Capitalism: An Instrument for Combating Poverty

As time continues in natural procession toward 2016, a new era of thought is unfolding. At its center, the notion that the private sector and business can be humanity’s principal weapon in the war against poverty. Multinationals were wary when the MDGs were unveiled, but now many are on board. And some rich-as-Croesus philanthropists, together with a bevy of market-friendly think-tanks, have started to monitor and measure the results of aid spending, and to search for ways to make it more effective.

Pre-eminent among the big spenders is Bill Gates, the Microsoft magnate, whose foundation has dished out more than $31 billion since 2000. George Soros, a Hungarian-born American financier, and his Open Society Foundations argue for transparency in aid, budgets and contracts. The Gatsby Charitable Foundation, started by Lord (David) Sainsbury, a British retailer, advises African governments and business on improving supply chains. Another Briton, Sir Christopher Hohn, a financier, has spent more than $1.5 billion since 2006 via his Children’s Investment Fund Foundation (CIFF) on spreading the crucial message that improving young children’s health leads to big benefits later in life.

Bill Gates stresses that his foundation is a catalyst, not an implementer. Other bodies, including governments, can do the heavy lifting. Convinced that “technology can fix everything,” he searches for innovative ways to lift up the poor, for instance by drawing them into a banking system and working out how to insure poor pastoralists’ livestock. The Gates Foundation has played a big part in virtually eradicating polio, and in greatly reducing malaria and other diseases, including river blindness. It has also contributed to the Global Fund to Fight AIDS, Tuberculosis and Malaria, the biggest public-private partnership of its kind, created in 2002, which spends $4 billion a year. More recently the foundation has concentrated on basic nutrition.

George Soros has sought to make governments and firms open about their dealings. In 2002 his foundation helped set up Publish What You Pay, now a global coalition of 800-plus independent watchdogs, and in 2013 it launched a Transparency Champions Challenge. Another monitor with clout is the Open Budget Index, launched in 2006 by the Centre on Budget and Policy Priorities, a Washington think-tank. The Berlin-based scrutineer, Transparency International, founded in 1993 by Peter Eigen, a former World Banker disgusted by the corruption he saw in east Africa, has become a strong force for uncovering corruption, including in the aid world.

The MDGs were meant to create a social safety net to be fit for an age in which the standard of living in a big chunk of the developing world is creeping towards the levels of rich countries. We know so much better now what works and what doesn’t work. Aid is an ever-declining part of the story and we must go beyond it – we must look to social enterprise and the private sector. Handouts do not have to be a part of the equation anymore.