letter to the editor: creative capitalism

One of the more interesting web experiments I've come across recently is a new blog titled Creative Capitalism: A Conversation, which truly is a blog conversation "designed to produce a book -- a collection of essays and commentary on capitalism, philanthropy and global development -- to be edited by us and published by Simon and Schuster in the fall of 2008." The blog features economic luminaries such as Richard Posner, William Easterly, Gary Becker, and more, and the idea for creative capitalism emanates from a speech given by Bill Gates at the World Economic Forum at Davos.

I recently learned that a letter I wrote to the editors will be included on the site within the next week, so I thought I would provide my fiercely loyal readership an early glance. I will offer a disclaimer that I likely should have added to the original letter -- the idea expressed in the latter half is meant to be a discussion point, not an endpoint. My impression from Gates' speech was that he wants capitalism to search for new ways to serve the needs of man, and that's the spirit in which I wrote this letter.

The creative capitalism blog can best be described as working group of top economists assigned two tasks: clarify what exactly creative capitalism entails, and debate its relative merits. Of course, an economist would wisely note that the dialogue's production would be greater if it specialized in answering one question at a time. The conversation is certainly a bit confused. One moment, Bill Gates and Warren Buffet are talking about the positive impact on profits of cause branding. A post later, the discussion centers on supporting causes that simply reduce revenues. In the next breath, Milton Friedman is arguing that capitalism has more social benefits than creative capitalism.

What question is the project answering again? Depends on the monologue you're reading. I might be so brazen as to suggest that the dizzying directions this discussion has taken indicate that a bit of top-down coordination might better utilize the immense human capital brought to bear on these issues. But I am but a poor part-time blogger, so I will join the chorus with my own interpretation of "what creative capitalism means to me ..."

Many libertarians would agree (looking at you, GMU) that increased competition for government services would be a good thing. We simply haven't figured out how to do it yet (problems of jurisdiction and spatial sporting come to mind). When I think of creative capitalism, I consider the opportunity to take the corporate model as the foundation for the voluntary associations that Alexander de Toqueville described in "Democracy in America."

When liberals ask the country to come together to tackle a social injustice, market enthusiasts counter that liberals should turn to personal charity. Yet the market enthusiast's response fails to provide a viable alternative to the liberal's public programs. The "charity" market is poorly defined, suffers from serious asymmetry of information, and a lack of coordinating institutions. Yes, this is partly because the government has crowded out private charity with its large programs. But still the market enthusiast will convince few liberals to disband the public safety net by asking them to have faith that the market will immediately respond with equal or better charitable services. In fact, without well-designed institutions, oversight, and coordination mechanisms, I think liberals are right to not rely on private charity to tackle social problems, even when compared to the wildly-efficient public systems.

But there is hope. Consider the industry titans modern feudal lords, forced to subsidize the wasteful public programs of the King. Their only hope is to create a parallel system of public programs that are more effective than those of the King. People want public services. If creative capitalism can provide these services, they can displace government services. Tocqueville saw the great strength of America in her civic associations. The federal government has grown so large so as to crowd out many of these ventures, and it will take the action of independent pillars of wealth, such as Bill Gates, to provide an alternative vision that liberals can believe in will better serve the needs of humanity.

To view creative capitalism as simply a value-destroying concession is to ignore the quiet competition between the private and public systems for satisfying the desires of the masses. The question is whether voluntary associations are up to the task. Surely, with friends like Gates and Buffet, the financial resources are there, but where's the vision?.