Bill v. Bill

In the Wall Street Journal Bill Easterly writes on Why Bill Gates Hates My Book. The book in question, I assume, is Easterly's The White Man's Burden: Why the West's Efforts to Aid the Rest Have Done So Much Ill and So Little Good. Easterly opens this commentary by pointing out that

This newspaper [WSJ] reported recently that Bill Gates hates my ideas. I have no hurt feelings, at least nothing that months of intensive psychotherapy can't cure.

He then writes that Bill Gates thinks that entrepreneurs will fall all over themselves to meet the needs of the rich but have no incentive to serve the poor. Bill Easterly responses,

Mr. Gates seems to believe that the solution is to persuade for-profit companies to meet the poor's needs by boosting the "recognition" of corporate philanthropy. But the dossier of historical evidence to suggest this would work is as thin as Kate Moss on a diet.

Easterly goes on

First of all, the recognition motive has proven to be awfully weak compared to the profit motive. Otherwise we would have had a lot more than the $5.1 billion of annual American corporate philanthropy to the Third World (as of 2005, which has the most recent reliable figures). That was four one-hundredths of 1% of the $12.4 trillion of U.S. production for the free market. Is it really the poor's only hope that the Gap will donate a few pennies per sexy T-shirt for AIDS treatment in Africa?

Profit-motivated capitalism, on the other hand, has done wonders for poor workers. Self-interested capitalist factory owners buy machines that increase production, and thus profits. Capitalists search for technological breakthroughs that make it possible to get more output for the same amount of input. Working with more machinery and better technology, workers produce more output per hour. In a competitive labor market, the demand for these more productive workers increases, driving up their wages. The steady increase in wages for unskilled labor lifts the workers out of poverty.

The Easterly bottom line,

... profit-motivated capitalism is still the best hope for the poor.

Game, set and match Easterly.

(HT: Greg Mankiw)