Bill Gates, Crypto-Socialist?

Bill Gates is right: the private sector is stifling innovation in green energy. But that's not the only place capitalism is holding us back.

Bill Gates, the original tech titan, is going around telling just about anyone who will listen to him that the free market is terrible at innovation.

It all seems to have started in 2010 when he complained to TED audiences about the “ridiculously low levels” of government spending on basic research on green energy, a line he has repeated in multiple venues.

Then in June this year, Gates gave a lengthy and eyebrow-raisingly odd interview to the Financial Times in which he said not once but repeatedly that it is the public sector, not private companies on their own, that will deliver a global shift to a clean-energy economy, and that as much as he loves philanthropy, it is no replacement for taxation as a mechanism to deliver wealth redistribution.

Amid discussion of the sort of green-energy innovation projects he was most excited about — recycled depleted-uranium nuclear energy, high-altitude kites or “kytoons,” and flying turbines capturing always-on wind power from the jet stream — he told the FT reporter how in the energy sector as in health, there are areas of research that have interesting potential to aid humanity but which offer no financial return. The public sector however can take the long-term view and so “government R&D budgets should be increased in that space.”

He went on to say how it was “the public sector that was there at the start” in digital technologies, the Internet, and shipping. This is certainly true. If he hasn’t read Marx, he certainly seems to have read Keynesian innovation economist Mariana Mazzucato’s book, The Entrepreneurial State, a bestseller among the summit-hopping set, which offers up a series of case studies from biotech through pharmaceuticals to microcomputers and shows how it has historically been the public sector that makes the high-risk investments in new technology long before the private sector is confident enough to part with its cash.

The reason is simple: companies are too risk-averse to invest in the absence of a sure thing. The ample historic evidence she marshals demonstrates that contrary to popular belief, it is most often the state that leads the way with innovation, not the captains of industry. She calls for “mission-oriented” public spending on moonshot-like projects to bootstrap humanity out of the current innovation desert.

“Because there’s so much uncertainty and there are so many different paths,” Gates continued, echoing Mazzucato’s thesis, “it should be like the Manhattan Project and the Apollo Project in the sense that the government should put in a serious amount of R&D.”

A few days later in a blog post, Gates expanded his argument:

Why should governments fund basic research? For the same reason that companies tend not to: because it is a public good. The benefits to society are far greater than the amount that the inventor can capture. One of the best examples of this is the creation of the Internet. It has led to innovations that continue to change our lives, but none of the companies who deliver those innovations would ever have built it.

In November, he told the Atlantic, again on the theme of green energy research: “Yes, the government will be somewhat inept. But the private sector is in general inept. How many companies do venture capitalists invest in that go poorly? By far most of them.”

And all of this has led up to the big reveal earlier this month at the UN climate talks in Paris, where Gates and business leaders such as Facebook’s Mark Zuckerberg and Amazon’s Jeff Bezos were there for the twin announcements of Mission Innovation — a commitment from twenty-one countries including the United Kingdom, the United States, China, India, and Mexico to double public spending on clean energy research by the end of the decade, and the Breakthrough Energy Coalition of businesses and foundations that are to “support companies that are taking innovative clean-energy ideas out of the lab and into the marketplace.”

Gates, the impresario behind both endeavors, again took to his blog to flesh out his thinking behind them, posting a nine-page policy document that goes into even more detail on how “government-funded research programs have produced many of the innovations that define modern life,” and extends the argument as to why market failure in the energy sector is particularly bad. While pharmaceutical companies invest 20 percent of their revenues in research and IT companies 15 percent, energy companies spend 0.23 percent.

This is because, he says, while most companies know within a few years whether a particular innovation will pay off, in the energy sector, it can take decades to know whether the research money will deliver a handsome return because it takes so long to adopt new energy technologies. “This is why governments play an indispensable role in supporting energy research.”

