Financial Times

The recent announcement by Bill Gates that he is part-timing at Microsoft to concentrate on the administration of his charitable foundation created a sensation.

Here was the world’s richest man, the poster boy of free trade, giving up a part of his riches – $31 billion.

Warren Buffet, who is almost as rich as Bill Gates, was giving up US$30 billion to the Bill Gates Foundation as well -– a grand total of $61 billion, the equivalent of the GDP of several low income countries. Both were seeking to share it with the poor of the world. Many photo ops followed with Bill Gates and his wife cuddling some of Africa’s poor children.

This was the stuff of what the Economist called “Super Billanthrophy.’

But beyond the euphoria, and the publicity, there was a curious and a significant contradiction behind this generosity: has the free trade, which was hailed as bringing prosperity for all by “lifting all boats,” failed the world for Bill Gates and Warren Buffet to come to the aid of the worlds poor?

After all, free market mantra was to result in better lives for all.

The World Bank and the IMF advocated the theme of free trade and privatization and liberalization remorselessly as a means of generated growth.

Alan Greenspan, the legendary ex-Chairman of the Federal Reserve Board pinned his unwavering hope for a better world on what he called the “natural inclination of man for profit.” Thomas Friedman, the leading apologist for globalization, free trade, free markets, and deregulation in his breathless expositions of the benefits of free trade viewed that globalization cannot be stopped. “I don’t think there will be any alternative ideology this time round. There are none.

“Many others of the like ilk supported by the Washington Consensus (the US Government, IMF and the World Bank), has propagated that notion of free-trade driven growth and prosperity with evangelical zeal. Riding on the crest of free-markets was the American dream: all were asked to embrace hard work, and were promised equal opportunity in exchange for a piece of the growing pie of prosperity, no matter where one lived. In that dream, “avarice was a virtue.”

That driving force will promote investment, create jobs, increase productivity, generate wealth and make for a better life for countless billions, percolating, trickling down to reach the poor, uplifting their standards of living, substantially lessening, if not eradicating poverty. Free trade in the form of American capitalism would beat a path to a Shangri-la for the entire world.

And the world gushed with enthusiasm. There was rush for the Utopia of free markets as all but two of central controlled nanny economies of the world embraced free markets with the passion of lovers meeting after an age of parting.

The supply and demand determined “invisible hand of free markets,” which acquired a divinity of its own, alongside, if not superior to an Almighty God, had failed to carry the worlds poor with it, as it made the rich richer and the poor poorer as the developed world grew wealthier.

The transnational corporations, the likes of Microsoft, UniLever, BAT, and Nestle, some 39,000 of them controlling 265,000 affiliates, which the free trade tune unleashed on the world, opened up hitherto closed “markets”.

The theme of eternal and unending consumption as the way of a better life was espoused. Along the way, breast milk was ‘inferior’ to the convenience of formula feeds; a fairer skin color a better than a black one; sugar-laden liquid, better than the ordinary water; grease-laden hamburgers a better food. Leslie Thurow surmised: “Free Markets will bring forth not just the best that there is to be had, but perfection at no cost.”

Trade and commerce flourished and expanded. Technology developed in geometrical progressions. The world grew more prosperous. With it, capitalist production has generated better amenities for millions across the world.

And the yachts lifted with the rising tide.

Unfortunately, the tide of prosperity did not lift the smallest of dinghies for them to be lifted in the first place. For those who had no boats, it was more misery than prosperity.

Despite the chant of greed bringing a better life for all, much work remained to be done.

There were miles to go, as the world was being strip-mined for its resources.

With India and China emerging from the side lines to demand their pound of flesh of the resources of the world, and before the world runs out of them, the invisible hand of markets needs some ‘help’ from the likes of Bill Gates and Warren Buffet.

Enter the Gates Foundation.

In his new role, Gates will not be a pot-bellied oil drenched Arab sheik doling out money. He is an entrepreneur par excellence bringing that expertise to his endeavour.

Reportedly, he and his wife, along with their silent partner Buffet, will seek to set up micro-mini entrepreneurs and projects in the poor countries.

