World Bank President David Malpass recently criticized Microsoft for spending $68.7 billion to acquire Activision Blizzard. His strange comments compared Microsoft's purchase of a video game company against wealthy nations banding together to help poor countries. He's drawn criticism from many around the web for his comments. While some have focused on the fact that Malpass used to work for the global investment bank Bear Stearns, I'd like to focus on a simple fact that Malpass seems to have missed: Microsoft isn't a country.
The controversial quote
First, let's take a look at the comments that have drawn criticism:
Malpass' comparison of Microsoft's purchase to donations from countries is just strange. First, Microsoft is not a country, so the budgets involved are not directly comparable. Microsoft may be worth $2.32 trillion, but that's nothing compared to the annual budget of the U.S. government or other wealthy nations, especially when combined. The $23.5 billion contribution announced by the World Bank came from "48 high- and middle-income countries."
- $67,000 is a lot to you and I
- $670,000 is a lot to a small business
- $670,000,000 is a lot to a city
- $67,000,000,000 is a lot to a tech giant
Do you know who $67 billion isn't a lot to in the grand scheme of things? The combined wealth of the richest countries on earth. Those nations gathered together to commit to $24 billion over three years to the World Bank's International Development Association (IDA). If Malpass isn't happy with how much is being contributed to the IDA, maybe he should call out the countries contributing.
Mixed up reasoning
If I squint hard enough, I can see Malpass' point. At least, I think I can. I believe the crux of his argument is that wealth distribution is lopsided and that Microsoft purchasing Activision Blizzard moves money around in a way that will never see those funds redistributed to developing countries.
"There needs to be a broader allocation of capital worldwide in order to achieve the goal that everybody has, which is that developing countries actually develop," said Malpass. "That has to be a core part of the global system in order to address the refugee flow, the malnutrition that's going on, and so on. There has to be more money and growth flowing into the developing countries and we've had the opposite case."
I'm not an economist, but Malpass' argument seems to hold some water. My question is, what does it have to do with how much money countries donated to the IDA? Malpass wrongly conflates Microsoft's actions with the contribution of wealthy countries to the IDA.
Microsoft is a business
Since Malpass worked in banking and finance for years, I assume he's aware of what a business is. It has been a few years since he was the chief economist for Bear Stearns while it collapsed, so he may be out of the loop. Businesses strive to make money. They are not under the same mandate as governments to help individuals.
Yes, businesses can, and should, donate money to worthy causes. They aren't, however, expected to do so in the same way world governments are. Microsoft certainly isn't under an obligation to not spend money on Activision Blizzard so it can donate money to developing countries.
I want to be clear. I think Microsoft and wealthy individuals should donate to help others. But businesses are beholden to shareholders. They operate to perpetuate themselves. Most, if not all, of their decisions will at least tangentially be related to making money.
A person could make a reasonable argument that Microsoft should donate more money to developing countries or to poor people. Microsoft does donate over $1 billion in software and services each year (opens in new tab), but for a company worth $2.32 trillion and that recently had as much as $150 billion in the bank, maybe that's not enough. But that doesn't seem related to what the wealthiest nations on the planet donated to the World Bank.
Sean Endicott brings nearly a decade of experience covering Microsoft and Windows news to Windows Central. He joined our team in 2017 as an app reviewer and now heads up our day-to-day news coverage. If you have a news tip or an app to review, hit him up at email@example.com (opens in new tab).
Microsoft does far more help in developing countries than the World Bank. How? By investing in data centers, global fiberoptic systems, software and much more. Go to any country in the world and ask yourself if their government does not have access to computers, the internet, and all sorts of software directly attributable to Microsoft? What about all the people in developing countries that have access to the same services? Malpass is just out to lunch on this one. Why should governments subsidize other governments that prevent their citizens from enjoying liberty? There is a reason Apple, Google, Microsoft, KO, and many other large global companies have invested billions around the world and in developing countries. It is because they are efficient, profitable organizations forced to compete in the free market of the US and to some extent in Europe. The World Bank is just another global government entity that loves to take money from productive people/organizations and tries to help poor people/organizations by telling them what to do. On the grand scheme of things, they waste more money with their policies and probably support a lot of corruption in the name of "helping the poor live better lives".
Thank you ddn123, you've helped restore my faith in humanity. Very, very well said.
