Critique of 'Creative Capitalism'
Richard Abernethy on Bill Gates' plan to "Fix Capitalism".
22 September 2008
Writing in Time magazine ('How to Fix Capitalism', 11 August 2008), Bill Gates advocates a “more creative capitalism” to combat world poverty. In issuing such a call, Gates acknowledges that actually existing capitalism has left billions of people in poverty, and something needs to change. However, he begins his article with a grand claim on behalf of capitalism: “Capitalism has improved the lives of billions of people – something that’s easy to forget at a time of great economic uncertainty”.
While it is true that the lives of most of the world’s people have improved measurably (life expectancy, real income and literacy rates have increased, child mortality has been reduced), “capitalism” has not done this. People, working by hand and brain, have won this general improvement in the standard of living, albeit within the prevailing capitalist system.
Still, Gates has a point. Capitalism has turned out to be far more durable, adaptable and expansive than many of its opponents believed in the past. At the onset of the Second World War, Leon Trotsky declared that capitalism was in its “death agony” – a highly credible view at the time. In the event, capitalism did more than survive; it sprouted whole new industries and technologies (not least the one dominated by Mr. Gates). The rise in living standards has been real, though very uneven. Absolute poverty has diminished, but inequality has increased, while approximately one fifth of humanity has gained nothing from the expansion of the productive forces, their standard of living remaining stagnant or declining.
Gates continues: “But it has left out billions more. They have great needs, but they can’t express those needs in ways that matter to markets. So they are stuck in poverty, suffer from preventable diseases and never have the chance to make the most of their lives”.
People with great needs that cannot be expressed in ways that matter to markets – or, putting it another way, markets indifferent to human need that is not expressed as purchasing power, as money. Some might deduce from that the need for an alternative to capitalism.
Gates argues that capitalism can be steered so as to lift more people out of poverty. This is something different from, and additional to, capitalist philanthropy such as the Bill and Melissa Gates Foundation. He writes: “We need a more creative capitalism: an attempt to stretch the reach of market forces so that more companies can benefit from work that makes more people better off”.
Efforts to modify capitalism in ways that benefit the poor are not exactly novel. Two well-known examples, not mentioned in the Time article, are the fair trade and ethical investment movements, both of which are more critical of actual capitalist practice, if not of capitalist relations of production. However, Gates may bear enough influence to persuade businesses to declare a commitment to anti-poverty, as many have already done to the environment.
For Gates, one example of “creative capitalism” is the (RED) campaign: “Today, companies like Gap, Hallmark and Dell sell (RED)-branded products and donate a portion of their profits to fight AIDS. (Microsoft recently signed up too).”
This appears to mean that the companies add a surcharge to their prices, which customers are willing to pay to support a humanitarian cause. For the companies, it’s a way of marketing their products and generally sprucing up their image.
Another side to “creative capitalism” is to view the poor themselves as an untapped market. Gates quotes one study that found that “the poorest two-thirds of the world’s population has $5 trillion in purchasing power”. He suggests that there are abundant opportunities for companies to develop low-cost goods and services that will be affordable to poorer customers. By way of example, he mentions Safaricom, a company that provides mobile phone services to ten million people in Kenya. Bill Gates may be on to something here. His ability to spot a business opportunity is not in doubt. And historically, this is what happened in the now developed countries: mass production of cheap goods for working class consumers was one factor in lifting living standards. However, such initiatives are more likely to help people who have at least a little spare income to spend, rather than the extremely poor.
Hypothetically, capitalism may sometime exist without absolute poverty (although this would require political settlements to the world’s wars, which are the most direct cause of extreme impoverishment). Indeed, the general trend is in this direction, although slow and erratic. At the same time, the trend is for relative poverty, inequality, to increase. I would not base a critique of capitalism on the claim that absolute poverty is an inevitable consequence of the system (although the actual existence of such poverty is obviously part of that critique). What are necessary features of capitalism are exploitation and alienation.
While criticising the idea of “creative capitalism”, I wish to avoid any easy assumption that socialism is the answer to poverty and other world problems. Our challenge is to work out how to build a new society that will solve these problems. Any system will have to face certain realities: population growth, climate change, depletion of fossil fuels.
Let us suppose that, at some time in the future, the working class (and allied social groups) have won political power. Moreover, that workers’ control has been established in industry. Even after such giant historic steps, there would remain huge inequalities between the developed and wealthy regions of the world and the undeveloped and poor ones. One of the defining characteristics of socialism is that economic activity would be planned and directed to satisfy human needs. An important part of this would be the transfer of wealth from richer to poorer regions to even out development, productivity and living standards. This would call for altruism and a high degree of political commitment from the peoples of the more developed countries of the world.