The take-home message from Bill Gates in his second-annual letter detailing the progress of The Bill & Melinda Gates Foundation is simple: it’s good to be rich. Not good in the Cristal/Bentley/gated-communities sense but good with a capital G. If you’ve got the money, you can- and should- do a lot of good.
Gates certainly has. The world’s richest man has now been working full-time at the $34 billion foundation for a year, lending his prodigious brain to the nonprofit’s efforts to stamp out famine, improve global health and boost access to quality education all over the world. But he’s also lending something else that helped him amass his $50 billion fortune: his capitalist sensibilities. Gates built Microsoft in an environment that encouraged innovation, efficiency and accountability. Those principles are bedrock of the Gates Foundation’s approach and his 2010 letter is rife with examples:
During the last two centuries, there have been a huge number of innovations that have fundamentally changed the human condition… Society underinvests in innovation in general but particularly in two important areas. One area is innovations that would mostly benefit poor people—there is too little investment here because the poor can’t generate a market demand.
Via 2010 Annual Letter from Bill Gates | Bill & Melinda Gates Foundation
If poverty-stricken countries can’t lure intrepid entrepreneurs or pharmaceutical firms with profit potential, it’s up to the rich, those beneficiaries of capitalism, to kickstart the third-world innovation revolution by building a market. Sound business principles still apply- the cure for deadly childhood diseases, after all, will be a business. A business whose product is cheap, readily-available vaccines.
This year the foundation helped launch a new approach to encourage a high-volume, low-cost supply of a pneumococcus vaccine that meets the needs of poor countries. This approach is called an Advance Market Commitment, and it involves a group of donors pledging $1.5 billion to help pay for the vaccine for poor countries. We expect that manufacturers will commit to building factories much earlier than they would otherwise in order to compete for this money.
Rather than spending the $1.5 billion on vaccines, the Foundation’s spending it courting and building a homegrown vaccine industry. Also, whatever they do fund better work- and work well- when that $1.5 billion is gone:
A key criterion for us is that once the innovation is proven, the cost of maintaining it needs to be much lower than the benefit, so that individuals or governments will want to keep it going when we are no longer involved.
The focus of the Gates Foundation’s work in the US has been on public education. Here again, he’s bringing on the market forces, promoting strict teacher-evaluation standards and the controversial performance-based pay model.
This is an instance where there isn’t a clean separation between the creation of the innovation—ways to evaluate teachers and help them improve—and the delivery of the innovation, which requires teachers to embrace a change to the personnel system. We are working on both at the same time. Teachers will be evaluated and given incentive pay based on excellence.
Gates’final point- that rich, developed nations are morally obligated to give foreign health aid to poorer countries (and in fact, should give much more)- might not sound terribly capitalist. Indeed some may say it sounds pretty damn socialist, just like those countries (hej Scandinavia) that top the list of most-generous donors as-a-percentage-of-GDP. But if foreign aid is considered an investment in global peace and the world’s general well-being, focusing on health aid provides a great ROI:
Aid for health rose from $5.6 billion in 1990 to $21.8 billion in 2007, which was less than 14 percent of all foreign aid from rich countries that year. This money was incredibly well spent—saving a life for far less than a tenth of what is spent to save a life in rich countries.
So who’s to say if those billions flowing to the developing world are going to rural health clinics or Robert Mugabe’s marble lap pool? An antiquated concern, says Gates, an unfailing stickler for accountability who with wife Melinda developed a presentation devoted to showcasing success in governments’health initiatives.
The argument as Gates presents it, isn’t that rich countries should funnel money blindly to poorer nations, but rather devote existing foreign aid streams to critical, cost-effective causes. No need for them to cannibalize their own GDP (risky-happy financial firms are already working on that, thanks). So long as the US, Canada, France et al are comparatively wealthy, robust free-market economies they can use their riches to nudge the rest of the world in the same direction: freer, healthier, wealthier. The Trickle-Down Effect according to Gates, can work.
Ms. Pendleton,
When I first started reading you piece I thought you were being ironic, if not out right sarcastic. You wrote:”Sound business principles still apply- the cure for deadly childhood diseases, after all, will be a business. A business whose product is cheap, readily-available vaccines.” I read that and thought, she is really sticking it to Mr. Gates with that one. However as I read, I realized that you were quite in earnest and that this, rather than nuanced parody, is simply naïveté.
Capitalists are pretty good and doing and making things that make a profit. There are few government or non-profit organizations who can provide hamburgers in the quantity or at the price that McDonald’s can. However, the simple fact of the matter is that there are a significant number of activities that are simply not profitable. Wiping out communicable diseases is one of them. If there were a billion dollars to be made wiping out malaria, it would be have been done sometime ago.