Malpass is an Trump appointee and doomer of Bear Stearns who is just raising his profile for his next job. But your comments about the World Bank, the world's leading development organization, could not be more ignorant. You have no idea what they do or how they do it.
Andrew, the problem with Malpass' comments (just going by what's written here, in fairness to him, I've not heard them in their full context) is that the World Bank's role has nothing to do with them. He stepped out of that role to make a personal opinion statement. To criticize a company for any acquisition and suggest the acquirer should instead donate its money is just a horrible, ignorant thing to say. It's destructive and furthers the false perception that corporations are evil for doing things that help their business grow. It's the classic battle cry of politicians who don't create or make anything, but they're really good at giving speeches to anger others and inspire hate toward business and entrepreneurs who do create and build things. I take that be ddn123's chief point, and on that, he's absolutely right.
OK, I figured I should educate myself on what he actually said, since I was spouting some angry words here. In the full context, it's not quite as bad as it originally sounded. What he's talking about is the government policy around central bank bond holdings that encourages this kind of spending over incentives to invest (not donate) to third world countries.
Andrew G1, the world bank has been around for decades. I do not have a deep understanding of the World Bank. But I do have a good perspective of the world, since I have been to many countries as a tourist. I know what I see with my own eyes. What is the leading development organization? First you have to define development. Are you building Infrastructure? Government institutions? Education? How is the World bank interacting with countries? At the end of the day, free market economics supported by clear and impartial application of the law provides the best method of allocating capital to bring goods and services to the market. In simple terms, poor people benefit faster from free markets than government solutions. Can the World bank support free market solutions? Sure. But the point Malpass was making is simple. I want more of MSFT's capital so I can do more for the world via World Bank operations. This attitude is what distorts the allocation of capital. You can argue that the World Bank needs to lend money to support investments in poor countries that would otherwise be bypassed by companies like MSFT. But we do not see that happening. What we generally see are poor countries run by inefficient (probably corrupt) governments that reward rent seekers at the expense of the citizens. Look at public education spending in the US? How much money have the residents of Fulton County spent over the last 50 years trying to give the poor kids in Atlanta a decent chance at life? What is the result? There are still many kids growing up in Atlanta that receive a lousy education because the government run education system cares more about spending money on rent seekers than on delivering a good service. If Fulton County cannot run a good operation, do you really believe the World Bank can show better results in alleviating poverty among the world's poor than companies like MSFT?
Wow, does that piss me off (not the article -- well written and explained, Sean -- the comments from Malpass), at least as the story is relayed here. I have not spoken with Malpass directly, so I leave open the possibility that his words here are taken partly out of context. Anyone who says something like this, assuming he's serious, should not be allowed near money. Those are the kinds of words that destroy value and remove wealth from civilization. That is massive ignorance on full display. So where Sean said he's not an economist, I am one, but practicing in the private sector and entrepreneurship, and what Malpass is quoted as saying is wrong on so many levels. Sean's article illuminated a few, let me hit some others: 1. ALL of the money the wealthy nations have to donate to help other countries comes from taxes on ECONOMIC ACTIVITY. Acquisitions are always strategic decisions by a company who believes that the purchase will help them advance their business interests, which in all cases means more profits and therefore more tax dollars to fund these programs. 2. In economics, we have a mathematical factor called the Multiplier Effect. In essence, if I spend $50 for a meal at a restaurant, that goes to the restaurant owner, some to the wait staff from the tip, some to the other employees, some used to pay for food from the farmers, etc. Each of those people then spends their share of that money, which similarly helps multiple people. And so on, and so on, with each successive step getting smaller so that the sum of all of these asymptotically approach the multiplier value. Over decades of study, we know that different forms of spending have different multiplier effects. The largest multiplier effect in general is corporate spending on R&D (probably because of the way it drives wages and innovation, which tends to overspend in pursuit of future value). The smallest is any money that passes through a government (they are inefficient and bureaucratic, bogging things down, reducing each taxed dollar's impact). This is one of the reasons (not the only one) why countries that tax and redistribute funds are almost universally poorer than countries who foster free enterprise. The multiplier effect generates wealth, like a compound interest effect on economic activity. 3. Based on #2, we can see that giving away money, while it may feel good and seem nice, it is not the most effective way to help people. Better is to give them jobs, because then those people also contribute economic value, growing the pie for everyone. Those dollars also have a greater multiplier effect. That CREATES wealth, doesn't just move it around. 