Friday, January 25, 2008

Bill Gates and 'Creative Capitalism'

Bill Gates has put forth a new type of economic system that would battle world poverty and growing inequality in the world. Here is the CNN story, here is the actual text of what he said.

The way Gates sees it, everything should be based in incentives. For people who can pay for goods, we don't have an incentive problem-- trade occurs, and though voluntary exchange everyone is better off. For people who can't pay, businesses don't have the incentive to provide goods, as the profits are not there. We need to introduce a new incentive-- recognition. If companies "doing the right thing" can get recognition for being good, caring entities, then they'll attract better people to the organization and get more customers. For companies "doing the right thing" and making money...well, they get the benefit of both effects.

I'm happy Gates is thinking about changing the structure of the system. (I think the funniest part of the CNN article is when Bono "pushed the debate towards issues such as...poverty alleviation...") Forcing people to recognize "good" companies won't make them do so any more than they do now, and insofar as "good" companies profit in the manner that Gates described, the market will already have that covered. But kudos for thinking outside of the Bono-aid box.

Still, the big question is: Why are those in poor countries not able to compete in markets in the first place? Trade barriers? Low standards of living due to poor institutional environments? The answers are down these paths.

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