Friday, August 31, 2007

More on Mexico's Plutocracy Problem

In an earlier post on illegal immigration, I mentioned a fabulously wealthy Mexican gentleman named Carlos Slim, and his role in restraining the economic potential of the Mexican economy. I have found his name popping up repeatedly since then. The most recent report that I have encountered is "Mexico's Plutocracy Thrives on Robber-Baron Concessions" by Eduardo Porter (New York Times, August 27, 2007, p. A16).

Porter provides some interesting facts:

  • Of the 946 billionaires in the world, 10 are Mexican, and Carlos Slim Helu is one of them.

  • Carlos Slim (worth US$59 billion) recently surpassed Bill Gates (US$58 billion) as the world's richest man.

  • Mr. Slim's net worth amounts to 7% of Mexico's GDP. Bill Gates's wealth is only 0.5% of America's GDP. John D. Rockefeller's (1839-1937) wealth was worth 1.5% of his country's GDP (I'm guessing that he means around 1890).
This son of Lebanese immigrants who clearly has remarkable abilities that most of the rest of us do not have -- and he is entitled to reap the fair fruit of that -- nonetheless did not get to where he is today without significant and morally questionable government help.
In 1990, the government of President Carlos Salinas de Gortari sold his friend Mr. Slim the Mexican National phone company, Telmex, along with a de facto commitment to maintain its monopoly for years. Then it awarded Telmex the only nationwide cellphone license.

When competitors were eventually allowed in, Telmex kept them at bay with some rather creative gambits, like getting a judge to issue an arrest warrant for the top lawyer of a competitor. Today, it still has a 90 percent share of Mexico's landline phone service and controls almost three-quarters of thew cellphone market.

Porter reports that 20% of Mexicans have land lines, less than half of these have cellphones, and only 9% of Mexican households have Internet access. The corrected front page Wall Street Journal Luhnow article on Slim cites the World Bank as putting that land line figure at about 50%.
Mr. Slim's style of wealth accumulation is not rare in modern Mexico. From television to tortillas, vast swaths of the Mexican economy are controlled by monopolies or oligarchies. Many of Mexico's billionaires were created by the government during the privatization of the state-owned companies in the 1990s.

But though the figures may or may not be off, it is certainly true that if men like Carlos Slim would loosen their monopolistic control of their country's economy, they would have more potential customers with a lot more money. As a consequence, they (along with everyone else) would be much richer -- or "prosperous" is perhaps a gentler word.

Porter's leftist sentiments come through in his attempt to sound the alarm here in the United States against big business and wealth accumulation. We are "fast approaching Mexico's levels of inequality." He cites "[t]he concentration of 44 percent of the nation's income among the top 10 percent of taxpayers...." Aside from his seeming unreliability at reporting figures, the difference between our rich and Mexico's is that, in our relatively free economy (it could benefit from being freer), that wealthy 10% generates productive capacity and wealth which spreads throughout the population.


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