Since Forbes first published its annual “
World’s Billionaires” list in 1987, the idea of becoming insanely rich has become a big part of our culture, and is today a form of entertainment that the populace waits for every year to see who has moved up or down a spot on the forever growing list. Since it was first published over a quarter century ago, the amount of billionaires has grown from 140 in 1987 to 1,645 today. This is quite a leap, and is one of the many facts revealing the growing inequality.
Tech billionaires like Bill Gates, Mark Zuckerberg, and Larry Page tend to stick out because of their rapid rise to billionaire status, though many of the billionaires either inherited a great deal of their wealth or became billionaires after many years of work. The “overnight” billionaires, however, tend to get most of the attention. This is understandable, the possibility of becoming super-wealthy overnight from inventing some kind of software or website is quite intriguing. Plus, people would much rather hear about the “self made” billionaires like Bill Gates than the inherited billionaires like Christy Walton.
But overnight billionaires are not unique to silicon valley entrepreneurs. Around the world, since the billionaires list was first published, many individuals have made their fortunes through national privatization, a popular neoliberal practice that first became popular in 1970’s Latin America. Carlos Slim Helu, for example, the third wealthiest man in the world, worth $70.8 billion, has the privatization of telecommunication company Telmex to thank for his fortune.
Slim had already been a wealthy man before Telmex. In the early eighties, he made intelligent investments in devalued companies that had been depressed because of the peso crisis and drop in oil. But the privatization of Telmex made him the third wealthiest man he is today, and the deal was the epitome of crony capitalism.
Telmex was formed in 1947 by merging two telephone company operations in Mexico, L.M. Ericsson and International Telegraph Corporation, which gave Telmex a monopoly on long distance calling. In 1972, the Mexican government purchased 51 percent of Telmex, taking majority control and operating the company as a public-utility. In 1989, newly elected Mexican President Carlos Salinas announced plans on privatizing Telmex, for various reasons, such as improving efficiency and cutting Mexico’s debt. In 1990, Carlos Slim’s company, Grupo Carso, along with two other companies (French and American) formed a consortium to buy a twenty percent share in Telmex, with Slim gaining the majority ten percent along with control of the company. Over the next two decades, Slim gained a strong majority ownership of Telmex, and his wealth skyrocketed.
Slim brought his political clout to this deal, and arranged to pay for Telmex out of company profits and also received a seven year anti-trust exemption. This was highly beneficial to Slim and other investors, but it has not been quite as good for the Mexican people. Mexicans pay some of the highest telecommunication rates in the world, and are overcharged about $13.4 billion per year, according to an Organization for Cooperation and Development report. So while Slim has traded places with Bill Gates and Warren Buffet over the years, the Mexican people have been overpaying for some of the doggiest service around.
Many other privatization billionaires famously came out of Russia around the same time, after the fall of the Soviet Union. After Boris Yeltsin abolished the constitution and dissolved the Russian parliament (authoritarian behavior that influenced Putin?), he had to use military force against the Russian Parliament, and attacked the White House (Parliament building), killing five hundred people. The military assault was supported by American government.
After Yeltsin gained complete power, his government began privatizing national industries, and many of the billionaires you see on the Forbes list today gained their wealth through some of the most blatantly corrupt schemes ever cooked up. National industries were sold off to a few lucky Russian (The Oligarchs) for prices that were fractions of their worth. Oil company Yukos was sold $309 million, and about a decade later was earning $3 billion in annual revenue. A fifty-one percent share of oil company Sidanko sold for $130 million, and two years later was valued at $2.8 billion. Nickel company Norilsk Nickel was sold for $170 million and today has annual profits over over $2 billion.
What made these sales even more painfully corrupt was that many of them were likely bought with public money. Vladimir Potanin, currently the highest ranked Russian on the Forbes list, greatly benefited when Russian ministers transferred sums of public money into private banks, one being his, Uneximbank. These private banks then provided the auctioning service for mine fields and oil companies, and unsurprisingly bought them themselves.
“Privatization billionaires” remind us how many of the worlds wealthiest people made their fortunes through corrupt and unethical practices. In countries like Russia, Mexico, and other nations, small minorities became super wealthy while citizens suffered. Reports have shown that the rapid privatization in Russia increased death rates and poverty.
No wonder billionaires tend to be so pro-privatization. Even the famously likable wealthiest-man-on-the-planet, Bill Gates, tends to support privatization in areas like education. Other top ten billionaires, like the Koch brothers, are famous for their libertarian ideology, and would have the government drowned in a bathtub and everything privatized if they could. The famous Walton family (Walmart), number eight and nine on the billionaire list, also push for privatization in areas like education.
Privatization is a tricky business, and as we have seen, tends to create great wealth for a few lucky individuals, without much improving the lives of regular people. Compared to other developed nations, America is very much a privatized country. The most famous example being healthcare, and we all know how good that has done. Even prisons have become increasingly privatized in America, which currently has the highest incarceration rate in the world. Billionaires have a good reason to support privatization, but citizens do not. Schools, prisons, military, healthcare, transportation, etc; these institutions should not be run to make a profit. They should be run for the public’s benefit, and privatizing them will do nothing but add some more names to the Forbes list, which is already rather long.