The Bangladeshi originated Grameen Bank proved that the poorest of the poor were reliable borrowers, repaying their debts to earn higher loan entitlements with a regularity which hit 98 percent. This was while the elegant but snooty bankers of the world, the emissaries of free trade borne prosperity, shunned them as unreliable to lend. Gates Foundation is a bigger entity, evaluating schemes, assessing them for prospects, targeting potential schemes which will have multiplier effect.

Previous attempts of big foundations have succeeded. Rockefeller Foundation focused on promoting dwarf wheat and availability of penicillin to contribute to better food supply and better health where free markets and governments failed. The Gates Foundation will do likewise in different areas.

While it cannot solve all the problems of the worlds poor (that is the supposed job for free markets), it can bring succor while the world waits the arrival of the bounty of markets at its door. The Gates Foundation will be a doubtless boon in many parts of the world where the comfort of free trade or good government has not arrived.

Still, the fact that the Gates/ Buffet duo chose to donate and target the poor, raises the question: has the mantra of free markets failed or is it that Gates is an impatient man?

The clear answer to both is that that free markets have failed.

Gates is not impatient: obviously he is simply smart enough to know that free markets don’t have the capacity to lift all boats, that the bigger boats will be lifted higher, that the dinghies may not be lifted at all, that free markets have limitations which cannot seek out the poorest of the poor because it caters not to the poor but to those who have the purchasing power the affluent and the rich.

Living in the United States, he can see that it is a land of extremes where 1 percent are rich beyond belief. The yawning gap between the have and the have nots is simply the “American Way”. The American Dream where those who worked hard could climb the ladder to the top did hold sway, once. Sadly this is no longer true.

Between 1980 and 2004, America’s GDP went up by 67 percent. But instead of making everyone better off, lifting ALL boats, one part got richer while the other (bottom) part slid further into the black hole of poverty. There are 37 million Americans living in destitution, 12.7 percent of the population, the highest in the developed world. The gap between the rich and the poor within countries, particularly in the US, has widened, not lessened.

Though median family income has gone up 18 percent, the top 1 percent saw their incomes rise 200 percent. The wealthiest 1 percent controls 33 percent of the nation’s wealth while the wealthiest 10 percent controls 75 percent of it. This was while enjoying tax cuts in their favor- massive enough for Warren Buffet, who benefited by the millions, to say that the cuts “scream of injustice”.

According to the UN's "World Economic and Social Survey 2006: Diverging Growth and Development, the yawning inequality in incomes is not only within countries but also between them.

That gap is growing and “must be confronted to prevent global destabilization.” Most of the world's poorest nations are falling behind in more or less similar degrees.

“The growing gap – with a few emerging nations including China and India bucking the trend – contradicted conventional wisdom that income differences would close as the world economy became more integrated.”

This lack of opportunity for the young is an appalling waste of human resources, energy and creativity. And with approximately 1.2 billion young people worldwide coming of working age in the next decade, it is an issue that will push its way up the agenda of policymakers and politicians."

The UN Development Program (UNDP) disputed the US position that ‘busting down tariffs is the surest way to reduce poverty.” While trade has exploded across the region alongside falling tariffs, job growth fell from 337 million in the ‘80s to 176 million in the ‘90s. This growth was not enough to keep up with the growth in population.

Arunadathy Roy views India as not coming together but coming apart because liberalisation has convulsed the country at an unprecedented, unacceptable velocity. The Indians who count themselves among the losers from this process easily outnumber the winners. Thousands of farmers have taken their own lives, having found themselves with a debt that could not be paid. More than 400 million farm workers each earn India just $375 a year in output. The comparable amount made by the million or so software engineers is $25,000.

The International Labor Organization (ILO) estimates 218 million children were in exploitative labour in 2004. Most work for suppliers producing products for transnational companies.

The Billanthrophy by Gates, is an unstated admission that all is not well with the free market mantra. That is a sign that those who are obsessed with one-size-fits-all solutions should heed.