pay to vaccinate her child — say fifty cents — and then he offers incentives to the first innovator who can develop millions of doses of that drug at fifty cents apiece. Very smart. And entirely capitalistic. Governments can help most, he says, by creating incentives for social entrepreneurs to invent things that will actually pay off financially. There is no inevitable incompatibility between profit-making and doing good for the world.

In this matter he refers to Adam Smith, calling him “the father of capitalism.” The book of Smith’s that he quotes, however, is “The Theory of Moral Sentiments,” which preceded the book that more famously justified self-interested behavior as socially beneficial. Smith insisted that altruism is a genuine and important human motive: the desire to foster the well-being of others. And so Gates concludes that the competitive desire for financial gain is no more compelling than the desire for recognition.” Accordingly, he claims that it is not hard for companies to expand their capitalistic endeavors to include production for the betterment of the poor. Even if the company reduces its profits somewhat, this new goal will bring satisfaction and attract motivated employees, especially if it becomes recognized for its good social orientation.

I believe this is realistic. Moreover, like Gates, I am optimistic that the world will generally continue improving as it has been doing for centuries (with, of course, some spectacular exceptions). Gates describes himself as “an impatient optimist,” for he wants to make beneficial capitalism help more of the world than it now reaches — specifically, the bottom third.

What he does not mention is the apprehension of those Malthusian environmentalists who believe that the world’s natural resources will inevitably be depleted if capitalism continues its present course. For Malthus it was food that would inevitably be depleted, but today’s Malthusians believe that all kinds of other natural resources will be exhausted shortly because of population growth. This prediction has been made repeatedly since the eighteenth century, though the earth’s population has multiplied several times over, while the availability of food and raw materials has increased and their prices have declined. My friends expect this trend to stop any day now because “logically" it must do so because the earth is finite.

Gates’s own career partly explains why growth can continue without depleting “stuff.” He is one of the richest men on earth, but his money came from software — codes that exist only as organized symbols and not as physical objects. If you buy one of his programs, you may not even get a package to open. You can download it electronically.

The huge wealth of today’s capitalism does not consist of smokestacks or gold bars or granaries, but of knowledgeable, creative human personnel. Accordingly, he advises companies not just to donate money to anti-poverty projects, but rather to put their most creative talent to work developing products that will help the poorest third of the human population. It’s talent that now is truly “the wealth of nations.” Ours is the “information economy,” though my Malthusian friends have not grasped that reality yet.

And to benefit the poor, the upper four billion of the world’s six billion persons need not lower their standard of living, for there is enough for all of us if we use our heads creatively.

I love capitalism, just as I love democracy — yet there is room for immense improvement in them both. Pre-capitalist and undemocratic societies are dreadful places. People who have the prosperity and political freedom that we enjoy are, I think, obliged to share them with every other human being who aspires to them — as most people in the developing world do. That’s my philosophy, and (thank God!) it is also the philosophy of Adam Smith and now Bill Gates.