In 1998, when Forbes magazine released its annual list of global billionaires, an Indian billionaire made it into the world’s 100 richest people for the first time. But just barely — Indian-born Lakshmi Mittal ranked at 100. When the 2008 Forbes list was recently released, India dominated the world’s richest billionaires, with four out of the Top 8 in the world, more than even the US.
And it is not just India that has more billionaires. For the first time ever, Moscow now has more billionaires than New York City, and there are now more billionaires in the Top 100 from emerging market economies than from the US. New wealth is being created around the world at record levels, especially in the emerging markets.
Although the Indian billionaires on the Forbes list made headlines around the world, many are critical of this massive accumulation of personal wealth in developing countries such as India, where the average income is only $80 per month.
In fact, some might even condemn Indian billionaires as “robber barons,” in reference to the public criticism of the rising class of millionaires in the US a century ago. Some claim that “robber barons” accumulate enormous personal fortunes at the expense of consumers and workers, partly by monopolizing and manipulating markets to their advantage. Others, though, have argued that the “robber barons” actually benefit society by introducing new products, efficient methods of production and distribution, and in the process of amassing wealth create thousands of jobs and lower prices for millions of consumers.
What is India to think of its rising billionaire class, a group that now exists for the first time? Should the Indian billionaires be condemned for their massive accumulation of wealth in the midst of widespread poverty? Before Indian billionaires are dismissed too quickly as 21st century robber barons, there are several important reasons why India should celebrate them.
First, it should be recognized that in the process of creating personal fortunes, India’s billionaires create vast amounts of wealth for others, including thousands of employees. Consider Azim Premji. At the age of 21, he took over Wipro in 1966, and helped transform it from a vegetable oil and soap company with $2 million in annual sales into a $5 billion global IT giant.
Premji obviously couldn’t have orchestrated the explosive growth of Wipro without the help of others. Wipro currently has a staff of more than 73,000, and most of those jobs are in India, and most of those jobs are relatively highly paid. The Wipro example is not unique. In almost all cases, billionaires amass personal wealth by creating large organizations that generate millions of jobs.
And these large billionaire-led organizations typically create employment opportunities across the board, from the lowest unskilled positions to highly paid executives. It has been estimated that India’s top 10 billionaires have collectively created more than one million jobs in their companies.
Further, many of the employees who are currently at senior levels of organizations founded or run by billionaires started out their careers at very low or entry-level positions, and worked their way up to upper management levels. There are countless examples of steep upward mobility in Indian companies founded by billionaires. Simply put, in the process of becoming billionaires, these entrepreneurs regularly create many millionaires below them, and provide employment opportunities to thousands of people.
Second, most Indian billionaires have gotten rich by targeting affordable products towards the lower and middle classes. For example, look at the various Reliance companies founded and run by the Ambani family in India. From retailing to consumer electronics and telecommunications to retail brokerage, garments and groceries, the Reliance companies have been successful and profitable by bringing low-cost, affordable products and services to the masses.
Billions of dollars have certainly ended up in the hands of the Ambanis, but their companies have generated billions and billions of dollars of value for millions of Indian consumers, and they and their companies have improved the lives of millions in the lower and middle classes of India.
India might not win any gold medals at this year’s Olympics in Beijing, but when it comes to the world’s billionaires, Indians are now among the top world-class gold medal winners. In that respect, the billionaires of India should be admired as national heroes, just like an Indian Olympic gold medal winner.
India is a much more prosperous country today, and has a much larger middle class with its abundance of billionaires, than it was 10 years ago, when billionaires were scarce. When the Forbes list of world billionaires comes out next year, India should aspire for many more on that list since it will be a sure sign that more wealth is being created for everybody.
Mark J. Perry is a professor of finance and Madhukar Angur is a David M French distinguished professor of marketing, both at the University of Michigan. Comment at email@example.com