The Bible has a lot to say about poverty and helping others. Proverbs 14:31 tells us,

Whoever oppresses a poor man insults his Maker, but he who is generous to the needy honors him.

In Matthew 25:40, Jesus says,

Truly, I say to you, as you did it to one of the least of these my brothers, you did it to me.

Clearly, the Bible requires that Christians help the poor. But while many people focus on charity and philanthropy, many forget the incredible role that markets and commerce play in helping “the least of these.”

In light of these issues, Bill Gates has an interesting piece in the tech magazine Wired, in which he describes what led him to move from the head of history’s most successful software company to one of the leading philanthropists on the planet. He calls it “catalytic philanthropy.” There’s a lot of good stuff in the piece, and it’s worth reading in its entirety.

I’m especially pleased that he emphasized the role of Norman Borlaug (one of my heroes) and the Green Revolution in improving the lives of hundreds of millions of the world’s poor. This is an important story that has become politically-incorrect, since it implies that chemical fertilizer and genetically-modified grains have had many benefits. Wealthy westerners tend to be aware only of their costs.

Clearly Gates’ endorsement of these things emerges from his concern for the poorest of the poor. By his own accounting, he’s known that he wanted to be a philanthropist since his thirties, at the very height of his commercial success, and thoughts about the poor were a part of the mix even then. But his burning concern for the poorest of the poor was especially stoked by a trip to Africa that he and his wife Melinda took in 1993. The purpose of the trip was to go on a wild safari, but they also encountered extreme poverty. Since then, the Bill and Melinda Gates Foundation has given hundreds of millions of dollars to addressing this problem.

His praise of the Green Revolution reveals Gates’ willingness to take politically incorrect stands. Unfortunately, his essay also betrays what, I think, are misconceptions common even among committed philanthropists who know, or should know, how free enterprise works.

Giving Back

First, Gates expresses a nearly ubiquitous opinion of successful business people turned philanthropists:

I have known since my early thirties that I was going to give my wealth back to society. The success of Microsoft provided me with an enormous fortune, and I felt responsible for using it in a thoughtful way.

The sentiment is laudable; the problem is that this implies that the nature of business is to take wealth away from society. But in a free economy with the rule of law, business, certainly in its entrepreneurial phase, is a way of giving. I spent over a decade living in Seattle, and it’s clear that the fruits of Gates’ labors—even if he did sometimes have a cutthroat style—were a gift to millions of people. Philanthropy is not the giving that comes after private taking. It’s a form of giving made possible by the first form of giving—business.

Forget the Gap

Second, Gates sings of the praises of “capitalism,” but doesn’t think it’s much help for the poor:

I am a devout fan of capitalism. It is the best system ever devised for making self-interest serve the wider interest. This system is responsible for many of the great advances that have improved the lives of billions—from airplanes to air-conditioning to computers.

But capitalism alone can’t address the needs of the very poor. This means market-driven innovation can actually widen the gap between rich and poor.

Here Gates seems to blur separate issues. The relevant question isn’t the elusive and ever-changing gap between rich and poor. The concern is the lot of the poor. Period. Wealthy philanthropists should forget about the gap between them and the rest of us, and focus their attention on improving the lives of people at the bottom. For a mother in Namibia who can’t feed her children, Gates’ wealth is neither here nor there.

Markets for Me, Philanthropy for Thee

Third, the quote above, and a good bit of Gate’s article, seems to rest on a mistaken understanding of the role of markets and philanthropy in helping the downtrodden.

Certainly a market economy can’t serve all of humanity’s needs, any more than man can live by bread alone. And certainly charity has a profound role to play in meeting emergency needs. But too many philanthropists seem to believe that while rule of law, markets, property rights, commercial virtues, etc., allowed all the actual wealthy societies to become, well, wealthy, there’s some other pathway for the poorest nations.

There’s no evidence that that’s the case. Since there is only one known pathway up the mountain of widespread wealth creation, why not focus on helping other nations find the same path, rather than wandering off on some idealized, and untested, path?

More Aid

And this leads to the fourth problem: government-to-government foreign aid. Bono, the lead singer for U2, has long been an avid defender of such aid; but now he is emphasizing the role of markets, of “capitalism,” to increase the lot of the poor in the least developed countries.

Unfortunately Gates hasn’t quite made the transition, and is still calling for more of this type of aid. Why? Here’s my speculative theory: the allure of big aid is popular with philanthropists because it looks structurally identical to philanthropic giving, and it seems to supplement their own philanthropic giving. But whatever the reason, we now have very good empirical evidence that, with some exceptions, government-to-government aid either doesn’t work or makes matters worse.

I suspect that the good work of the super wealthy like Bill Gates would be more effective if they would remember the lessons they learned as budding entrepreneurs, before they became established philanthropists.

What role does the market play in promoting the common good? Leave your comments here.