Yet Gates “and his billionaire friends” have come in for a kicking in the Guardian from progressive writers Martin Lukacs and Rajiv Sikora. They sneer that we don’t need any new technology, that we just need more small-scale, locally owned wind and solar cooperatives like in Germany and Denmark. Gates just wants “governments to lay the groundwork for a new frontier of green profit making,” in “climate quick fixes” such as carbon capture and storage (CCS) and geoengineering that “promise we can keep burning fossil fuels.”

It’s a shame that Lukacs and Sikora aren’t recognizing the glorious opportunity here for a cheeky bit of political jiu-jitsu.

Let’s be clear: while it’s a fun joke to suggest that Gates is turning into a commie because he has had an epiphany about market failure and the importance of progressive taxation and the public sector, the reality is that his foundation, along with a host of others, are chucking billions at the privatization of education in the US — at efforts to link teacher pay to pupil tests, to expand charter schools, and to restrict collective bargaining.

Even where the Gates foundation has won more fans — with its work on AIDS, malaria, and the growing threat of tuberculosis — their unofficial vetting of World Health Organization policies should trouble any believer in democracy.

But don’t Lukacs and Sikora at least find it tantalizing that Bill Gates is going around evangelizing about how capitalism isn’t enough?

Gates actually makes no mention of CCS or geo-engineering in his paper. Instead, one of the fascinating areas that he wishes more public funding would be spent on is solar chemical, also known as artificial photosynthesis.

While solar photovoltaic generates electricity from sunbeams, and solar thermal uses sunlight bouncing off mirrors most often for heating, solar chemical exploits the power of the sun to split water to produce oxygen and hydrogen that can then be used as fuel, or utilizes sunlight, water, and CO2 to create hydrocarbons that can be combusted with no net release of carbon dioxide into the atmosphere.

We already have the technology to electrify our passenger vehicle fleet; we just need Norwegian-style demand-management policies to rapidly drive adoption of electric vehicles. But due to the poor energy density of even the most advanced batteries, electric jumbo jets and cargo ships are still out of reach. The batteries necessary to do the job would be too heavy.

The greenhouse gas emissions from most first and second-generation biofuels have turned out to be worse than fossil fuels once a full life-cycle analysis is performed. So solar chemical could be the miracle option to solve our emissions in these key sectors. Gates is right to call for fresh public funding here while most private investors don’t see where they can make a buck.

But even more useful, progressives can take where Gates begins his argument, expose the contradictions, and take it to the logical conclusion that would make the billionaires blush.

We know that energy is not the only sector to suffer from the blight of risk-averse investor laziness and innovation stagnation. What makes the aforementioned tuberculosis and other bacterial infections so frightening is that we are running out of drugs to treat these illnesses. Multi-drug-resistant (MDR) and extensively-drug-resistant (XDR) TB is spreading westward and there seems to be little we can do to stop it in the absence of the development of new classes of antibiotics.

We are on the cusp of a post-antibiotic era, where an infection after a scratch or arriving via an everyday hospital catheter can be a death sentence.

The rise of anti-microbial resistance is in many ways a more immediate threat to humanity than even climate change. And everyone familiar with the problem knows there is one reason for this: the refusal of pharmaceutical companies for some three decades now to invest in the necessary research because antibiotics are just not profitable enough compared to drugs for chronic illnesses.

In sector after sector, the set of all things that are profitable is much smaller than the set of all things that are useful. Capitalism fetters production, limiting what we could produce to only those things that permit capital to expand — a diminishment of the lives of everyone, even the wealthiest individuals. Drug-resistant TB doesn’t care how many billions you have stashed in the Bahamas.

Expressed in language that Silicon Valley could understand, this is to say that capitalism can only ever offer a shadow of the potential innovation that socialism could deliver. Meanwhile, the small-is-beautiful, neo-Malthusian, micro-leftism of the likes of Lukacs and Sikora has nothing to say about innovation, research, or the advance of our species.

For the sake of the climate, for the sake of tackling antibiotic resistance, for so many other reasons, we need to revive arguments about how capitalism holds back production and stifles innovation that were once at the heart of progressive discourse.

We could have so much more — and without having to rely on the likes of Bill Gates.