The same is true for education, teaching children is not the same a making widgets. You wrote:”Here again, he’s bringing on the market forces, promoting strict teacher-evaluation standards and the controversial performance-based pay model.” If teaching children could turned into a profit making commodity, this would have been as well. One of the biggest problems facing teachers is the high burn-out rate of new teachers due the fact that teaching is highly stressful. Classroom management is a huge problem, made worse by large student to teacher ratios. Teaching 50 15 year-olds science is almost impossible no matter how “strict” the standards or the existence of “performance” rewards.
I wish Mr. Gates the best of luck but it is simply unrealistic to imagine that wiping hunger is going to make a profit.
Dear David,
Thanks for reading and for the thoughtful comments. However I do disagree with you on your point that combating hunger are and educating students are antithetical to capitalism. Curing diseases and ailments of all kinds is a hugely profitable industry- just look at big pharma. I am definitely not advocating trying to replicate that model in developing countries but I do think that one of the key things Gates is trying to do is encourage many local companies to develop vaccines for their own population- encouraging competition to keep the prices low and the product widely-available. Many of the communicable diseases that prove deadly in developing countries were eradicated in the West a long time ago thanks to widely-available vaccines provided by companies that had an economic incentive to manufacture them.
On education- I don’t think Gates’goal is to make public education profitable (sort of an oxymoron anyway) but rather encourage teachers to improve and attract more bright people to the profession by offering financial incentives. You’re absolutely right to the point out that teaching is stressful- all the more reason teachers should be well-compensated. Many extraordinarily bright college grads bypass teaching for banking or other highly-paid gigs because they have an overwhelming debt burden and it’s a shame- students lose out.
I don’t necessarily agree with Gates entirely and sure don’t know if it will all work but I did want to point out his interesting approach.
Thanks again for reading!
Devon
Ms. Pendleton,
Dear David,
“Thanks for reading and for the thoughtful comments.”
You are quite welcome.
“Curing diseases and ailments of all kinds is a hugely profitable industry- just look at big pharma.”
I fear that have conflated several entirely different issues. “Big Pharma” is very good at making profitable drugs (e.g. Viagra) but not unprofitable drugs. There is a whole category “orphan” diseases where pharmaceutical treatments exist but are not manufactured because – wait for it – they not profitable. Further, vaccines, which is really what we are talking about when we are talking about wiping out communicable diseases, are almost never profitable on a free market basis. Almost their entire market consists of government public health agencies. There are hardly any vaccines sold to the general public the way Viagra is. More to the point, it is the distribution of vaccines that is the hard part, making them is easy. Getting vaccines to people who need them is very costly and never profitable.
“I am definitely not advocating trying to replicate that model in developing countries but I do think that one of the key things Gates is trying to do is encourage many local companies to develop vaccines for their own population- encouraging competition to keep the prices low and the product widely-available.”
In poor countries, for vaccines to be effective, they have to be free, which is as low a price as is possible. They are free because the governments buy then at higher prices from a handful of vaccine manufacturers but give them away. These are not consumer driven markets.
“Many of the communicable diseases that prove deadly in developing countries were eradicated in the West a long time ago thanks to widely-available vaccines provided by companies that had an economic incentive to manufacture them.”
Yes, but not by a consumer driven market where individuals go to the corner drug store and buy them. The market was captive and made up of governments buying vaccines and giving them out for free, often on a mandatory basis. Children cannot enroll in school unless the vaccination records are up to date.
“On education- I don’t think Gates’ goal is to make public education profitable (sort of an oxymoron anyway) but rather encourage teachers to improve and attract more bright people to the profession by offering financial incentives.”
My point was that teacher pay is not really the issue. People who go into teaching do so because they want to teach and the pay is really not that bad. Plenty of them are pretty bright if the truth be known.
“You’re absolutely right to the point out that teaching is stressful- all the more reason teachers should be well-compensated. Many extraordinarily bright college grads bypass teaching for banking or other highly-paid gigs because they have an overwhelming debt burden and it’s a shame- students lose out.”
There is no problem attracting people to teaching, it is keeping them. Pay is not the main reason people leave teaching, it is too many students, not enough resources, poor equipment, lack of air conditioning (no really, try teaching 40 eighth graders science on a sweltering afternoon), stress, paperwork, &c. Gimmicks like “performance based” pay or “bonuses” do not address the retention issue.
David.