The wealth of crony capitalists around the world has grown exponentially by 850% in the past 25 years to $3 trillion, a survey has shown.
“Some 65% of the increase has come from America, China, India, and Russia. Overall 40% of crony-capitalist wealth derives from autocratic countries and amounts to 9% of their GDP,” The Economist reported earlier this month. It published the 2023 crony-capitalism index on May 2.
Russia remains the most crony-capitalist country, with 19% of its GDP accounted for by the wealth of chums of those in power.
“Only one-fifth of Russian billionaires’ wealth is derived from non-crony sectors, which shows just how distorted the economy is,” the weekly publication said. This is despite the Ukraine war leading to a sharp decline in the cronies’ wealth from $456 billion in 2021 to $387 billion this year.
The Economist used data from a Forbes list of the world’s billionaires and their worth. Each individual was labelled “crony” or not, based on the person’s source of wealth. The study lists 43 countries with a GDP of more than $250 billion.
In the US, the wealth from the crony sector stood at around 2% of the country’s GDP. “Tech firms are among the biggest lobbyists in Washington...Reclassify tech as a crony industry in our index and America’s crony wealth increases to 6% of GDP,” the report said.
China and India see a decline since 2021
China saw a decline in crony wealth from 4.4% in 2018 to 2.5% after its “common prosperity” policy hit capital-intensive sectors like technology, education, and entertainment. However, high-profile tycoons have moved their assets to Singapore, the report said.
“In 2019, [Singapore] had just 33 Chinese family offices—firms which manage a family’s assets. There were perhaps 750 by the end of 2022,” The Economist said.
In 2022, China was ranked 23rd on the list, much lower than its 10th place in 2021. India, too, improved its ranking from 7th to 10th position now.
Indian crony capitalists’ wealth in sectors such as banking, defence, extractive industries, and construction, made for nearly 8% of the country’s GDP, the report said, up from 5% in the past decade. In 2021, India was seventh on the index.
“India’s leader, Narendra Modi, has favourites among the country’s corporate captains,” the report said, referring to billionaire Gautam Adani’s meteoric success in recent years.
Adani’s eponymous ports-to-power conglomerate is often in the news for its deals in sectors closely linked to the government. He was briefly the world’s third-richest person in September, the report highlighted, before the US-based short seller Hindenburg Research’s allegations of fraud and market manipulation short-circuited the group’s prospects.
“What happens when cronyism gets completely out of control? If elites so enrich themselves that they impoverish a country, a ‘kleptocracy’ forms,” The Economist said, citing the declaration of Polish sociologist Stanislav Andreski.