Bad Money, Good Money

London – The British comic genius Spike Milligan once observed that he would love to have the opportunity to discover that money wouldn’t make him happy. Big lottery winners, it is claimed, end up miserable, though real-life research suggests that they are as happy as you and I would be with a check for a million dollars. Money, however, can trigger all sorts of other emotions – like rage, for example. That is pretty much how most people reacted to the stories about bankers’ bonuses, when the great crash of 2007-2008 wiped out banks, businesses, shareholders’ savings, growth, and jobs. There was, as one banker charmingly conceded, a bit of asymmetry between what bankers were being paid and what their banks had lost. The Nobel Laureate Amartya Sen notes in his latest magisterial book The Idea of Justice that most people understand that a process is fair when they can detect a connection between effort and reward. The bankers failed this test dismally. We gritted our teeth and for the sake of our national economies supported our governments as they bailed out the banks with public money. It was a necessary, if infuriating, act of salvation to avoid economic disaster. Having socialized banks’ losses after we had seen the privatization of their gains, our rage quotient has shot up once more at the news that the banks we saved are again filling the troughs into which all those snouts are enthusiastically dipped. The sheer unseemliness of what is happening raises blood pressure as well as eyebrows. How do they have the nerve? We should not, however, allow this sentiment to turn into an all-purpose rant against personal wealth. Sometimes its owners use it in hugely generous amounts for great public gain. Consider the cases of two of the world’s biggest philanthropists, George Soros and Mo Ibrahim. George Soros, the enormously successful investor, has used much of his own wealth to establish the Open Society Institute, which has helped to underpin the democratic revolution in Central and Eastern Europe and to press for human rights worldwide. Mo Ibrahim is one of Africa’s most distinguished entrepreneurs. He built a business empire on technology, software, and mobile telecommunications. Ibrahim has established a foundation whose main purpose is to raise standards of governance in Africa. The continent certainly needs to pay heed. With a billion people living in more than 50 countries, Africa is wracked by poverty and, in too many places, torn apart by war. The Oxford development economist Paul Collier reckons that 75% of the poorest people in the world live in countries that have only recently recovered from conflict or are still in conflict. Most of them are in Africa. These are countries where it sometimes seems easier to start an uprising than to start a business. Guinea, with a nasty military junta in power, is on the brink of disaster. In Sudan, the Darfur conflict is unresolved and divisions between the north and the south once again threaten peace, with a promised referendum on southern independence due by 2011. Hundreds of thousands of displaced people huddle in camps in Somalia, where warlords rule. The list, alas, goes on. It is not as though Africa lacked resources or the ability to govern itself well. Peaceful Botswana is a good example of what can be achieved. While climate, geography, and the colonial past share some of the blame for today’s misery, most of the responsibility belongs to those African governments that have behaved so badly. Ibrahim wants to stamp out corruption, to see the rule of law applied everywhere, to foster policy environments that encourage businesses to start up and thrive, and to strengthen the role of women. He wants to reward those who support pluralist democracy and is a champion of civil society and a free press, and the Ibrahim Foundation is also deeply involved in the fight against global warming. He also points out that less than 5% of total trade in Africa is undertaken between African countries. There is a powerful argument for regional economic integration on the continent, abolishing trade barriers, sharing infrastructure like power generation, and allowing free movement of people, goods, money, and jobs. Some countries in East Africa are now trying to do something about that for themselves. Philanthropists like Mo Ibrahim and George Soros – or Bill Gates and Warren Buffett – can use their fortunes to make the world a better place. We shouldn’t allow our exasperation with bankers to morph into an assault on the creation of wealth. As Spike Mulligan was unable to discover for himself, money really can make people happier, producing a more just world with greater opportunity for the poor and disadvantaged. Let’s hope that we move in that direction in 2010. Chris Patten, the last British Governor of Hong Kong and a former EU Commissioner for External Affairs, is Chancellor of the University of Oxford. Copyright: Project Syndicate, 2009. www.project-syndicate.org