According to a recent report on crony capitalism, the wealth of oligarchs and plutocrats has risen from $315 billion to $3 trillion over the past 25 years, now accounting for nearly 3% of global GDP. The report highlights the problem of crony capitalism, particularly in autocratic countries, and calls for more action to combat it. The study classifies the source of wealth into rent-seeking and non-rent-seeking sectors, with rent-seeking sectors often involving chummy dealings with the state. Russia is identified as the most crony-capitalist country, with 19% of its GDP derived from crony sectors.
The report uses data from Forbes to estimate the wealth of billionaires around the world. In 1998, there were 209 billionaires with a total worth of $1 trillion, equivalent to 3% of global GDP. This year, there are 2,640 billionaires worth $12 trillion or 12% of GDP. However, most of those listed do not operate in rent-seeking sectors. Adjusting for rising prices, there are 877 billionaires at 1998 prices, with a collective worth of $9 trillion.
Rent-seeking sectors are those that involve gaining favorable access to land, licenses, and resources, often through close relationships with the government. Common rent-seeking sectors include banking, construction, property, and natural resources. In these sectors, it is possible for individuals to inflate their earnings and form cartels to limit competition or lobby for favorable regulations. While they may bend rules, they do not typically break them.
Russia is identified as the most crony-capitalist country in the report, with 19% of its GDP derived from crony sectors. The effects of the Ukrainian war are evident, as crony wealth in Russia declined from $456 billion in 2021 to $387 billion this year. Only one-fifth of Russian billionaires’ wealth comes from non-crony sectors, highlighting the distortion in the country’s economy.
The report calls for more action to combat crony capitalism and the influence of oligarchs and plutocrats. The Russian Elites, Proxies, and Oligarchs Task Force was launched last year by the G7, the EU, and Australia to isolate and exert pressure on sanctioned Russian individuals. However, more needs to be done globally to address the issue and promote fair and transparent economic systems.
