The State must intervene
Carlos Slim is awarded the George Washington University President’s Medal
His interview in PODER magazine
By Dolia Estévez, Washington, D.C.
Photos by Eddie Arrossi
After decades of proclaiming the non-intervention of the State in the economy, the US government is now in contradictory terms with its own gospel. Paradoxically, Carlos Slim, who benefited widely from the privatization of State owned companies during the nineties, most particularly the telecommunications conglomerate Telmex (Teléfonos de México), considers as “necessary” the participation of Obama’s administration in big corporations “so as to avoid, in the context of deep economic recession, the destruction of even more institutions.”
The world’s third richest man, according to Forbes magazine, visited Washington DC on June 30th to receive the George Washington University (GWU) President’s Medal where he was highly praised for his business and humanitarian leadership. This is an unprecedented gesture if compared to Mexico where his image has been less benign.
“Carlos Slim has matched his extraordinary success in business with a passionate commitment to improve the standard of living of future societies. In the past, GWU medal has been awarded to successful businessmen, renowned philanthropists and humanitarian leaders. Today, “the Medal is awarded to a man that fulfills all these virtues and more,” said GWU President Steven Knapp to a crowded ceremony that included the Mexican Ambassador, Arturo Sarukhan.
Knapp enumerated the companies that comprise Slim’s empire including those acting in the humanitarian field, most notably the Telmex Foundation “created to help eradicate extreme poverty” and the Carso Institute for Health, which focuses on the fight against malnutrition. “Carlos Slim is what philosopher Antonio Caso has described as the ‘ideal human being: ethical, willful and spiritual’ ”.
Guillermo Gutiérrez, professor and Head of the Lung Health Division at GWU Hospital and Carlos Slim`s personal physician, recalled that twelve years ago the owner of America Mobile was critically ill with almost no chance of recovery. However, he survived thanks to his great love of life and his combative spirit. “We are in the presence of a giant, as were the Forbes, the Rockefellers or the Carnegies. I cannot think of anybody else who deserves this Medal more than Carlos Slim. Other recipients include former Russian President Mikhail Gorbatchev, former Primer Minister of Israel and Nobel Peace laureate Shimon Peres as well as former President of the Czech Republic, Vaclav Havel.
The Mexican magnate appeared grateful after receiving the distinction from such a renowned university, and affirmed that “the importance of George Washington University resides not only on its academic excellence, but on its influential position in the heart of the United States, in many ways, the heart of the world”. Founded in 1821, GWU is located only three blocks from the White House and is considered one of the most exclusive academic centers in the US.
While his success in business is undisputable, the philanthropic activities of Slim in Mexico –country where altruism is not a part of corporate culture- cannot be compared to the generosity of those iconic families mentioned by Gutierrez, or to Bill Gates, the world’s richest man that dedicates 100% of his time to humanitarian purposes through the Melinda and Bill Gates Foundation, the number one philanthropic foundation in the world.
At the end of the ceremony and in response to a question stated by PODER, Slim spoke about the economic recession in the US, its impact in Mexico, the rescue of American corporations and his future plans as a philanthropist.
Have you made donations to GWU or do you intend to?
Basically all we do in the education sector is concentrated in Mexico, where we support around 15,000 scholars per year. As Dr. Gutiérrez explained, I have been visiting GWU on a regular basis during the past years to work with the Faculty of Medicine. For the time being I am a client of Dr. Gutiérrez, who has also become my friend, but with GWU we have not yet discussed the issues you mention.
Mexico is suffering from the deep recession in the US. However, authorities have not yet agreed on when the economy might recover or the slowdown be reverted. In your opinion, when will the economy grow and create new jobs?
We all need a healthier and stronger United States. It is very difficult to predict when the recession will end, but what we do know is that there will be no growth. We must therefore strive to create jobs even in the context of zero growth. Growth without job creation is possible, particularly in the short term, and job creation with growth is possible too. This is why we are trying to foster job creation in a no growth context with the anti cyclical measures announced by President Felipe Calderón earlier this year. I am incapable of foreseeing how long this will last, but this will necessarily be related to the duration of the recessive period in the US and the rest of the world.
Is it risky for the American economy to try to come out of recession with such a hefty fiscal deficit?
Yes. I believe it is important that the world be extremely careful about acquiring big fiscal deficits that may have consequences in the future. There are fiscal deficits that can just be considered as an accounting issue, but there are others that are enshrined in the economic structure. The first ones are not important, because we can deal with them for one or two years and then recover in three or four more years.
For example, we witness this year an apparent expenditure to support credit institutions, but as soon as markets recover, governments will get back their money. They will even make profit on their initial investment. For example, if we increase a company’s capital by $100 dollars with convertible shares at 8 or 10%, against a 3% bond of the Treasury, at the end the US government will have a 5% profit and therefore attain a fiscal surplus.
In other cases, many activities can be fostered through public-private partnerships, without necessarily using public expenditure. This is the case of some infrastructure projects. Another example is that of credit institutions that have frozen their assets. These can be increased through public and private capitals. We have seen how some banks and financial institutions have succeeded in finding funds in the capital markets and prepay the US government.
During the eighties and nineties US policy consisted in putting pressure on Latin American governments to avoid the State intervention in the economy and privatize companies. Today we are witnessing the contrary. The US government is intervening in the economy buying assets of big private corporations in the financial and non- financial sector. Don’t you find this ironic?
Not at all. I believe the State should regulate the economy and, in such a negative context as the one we are living in, it must also participate. Moreover, it is obvious that the US government is acting to restructure companies and financial institutions, but on the contrary, its intention is not to operate them or keep them.
Is the government taking risks?
The government is doing business. I insist, instead of having a fiscal deficit the government will make money. Why? Firstly, because it will make profit on his investment, and secondly, because when the government sells these companies, it will sell them at much higher prices that what it originally paid for them. This will also foster private activities in the near future. This happened in those banks that were intervened by the government and a few months later were collecting 80 billion dollars from the private markets. In these circumstances it is important that financial institutions are capitalized, strengthened and stabilized with the help of the public sector.
So you agree with State intervention in private companies?
In the current situation, I believe it is necessary that the State participate in the economy so as to avoid the destruction of more institutions and companies, the loss of jobs and the destruction of more assets that will worsen the crises. I believe governments must intervene on an exceptional basis, as they are doing now, in order to transform these companies and capitalize them temporarily. The aim is that the US government withdraws once the private sector is capable of taking over on its own. Nevertheless, if the financial system is not stabilized, if those industrial sectors with large obsolete areas are not straightened up, then there will be more destruction.
Do you have plans to spread your philanthropic activities into the US?
No. I prefer to do this in developing countries. The US has a very structured network of philanthropic and charity programs. It is in developing countries where we are most in need.