How Carlos Slim, World’s Richest Monopolist, Provokes And Exploits The Mexodus

My New VDARE.com Column: An excerpt:

How Carlos Slim, World’s Richest Monopolist, Provokes And Exploits The Mexodus

So, who is Carlos Slim, the new world's richest man? And why does he have $67.8 billion?

Slim isn't an out-of-control maniac like Tijuana mayor Jorge Hank Rhon. The only scandals clinging to Slim's name are business-political, not personal. He embodies the Mexican ruling class at its best.

Which still isn't so hot.

Although not an innovator, Slim is a competent businessman and manager. He likely would have gotten rich in even the most honest country. He's a bit like baseball slugger Barry Bonds, who was the best player of the 1990s, even though he avoided steroids through the 1998 season. But once Bonds combined his natural gifts with performance-enhancing drugs, he quickly turned into the greatest hitter in history. Similarly, mix Slim's financial skills with Mexico's crony capitalism and you get the richest man in the world.

As New York Times correspondent Alan Riding wrote of Mexico in his 1984 bestseller Distant Neighbors: A Portrait of the Mexicans, "Public life could be defined as the abuse of power to achieve wealth and the abuse of wealth to achieve power." It's worth examining how the master plays the game.

The Mexican-born son of a prosperous Lebanese Christian merchant originally named Yusef Salim Haddam, Slim made his big move in 1990 during President Carlos Salinas' corrupt privatization binge (which was enthusiastically endorsed by the elder President Bush). He bought the government's telephone monopoly. Interestingly, Slim's telephone monopoly was written into NAFTA, negotiated during Bush I, granting Slim a decade without foreign competition.

Andres Oppenheimer, a Pulitzer Prize winner of the Miami Herald, reported in his entertaining book on the Salinas debauch, Bordering on Chaos:

"Salinas offered their buyers sweet regulatory deals… he offered them … a series of behind-the-scenes government favors that would guarantee the profitability of the new owners' investments."

Oppenheimer goes on:

"Salinas authorized spectacular tariff increases without demanding corresponding improvements in the telephone service. In 1991, Telmex was allowed to increase telephone rates by 247.4 percent, while wages that year were allowed to rise by 18 percent."

Of course, such a deal came with a price tag. On February 23, 1993, President Salinas invited Slim and the other 29 richest men in Mexico to dinner, where he shook them down for campaign contributions to the ruling PRI party of 25 million American dollars each—$750 million!

Slim wasn't fazed by the demand, merely suggesting that there was a more discreet way to do this. Oppenheimer writes:

"Telecommunications magnate Slim … supported the motion, adding only that he wished the funds had been collected privately, rather than at a dinner, because publicity over the banquet could 'turn into a political scandal.' In a country where half the population was living under the poverty line, there would be immediate questions as to how these magnates —many of whom had been middle-class businesspeople until the recent privatization of state companies—could each come up with $25 million in cash for the ruling party."

The PRI has been out of power in Mexico City since 2000, but Slim has kept his monopoly. The New York Times reports that Slim "used his influence over the government to fight off attempts by competitors—including MCI and AT&T—to get a piece of the Mexican market." [Prodded by the Left, Mexico's Richest Man Talks Equity, By Ginger Thompson, June 3, 2006]

According to The Economist's 2006 survey of the Mexican economy:

"Telmex still [has] 94% of landlines, 78% of mobile services and 70% of the broadband internet market … If Mexico were the United States, Telmex would have been broken up years ago. But Mexico is Mexico. Telmex is merely one of the more egregious examples of the widespread rule of oligopoly."

Slim's accumulation of $3,000 for every family of five in Mexico has sapped the country's economic growth. Connecting more people via telephones is perhaps the surest way to grow a backward country's economy. But Slim's monopoly keeps the price high by world standards:

"Forbes reported that the average monthly phone bill for a small business in Mexico is $132, compared with $60 in the United States."

In the NY Times article noted above, Ginger Thompson pointed out that Guillermo Ortiz, head of the Bank of Mexico, estimates that due to monopolies like Slim's:

"Economic growth is one percentage point less than it could be with real competition. There are not enough jobs to keep workers from migrating to the United States and investment is being driven to countries like Brazil and China.”

One percentage point lower growth may not sound like much, but it adds up. George Mason University economist Tyler Cowen points out:

"Had America grown one percentage point less per year, between 1870 and 1990, the America of 1990 would be no richer than the Mexico of 1990."

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My published articles are archived at iSteve.com -- Steve Sailer