Idle Dreams of 'Creative Capitalism'
Bill Gates' Plan to Solve World Poverty

By Phil Hearse

One advantage of  having untold billions in your bank accounts is that the people around you don’t tend to tell you you’re talking rubbish; in fact they tend to be very nice to you and take everything you say very seriously. And so it is with Bill Gates’ new plan to generate ‘creative capitalism’ that he thinks will make major strides towards solving world poverty. Floated at a special meeting at the Davros economic forum in January, Gates’ proposals are now a major article in Time magazine; the same magazine has organised a round table forum on the topic and a ghost-written book is on the way. Lots of people are talking about it, even if few company CEOs are taking it seriously.

Let’s start of by noting that – as everyone knows – Bill Gates has given up his day jobs at Microsoft to devote himself to the Bill and Melinda Gates Foundation, through which he and his wife Melinda intend to give away tens of billions of dollars to charitable causes, like projects to fight malaria and AIDS. He didn’t have to do that, of course and many leading capitalists would find it too ‘bleeding heart’ liberal to even think about it. But it doesn’t involve any significant personal sacrifices – there’s not much you can do with $50bn in the bank that you can’t do with $20bn. However his recognition of the realities of world poverty, disease and hunger are much more frank and open than is normal among US business people or politicians.

So how does ‘creative capitalism’ work? How can it bring billions out of poverty in a way that old-fashioned normal capitalism was incapable of? The chain of logic in his plan is precise. It goes like this (all quotes from the article linked above):

  1. “Capitalism has improved the lives of billions of people – something that’s easy to forget at a time of great economic uncertainty.” More on this assertion later.

  2.  However “it has left out billions more. They have great needs but they can’t express those needs in ways that matter to markets”. You could rephrase that last sentence as: “They can’t get what they need for a decent life because neither they as individuals or as communities have any significant amount of money”.

  3. “Governments and nonprofit groups (ie NGOs, PH) have an irreplaceable role in helping them, but it will take too long if they try to do it alone. It is mainly corporations that have the skills to make technological innovations work for the poor. To make the most of those skills we need a more creative capitalism: an attempt to stretch the reach of market forces so that more companies benefit from doing work that makes people better off. We need new ways to bring people into the system – capitalism – that has done so much good in the world.” (My emphasis PH).

  4. The situation is really bad and its not getting better fast enough. For example a billion people live on less than a dollar a day. “They don’t have enough nutritious food, clean water of electricity. The amazing innovations that have made lives so much better – like vaccines and the microchip – have largely passed them by. This is where governments and non-profits (ie NGOs) come in”. Note this last sentence, a wise tactical move in the chain of argument. Gates is not going to claim that the self-interest of the big corporations in selling things to the very poor is going to solve the really major problems of poverty and infrastructure. That must be solved by ‘governments’ and NGOs.

  5. However things will chug along much faster in the poverty reduction stakes if government and NGO efforts are aided by the more intensive involvement of corporations in selling to the poor. Because “improvements will happen faster and last longer if we channel market forces, including innovation that’s tailored to meet the needs of the poorest, to complement what governments and non-profits do…Naturally if companies are going to be involved they need some kind of return. This is the heart of creative capitalism”. In this argument Gates has evidently been influenced by CK Prahalad’s book The Fortune at the Bottom of the Pyramid, which argues that the poorest two-thirds of the world’s population have a $5 billion worth of spending power, and companies can go and get it if they can find stripped-down products at the right price. Gates says Microsoft is working on PCs for use by illiterate people who will need minimal training and a PC that can be accessed by up to 50 students in an impoverished classroom, in a school that can’t afford more than a few PCs. Another example is mobile phones: Vodaphone thought they would only get 400,000 customers in Kenya, now they have 10 million. Why? Innovative pricing – they charge by the second not by the minute!! So you can be sure that long pointless conversations are rare among the poor.
  6. This is a win-win situation with corporations making significant profits out of helping the poorest and the poor having their lives improved significantly, but this will take innovative products and thinking ‘outside the box’. But this is only part of the creative capitalism matrix. The other one is devising ways to make ethical and charitable actions by corporations profitable. You can do that by foundations and government giving extensive publicity to the good works of the corporations; good publicity will get charitable and ethical companies more clients in the advanced countries, thus making them more profitable. Being ethical can be a major selling point. But also, governments must do their part by giving charitable and ethical corporations positive incentives. He quotes an interesting hypothetical case: if a drug company produces a cheap malaria drug and gets it quickly into Africa, the US government could prioritise their other applications at the Food and Drug Administration and get their anti-cholesterol drug onto the market a year quicker than anticipated!

