Thursday, October 15, 2009

Has Mexico Read ‘Atlas Shrugged’?

For those of you who haven't read one of the best fiction books of all time, 'Atlas Shrugged', here's a three sentence summary of a 1200-page book: Those individuals that use their talents to create goods and services that are of value to people should not be punished by their government or anyone else. Any attempts to reduce their company's profits or their income are wrong and counterproductive. Rather, society should be happy that such individuals are prospering, since their prosperity will improve the prosperity of all people of good will.

Today, many people are concerned that the gap between the rich and poor is increasing. And indeed it has been for a number of years. But what they fail to mention is that the poor and middle class are still getting richer (over any time span of 10 years or more). So there's no need to begrudge the Bill Gates', the Ross Perot's, the Sam Walton's or the owners of Google. It is much better to be happy that we live in a country where such individuals can prosper, and where the prosperity of the upper class has a positive effect on us all. After all, with fewer prosperous people, fewer new houses would be built, fewer new cars would be purchased, and the list goes on. And who builds these houses and cars? Those in the middle class and the poor.

(Of course, I am not referring here to a rich person or company that intentionally causes harm in some way, for example by defrauding others. Such should be punished according to the law. I am only referring to those people and companies of good will.)

Where does Mexico fit in to this? Mexico is one of the few countries that has a state-owned oil monopoly, named Pemex. Because it is run by the government, the usual problems occur: it has a huge and inefficient bureaucracy and a bloated workforce. And it doesn't allow private investment and profit sharing and thus does not attract the outside expertise that Mexico needs to increase their oil production. Thus their biggest oil field in the Gulf of Mexico is producing one-fourth of its 2004 output. This has been a financial disaster for Mexico. There is plenty of oil to be had. British Petroleum has just discovered new oil fields in the Gulf containing up to 12 billion barrels of oil. But President Calderon of Mexico has said that Mexico doesn't have the technology or the operational capacity to recover this oil by themselves. He has tried to change Mexican law to allow foreign companies to become involved, but with no success so far.

On the other hand, Brazil is enjoying an oil boom because it has opened it energy sector to outside investment. This is a win-win situation since the outside investors provide the technology and expertise to recover the oil, and they pay Brazil for the right to do so.

Any country that wants to prosper must allow their citizens and their companies, as well as foreign investors, the freedom to develop that country's resources on a profit sharing basis so that all can benefit.

Rather than begrudge a person or company that is successful and profitable, we should applaud it.


Tim Farage is a Senior Lecturer in the Computer Science Department at The University of Texas at Dallas. You are welcome to comment upon this blog entry and/or to contact him at



A.J. Paradowski said...

I think the biggest problem isnt necessarily that the rich are getting richer, but rather what they're doing with their money. Personally, I dont feel that Bill Gates buying 5 Hummers stimulates the economy. On the contrary, it sends a signal to the automakers that these cars as a status symbol are highly sought after thus production should continue. As fine and dandy as this is, no other country in the world seems to want Hummers rolling down their streets. All this does, and did,is leads to a back up of sales and a rapid drop in profit for the major dealers in America. Without progress in areas such as gas mileage, America is left with cars that it cannot export because no one wants them. Instead, Americans are left to buy Japanese or German imports which does nothing but strengthen foreign economies. In my opinion, for what it's worth, cars are among the only goods America can still manufacture and export, however with no demand for these cars to fill the cost of building said vehicles just digs a huge hole for companies.

And just on a side note, I believe government control over companies isnt a good idea. However, government regulation is a different idea entirely. Let GM build whatever car, truck or SUV they want, just make sure that it gets over 30 miles per gallon. I know we as Americans have the technology to make this happen, all thats lacking is the driving force.

Sorry if I sound like a hippy liberal!

Tim Farage said...

A. J.,

Thanks for your comments. I do agree that there is a place for government regulation. For cars, I'd rather see a tax (or limitation) on the pollution given off, rather than a mileage quota. This would have the effect of cutting down on pollution.

I'm not as concerned about mileage, because, if we were sane, we'd build lots of pollution-free nuclear power plants, and in ten years or so, when cars run by batteries are cost effective, they can plugged into a electrical socket at night, and charged with electricy generated by those plants.


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