Bill Gates, chairman of Microsoft, recently committed himself to donating $750 million to the Global Alliance for Vaccines and Immunisation charity. On the World Economic Forum in Davos, Gates, together with rock star Bono and Tony Blair, stated that “2005 must be a turning point for poverty in Africa”. With these messianic words, the richest man in the world, with a net worth of $46.5 billion, is more and more presenting himself as the saviour of the world.

A lot has been written about the generosity of Bill Gates and his foundation. Generally Gates is presented as the greatest benefactor on earth. The Times wrote:

“Today’s donation pushes Bill Gates into an even more exalted position as the world’s biggest philanthropist.

The Gates foundation, which is worth $30 billion, (£17 billion), is now the largest charity to have been created by a single benefactor or private company by a factor of three, following a previous $3 billion gift from its founder last July. Mr Gates has stated that he intends to give away 90 per cent of his fortune, which is currently valued at about $50 billion.

The causes to which he has channelled his wealth – global health inequalities, education programmes, public libraries and projects around his home town of Seattle – have changed dramatically because of his contributions.” (January 31, 2005)

Indeed, the Gates foundation is the richest charity in the world. Its annual income is that of a small country. Because of this massive wealth, a lot of people have undoubtedly been helped by the donations of Bill Gates and his foundation. However, it would be naïve to consider Bill Gates a benefactor to the oppressed of the world. True, for a couple of years he has been giving away significant amounts of his personal fortune to the poorest in the world, more than any other businessman has ever done. However, we think that this does not make any real fundamental difference.

First, we are tempted to ask: why is it that Bill Gates is the wealthiest man on the planet? Is there not an extremely big contrast between the personal income of this billionaire and the poor conditions more than a billion people have to cope with? Let us start with the first question.
The Microsoft monopoly

This is not the place to go into the exact details of Bill Gates’ rise to fame and riches. Suffice to say that, contrary to the popular myth, his story is not one of rags to riches. Gates’ grandfather was a wealthy banker, James Willard Maxwell, who established a million-dollar trust fund for his grandson on which he could always rely. He was also the son of a wealthy attorney in Seattle and thus, as an upper middle class young man, he had the necessary funds to found Microsoft in the first place.

Together with Paul Allen, Bill Gates founded Micro-Soft in 1975, later called Microsoft Corporation. After having marketed its own Microsoft version of BASIC, a programming language, the company took off. As early as 1976, Gates wrote an “open letter to hobbyists”, which claimed that a commercial market existed for computer software. This may seem obvious these days, but it is important to note that software at that time was hardly ever sold. Since all software was based on the software and ideas of others, it was considered impossible to own it. Software was developed by hobbyists and was passed around and shared in the community. The capitalist logic had its last laugh, however, and the commercialisation of software paid off.

The breakthrough for Microsoft came when IBM decided to enter the personal computer market in the late 1970s. IBM needed two things: an operating system to run it and a programming language. The company contacted Bill Gates about BASIC and at the same time enquired about an operating system. They signed an important contract in 1980, despite the fact that Gates had no operating system at all. Hence, Microsoft simply licensed a clone of CP/M, the de facto standard at the time. This piece of software, which Microsoft had not written themselves, was significantly renamed QDOS (Quick and Dirty Operating System). As Bill Gates and his company had hardly made any investment costs (this was done by other companies like Digital Research, Seattle Computers and IBM) and had no production costs (IBM funded the production), Microsoft was able to sell its product below the market price and gradually drive competitors out of business. The only thing left to do was to purchase all rights for QDOS for just $50,000 and rename it MS-DOS. Now they had a product in which they had played no part in its innovation but which was extremely profitable. And that is what business is all about after all.

This, in a nutshell, is how Microsoft initially made its millions. The company accumulated ever more capital and with its growing resources it could squeeze competitors as WordPerfect and Lotus 1-2-3 in the late 1980s. Bill Gates was even able to rival that other giant, IBM. IBM will have regretted the signing of their contract with Bill Gates, which in a sense was their death warrant as monopolists in the computer industry themselves. The millions of profit became billions in the nineties, and Microsoft gained a monopoly position. At the height of the dot.com boom in 1999, Bill Gates’ wealth was estimated at a mere $90 billion (Forbes figure). They became (and still are) one of the world’s most profitable enterprises and could flood the market with their products.
Predatory tactics

Despite all marketing campaigns, Microsoft did not grow through “innovation” or by offering the best product available. For a monopolist it is much cheaper to wait for a small company to come up with a good product and then simply buy them. A company called WebTV brought the Internet to television sets. Fearing a market shift from personal computers to digital TVs, Microsoft bought WebTV in 1997 for $425 million, thus removing a potential competitor. Some months later Microsoft saw the threat of free email services, in particular Hotmail, so they bought it.