  7. In fact creative capitalism is already underway, with some companies doing some of the things that Gates suggests. The neat thing is that creative capitalism is a way of making money and helping the poor at the same time: “As I see it, there are two great forces of human nature: self-interest and caring for others. Capitalism harnesses self-interest in a helpful and sustainable way but only for those who can pay. Government aid and philanthropy channel our caring for those who can’t pay.” But now we can go beyond the capitalism/philanthropy dichotomy by combining them together in new and creative ways: creative capitalism!

Rose-tinted spectacles: will 'governments' do their bit?

So how should the Left and the global justice movement see these proposals? Actually within this framework there can be useful and positive proposals, for example schemes to get clockwork radios and cheap laptops to people who couldn’t otherwise afford them are already in place.

But the main drawback in Gates’ proposal is that it is a schema, an idea though up in a Seattle ivory tower, that has precious little purchase on the real world and indeed sees it through rose-tinted spectacles . That’s why it’s so abstract, for example in its insistence that it’s ‘governments’ and ‘non-profits’ that have to solve the main problems of food, water and poverty. But which governments? Using which methods? Financed how? Paying for infrastructural development with which funds?

Gates’ argument takes presumably the G8 governments, the banks, the IMF and the World Bank as a benevolent given, the people who are going to be there (or at least could be) for the purpose of disinterested poverty alleviation. This is far from being the case. These are the same forces that have through the debt crisis and neoliberal ‘conditionalities’ imposed and deepened poverty in these countries. Why has Kenya’s infrastructure collapsed? – because the World Bank in the 1980s insisted on huge cutbacks in government spending in return for more loans, so state services like education and health fell to bits, as did the roads and government buildings in even a big city like Mombassa. Why is there increased malaria in Sri Lanka? Because the IMF and the World Banks insisted on the closure of the anti-malaria programme of crop spraying and special clinics. This is the general pattern, compounded by corruption and privatisation that have made things much worse for the poor in many ‘third world’ countries.

World cheap labour system

Moreover Gates has absolutely no conception of the social relations of production on a world scale. So he says that the involvement of creative capitalism can speed up what government and NGOs are doing; but he fails to see the logic of his own argument. If ‘governments’ were audaciously tackling poverty, new market opportunities for corporations would already be emerging amongst the poorest two billion world citizens as people became less poor. But it’s not happening because of the structural factors locking those two billion into poverty. What are those structural factors?

Generally we can say world poverty has three main causes. The first is that neoliberal capitalism has created a world cheap labour economy. That’s why for example the Chinese economic miracle may be able to create an aspiring consumerist middle class of 100 million, but why many more hundreds of millions are stuck in ultra-low paid jobs or are itinerant labourers treated like serfs. The one is the condition of the other. The market, not least the market for computers and hi-tech goods, relies for its fat profits on precisely these low paid workers, in China, in India, in South East Asia and in the maquiladora assembly plants along the Mexican border with the United States – and in many other places. ‘Creative capitalism’ won’t do a blind thing about this world cheap labour economy.

Second world poverty is caused and sustained by the debt and loans trap into which the corrupt local capitalist classes have dragged their economies, in alliance with the World Banks and the IMF mentioned above.

The third main cause of world poverty is the simple exclusion by international of parts of the world, mainly in Africa, that are regarded as useless and basket cases, in which let it be said that ‘uneconomic’ people are regularly closed down by famine and disease. ‘Creative capitalism’ is of course incapable of dealing with, or even recognising, these structural factors that create rich and poor countries.

