The Economist has just released a clever “crony capitalism” index, measuring the places where government-connected businessmen are most likely to prosper. The index works by measuring the wealth of a country’s billionaires who are involved a number of “industries that are vulnerable to monopoly, or that involve licensing or heavy state involvement,” including utilities, ports, and airports, energy, infrastructure, investment banking, and defense.
The place—not actually a country—that tops the list is Hong Kong. This is not particularly given that catering to international business interests is Hong Kong’s raison d’etre. This is a place where business groups literally select members of the legislature and where you can go to an HSBC ATM and take out money with an HSBC logo on it. It is home to 45 billionaires, just two fewer than Britain, which has nine times as many people.
But it’s interesting to note that Hong Kong has also, for 20 consecutive years, topped the Heritage Foundation’s “economic freedom” index, which measures countries based on rule of law, limited government, regulatory efficiency, and open markets. Singapore, which is in second place on the Heritage Foundation’s list, comes in fifth on the Economist’s cronyism list.
In Hong Kong’s case, Heritage notes that the territory enjoys “low rates of corruption, although business interests exercise a strong influence in the unicameral legislature and executive branch.” (“Strong influence” over the government is also exercised by the decidedly not-free People’s Republic of China, though that’s another issue.)
The Economist is quick to note that Hong Kong and Singapore are well-run places by any standards, but also says that they are “packed with billionaires in crony industries. This reflects scarce land, which boosts property values, and their role as entrepots for shiftier neighbours. Hong Kong has also long been lax on antitrust: it only passed an economy-wide competition law two years ago.”
You wouldn’t be able draw a linear relationship between the two indexes. The disconcertingly newsy trio of Russia, Malaysia, and Ukraine, which round out the top five most cronyistic countries on the Economist’s list, are all scored pretty dismally by Heritage. The least cronyistic place measured, Germany, is a respectable 18th on Heritage’s list.
But in looking at indexes like the one Heritage puts out, it’s worth keeping in mind that the some of the places being celebrated for governments that give free rein to private industry are places where the two simply have a symbiotic relationship.