The world does seem unfair. On one hand, you have people fighting it out to top the Forbes rich list, and on the other, you have 1.1 billion people living on less than a $1 a day, according to a report published by The World Bank. Poverty is a problem many countries face, but due to a lack of resources, governments and NGOs can't do enough. They need support, and that's where Bill Gates comes in.
The man, who has topped the Forbes rich list consecutively from 1995 to 2007, gave a ground-breaking speech on 'creative capitalism' at the World Economic Forum in Davos in January 2008. Coupled with his article in Time magazine ('How To Fix Capitalism', August 11, 2008), he provides an insight, and more importantly, a thin end of the wedge for the future of capitalism.
The Problem With Capitalism
The Problem With Capitalism
Capitalism has touched and improved the lives of many people. But, in it's pristine form, it hasn't provided anything for the neglected.
But, the problem lies in the longevity of the solution. In this world of short-term economic ups and downs, it's hard to remain attentive to global welfare issues. And in the midst of a global economic crisis, these welfare issues get neglected and thrown back down the priority list. Fund-raisers, donations and aid may be temporary fixes. But, there is a need for a continuous, long term effort to solve problems like the one faced by Ethiopia.
What Is Creative Capitalism?
Government aid and philanthropy are generally, selfless. Capitalism isn't. Capitalism deals with making a profit, and harnesses self-interest regarding it's own employees. The problem lies in permanently riveting capitalism to global welfare problems. This is where creative capitalism comes into the picture.
Creative capitalism deals with channeling market forces and innovation into solving the problems of economically-challenged, thereby paying heed to the problems of the neglected and helping companies see the green in the bottom line.
It helps by creating a permanent ground for companies to work on, and helps maintain their interest in projects targeting under-developed and developing countries and extends the longevity of benefit provided to the people of these countries.
Is Creative Capitalism Possible?
Creative capitalism isn't just some new penned word. It has already reached fruition in some cases. Companies like Gap, Hallmark and Dell sell (RED)-branded products, a brainchild of U2 vocalist Bono. These companies donate a portion of their profits, from this brand, to fight AIDS and, in the past year, has generated $100 million for the Global Fund to Fight AIDS, Tuberculosis and Malaria. These companies get recognition for the work being done, customers experience a moral satisfaction knowing that they have contributed to a welfare cause, and the donation helps the cause.
Product (RED) is not a non-profit brand and hence, companies do reap profits, thereby making the brand, and ultimately the proceeds towards the cause, permanent.
Creative capitalism is not about asking companies to be more virtuous, but it's about asking them to identify opportunities in places previously uninspected. It combines innovation and technology, present with companies, in developing products which people in under-developed and developing countries need and, in the same time, help these companies make profits.
According to The World Bank, there is almost $5 trillion of purchasing power in the poorest two-thirds of the world's population. Indeed, there is plenty of scope for companies to benefit financially and simultaneously help bring technology to these people. But, companies must study these markets in order to identify the needs of these people. Vodafone, in 2000, invested in a Kenyan cell-phone company called Safaricom. Today, Safaricom has more than 10 million customers, much more than the estimated 100,000, and is making a profit (net income of $169 million in 2007). To cater to low-income Kenyans, Safaricom charges users on a per-second basis, which helps reduce call charges. Kenyan farmers use their cell-phones to find the best prices in nearby markets. Cell-phones also enable users to carry electronic cash, which requires authorization before its use, and hence, limits the potential of becoming a victim of a robbery or theft (commonplace incidents in Kenya). These amenities provided by cell-phones have helped Safaricom prosper in Kenya, which shows the outcome of creative capitalism.
Who's Responsibility Is It?
Companies willing to embrace creative capitalism need help. R&D costs incurred in developing a drug are huge and the incentive, in terms of publicity and praise, involved in helping the people of an under-developed country might be insufficient to convince companies to get involved. In such cases, the government should do it's part to support such companies and reward them in non-financial ways. For example, under a U.S. law enacted in 2007, any drug company that develops a new treatment for a neglected disease, like malaria, can get a priority review, from the FDA, for another drug the company has produced. A priority review speeds up the FDA review process, and this helps the company in putting its product in the market as much as a year earlier, and this could be worth millions to a company.
There is a need to eradicate red-tape to allow more business investment and provide flexibility to companies. The government, industrialists as well as NGOs need to work together to make creative capitalism work.
The Future Of Creative Capitalism
The future of creative capitalism lies in identifying new opportunities in poor countries. The examples of Sumitomo Chemicals (a Japanese company, which bought a stake in Tanzania's A to Z Textile Mills to create up to 10 million insecticide treated mosquito nets) and Cadbury (the British confectioner is investing millions in small farming communities in Ghana that provide the cocoa beans for one of it's lines of chocolate) reiterates this fact. There seems to be immense opportunities for creative capitalism. And industrialists should take note of this.
Please feel free to post comments regarding any personal ideas or examples of creative capitalism.
Isn't RED the same as colgate donating 1 Rupee for every paste it sells?
ReplyDeleteNo, RED branded products are conspicuously different. You can tell whether a Dell laptop is normal or RED-branded, because the RED-branded laptop has a Product-(RED) stamp and the color is also deep red. It allows customers to boast of buying a RED-branded item, and that's why it works. Besides, a greater portion of money is also donated.
ReplyDelete