Corrution and violence: how the third world ruling class keeps control

Bill Gates’ plan leaves out another crucial arena of human endeavour: politics and power. In the ‘less-developed’ countries you have whole classes of people who are rich by international standards and who maintain their wealth by the ultra-exploitation of the poor, hand-in-hand with international capitalism. Do they want international institutions or philanthropic busybodies to come into their countries and solve the poverty that they don’t regard as a problem, but a key source of their wealth and power? Do the Pakistani semi-feudal landlords want the freeing of their virtual serf labour force and for them to be paid decent wages? Of course not. In addition, in most third world countries pillaging state funds, corruption on the most monumental scale imaginable, is a crucial factor in the wealth and power of the local capitalist elites. For example, no Mexican president ever leaves power without his personal fortune being increased by at least $100m. Everyone knows it, it’s part of the system.

Ultra-neoliberal president Carlos Salinas de Gortari in the 1980s left office with many times this amount, in addition to virtually giving his friend Carlos Slim control of the Mexican telephone service Telmex in a privatisation scam, thus creating an empire through which Slim was, for a period in 2006-7, officially the world’s richest man. And this in a country where at least 80% of the population are very poor and where increases in food prices are pressuring their ability to consume even the tortilla staple of the poor.

But I don’t want to particularly demonise the Mexican ruling class. Everyone knows that dictators like Suharto in Indonesia and Mobutu in Zaire (now the Democratic Republic of Congo - DRC) stole even more. So creative capitalism comes up against yet another barrier. But then there’s the chaos and genocide that emerges as corrupt governments start to collapse and militarist gangsters take over, as has happened in the DRC.

There’s another intrusive layer of reality that Bill Gates hasn’t noticed – imperialist war, military occupation, torture and mega violence, such as that used by the government-backed death squads in Colombia to intimidate the poor peasants who sympathise with popular movements. How does creative capitalism work in Colombia? Or Iraq? Or Afghanistan? All these things are off Bill’s radar.

The poorest have no resources to buy into creative capitalism

One more thing that goes more to the heart of the theoretical basis of Gates’ position, namely CK Prahalad’s book The Fortune at the Bottom of the Pyramid. Prahalad argues that the poorest two thirds of humanity wield $5 trillion worth of spending power, so the transnational corporations need to make new markets to exploit/benefit this sector. Well, that’s more than 4.2 billion people. If we do the sums, it’s easy. It’s saying the average annual spend of the poorest two thirds of humanity is $1,190 a year, a pathetic amount that comes to $3.2 a day. Within that there are probably millions who have $10 or $12 a day, many with $4-6 and a billion who have $1 – or less. The target group of ‘creative capitalism’ is never going to be that poorest billion who have virtually nothing at all.

But even among that sector of the world’s population that earn maybe $20-$50 a week, the next period is going to be extremely hard, with very little left over from spending on food, clothes and fuel for cooking and keeping warm to spend on the innovative products of ‘creative capitalism’. Gates refers to ‘short term’ ups and downs in world capitalism and clearly expects the current crisis to be like that. It’s clearly not going to be short-term. Gates’ proposals could not have come at a worse time.

Naive faith in technology

Beyond that, Gates has – unsurprisingly – a naïve faith in technology to be a key factor in ending world poverty. But he himself recognises that the basics of food, water, electricity, and clothing are the main concerns of the poorest. Cheap laptops are useless to people who don’t have these basics. Moreover most electronic goods involve very delicate technology with easy access to repairs and servicing that don’t exist in many of the poorest areas. It’s good to be able to have some robust cheap technology, like a clockwork radio that doesn’t need electricity or batteries; but you can’t eat it, it won’t give you clean water and it won’t build a school for your kids. More advanced technology becomes more relevant as poverty starts to be overcome, not before.

Finally, what will the response of the corporations themselves be? In fact appearing ecologically ethical is a key part of the marketing of major corporations, especially the oil companies. Britain’s Co-operative Bank makes a point of ethical investment and doubtless gets a certain consumer bonus from that, although no one has measured it. I doubt that it is particularly substantial. In the end though we are going into a harder and tougher world in which for 99% of corporations, let alone banks and financial institutions, the bottom line – profits – will be the be-all and end-all.

The Gates Foundation will continue its philanthropic course largely ignored by the rest of the business world. In the end its all a throwback to the charity of the super-rich so characteristic of Victorian Britain, where philanthropy was certainly displayed by the capitalist class, but not exactly in equal proportion to their self-interest. The billions of the poor and the oppressed need something more practical than creative capitalism to change the structures of their exploitation. Like overthrowing the social relations of capitalist oppression at a local, national and international level.