Another point in case were the infamous “browser wars” between Microsoft and its then competitor Netscape. Even today, despite numerous security problems with Microsoft’s browser program Internet Explorer (viruses, spyware, exploits), many people falsely assume Internet Explorer is the Internet, not knowing that there are numerous browser alternatives available to surf the World Wide Web. However, the overwhelming dominance of Microsoft’s Internet Explorer is only a fairly recent phenomenon. In the early nineties another company, Netscape, held around 90% market share and was the de facto standard browser. Microsoft saw Netscape’s success as a threat to its dominant Windows operating system and in 1995 launched an aggressive campaign to establish control over the browser market. They licensed Mosaic, another browser at the time, as the basis of Internet Explorer 1.0.

As a monopoly with lots of cash, they had two strong advantages in the browser wars. One was simply a matter of resources: Netscape may have had nearly 90% market share, but as a relatively small company it lacked financial backing. Another significant advantage was that Microsoft Windows had a monopoly in the operating system marketplace that was used to push Internet Explorer to a dominant position. The trick was to bundle Internet Explorer with every copy of Windows. Hence, even though its browser was technologically inferior, Microsoft was able to enlarge its market share with some sly marketing tactics and a great deal of cash. In the end Netscape was pushed out of the market. Internet Explorer became the main browser and despite being ridden with all kinds of security issues, it is still the most widely used browser to this day because of Microsoft’s dominance. Such is the power of a monopoly: once it has taken control of the market it can afford not to develop its product anymore. That is indeed the case with Microsoft’s Internet Explorer and to a lesser extent with its Windows operating system in general: literally millions of dollars and working hours are lost because of the constant need for updating, installing patches, removing viruses and spyware. Only very recently, since Netscape’s open source successor, Mozilla, has been putting up some competition has Microsoft been forced to develop its browser further.

In other words, Microsoft systematically pumps money into a product or technology, in many cases even buys off its competitors, only to accumulate its capital, generate more profits and to strengthen its monopoly position. It is more than ever a financial behemoth which, when it fails to create viable competitive software, readily uses its financial resources to buy out starting companies and key technology to maintain its iron grip on the industry. They have acquired companies involved in 3D animation, Internet development tools, speech recognition, Internet payment security, business news services, etc.

In doing so, Microsoft has helped assure that companies and even governments that might have supported a broad range of different systems and formats, including Microsoft competitors, stick to Microsoft’s closed, proprietary formats like Windows Media Audio for audio files and Microsoft Word documents for text files. This is called a “vendor lock-in” – making people dependent on a vendor without being able to move to another one without significant switching costs. Since the closed format of these files is not documented or publicly available, in practice this means that other software than Microsoft’s Windows Media Player or Microsoft Word can only try to guess what it is supposed to do with it unless they bought an expensive license for playing or reading the files. That is also the reason why Microsoft is proud to “donate” its software to many schools, which do not have the resources to buy any software, thus entrapping future generations into its software monopoly. We will elaborate on the matter of closed versus open standards in a future article on free software and GNU/Linux.

Thus, we see that Bill Gates and his fellow managers know how to do business. They know that a technologically superior product is rarely the same as the winning product. Time and again its predatory strategy has been to enter a market fast with an inferior product to establish a foothold, create a closed standard, tie people to their system and grab market shares. That is the path to follow in order to make huge profits.
Big business and charity

Bill Gates has accumulated a huge personal fortune over the years. After all, that is what capitalism is all about: making profits in a dog-eat-dog economic system that rewards the most aggressive players in the game. In that sense, what Bill Gates is doing is nothing new. He is merely continuing the business tactics of his predecessors. Some of the most powerful men in American history approached business in exactly the same ruthless manner. Men like JP Morgan, John D. Rockefeller, Cornelius Vanderbilt, Andrew Carnegie were all monopolists. They are now respected historical figures whose families are amongst the richest in the world. Interestingly, all of these extremely wealthy industrialists, each of whom bought out their competitors, gave a part of their fortunes to all kinds of charities. Is there not a contradiction here?

