Tuesday, January 29, 2008
Thursday, January 24, 2008
Ah, there are days when I pick up (or click into) the Wall Street Journal and just get infuriated by the first article I read. Today we have the richest man in the world arguing for something called "Creative Capitalism" to help the worlds poor. Bill Gates, Microsoft Founder and Chairman, gave a speech today at the World Economic Forum in Davos Switzerland that is anything but a defense of capitalism.
"We have to find a way to make the aspects of capitalism that serve wealthier people serve poorer people as well," Mr. Gates will tell world leaders at the forum, according to a copy of the speech seen by The Wall Street Journal.
Mr. Gates isn't abandoning his belief in capitalism as the best economic system. But in an interview with the Journal last week at his Microsoft office in Redmond, Wash., Mr. Gates said that he has grown impatient with the shortcomings of capitalism. He said he has seen those failings first-hand on trips for Microsoft to places like the South African slum of Soweto, and discussed them with dozens of experts on disease and poverty. He has voraciously read about those failings in books that propose new approaches to narrowing the gap between rich and poor.
In particular, he said, he's troubled that advances in technology, health care and education tend to help the rich and bypass the poor. "The rate of improvement for the third that is better off is pretty rapid," he said. "The part that's unsatisfactory is for the bottom third -- two billion of six billion."
Gates' first fundamental mistake is mistaking capitalism as purely an economic system. Proper laissez faire capitalism is first a political system, one based on individual rights. When viewed in that light the claim that capitalism has failed the poor seems tinny. Look at the world's poor in China, India, Southeast Asia, the Middle East and the entire African continent. Capitalism as a political system could hardly be said to exist here. Capitalism hasn't failed these people, but rather Communism, Islamofascism, and plain barbaric tyranny have. To lay that guilt at capitalism's feet is poorly placed blame, and this coming from one of the world's great capitalists.
As I've previously blogged, in pockets where enough basic individual rights exists, beginning with such things as private property rights, then the profit motive serves even the poorest of the poor effectively.The answer then is not to cast a new form of capitalism
With today's speech, Mr. Gates adds his high-profile name to the ranks of those who argue that unfettered capitalism can't solve broad social problems. Muhammad Yunus, the Bangladeshi economist who won the 2006 Nobel Peace Prize for his work providing small loans to the poor, is traversing the U.S. this month promoting a new book that calls capitalism "half developed" because it focuses only on the profit-oriented side of human nature, not on the satisfaction derived from helping others.
Here is Gates' other fundamental error, altruism. He plans to quote from Adam Smith's The Theory of Moral Sentiments on the pleasure man derives from taking an interest in the fortunes of others. What's Gates solution? It's nothing new, just the good old mixed economy of course.
Key to Mr. Gates's plan will be for businesses to dedicate their top people to poor issues -- an approach he feels is more powerful than traditional corporate donations and volunteer work. Governments should set policies and disburse funds to create financial incentives for businesses to improve the lives of the poor, he plans to say today. "If we can spend the early decades of the 21st century finding approaches that meet the needs of the poor in ways that generate profits for business, we will have found a sustainable way to reduce poverty in the world," Mr. Gates plans to say.
No, Mr. Gates, instead of calling capitalism a partial solution, and calling for a new kind of capitalism based on altruistic sentiments, you should be calling for the establishment of capitalism in the first place, where none exists.
Monday, January 21, 2008
I like looking for stories of admirable people. People to admire because their stories illustrate some interesting aspect of life or illuminate an important principle. This post's topic is the idea of purpose, and what it means over the course of a life, and the admirable person is: Sandra Bullock.
Forbe's July 2007 (so shoot me, it's been in my file for a while) article "Miss Practicality" is an illustration in how a career changes over time. Miss Bullock, cute and likable girl-next-door on screen, has parlayed that success into her own movie production company, which then branched into television as well as active real estate work, and even a restaurant chain. How do those all fit together? It's her management skills.
In films Bullock delivers an appealing and cute likability, but in showbiz she can be tough and fiendishly focused on micromanaging the minutest details of whatever occupies her.
By the time she had parlayed Speed into roles in a string of well-received films, she had developed a penchant for pitching in to scout locations, court potential investors and give the studio her opinions on which overseas markets might offer the best returns.
By combining her self knowledge of what she liked to and could do well, with opportunities that came her way, she's found reward doing many different things. In the process, she's increased her leverage and power so that she's able to direct her next steps as opposed to letting the market dictate her work.
"Producing gives business-minded actors the ability to create vehicles that are perfectly matched to their talent and their sensibilities. If you're simply waiting for the phone to ring, you're at the mercy of the marketplace."
This is a great illustration of how purpose develops within us over time. Few of us end our careers where we originally envisioned they'd go, and rarely in the exact type of job we envisioned. For most that is a good thing as it represents maturing desires, better knowledge about what satisfies us, and broader offerings in terms of suitable jobs. I for one, thought I'd be designing chemical plants; certainly never thought I'd go to business school, work in marketing, or aspire to run my own business unit some day. But that is the adventure that life takes us on, if we are willing to understand ourselves, and our inspirations, and look for unique and sometimes unthought of opportunities to practice those traits.
Justice does exist in the world, whether people choose to practice it or not. The men of ability are being avenged. The avenger is reality. Its weapon is slow, silent, invisible, and men perceive it only by its consequences—by the gutted ruins and the moans of agony it leaves in its wake. The name of the weapon is: inflation. - Ayn Rand, Egalitarianism and Inflation
And the Republican administration is supposed to be a friend of capitalism? Steve Forbes has another great editorial, "Bush's Big Boo Boo" from this week's edition of Forbes. Boo boo is putting it mildly. The looming recession is a complete result of mishandled monetary policy, and another glaring reason why the free market should be running monetary policy, not the central bank.
In a thesis that Forbes has been pounding for over two years, he asserts that the Fed is creating inflationary pressure by injecting more credit into the economy. Voila, $100/barrel oil! Excess liquidity means speculation; voila, sub-prime housing market. Devalued assets means fire sales for foreign investors; voila foreign bank bail-outs in return for equity stakes. His best indicator for this phenomena the last few years? Gold. It's price has shot up more than two fold in the last two years. There is nothing else to explain this except inflation, pure and simple.
With it, oil has doubled from $50 to $100/barrel reeking havoc with more than just gasoline. My industry, the petrochemical industry, is heavily dependant on oil as a major feedstock, and this industry feeds all the major industries, plastics, construction, personal care, etc. Rising feedstock costs disrupt operations and throw supply demand balances out of whack causing diversion of time and effort simply to keep up pricing with costs.
Temporary stimulus packages such as the President is proposing will not do any good. There is only one solution and that is to slowly mop up the excess liquidity in the market and fix the currency. This is not a quick fix, but it is the only one.
If I had to choose at this point, I think a competent enemy is sometimes not as bad as an incompetent "friend" of capitalism. At least I watch the enemy closer and don't let him play with the really dangerous toys.