POLITICAL ENTREPRENEURSHIP AND CORRUPTION

Writing for Wall Street Journal, Burt Folsom compares the entrepreneurship in two countries; the U.S. and Mexico.

The discussion in the article is focused on Carlos Slim who supossedly surpassed Bill Gates as the world's richest person. As the article demonstrates, the spread of political entrepreneurship coexists with weak contract security and insecure protection of private property rights. In comparison to market entrepreneurship, political entrepreneurship is costly to growth and does not embrace risk-taking, quality maximization and price minimization as strategic terms. Here is an interesting story:

"Enter Carlos Slim. His father, Julian Slim Haddad, a Lebanese immigrant, made his money as a merchant during the chaos leading up to the Constitution of 1917. Carlos Slim greatly expanded the family fortune by working closely and cleverly with government officials. (In fairness to Mr. Slim, there may not be another avenue to great wealth in a massively interventionist economy.) His major opportunity came when President Carlos Salinas de Gortari decided to privatize some inefficient industries. Mr. Slim bought Telmex, the nation’s phone company, in 1990 in a controversial auction which was decidedly less than transparent. With that purchase came a six-year monopoly guaranteed by the government. Although Mr. Slim was supposed to relinquish the monopoly in 1997, he used a variety of legal and political tools to maintain it, for example filing injunctions in court to block orders from the regulator to provide competitors fair access to his network. According to OECD figures, Mexican consumers and businesses still pay above market telephone rates. Fewer than one-fourth of Mexican homes have telephones. With a near monopoly of fixed-line telephones and data access (the Internet), Mr. Slim has reaped windfall profits which, wisely invested, have propelled him to immense wealth. Meanwhile, Mr. Slim’s newer ventures—his construction company and his oil services company—rely on government contracts for their major business. Recently President Felipe Calderon met with Mr. Slim and urged him to accept greater competition."

Source: Burt Folsom, Slim Pickings, Wall Street Journal, August 29, 2007 (link)