Our crony-capitalism index provides a window into Russia’s billionaire wealth

ABillionaire though Receiving a bad rap year after year, the sanctions imposed on Russian oligarchs have intensified surveillance over the source of the tycoons’ wealth. On March 1, President Joe Biden announced that his government was forming a “Klepto Capture” task force to “pursue the crimes of the Russian oligarchy.”

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The flurry of obscure money around the favorite plutocratic playgrounds of New York, London and Paris is nothing new. In 2014 Economist The Crony-Capitalism Index was created to measure whether the world was facing a new golden age, characterized by the modern equivalent of pirate barons in late 19th century America. In 2016, when we last looked at our index, we saw that the crony-capitalists had improved in the 2000s but they were beginning to feel the heat from the believers in the rich world and the anti-corruption purges in the developing countries. How has crony capitalism performed?

Entrepreneurs seeking rent tend to use their relationship with the state for maximum profit. Technically speaking, an economic rent is the surplus of capital and labor after paying the market price. With perfect competition there will be no surplus. But rents can be artificially increased if firms win contracts at favorable prices, form cartels to tailor consumers, or lobby the government for favorable rules. Most rental businesses operate perfectly legally.

Our index uses 25 years of data from Forbes’ annual stock-tech of the world’s billionaires. The total estimated assets of 2,755 people in publication in 2021 were $ 13trn. We have categorized the main source of wealth of each millionaire into crony and non-crony sectors. There are many industries in our crony sectors that are at risk for rent due to the proximity of the state, such as banking, casino, defense, extraction industry and construction. We have compiled the billionaires according to the information published as a part of the citizenship of the country GDP.

Russia’s crony economy is stuck like a bling-up muscovite in Algarve. About 70% of the 120 Russian billionaires, who together hold 80% of its billionaire assets, fall into our crony-capitalist definition. Wealth is equivalent to 28% of Russia GDP Came from the crony sector in 2021, increased from 18% in 2016. But many Russian oligarchs will cut the hair of their empire as a bite of sanctions.

Globally, crony wealth has declined as a whole, reflecting a partial increase in technology-related wealth. Even so, owning one is still beyond the reach of the average person. In Malaysia, a former prime minister was jailed for corruption after stealing রাষ্ট্র 4.5 billion from the state in 2020, but crony capitalism still dominates there. India’s share of billionaire wealth from the crony sector has increased from 29% to 43% in six years. The Philippines has dropped to fourth place in our index but the crony sector still accounts for four-fifths of the total billionaire wealth.

In contrast, about four-fifths of American billionaires, 90% of total assets, work in the non-crony sector. Wealth in the non-crony sector has increased from 11% to 17%, led by technical valuation growth GDP Between 2016 and 2021. But in recent years, the United States has begun investigating the companies of its behemoth-building billionaires. Technical firms showcase certain features of the crony industry: for example, they spend a lot of money on lobbying to maintain their juicy market share. Re-classifying technology companies as crony would increase America’s crony wealth by 2% to 7% GDP.

Over the past decade, China has created new billionaires that you can call Yves Saint Laurent. In 2010 there were 89. There are now 714 with a combined wealth of t 3 trn, which is about 70% of the amount in America. Its crony-sector shares GDP There has been little change in six years, although the share of billionaire’s total wealth has dropped from 44% to 24%. This reveals an error in our index: to some extent all businesses operate in China with the consent of the state. As Jack Ma discovered on Alibaba in 2020, falling out of favor could have serious consequences. If all Chinese billionaires were considered crony, China would be second on our index.

Billionaires in dictatorial countries are vulnerable to the will of their leaders. Mikhail Khodorkovsky was valued at $ 15 billion in 2004 but fell out with Vladimir Putin and his oil company was confiscated. The purge in Saudi Arabia means that not a single billionaire from the state has appeared on the Forbes list since 2017. Billionaires in dictatorial countries outside China collect about 70% of their wealth from the crony sector. A good chunk of this 50 750 billion could be hidden in Western countries who don’t question too much. 3

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This article was published in the print edition of Finance and Economics under the heading “Manufacturers and Receivers”

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