Consider the case of the infamous JD Rockefeller. In the course of the years, his Rockefeller & Company began to make ever-growing profits. Step by step, Standard Oil (its new name) gained control of oil production in America and in effect became the first great American trust. Whether Rockefeller felt guilty because of the accumulation of his capital does not really matter here. The fact is that by the turn of the century he was the most hated man in America. Probably that will have triggered his image change – Rockefeller was now more and more presented as the philanthropic entrepreneur as he started giving millions to charity. Like Bill Gates he could afford to give away quite huge sums of money. Just the same, it was no coincidence that he made this move after he was convicted several times in anti-trust cases. One century after Rockefeller, Bill Gates can simply afford to give away record donations because of the record profits he has made over the years.
Health care and charity

Leaving aside the possible motives for giving away significant amounts of your personal fortune, we should ask why it is precisely billionaires like Bill Gates who should provide essential vaccines to Africa in the first place. There is something seriously wrong when providing vaccines and other elementary health care falls on the shoulders of “entrepreneurs” who got rich by following the capitalist logic – profits first, by all means necessary! The irony is that while millions of people in the so-called Third World are dying from starvation and easily curable diseases, drugs companies operating in the area make billions of profits while hardly investing in desperately needed drugs. Just like Microsoft, pharmaceutical companies are run on the basis of profit. They are simply not interested in developing treatments to cure diseases since poor people do not have the purchasing power to buy the necessary medicines. Hence research programmes of the pharmaceutical giants are mainly devoted to products which treat typically “Western” problems like baldness, obesity and impotence.

As in the software industry and industry in general, a process of concentration has taken place over the years. One pharmaceutical giant after another fused with another, only to accumulate ever more capital held in the hands of a few individuals. Several mergers have created massive companies like Pfizer Inc., with an annual GDP greater than many “Third World” countries. Cheaper generic alternatives of expensive drugs are continually blocked by a vicious pharmaceutical lobby that does not care about the health of people they cannot make a profit from. Combine this with the rotten regimes in the ex-colonial world who are eating out of the hands of their imperialist masters in the West (see our article One billion children in extreme poverty: a holocaust on a world-scale), and it becomes clear that Bill Gates’ donations to “good causes” are merely a patchwork of a system that cannot provide universal health care and which condemns millions to death from the moment they are born.
The accumulation of capital

Bill Gates in piling up his huge fortune, behaves like all other capitalists. And although he is not personally responsible for all the misery in the world, just as George W. Bush is not the Great Satan tormenting the world, he is part of the class that oppresses the workers of the world. His huge profits can only be made by exploiting other people. The fact that Gates may even have alleviated some misery in some concrete cases in Africa (in reality only a palliative gesture) misses the point. The crux of the matter is that no matter how much money is thrown into charities, the fundamental problems will never be solved on the basis of the present economic system, a system based on production for profit not for need. Gates is only one element in this global capitalism as already described by Marx and Engels in the Communist Manifesto more than 150 years ago. Since then the face of capitalism has obviously changed, as described in Lenin’s very relevant book Imperialism, the Highest Stage of Capitalism. However, the fundamental laws governing the profit system remain valid and it is still true that you cannot separate the billions of profit being made by companies from the appalling conditions the majority of the people on this planet have to live in. The two opposites are irrefutably intertwined. The accumulation of unseen amounts of wealth is accompanied by the appalling poverty of billions of people.

At the beginning of the 21st century, we more than ever live in an age of monopoly capitalism. So-called free trade has never really existed in the last hundred years. Despite all the talk about free trade and liberalisation, there has always been a ferocious struggle for markets between all the main capitalist nations on the stage of world politics (a process called imperialism), and this is equally true for companies and their competitors. Marx and Engels explained in Capital that under capitalism free competition always gives rise to the concentration of production, which, in turn, at a certain stage of development, leads to monopoly. Contrary to the early forms of capitalism, the capitalism of the last hundred years has always had a tendency to stifle free competition. This is what Lenin had to say on the subject:

