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The Varsavsky Foundation
Avenida Bruselas 7, Planta 3
28100 Alcobendas
Madrid, Spain

The political blog of a social entrepreneur

Do we want there to be no rich people or no poor people?

I have been criticized many times in this blog for having done well in life. Especially in my Spanish blog. Many readers know however that I grew up in a middle class family environment –the son of professors– and that I made my money by founding different companies. They also know that I started my companies by writing a business plan, searching for investors, recruiting a good management team, and executing out a strategy. So there are not many secrets about how I made my money in technology. Criticizing me for being rich in my blog. If it is done with humor, I leave it. If it is a direct insult, I don’t publish it. But the attitude of some readers towards my makes me wonder if people who hate successful people realize that what a society needs successful businesses in order not to eliminate poverty.

What do we want, a society without rich people or a society without poor people? To me the answer is clear. What we want is a society without poor people or, like my Argentinean friend Maximiliano Fernandez says, what a country has to aspire to is to have the “richest poor” people in the world. Why? Because if the poor people of, let’s say, Switzerland are the richest in the world –which they may very well be– then the rest of the Swiss will be even better off and all is well. And Switzerland is a good example because it has the richest poor people in the world, but it also has some of the richest people in the world. The same goes for Sweden, another country where the poor live well, but where there are also people, like the founder of IKEA, with huge fortunes almost unrivaled in the world.

Still unconvinced readers will ask me, “What’s going on in countries like Nigeria, in which almost everyone lives in misery, but some are billionaires?”. My answer is that my argument in defense of the rich is not valid in countries that live off of the exploitation of natural resources. In those cases, where it is common for a few to take control of everything, then the argument of some of my readers, that many are poor because a few are rich, is valid. So in those societies what is needed are strict policies of wealth distribution. But in information societies like the EU, USA and Japan of today, which live mainly off of the accumulation of knowledge, the formula that says that in order for there to be fewer poor people there have to be many business leaders competing for human resources and raising wages, is applicable. And those business leaders and entrepreneurs are generally rich.

Take the United States for example, the country with by far the most billionaires in the world. Interestingly enough, its Gini index (which measures a country’s inequality of wealth distribution) is not so much better than Nigeria’s. And yet the USA’s Human Development Index (HDI) is the 4th highest in the world, while Nigeria ranks near the bottom of the barrel at 142th. Perhaps Nigeria’s Gini coefficient is not much worse than the USA’s because so many people are poor, and its rich citizens are actually few and far in between. In contrast, the USA has hundreds of billionaires and thousands of millionaires in addition to a very large middle class. Hence, there is still inequality, but poor – better yet, non-rich – Americans are much better off than non-rich Nigerians.

What’s more, I don’t know of a single successful society, meaning a country whose poor are among the richest on the planet, that doesn’t also have very rich people. As for rich Americans, well let’s look at Larry Page and Sergey Brin, the co-founders of Google. Their combined net worth is over $37billion, but think about how many jobs Google has created, and how much wealth it has brought, not only to its thousands upon thousands of employees, but to the computer industry in general, both in the USA and around the world. In contrast, Aliko Dangote, Nigeria’s richest citizen with a net worth of $2.1 billion, amassed his fortune by gaining a near monopoly on Nigeria’s commodities trade. Again: by taking control of natural resources. Dangote Group is not exactly a boon to Nigeria’s economy.

My conclusion is that when a country really mistreats its entrepreneurs it becomes impoverished. This doesn’t mean that we don’t have to implement progressive taxes –which I think are very good– or create an environment in which people that fall into adverse situations receive the help that they deserve to come out on top, and in which inequalities are reduced. But the solution is not to have fewer rich people, but to have fewer poor people.

Posted on January 27, 2011