Why the Third World Needs Capital Not Charity

Rather than getting billionaires to hand over millions of dollars and then spending it on health projects, Gates and Buffett would achieve much more if they were able to convince those same billionaires to set up factories in those countries and employ people.

That way the economy can produce goods and provide services to meet the needs of locals and to meet the needs of international markets. The natural consequence would result in an inflow of investment capital into those countries and an increase in individuals' wealth.

This would provide the capital for more investment, more businesses, more jobs, more wealth and… an increase in the standard of living.

Instead, Gates has jumped on the Global Warming bandwagon to argue that the third world needs to reduce its carbon emissions. (Thanks to Money Morning blogger ‘earlwag’ for posting this video of Gates warning about the dangers of CO2).

Gates is obviously a very bright and smart guy. But clearly he's got just as much (ie. none) clue about global warming as your editor.

According to Gates' comments in the video:

“My full-time work at the Foundation is mostly about vaccines and seeds, about the things we need to invent and deliver to help the poorest two billion live better lives. But energy and climate are extremely important to these people. In fact, more important than to anyone else on the planet.”

Poor countries don't want things invented for them. They want that magic word - capital..

While vaccines and seeds may indeed provide benefits to the poorest two billion, improvements in these areas are only achievable and sustainable if these people are able to live in comfortable surroundings.

You can have as many vaccines and seeds as you like, but if you're still living in a ditch because you can't afford a proper home, because you can't get a job, because they are no firms to employ you, because there is no access to capital… well, the vaccines and seeds are only going to have a limited impact.

As I say, what's more important to the well-being of any nation is the support and encouragement of entrepreneurial activity to achieve wealth. And for that it's the access to capital that is the most important ingredient.

Without capital nothing happens.