Tuesday, May 08, 2007

The Billionaire Situation

The rise of ever more billionaires causes much anguish at growing inequalities. Forbes magazine says that India has produced 14 additional billionaires in the last year, taking its total to 36. This is more than the 24 billionaires in Japan, Asia’s richest country. The Left Front will gleefully declare that globalisation has made the rich richer and the poor poorer.

I too find it depressing that a billion people round the world remain mired in poverty. But I cheer those self-made men and women, from families of modest means, who have nevertheless clawed their way to the top of the wealth ladder through sheer talent, perseverance and guts. Forbes reports that no less than 60% of the world’s billionaires are self-made. This is not a sign of the rich getting richer. It is egalitarianism by other means. This is not socialist egalitarianism which seeks equality of outcome for all. But it is a step toward liberal egalitarianism, which seeks equality of opportunity.

We are seeing an explosion of billionaires in countries that traditionally had none, and from families of modest means. No longer is wealth limited to a handful of ultra-rich white families. The talented are now overtaking old wealth, both within their own countries and in the world. Forbes lists a record 946 billionaires in 2006. The list has 178 newcomers, including 19 Russians, 14 Indians, 13 Chinese and 10 Spaniards, as well as the first billionaires from Cyprus, Oman, Romania and Serbia. Forbes says that of its listed billionaires, 17% became poorer and 32 dropped below the billion-dollar mark. The rich don’t always get richer. The new billionaires have made money in everything from media to computer software, from real estate to coffee. They have converted their excellent human capital into financial capital. That represents progress towards a world of merit. Sadly, one billion people remain poor. They lack the access to education, capital, networks and infrastructure that are vital to convert talent into riches. In too many countries, the state has failed to provide the basic framework that will help talented people rise fast. No serious attempt has been made in India to reform the face of government that the villager sees. Reform all these areas, and we should see many more billionaires.

Of the self-made people in the list, Lakshmi Mittal does not really qualify. He was born in a business family. Yet by global standards he is self-made, since his family lacked the means to build or buy large steel plants. Instead, he used his managerial talent to take over sick steel mills for a song across the world, and turn them round. Once he gained critical mass, he went for big takeovers. Computer software has yielded a spate of Indian billionaires. Azim Premji of Wipro inherited a vegetable oil business but converted it into a software major. Three middle-class founders of Infosys have become billionaires - N R Narayana Murthy, Nandan Nilekani and Senapathy Gopalakrishnan. Ditto for Shiv Nadar of HCL.

The Left Front regards stock markets as casino capitalism. In fact the stock market boom has been crucial in converting human capital into financial capital. The world’s money is flooding into India to share in the wealth created by Indian entrepreneurs. The price of real estate (and realty shares) has gone through the roof. In consequence, many builders unknown to the general public five years ago now rank among the richest in the world..

Socialists will deplore the rise of so many billionaires in the midst of widespread poverty. But amiri hatao does not lead to garibi hatao, as Indira Gandhi demonstrated in the 1970s.

I say that 14 new billionaires is not enough. I would like to see a million new billionaires, based entirely on talent. That will be egalitarianism of opportunity. Particularly, that is the only way India can get back from the international society after everything that has happened sans globilization within the country.

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