Kinder Capitalism

This week, Bill Gates made a speech to the World Economic Forum in Davos, Switzerland, calling for what he describes as a ‘kinder capitalism’. The Wall Street Journal states that his newfound humanitarianism was born of the awareness that although capitalism has served many in the developing world, it leaves the poorest of the poor behind.

Gates sees capitalism’s worst failings in the areas of technology, health care and education. Billions are invested in each of these sectors, but only a tiny fraction of that investment reaches the two billion poorest members of the population.

His prescription? “We have to find a way to make the aspects of capitalism that serve wealthier people serve poorer people as well,” says Gates. He goes on to describe how businesses should task some of their best and brightest with creating products and services targeted at the poorest of the poor.

Reaction among economists and political writers ranged mostly between detached amusement and indignation. Left-leaning liberals attacked the speech for the hypocrisy inherent in a multi-billionaire who once, according to the New York Times, saw ‘finite greed’ as a weakness to be exploited. Those on the right tended to attack him for biting the hand that feeds him so well. Free markets, they say, don’t react well to meddling of any kind.

Felix Salmon, writing for Condé Nast, gently pooh-poohs the speech, stating, “…if Davos was hoping for a paradigm-breaking speech, they didn’t get one: they got a recitation of standard corporate-citizenship bromides instead. Which is all well and good: it happens every day at Davos. It just isn’t very special.”

But a small minority saw some wisdom in the proposal. The Huffington Post, a prominent online source of political news, published a very complimentary review of the concept. Taking Gates’ words and running with them, the author goes on to describe the work Nobel Prize winner Mohammed Yunus in developing the concept of micro-lending.

“With two such influential people as Gates and Yunus focusing on innovation, capital-driven change-making and the world economy, there is nothing to stop the social business model from snowballing into a worldwide movement, which can indeed eliminate poverty.”

Micro-lending is a proven way to address poverty. It works in increments smaller than most commercial lending institutions would be willing to consider, but it makes possible those first steps into a cash economy that are so critical to the most vulnerable families. Here in Vanuatu, both VANWODS and the Melanesian Cooperative Savings and Loans Society provide small loans to people in need of cash for a variety of purposes. Both report that only a tiny minority default on their loans.

Extending this principle to the area of business goods and services remains something largely overlooked by most commercial organisations. While cottage industries are often supported by NGOs, a small minority manage to advance beyond the very small scale at which they start. Very few global businesses care – or even know – about economic activity at this level. The payments are so small, and the profit margin so tiny, that it would actually cost them money to participate.

Assuming you’re familiar with this column, you’re likely waiting patiently for the tie-in to technology and communications. Something a little less tenuous, at least, than a mention of Bill Gates. The relation between this story and the world of technology is threefold.

First, and most importantly, comes the obvious: Micro-lending, micro-profit business and very low-cost equipment are all necessary in order for Vanuatu to fully embrace twenty-first century communications technologies. While such business activities won’t necessarily derive significant direct benefit in terms of profit, there is no doubt that they will enable a fundamental shift in economic activity in Vanuatu. Improved communications are a prerequisite for any kind of development, and since we’ve chosen free market methods to implement economic growth, we must accept that it has to operate at a scale appropriate to our particular needs.

The second point addresses Mr. Gates’ admonishment to the world’s business leaders to require that their best and brightest devote their time to creating business opportunities for the poorest among us. Bad advice. The skills required of a Chief Technology Officer, for example, have very little application to the issue of how to push wireless network services 100 metres further in a densely forested terrain.

One commentator in an online forum responded to this idea with an anecdote from Kofi Annan, ex-Secretary General of the UN. He went to university in the Northwest United States, an area that experiences bitterly cold winters. Mr. Annan, a West-African, spent the first few months freezing because he swore that he would never allow himself to wear the ridiculous-looking ear-muffs that were so common there. It took months of suffering before he swallowed his pride and accepted that local wisdom trumps even the cleverest ideas. The best way in which large telecommunications companies operating in the Pacific can ensure widespread coverage and low-cost maintenance is to lay out the basic service, then get out of the way.

Government has a role here, too, to ensure that the telecoms market is properly opened at the lowest level, opening the door to anyone with the wit and the will to help extend service to reach every corner of this country.

The third common thread, and by far the most difficult to encapsulate, relates to the whole idea of capitalism being made ‘kinder’. What Felix Salmon calls ‘a recitation of standard corporate-citizenship bromides’ is actually something far more important than the black-tie circuit seem to realise. Good corporate citizenship is not a ‘bromide’ – it is a precondition for business at all levels. It’s rather telling, therefore, that our current crop of global economic leaders should react to such talk as if it were nothing more than pretty-sounding pabulum.

It’s been said that two things trump all others where development are concerned: rule of law and the right of private ownership. Economic strategies, from the most libertarian free market approaches to the most heavily interventionist statism, can both thrive, provided that these two preconditions are met. This requires cooperation from government, civil society and the private sector.

Telecom Vanuatu has advocated loudly about its willingness to accept a more competitive market, provided that the rules of competition are applied ‘fairly’. Establishing what constitutes fairness in this context will be up to the newborn Utilities Regulatory Authority. We can only hope, therefore, that the government of Vanuatu and the experts brought on board to oversee this nascent market place will ensure that it makes a place for small operators to work at a level appropriate to Vanuatu’s needs, that it ensures the financial tools exist to grow local businesses from the lowest levels, and that it never allows short-term greed to trump the common good.