Khosla, Sun Co-Founder, Uses Capitalism to Help Poor - NYTimes.com.
MUMBAI, India — Vinod Khosla, the billionaire venture capitalist and co-founder of Sun Microsystems, was already among the world’s richest men when he invested a few years ago in SKS Microfinance, a lender to poor women in India.
But the roaring success of SKS’s recent initial public stock offering in Mumbai has made him richer by about $117 million — money he says he plans to plow back into other ventures that aim to fight poverty while also trying to turn a profit.
Now let's do a thought exercise. Let's say that the microcredit projects are extremely successful, leading to abundant economic activity for thousands, hundreds of thousands, even millions, of women and their families.
Among the effects of that increase in economic activity will be an increase in the value of land in the places where that activity is taking place. That means that those who own land will be able to charge those who do not own land more for access to it. If the recipients of microcredit are already landholders, they will benefit as rents rise in their community. If the recipients of microcredit are not yet landholders, they will find themselves paying more rent to those who are. The tenants become sharecroppers, sharing their product with a landholder who provided no value added. Landed gentry.
Q. So how do we make microcredit's benefits accrue to the community as a whole, rather than simply to the landholders?
A. We encourage nations and communities to place more -- even all -- of their revenue collection onto the value of land and of natural resources, rather than permitting that value to accrue to those who claim title to the best land
Socialize that value -- treat it as the common treasure of the entire local community, rather than as the private windfall-collector of any individual or group. Collect that rent, rather than letting it accrue to the benefit of an individual. Use it to build schools, to dig wells, to clean water, to fund public services.
That is how to help whole communities. That is how we can end poverty.
Microcredit alone will make winners out of a fortunate few. But it won't improve life for the community, or create opportunities for the next generation. Collecting the increase in land value that the increase in economic activity creates WILL.
Does this take anything that the borrower created, either by their efforts or their risk-taking? No. They get to keep that.
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