Editor's Note: Carlos Slim, the Mexican son of Arab immigrants, surpassed Bill Gates in becoming the world's richest man. The story of how a Mexican is the wealthiest man on Earth is the story of how NAFTA's (North American Free Trade Agreement) limitations distort income distribution in both Mexico and the United States, says NAM contributor Louis Nevaer.
Mexico City – Which country could give the son of a poor immigrant from an impoverished faraway land so many opportunities as to make him the world's richest man? Mexico.
It is NAFTA's most ironic of unintended consequences that Carlos Slim, the Mexican son of Arab immigrants, surpassed this month Bill Gates to become the world's richest man.
When the Dow Jones closed above the 14,000 mark for the first time on July 19, 2007 Slim's net worth was estimated to have exceeded $69.3 billion. By comparison, according to Forbes Magazine, Bill Gates is worth $59 billion and Warren Buffet a mere $52 billion. (Earlier this spring Forbes Magazine reported that Slim had replaced Buffet as the second-richest man, and believed he would surpass Gates within "a year." This year's bull market has given Slim a 28 percent surge in price of the stocks he owns.)
The story of how a Mexican is the wealthiest man on Earth is the story of how NAFTA's limitations distort income distribution in both Mexico and the United States. In the early 1990s, when negotiations for NAFTA were underway, the United States and Mexico decided to exclude certain things for negotiation. Presidents Bill Clinton and Carlos Salinas both knew that their nation's congresses would oppose the treaty if certain areas were included in the trade deal. Clinton said, as the first President Bush had before him, that ending subsidies to American farmers was impossible to entertain. Salinas said that opening up Mexico's oil and electrical industries to American companies was not in the cards. Both agreed that increasing taxes on their nations' wealthiest, and enacting proactive regulation to level the playing field, would result in corporate lobbyists on both sides of the border opposing the treaty.
Almost a decade and a half into NAFTA the result is that unlike the continental integration meticulously underway in Europe, market imperfections are producing stunning market failures in both the United States and Mexico:
• Without an end to American subsidies to its farmers, below-market products have flooded Mexico, bankrupting millions of rural farmers, and sending several million undocumented workers into the United States, exacerbating an immigration crisis that is infuriating the American electorate;
• Without the restructuring of Mexico's oil and electrical industries, current Mexican President Felipe Calderon is confronting a looming energy crisis; only the sharp rise in the price of oil has buffeted Mexico's antiquated oil and electrical industries, both of which remain government-owned, and are at the limits of their production capacities,
• Without higher taxes on the most privileged, and through the systematic failure to create level playing fields through regulation – the repeal of the Glass-Steagall Act in the United States has resulted in the emergence of oligopolies the size of which the robber barons of the Gilded Age could not have dreamed, and the failure of the Mexican Congress to pass market reforms continues to stifle Mexican entrepreneurship – we are witnessing the concentration of wealth unprecedented in history.
These limitations created the conditions for Carlos Slim – and Bill Gates and Warren Buffet – to amass fortunes of such size they are obscene. Gates and Buffet, for instance, have pledged to give away most of their fortunes, since their sheer magnitude no one person can manage.
Carlos Slim struggles about what to do with so much money. His wealth derives primarily from telecommunications, Telefonos de Mexico, or Telmex, the Mexican phone company, and AmÃ©rica MÃ³vil, Latin America's leading cellular phone provider and he now confronts the stunning reality that he is worth more than the poorest 45 million of his compatriots combined.
To be sure, there is nothing shameful, or wrong, in how Slim acquired his wealth. He has not staged a coup, launched a war, profited through fraud or deception upon consumers around the world. He has played by the rules, acquiring Telmex when it was privatized, and he has pioneered providing the public with cell phones to chat away endlessly from Alaska to Argentina. He has reinvested his profits wisely, acquiring business interests in everything from construction companies to restaurant chains. Not bad for the son of a poor immigrant who opened a dry goods store, La Estrella del Oriente (Star of the Orient) in 1911.
One can criticize the political conditions that continue to give him an unfair competitive advantage – many telephone companies complain that Telmex is so big it should be broken up – but the root of the problem is the systemic failure of the United
States and Mexico to work closer together. President Bush's failure to reform the agricultural subsidies that give American farmers an unfair advantage, or to lobby successfully for a more sensible immigration policy, is mirrored by President Calderon's failure to end the oligopolies that characterize and stifle Mexican entrepreneurship. Neither Bush nor Calderon have shown much interest in a more equitable distribution of their nations' wealth, unlike the European Union, where state policy is to provide every European with a decent, middle-class life.
As the world's wealth is concentrated in fewer and fewer hands, the social contract is shifting under our feet.
Isn't there something odd when Bill Gates holds a news conference to announce he will personally end malaria? Wherefore government?
Carlos Slim has remained silent, content to have underwritten the revitalization of Mexico City's historic neighborhood of Alameda, a short stroll from the Presidential Palace. He is, however, aware that Mexicans are now looking to him to announce the divestment of his fortune through philanthropies, as Gates and Buffet have done.
"As he has said many times himself, he is not in any competition," Arturo Elias Ayub, Slim's spokesman, said when asked to comment. Perhaps the greater irony that it is precisely a lack of competition that got Mr. Slim to where he is escapes those around him.
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