Monday, July 13, 2009

The Rich Must Help The Poor By Steve Hamm of Businessweek

Bill Gates: The Rich Must Help the Poor

Bill Gates has long been admired and listened to because of his great wealth; his ability to build one of the most successful companies ever, Microsoft (MSFT); and his contributions to the PC revolution. Now that he's spending most of his time as co-chairman of the Bill & Melinda Gates Foundation, he has a new role: shaping the world's thinking about how best to combat social problems.

On Jan. 26, Gate published his first annual progress report on the foundation's projects, and a call for action by governments and wealthy individuals to help address the global economic crisis. Fellow philanthropist (and Gates friend) Warren Buffett earned the nickname the Oracle of Omaha for the insights in his annual letter to Berkshire Hathaway's (BRKA) shareholders. If Gates wins anywhere near the same following, he may come to be known as the Sage of Seattle.

In his letter, Gates warns that the financial crisis will probably not pass in a year or two, but he expresses confidence that the problems will be behind us in five to 10 years. "A key reason for this is that innovation in every field—from software and materials science to genetics and energy generation—is moving forward at a pace that can bring real progress in solving big problems. These innovations will help improve the world and reinvigorate the world economy."

The Poorest Get Poorer
Gates amplified some of his themes during a Jan. 26 press conference, which was held in advance of a trip to the World Economic Forum in Davos, Switzerland, and to Nigeria, where he planned on pushing the battle against polio. "The people who suffer the most [from the economic crisis] are the poorest," Gates warned. At Davos, he said, he planned on thanking government and business leaders for increasing their contributions to global health and economic development over the past five years. But he said he would also urge them to keep up their commitments.

"The success we've had in meeting the needs of the poorest are easily lost," he said. "I want to make sure that people see this is concrete stuff: Lives are affected in a dramatic way."

Even though the Gates Foundation's endowment lost 20% of its value last year, Gates is increasing the amount of giving from $3.3 billion last year to $3.8 billion in 2009. As of Oct. 1, the endowment's total value stood at $35.1 billion. Most of the endowment comes from the Gates family, but Buffett pledged in 2006 to give 83% of his fortune to the foundation in a series of annual installments. He has already contributed about $5 billion.

By increasing his funding of projects, Gates aims to set an example for governments and individuals on how to respond in this time of crisis. He warns in his letter that the state and federal governments may be tempted to cut education budgets in the face of tax revenue shortfalls, but he urged them to hold the line. Gates commended the Obama Administration for its pledging to invest in improving public education. He also urges wealthy people to keep up their giving.

"Otherwise," he writes, "we will come out of the economic downturn in a world that is even more unequal, with greater inequities in health and education, and fewer opportunities for people to improve their lives."

Battling Disease
Gates writes that Buffett encouraged him to write an annual letter. His goal was to spell out the foundation's goals and to show where it has made progress and where it has not. Half of the foundation's annual program funding goes to disease suppression. Most of the rest goes to improving agriculture in Third World nations and to improving education for poor people in the U.S.

The programs that the foundation backs have made progress against some diseases, Gates writes, especially those that cause childhood deaths. But he says he's disappointed with the slow progress in coming up with effective and affordable AIDS vaccines. Gates admits that many of the investments the foundation has made in education haven't improved students' achievement in any significant way, but he says some charter schools achieved some notable successes. He urges state governments to permit more charter schools to be established and to increase their funding.

While the Gates Foundation is increasing its program investments this year, it doesn't plan to expand into new focus areas.

"I'm a believer that foundations in general work on too many causes," Gates said during the press conference. "If they worked on half as many causes and went deeper on a few things, the impacts would be greater."

Hamm is a senior writer for BusinessWeek in New York and author of the Globespotting blog.

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