“Today, monopoly has become a fact. The economists are writing mountains of books in which they describe the diverse manifestations of monopoly, and continue to declare in chorus that “Marxism is refuted.” But facts are stubborn things, as the English proverb says, and they have to be reckoned with, whether we like it or not. The facts show that differences between capitalist countries, e.g., in the matter of protection or free trade, only give rise to insignificant variations in the form of monopolies or in the moment of their appearance; and that the rise of monopolies, as the result of the concentration of production, is a general and fundamental law of the present stage of development of capitalism.” (Lenin, Imperialism, the Highest Stage of Capitalism)

One could object with some reason that Microsoft is not a real monopoly since for instance on the operating system front they do have some competition for instance from Apple Macintosh. That is true, but then monopolies hardly ever have an absolute monopolistic position. It is estimated that Apple and the various Linux operating systems combined each have about 3 percent market share. That still leaves more than 90 percent of the market in Microsoft’s hands. What counts is the general dominance and behaviour on the market. Microsoft has aggressively used its market share to enter into new markets like Internet technology and video games, it has integrated its web browser into the operating system and has signed deals with hardware manufacturers to bundle Microsoft products instead of those of competitors. Again, there is nothing fundamentally new here. As Lenin said:

“For instance, in America, a certain Owens invented a machine which revolutionized the manufacture of bottles. The German bottle-manufacturing cartel purchased Owens’ patent, but pigeonholed it, refrained from utilizing it. Certainly, monopoly under capitalism can never completely, and for a very long period of time, eliminate competition in the world market (and this, by the by, is one of the reasons why the theory of ultra-imperialism is so absurd). Certainly, the possibility of reducing cost of production and increasing profits by introducing technical improvements operates in the direction of change. But the tendency to stagnation and decay, which is characteristic of monopoly, continues to operate, and in certain branches of industry, in certain countries, for certain periods of time, it gains the upper hand.” (Ibid.)

The future of computer technology

Some people see a solution to Microsoft’s monopoly in breaking it up into smaller companies, with the idea of keeping the monopoly in check through other competitors. This is of course also what the present competitors want, themselves being companies looking for a profit. Companies like Apple would conduct themselves in the same, if not more ruthless manner if they were in this same powerful position. Moreover, in the context of a global, interlinked economic system, splitting up a company in order to preserve a niche market for Microsoft’s competitors would in effect be an attempt to turn back the clock – a reactionary measure. As a side-note, John D. Rockefeller only got wealthier after the government busted up his Standard Oil company in 1911.

More importantly, it is a fact that despite the dominance of Microsoft over some markets it is involved in, their dominance leads to a de facto standardisation. In itself standardisation is a very positive thing. When buying a new computer, it makes sense to have all the necessary software available without any further costs. In that sense, bundling software into the operating system is a positive development. The problem is that it is a private company that decides which software will be bundled, i.e. their own. As we have seen, this software usually is of an inferior quality compared to other software made by other companies or free software foundations, thus creating the infamous vendor lock-in: people become dependent on the products of one particular company.

Hence, the control over a vital technology upon which millions of people and a significant part of the world economy depend is now in the hands of a handful of people. Critical decisions, which affect products essential for the working of offices, schools and hospitals, are made by private individuals who have no unaccountability at all. It requires no imagination to see what could be done with the extraordinary dividends paid to Microsoft stockholders.

The current state of affairs in the technological world should make clear that there is not much point in being opposed to Microsoft in any abstract way. What is needed is an opposition that goes further than scratching the surface of the problem. Microsoft, in effect, has also made quite some useful software over the years (though usually the result of buying existing software) and has some very capable programmers on board. All these resources, however, are not being put to use for the public good. People are actually buying an expensive license of their software so they do not really own it. In order to remove the existing fetter on technological development, the source code of Microsoft’s and other private companies’ software should be made publicly available so that all software can be freely distributed for the benefit of the whole of mankind. Why should the slogan of “nationalisation under workers’ control” not apply to Microsoft and all the other big software companies?

What is needed is a transfer of all available computer technology to a form of social ownership, linked with a democratic world socialist government that would finally put all available resources and technology to the public’s use. That, in turn, requires a socialist transformation of society that would abolish the profit system and establish a worldwide democratically controlled economic system where production is based on the needs of mankind.

March 17, 2005

This is the first article in a series on computer technology. We intend to write more about free software, GNU/Linux, copyrights, patents, file sharing and its relationship to capitalism and a future socialist society. The author is interested in your views, comments or criticisms. Please write to maarten ([at]) marxist.com.