As the people who really rule the world hobnob this week at the annual Davos meeting of the World Economic Forum, there’s always a strong whiff of do-goodness to justify the gathering. So it was no surprise that Bill Gates, in his last appearance as chairman of Microsoft before retiring to run his foundation, decided to plead for a kinder, gentler capitalism.
In a speech to be delivered Thursday, Mr. Gates, one of the richest men in the world, will express concern that the benefits of capitalism seem to bypass the poorest people in the world. He is calling for companies to develop products aimed at the poor, products that will make a profit, of course, but will also improve the lives of the poorest.
Of course, social entrepreneurship is nothing new. But Mr. Gates proposes large companies assign their best people to solve some of these problems. He’s not abandoning capitalism, which has been very, very good to him--he’s just proposing some of its resources be directed at problems the free market doesn’t solve automatically.
Another challenge to free-market capitalism has emerged not too far from Davos. Unemployment or pollution? That’s the Hobson’s choice that Arcelor Mittal, the world’s largest steelmaker, has posed to European authorities, according to an article in the French daily Le Monde. The company is the result of a takeover of Luxembourg-based Arcelor by Mittal Steel in 2006.
There was some controversy as Europeans came to grips with the idea that a company led by Indian industrialist Lakshmi Mittal would swallow up a large European enterprise. In initially rejecting Mittal’s bid, Arcelor’s CEO reportedly dismissed Mittal Steel as “a company of Indians” and authorities in France and Luxembourg strongly opposed the bid. The tensions over the purchase may seem tame compared to what is likely to erupt over Mr. Mittal’s latest proposal. And they may well foreshadow the difficult choices that authorities will confront in coming years as governments and companies struggle to balance economic growth against efforts to control carbon emissions.
When Mr. Mittal took over Arcelor, he proposed reopening a steel furnace in Seraing, a suburb of the Belgian city of Liege. The idea of 2,000 jobs at the plant and another 6,000 in related services was seen as godsend to the economically depressed Wallonia region. Local officials made many promises to Mr. Mittal that they may not be able to keep. ArcelorMittal says it needs 15 million tons of carbon-emission credits lasting until 2012 to make the plant viable. Regional authorities have some carbon credits available but nowhere near that amount.
The steelmaker says it can’t afford to spend 300 million euros to buy the credits it needs, especially since the company has already put up 20 million euros to renovate the site. After all, steel from the Seraing plant is already likely to be more expensive than steel made in Eastern Europe and Asia. The regional government has appealed to Belgian authorities, who are unlikely to find a sympathetic ear at a European Commission already under pressure to cut carbon emissions. Belgian unions warn that production will move to Eastern European or Asian countries with far more lax pollution rules.
As for the workers in Wallonia who thought jobs in steelmaking were coming back, they have found little comfort in the headlines from last week, when ArcelorMittal cut some 600 jobs in France’s Moselle region. That's capitalism too.