4. If your response to my #3 is that Microsoft, as a software company, is not in a position to just create jobs in developing countries, then I would point out: EXACTLY. They should focus in areas where they know what they're doing and can build value. Hire people who can help them achieve their goals and do business with companies that do the same. They pay taxes that go to these programs. Also, if they wish to use a portion of their profits to support some charities, many of which perform similar global functions, that's fine and noble, but back to the same reasoning as #1, those profits come from running a good business. The bigger and more successful the business the more profits there are to share at any given percentage. So charities benefit from a successful Microsoft. Ergo, the acquisition, as long as MS management is correct that it will help them execute their strategy, will ultimately result in more money going to help developing nations (over the long-term) than if they just gave it to them directly. 5. Ever heard the parable of the Goose that Laid the Golden Eggs? Every day a new golden egg, constant wealth creation. But the greedy leftists in the village thought it would be better to kill the goose to get all the eggs out of it once, blind to the future with no more goose to keep laying them. That's the exact same thinking behind the comments attributed to Malpass. If a company gives a generous 10% of its profits to charity and another 20% to shareholders, that means the remaining 70% can be used to grow the business, increasing the base on which the 10% and 20% are paid, creating year-over-year growth and a win for everyone. The growing business is better than the golden goose, in that it's like the goose is having goslings who grow into more geese who also lay golden eggs and the whole golden egg farm keeps having more and more to give. But like the goose, if you cripple or kill the company with taxes or bureaucracy, it stops growing and stops being able to pay others out of its profits. Malpass' quote represents the worst kind of ignorance -- it's malicious, causes tremendous harm to those less educated on economic matters, and creates strife between those who are creating wealth and those who now, thanks to words like Malpass', feel entitled to take it from them. Instead of all being proud of our companies and their success and all the good and wealth created for millions of people and tools for billions of us, these words encourage us to attack them and tear them down. There are companies that actually do bad things, whether unethical or illegal, but there is NOTHING in a corporate acquisition to further business strategy and growth that is remotely either of those. By throwing around accusations like this to companies who are not doing anything wrong, it just dilutes the real damage done by the truly bad players. Despicable words.
OK, I'm glad I qualified my rant acknowledging that I hadn't originally heard the full context of his quote. On further research, I see that what he's actually talking about is the government policy around central bank bond holdings that encourages this kind of spending over incentives to invest in (not donate to) third world countries. That's actually reasonable and in-scope for his work at the World Bank. It doesn't appear that he was actually criticizing Microsoft, but rather government policy that encouraged Microsoft's action. That is an important distinction.
The world bank facilitates Rent Seeking. While some rent seekers may do good. I general, rent seekers distort the allocation of capital and thus reduce economic efficiency. Would a company invest in a country with low market opportunities? No. So, the World Bank can reduce the cost of addressing these opportunities giving poor countires faster access to market opportunties. However, the reality is the World Bank is still a global orgainzation subjected to significant rent seeking issues that do not efficiently allocate capital. I will give you an example. The World Bank my favor green tech to solve the climate crisis. But poor countries should use cheaper technology to allow people to obtain energy. Once these poor countries can overcome the acute shortage of energy, and build a higher functioning economy, then they can switch to "cleaner" tech. Does anyone believe the World Bank would support the construction of coal fired power plants in the third world to provide cheap energy the poor? Or would the World Bank provide loans to build solar plants to fight climate change?
ddn123, excellent example.
The World Bank and the IMF issue loans to poorer nations not grant funding. Loans have repayments attached which pull out large amounts of money out of a nations economy thus keeping the nation poor. If he is so concerned, he is the authority to change that as well as put pressure on wealthier nations to contribute. But, he won't do that. Swing and a miss.
You don't get the point of loans to developing countries or what the World Bank does. You should read more about the Bretton Woods institutions (of which the World Bank and the UN are examples) and their role in development policy.
You do realise Developing Nations cannot default on payments otherwise it has massive ramifications for their entire economy? So, why on earth are they not being grant funding to reduce poverty and invest in schools, jobs, infrastructure. Which in turn would help the economy, provide opportunities and ultimately it would reduce the number of migrants travelling to other countries. Thus reducing the "brain drain" and over generations a robust economy will develop. By this point, presuming the nation remains a democratic nation it will ultimately seek to join a trading block for movement of goods, travel for people. As a result, they would also fiscally contribute into that block. That fiscal pool in turn is invested within the partners in the block as well as aide funding for other developing nations. I suggest instead of looking at or reading more about institutions you look at the economy and fiscal data. As well as the psychological aspects of softpower. Lastly, if loans were soooo beneficial... ask yourself why are the nations still in poverty?
