Dan McLaughlin

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To Home Page Latest Newsletter Column Archives Click to get these columns for your local paperd	Post Comments Below © 2007 Daniel J. McLaughlin Smart People, Dumb Comments I am often struck by the exceedingly dumb comments made by very smart people. Bill Gates is a brilliant man. He founded one of the most successful companies in history and is a multi-billionaire. It would seem that he should know a thing or two about capitalism and markets, but from his speech at the World Economic Forum in Davos, Switzerland, either he really doesn’t have a clue or he is being intentionally dishonest. His speech was about something called “creative capitalism”, a new and improved, more enlightened capitalism than the system he made his billions in. It brings together corporations, governments and non-governmental organizations to solve the problems of poverty. The thrust of his comments was that technology has brought progress in developed economies, but the poor of the world don’t have advanced markets to bring the benefits of new technology to them. He cites a growing inequity in results around the world and implies that it is a failure of traditional capitalism. There is little incentive under traditional capitalism to serve those markets because there is no profit in it. He does have a point. There is no profit in serving those would-be customers. The real question is why. The answer is not that difficult to fathom, yet it seems to be beyond Mr. Gates’ grasp. Typically, countries that are destitute or lacking effective markets, and thus, unattractive to profit making companies, lack the one essential ingredient to progress and prosperity: capitalism of the traditional variety, which is synonymous with economic freedom. Mr. Gates calls on corporations to cooperate with governments to solve the problems of those countries, but doesn’t recognize that those governments and politicians are the very core of the problems. Mr. Gates announced at the conference that the Bill and Melinda Gates Foundation would be giving $306 million dollars for green technology and farming techniques to boost millions out of hunger and poverty, a worthy goal and a generous gift. He said “Of the billion people living on less than $1 per day, three quarters are farmers.” He is blind to the fact that any society based primarily on subsistence farming is suffering only from a lack of capitalism. Those countries are not excluded from the global economy by companies in developed nations. They are excluded by protectionist policies of their own or other governments. They are unable to accumulate wealth because of confiscation by the predatory state or lack of protection from other predators. They are kept down by crushing tax burdens or obscenely harsh regulation of business. In other words, they lack property rights and economic freedom essential for development. What he calls creative capitalism is not capitalism at all, but rather a step toward statism, the concept that government is the solution to society’s ills. He calls for companies to divert their top talent from profit making activities to solving the problems of the poor. Charity is a wonderful thing. It is what makes us human. Charity of any individual or organization, however, can only come from profits. It is in everyone’s best interest for any company to increase profits through honest trade. That gives them the resources to provide new jobs, serve new markets, develop new technologies that reduce costs for all people, including the poor, and to be charitable. Mr. Gates believes that reducing population growth is an important goal for poor regions, never realizing that many of the most prosperous nations in the world have much higher population densities than most of the developing countries. Many of the most destitute nations have extremely low population densities. If people are given conditions where they can be productive and accumulate wealth, they will produce far more in their lifetime than they will consume. Free people are an investment in the future. Poor countries actually need more people, bigger markets and increasing opportunity for individuals to produce more and keep what they produce. Under those conditions, you can be sure that their markets will not be ignored because they will be prosperous. It is very unfortunate that successful capitalists such as Bill Gates seem to be embarrassed by their wealth and attack the system that gave it to them. His wealth came from making people better off. He should be proud of that. It is admirable for him to be generous with his riches, but his prescriptions will not bring about significant improvement because true capitalism, which he considers the problem, is actually the only antidote to the real problem of statism and tyranny.
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Daniel Mclaughlin Copyright © 2007 [Daniel McLaughlin]. All rights reserved. Revised: 02/10/08

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Smart People, Dumb Comments

I am often struck by the exceedingly dumb comments made by very smart people. Bill Gates is a brilliant man. He founded one of the most successful companies in history and is a multi-billionaire. It would seem that he should know a thing or two about capitalism and markets, but from his speech at the World Economic Forum in Davos, Switzerland, either he really doesn’t have a clue or he is being intentionally dishonest.

His speech was about something called “creative capitalism”, a new and improved, more enlightened capitalism than the system he made his billions in. It brings together corporations, governments and non-governmental organizations to solve the problems of poverty. The thrust of his comments was that technology has brought progress in developed economies, but the poor of the world don’t have advanced markets to bring the benefits of new technology to them. He cites a growing inequity in results around the world and implies that it is a failure of traditional capitalism. There is little incentive under traditional capitalism to serve those markets because there is no profit in it. He does have a point. There is no profit in serving those would-be customers. The real question is why. The answer is not that difficult to fathom, yet it seems to be beyond Mr. Gates’ grasp.

Typically, countries that are destitute or lacking effective markets, and thus, unattractive to profit making companies, lack the one essential ingredient to progress and prosperity: capitalism of the traditional variety, which is synonymous with economic freedom. Mr. Gates calls on corporations to cooperate with governments to solve the problems of those countries, but doesn’t recognize that those governments and politicians are the very core of the problems.

Mr. Gates announced at the conference that the Bill and Melinda Gates Foundation would be giving $306 million dollars for green technology and farming techniques to boost millions out of hunger and poverty, a worthy goal and a generous gift. He said “Of the billion people living on less than $1 per day, three quarters are farmers.” He is blind to the fact that any society based primarily on subsistence farming is suffering only from a lack of capitalism. Those countries are not excluded from the global economy by companies in developed nations. They are excluded by protectionist policies of their own or other governments. They are unable to accumulate wealth because of confiscation by the predatory state or lack of protection from other predators. They are kept down by crushing tax burdens or obscenely harsh regulation of business. In other words, they lack property rights and economic freedom essential for development.

What he calls creative capitalism is not capitalism at all, but rather a step toward statism, the concept that government is the solution to society’s ills. He calls for companies to divert their top talent from profit making activities to solving the problems of the poor. Charity is a wonderful thing. It is what makes us human. Charity of any individual or organization, however, can only come from profits. It is in everyone’s best interest for any company to increase profits through honest trade. That gives them the resources to provide new jobs, serve new markets, develop new technologies that reduce costs for all people, including the poor, and to be charitable.

Mr. Gates believes that reducing population growth is an important goal for poor regions, never realizing that many of the most prosperous nations in the world have much higher population densities than most of the developing countries. Many of the most destitute nations have extremely low population densities. If people are given conditions where they can be productive and accumulate wealth, they will produce far more in their lifetime than they will consume. Free people are an investment in the future. Poor countries actually need more people, bigger markets and increasing opportunity for individuals to produce more and keep what they produce. Under those conditions, you can be sure that their markets will not be ignored because they will be prosperous.

It is very unfortunate that successful capitalists such as Bill Gates seem to be embarrassed by their wealth and attack the system that gave it to them. His wealth came from making people better off. He should be proud of that. It is admirable for him to be generous with his riches, but his prescriptions will not bring about significant improvement because true capitalism, which he considers the problem, is actually the only antidote to the real problem of statism and tyranny.

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