What’s Wrong With Wealth?
My advisors assure me that defending millionaires is unpopular and politically incorrect. Nevertheless, the issue at hand is not about defending millionaires or billionaires in a senseless class struggle. Something greater is at stake, namely, the future that we envision.
Prevailing Latin American mindsets represent terrible obstacles to the road of economic development. Therefore, we need to continue pushing for a cultural change to banish these repulsive ideas that have poisoned thinking in the region for centuries. My commitment is to do everything in my power to bring this about and if this requires publishing uncomfortable articles, then so be it.
Some people and organizations seek to promote the idea that "wealth is evil" when what is really unacceptable is poverty. For example, I recently came across an article with the headline: "Four businessmen own 9% of GDP." In this tendentious article, based on "information" from Oxfam, once again a group of successful businessmen are attacked because they "benefited from the privatization of public properties," which to begin with is nonsense.
The statement is illogical for many reasons, but mainly because the assets that were privatized in the 1990s, not only in Mexico but throughout the world, were not public properties in the economic sense of the term but rather business-type resources that generate considerably more value in the hands of the private sector. Thanks to these privatizations, many governments managed to put their finances on a healthy footing and boost their economies, and Mexico was no exception.
The study by this NGO contains a number of methodological flaws. To begin with, it does not distinguish between public properties, in the economic sense, and private assets that naturally lose value in government hands. The study also confuses market value with wealth, flows with balances, and inequality with poverty. One of its most notable shortcomings is that it does not differentiate between wealth concentration and wealth generation, the latter being the desirable direct result of business activity.
The article mentions two CEOs of mining companies, but forgets to note that the market capitalization is at a ten-year low given the worldwide drop in commodity prices.
They and other businessmen around the world have experienced a brutal decline in the profitability of their operations, at no cost to the public coffers, precisely because they are prepared to face these types of risks. If this were not the case, they would not be successful businessmen. I wonder if we can say the same thing today about companies in government hands. With the 21st century well underway, some of these companies continue to be capitalized with our taxes.
The article also specifically mentions me as a "beneficiary of privatization," but omitted to clarify that the profitability of TV Azteca has been eroded by profound changes in the media industry worldwide. It also neglects to mention that when it was in the hands of the government, TV Azteca was a company that posted huge financial losses.
If TV Azteca had continued in government hands it would have gone bankrupt many years ago. When the company was state-owned it had practically no viewer audience, few advertisers, and low revenue, not to mention CEOs that were replaced on average once a year. Today, TV Azteca has strong leadership and reacts swiftly to profound and not always favorable changes in the industry.
Another big mistake in the methodology of the study is that it confuses the market value of a company with revenue, which are very distinct concepts. While the former measures what investors are willing to pay for a company at a given time, revenue is a variable that is meaningless if costs and expenses are not subtracted to determine cash flow.
The headline of the article is also tendentious, because controlling shares of a business group is very different from "owning X" percentage of GDP. If I hold my resources in the form of shares in productive companies, does that mean that I can completely liquidate them at market value? Obviously not, because if I sell all my shares, it is very likely that the market value will collapse.
Do we want to put an end to the rich or the poor?
Two months ago I commented in a blog about this terrible tendency to see things in black and white, attacking wealth and exalting poverty, when we should be doing exactly the opposite. In this regard, I also shared this video of Margaret Thatcher.
Let’s just consider the history of the last hundred years. In the former Soviet Union, North Korea, Cuba, and more recently in Venezuela, it has been shown that attacking businessmen, far from eliminating poverty, sinks economies into terrible backwardness and underdevelopment, because when material resources are confiscated, wealthy families simply take their human capital, which is more valuable than money, to other countries. This is precisely what is occurring today in Brazil and until recently in Argentina and France. The loss of businessmen in one country is a gain for other nations.
Those who propagate anti-business ideology probably seek to lead the respective countries toward socialism, which is a form of government that destroys freedom and plunges us into poverty.
Finally, we must consider that businessmen and entrepreneurs are an extremely valuable resource because: (1) they take risks that nobody is willing -or prepared- to assume; (2) they accumulate and multiply capital to deal with these risks; (3) they creatively and innovatively resolve problems; (4) they provide products and services that the government is unable to offer in an efficient, acceptable, and timely manner; (5) they create millions of jobs; (6) pay taxes, and (7) generate wealth.
Unfortunately, Oxfam is on a global crusade against wealth. This energy and resources would be better focused on combating poverty, which is much more difficult, but is in theory its mission.
Inequality exists in every human society in which talent and other qualities are distributed or acquired in exponentially different ways. Let’s just consider a musician such as Yo-Yo Ma, a soccer player like Lionel Messi, a filmmaker such as like Steven Spielberg, or a writer such as Mario Vargas Llosa. They are all extraordinary in what they do. We have never seen musicians clamor that Yo-Yo Ma "concentrates too much talent," for that would be absurd. Naturally, the income received by this cellist corresponds to his expertise.
The problem is not inequality in and of itself, which exists in all human fields, but poverty and the inequality of opportunity, which is what is really offensive. It is clear to me that this is where we should be concentrating our efforts, in creating opportunities for everyone to live a full life, albeit with considerable or little money.
Envy is a corrosive feeling that destroys those who promote and engage in it. To base our public policies on this repugnant sentiment would only lead to failure. By the same token, attacking businessmen, far from resolving the problem of poverty, will sink us into misery.
Businessmen are an extremely scarce resource that we need to promote, not attack. I am very critical of these kinds of biased articles and NGOs that lash out at business success and wealth, because they have simply failed in their mission to eradicate poverty. Tackling extreme poverty is no small task, but a good start is to create more successful companies that create jobs and well-being for families, as opposed to public policies that destroy prosperity.