Carlos Slim on How to Fix the U.S. Economy
The world’s richest person talks to Lloyd Grove about why the U.S. should boost capital-gains taxes and pare back the welfare state.
Mexican telecom tycoon Carlos Slim Helú—whose family fortune of about $74 billion makes him the world’s richest human (well ahead of Bill Gates and Warren Buffett on the Forbes list of billionaires—plays against type.
“I wanted to go to the restroom, but I will go now,” the 71-year-old Slim tells me with a laugh, having sat down to a spur-of-the-moment interview at the Metropolitan Club. This was after he patiently endured a lengthy black-tie dinner celebrating a “creative leadership summit” hosted by Canadian-born magazine publisher Louise Blouin.
The mustachioed mogul, looking slightly rumpled in his tux, has shown up with his dashing nephew Roberto, but no entourage or security, to receive a Blouin Foundation Award for his philanthropic work.
“Our philosophy is you need to give nonprofit money for health, nutrition, education, culture, and sports,” says Slim, who has funded his own foundations to the tune of $10 billion, has pledged another $100 million to a Clinton Global Initiative sustainable growth project, and forked over equally eye-popping amounts in joint ventures with the likes of Microsoft’s Gates and Los Angeles billionaire Eli Broad. “You need to support human development and human capital as much as possible. And we’ve had 25 years of programs, great programs. We supported 125,000 surgeries. We fund 15,000 scholarships every year for college and higher education. We gave bicycles for rural areas. We gave laptops.”
He adds: “We do something more interesting: We do digital libraries, and instead of lending books we lend laptops …You need education, and at the end of the day, you need people to have jobs. And education now will come through technological means. You cannot make thousands of universities or hundreds of thousands of professors, but with technology and the Internet you can have great courses and make a digital university.”
Slim, who speaks heavily accented but serviceable English (which I’ve taken the liberty of cleaning up here and there), also chatted about his wish to increase his ownership stake in The New York Times (to which he lent $250 million in 2009 to help the paper through financial troubles), his love of the New York Yankees, his reasons for paying $44 million last year for the Doris Duke mansion on Fifth Avenue, his policy prescriptions to fix the ailing American economy and stop the massive drug violence on the U.S.-Mexican border, and his claim that, contrary to widespread belief, he is by no means a monopolist in the lucrative Mexican telecom business.
“There are a lot of competitors. If you look, there is Nextel, Telefónica, all the TV companies together,” Slim maintains, arguing that he owes his 70 percent market share to high quality of service and savvy marketing rather than preferential treatment from the Mexican politicians he takes very good care of financially. “And we don’t have the convergence—we cannot provide ‘triple play’ [phone, Internet, and cable], and we are monopolists? We operate in 20 countries, and if we were a monopoly with expensive and bad service, our customers would not be with us. We would not have their loyalty.”
In years past, Slim prided himself on never owning a residence outside Mexico, so I ask if he’s planning to spend more time in New York now that he’s bought himself an Upper East Side palace.
“No, no, no,” Slim replies. “It has six or seven floors. Do you think I will live in a house of seven floors? I bought it to build apartments for renting or business. I’ll be staying in a hotel, always.”
What about the Yankees? Slim is a rabid fan. Would he like to buy the team?
“No,” he insists. “I like baseball to enjoy. If you are in business, you are not enjoying. You are working. It’s more fun to watch them play and watch Mariano Rivera [the star Panamanian relief pitcher] break records. He’s the best closing pitcher in baseball. He’s 41 years old. It’s fantastic.
How do we fix this recession?
“With the same things that were done in 2000 and 2001, when it was temporarily solved with big expenditures and very aggressive monetary and fiscal policy,” he tells me. “Aside from lowering taxes, we should be directing more money to the real economy, not to the financial economy. The volatility of the markets is so great that more is won or lost in a single day than in five years of accumulated interest. And that’s not a good thing.”
I ask if he agrees with President Obama’s so-called Buffett rule, which would mandate that rich people like Warren Buffett—who benefits from a 15 percent tax rate because his money comes from capital gains—pay at least the same rate as their secretaries.
“I don’t know what Warren Buffett pays,” Slim says, “but I think that the fiscal policy should be fair. You don’t need to raise taxes on rich people, because they create capitalization and investment. But you need to tax speculation—meaning capital gains. Why should it be just 15 percent? Salaried people pay 35 percent. Why shouldn’t that be paid on capital gains?”
“The welfare policies that you are following—you and Europe—are unsustainable,” Slim argues. “You cannot have people retiring at 60 years old, and you cannot provide universal health care the way you do. That’s crazy. The focus should be the support of small- and middle-size business. That is where the employment is. And there should be investment in the real economy. Infrastructure is an example. And the best way to do that is with the private sector. It’s more efficient.”
I ask what should be done about the terrible violence surrounding the illegal Mexican drug trade, with grisly murders in the tens of thousands.
“It’s a problem coming from the United States,” Slim says.
Because of the demand?
“Because of everything. You stay with the money and the drugs. We stay with the weapons and the violence. And you’re selling the weapons to the consumers in Mexico. And the retail price [of the drugs] is, I don’t know how much bigger, let’s say 10 times in the U.S. what it is in Mexico. And that means the demand is here and the money is here. It’s like what used to happen during Prohibition in Chicago. You had a lot of violence there.”
What’s the solution?
“Follow the money.”
Would it help to legalize the drugs and, as with Prohibition, eliminate the incentive for crime?
“It doesn’t ‘help,’ ” Slim says. “It finishes.”
Not that he’s necessarily suggesting that prescription.
“We don’t know the consequences in health—how bad these drugs are,” Slim says. “But I think we should be doing more work together.”
Slim’s empire, though based on telecommunications, spans about 200 companies and 220,000 employees in such diverse industries as hotels, banking, construction, cigarettes, soft drinks, mining, bicycles, airlines, railways, and printing. But it’s his investment in The New York Times—of which he owns slightly more than 7 percent, with warrants to increase his holdings to 16 percent by 2015—that has raised his public profile in the United States.
I ask what his intentions are.
“It’s a financial investment,” says Slim, whose $250 million loan at 14 percent interest, to help the media company through some cash-flow problems, was paid back in full ahead of schedule. “It was a very good sign when they paid back the loan early, and if I invest part of the payment or part of the interest, it’s because I think it’s a good company and a great brand. Now they’re doing buybacks and the dividend is so high, etc., and they’re managing the newspaper in a very good way. We are not speculating. We are there for a long time. But if the stock goes down more, it will be interesting—because it will come back more.”
What if it starts writing critical articles about Carlos Slim?
“They have done that.”
Any reaction to the appointment of Jill Abramson as the new editor?
“I’m sorry. Who?”
Obviously, some matters are below Slim’s paygrade.