I don't need to squint to see his point.
Microsoft - much like the rest of Big Tech - likes to keep virtue signalling and spewing woke BS. Just look at Nadella's pathetic statement when announcing the plans to acquire Activision. So when a company that keeps presenting themselves and hollier-than-thou goes and spends billions just to buy a videogame maker to try to thwart competition, of course they can be called out. No, Microsoft shouldn't be going around donating money to solve problems that are the issue of the governments.
But they should also STFU about politics and abstain from constant political statements virtue-signalling. 'cause otherwise, of course people will call you out to put your money where your mouth it.
Which they only do to a bare minimum and for some nice tax write-offs. If Microsoft wants to stay clear of these jabs, they should clean their house of the woke garbage and follow in the footsteps of Basecamp, Coinbase and others by making clear that at Microsoft there's no room for employee activism of any sort and that the company is there to make products and profits, not political propaganda.
While I agree with you, companies only pursue "woke" policies because they think it will reflect well on them and make them more money. Companies can be quite amoral and are a lot like politicians in trying to determine which way the wind of public sentiment is blowing. If "woke" starts to give negative publicity, they will drop it like a bad habit. So in the end, it is our fault that companies say and do things like that.
We must push for a socialist Constitutional direct liquid democracy.
End private property and copyrights.
End passive income.
Push for personal property and open source
Push for planned economy with ai and online sensors and use automation to automate as many jobs as fast as possible.
and shared work Aka 4hour work days or 3 days a week with same pay level and more employees. And push for automation as fast as possible
Aka a new version of socialism . And we must end capitalism .
There is the worker class aka proletariat and the owner class aka the bourgeoisie and thet are not are not are friends the rich are the enemies e that's why they steal from us oppress us.
Their wealth is our poverty
Their power is our weakness
Their control is our helplessness
Their existence is our Extinction .
We Couldn't reform monarchy or the religion that is why we had to take away all their power.
We can't reform capitalism and the bourgeoisie to serve the masses will. just like we couldn't with the others thats why we must move to socialism constitutional direct liquid democracy where we the masses / worker's have the power it's always so sad just like in the past when you saw peasants fighting for the right of the monarchy and the royalty to rule over them.
Even though they're peasants.
And now today we see workers fighting for the bourgeoisie to own and rule everything including their lives.
Even though their workers.
The monarchy promised the peasants eternal life with religion.
The bourgeoisie promised the workers that they have a chance to become rich too.
Same Lie different clothing
The problem with what you're pushing is that we've seen it doesn't work. We saw it with the stagnation and collapse of the Soviet Union. In pushing for grand ideals, we must remember human nature. Everyone acts in their own self interest, at least as they see it. In the system you propose, you remove the incentive/reward for being industrious. Under capitalism, the world has moved from manual labor for most things to possessing technology unparalleled in history. Yes, there have been bumps, bruises, and injustices along the way. Yet progress marches on. Remember that the first industrial revolution took hold first in England, and then in parts of Europe and the world that were (at least more so) free market. Among the last were places like France that at the time had strictly state controlled economies. The United States, for all its flaws, has been a veritable fountainhead of innovation. It has also been one of the most free market nations in the planet for the last 200 years. Many of our poor people look fabulously wealthy compared to many in the world and throughout history. This is no reason to get complacent and ignore the poor, but it is also a strong recommendation in favor of the system we call capitalism.
Dradzk, you took the time to reply to the homeless guy throwing orange juice at people on the street corner. Bless your heart.
rotflmao, thank you for that
As a society we do such an amazing job of buying fish for third world countries. What we suck at doing is teaching them how to fish. Example only and not wanting to start a political firestorm. We did this with Afghanistan. We did this amazing job of going in and fighting the good fight but in the end we didn't teach them one thing except how to run from your problems that really don't have solutions.
Here we go with this nonsense. They are a corporation, not a charity or a government, and they exist to be able to make money for shareholders. As long as a company isn't out there doing things deliberately to hurt society, I don't have any expectation for them to strive to end world hunger. That's what Government, many of who are elected, is for.
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