Bill Gates - a bit fuzzy about Adam Smith?
Billionaire Bill Gates would like to see business generate profits while simultaneously reducing poverty around the world Wall Street Journal (24 Jan). This is a handsome idea, but it can hardly work if a few fundamental ideas are not put in place first. We are thinking of the rule of just law, property rights, and the end of unfair trade practices imposed by developed nations on the people of developing nations.
If a person in Africa cannot leverage his house to establish a business, cannot even depend on being able to live in his house if someone more powerful chooses to take it away, cannot escape the grinding corruption of his government, cannot depend on the rule of just law, and is held hostage by unfair trade barriers, it beats us how western business is going to make much of a difference. Perhaps Bill Gates discussed some of these details at Davos, where he spoke.
Gates was quoted in the Wall Street Journal as saying that he is "not calling for a fundamental change in how capitalism works. He cited Adam Smith, whose treatise, The Wealth of Nations, lays out the rationale for the self-interest that drives capitalism and companies like Microsoft. That shouldn’t change ‘one iota,’ Mr Gates said.”
The word capitalism had not even been coined when Adam Smith wrote, and we, personally, think it is not a very useful description of economies today. Smith was describing a society – British society – in which men and women used capital to start businesses and tried to be as creatively prosperous as they could be while avoiding the heavy hands of the state, always too interested in their money, and the unfair trade practices of monopolies. They were largely protected by Common Law or, as Adam Smith saw, they could not have built a successful economy at all.
“Capitalism” and “capitalist” hardly describe the energy and inventiveness of millions of citizens or the highly practical and enterprising system that has lifted hundreds of millions out of poverty and made it possible for so many to live interesting and comfortable lives. Some people sneer at this, but it looks like a pretty good thing to us.
Unfortunately, this economy is always under attack because the faults of greedy or careless people are ascribed to the system they abuse.
Gates pointed out that Adam Smith had the unique idea that “humans gain pleasure from taking an interest in the ‘fortunes of others’”, and wrote about it in The Theory of Moral Sentiments. We think that’s true. Our evidence is personal. We also see that there are hundreds of thousands of people, many of them businesspeople, who are funding tens of thousands of charities in Britain, and taking real pleasure from helping others.
Adam Smith was a fascinating fellow. He did not pull his ideas about moral emotions out of the blue. He gave them a real source. You can read more about him here.