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The Economist’s Crony Capitalism Index Does Not Measure Crony Capitalismby Eden Schiffmann |
The Economist’s recent cover story,
introducing what it calls the "Crony-Capitalism Index", has generated a
lot of buzz. The study ranks 23 countries (counting Hong Kong
separately) based on the Economist’s calculation of the prevalence of politically connected business dealing. The study takes billionaires from the Forbes Billionaires List
who are primarily active in certain industries (such as casinos,
banking, extractive industries, real estate, utilities, etc.) that the Economist
deems “rent-heavy,” and looks at these billionaires’ share of the
economic pie in their country. The index has already been used as the
basis for media criticism of those countries that scored poorly, such
as Hong Kong (1st) and Malaysia (3rd) — indeed, the Malaysian government was so upset that it censored the Economist for the week the index came out.
Some
of the results are unsurprising: Russia and India score fairly high in
this measure of crony capitalism, whereas Germany bottoms out the list.
But other results are more puzzling. Not only does the index report
that Hong Kong has more crony capitalism than mainland China, but also
that mainland China has less crony capitalism than either the United
States or Great Britain. What gives? Does the United States really have
more of a crony capitalism problem than China?
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