Capitalism’s veritable poster-child, Bill Gates (is he still the number one richest person in the world?), said today that we need to refine the free-market system.

“Free-market forces have failed the world’s poor,” he said.

He was addressing the World Economic Forum in Davos, Switzerland – an audience that’s done well by free-market forces just as they are.

But Gates is calling for something new: “creative capitalism—pushing beyond profit goals to more compassionate ones.

He admits that his company, Microsoft, hasn’t always been about charity, but his own philanthropic work has taken him to places in the world where he’s been faced with the brutal realities of poverty, places that have been bypassed while others thrive.

How would he do it? He offered a couple options:

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    1. Simple recognition (maybe others would call it “enhancing the brand”): “Recognition [for magnanimous works] enhances a company’s reputation. In markets where profits are not possible, recognition is a proxy; where profits are possible, recognition is an added incentive.” One might ask: Would this be enough?
    2. A second carrot is expanding into untapped markets by helping people out of poverty and getting them to buy products at reduced costs.
    3. Gates also sees a role for government in this brave new capitalism: “I believe the highest-leverage work that governments can do is to set policy to create market incentives for business activity that improves the lives of the poor.”
    4. Another idea: Help businesses in the “poor world” reach markets in the rich world. (He’s got a project going that does just this, bringing African coffee farms to an international gourmet market.)
    5. And finally: Listen to your good friend Bono. The U2 star has been doing good deeds in the world for some time and generally making a stir, politically. But apparently when he’s had a few drinks Bono comes up with extra brilliant ideas, like getting a percentage of each purchase from civic-minded companies to help change the world. A lofty way to put it, perhaps, but we’re full-circle back to branding – where companies appeal to customers’ sense of moral responsibility and gain loyalty from the feel-good power of being good Samaritans.

    For all these efforts, Gates urged corporations to dedicate some of their top innovators’ time to issues that could help people left out of the global economy—perhaps the most important piece of the puzzle if any of this is to actually materialize.

    How to get corporations on board? Bill Gates just plain asked: “I’d like to ask everyone here, whether you’re in business, government or the non-profit world, to take on a project of creative capitalism in the coming year. Can you find a way to apply this so that the power of the marketplace helps the poor?” (He also told the Wall Street Journal that in his retirement from Microsoft, he sees a role for himself spurring companies into action.)

    Some of this seems far-fetched. But I’m glad Gates is using his high profile to remind corporate types that the system’s not working for everybody. And whether they jump to action or not, I hope the Davos crowd was stirred by the values at the core of his message; among them responsibility, humanity, and fairness.

     P.S. In his speech, Gates raised an important point that Alan just posted about today:  “The bottom billion misses the benefits of the global economy, and yet they’ll suffer from the negative effects of economic growth they missed out on. Climate change will have the biggest effect on people who have done the least to cause it.”