Tuesday, February 12, 2008

Richard Posner and Gary Becker pan Bill Gates' "Creative Capitalism"

Posner writes:

There is a hint in Gates's speech that profit maximization is the real goal, and the question for "recognition" a veneer. When he talks up "business models that can make computing more accessible and more affordable," it sounds as if he may be trying to develop new markets for Microsoft. That is also the implication in Prahalad's statement that I quoted. Gates talks about "markets that are already there," that is, in poor countries, "but are untapped." In other words, there are business opportunities in poor countries, and business opportunities require imagination rather than altruism to exploit.

A curious omission in Gates's speech is a theory of why so many people are desperately poor. When he says that "diseases like malaria that kill over a million people a year get far less attention than drugs to help with baldness," he does not pause to inquire why that is so. It is so, first of all, because people in wealthy countries do not suffer from malaria, and, second, because cheap but highly effective methods of combating malaria, such as mosquito netting and indoor spraying of DDT (which would have few negative environmental effects, unlike outdoor spraying), are somehow not provided, but for reasons political and cultural rather than financial. We know that a nation doesn't have to be rich in natural resources to be prosperous. The essential ingredient of economic growth is human capital, and it depends primarily on the existence of a political system that prevents violence, enforces property rights, provides a minimum level of public goods, and minimizes governmental interference in the economy. Without such institutions, economic growth will be stunted; altruistic capitalists will not cure their absence.

Becker pens:
My own belief is that there are far more effective ways to help poor nations of Africa and elsewhere speed up their rates of economic development and reduce the impact of malaria, Aids, and other devastating diseases. Probably the single most important step is to encourage much more market-friendly policies by African and other governments in poor countries. In addition, it would help to reduce, better still eliminate, tariffs by rich countries on the agricultural and other exports from developing countries, encourage more widespread use of DDT and mosquito netting in combating malaria (see my post on deaths from malaria on Sept. 24, 2006), and provide private and perhaps public subsidies to the development of new drugs that help fight diseases mainly found in poor countries.

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