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Warren Buffet Swats the Invisible Hand

Warren Buffett has been in the news twice recently: yesterday for having announced he’s giving $31 billion to Bill Gates’s foundation, and several weeks ago for buying an Israeli tool company.

The Israeli stock market surged on the news that the Oracle of Omaha had bought one of their own companies — a welcome vote of confidence in a remarkable but besieged economy.

The $31 billion gift will make a lot more noise, and for a lot longer. Surely everyone in the non-profit world is wondering how this will reshape things. Politicians too.

But I was particularly captured by one sentence that Buffett said last night on The Charlie Rose Show. He was explaining why he wanted to give so much money to a foundation that mainly tries to alleviate poverty. “A market system has not worked in terms of poor people,” Buffett said.

Coming from Buffett, this statement isn’t much of a shock. But it certainly is an indictment — of the free-market system that has made so many people like Buffett very, very rich (though not as rich as him), of the system that so many economists and businesspeople and politicians and journalists believe in on so many dimensions, including its ability to help poor people stop being poor. Note that Buffett didn’t say that the government hasn’t worked for poor people (although I am guessing he wouldn’t disagree with that statement either). It was the market system directly, even with Adam Smith’s wonderful invisible hand, which is meant to correct, to police, occasionally to lift someone up.

I am wondering how conservative politicians and economists and journalists in particular will repond, if at all, to Buffett’s comment.