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Depending on the answer to these questions, even those generally inclined in the media and politics to boost the fortunes of billionaires might have to rethink their stance. After all, if it turns out that having more billionaires doesn’t favour GDP growth, the policy suggestion to reduce income concentration at the top moves from a moral argument to one about economic growth and prosperity.
This is the set of questions that I, along with my colleague Sutirtha Bagchi of Villanova University, have examined. Using data on billionaires published by Forbes magazine, we applied econometric techniques and arrived at a finding that will perplex some and delight others: a greater presence of billionaires in a country actually slows down its economic growth.
Controlling for other relevant factors, such as the country’s level of income and education, we demonstrate that countries could grow their economies faster if there were less money controlled by the uber-rich. This implies that economies could be more efficient if more money were allocated to people other than those at the top of the income and wealth pyramid.
Other key factors to be considered are the sources and nature of inequality. Indonesia and the United Kingdom, for instance, have a similar value of the most widely used indicator of income inequality (the so-called Gini coefficient). However, the two countries differ markedly in the role that political connections play in achieving economic success and, as a consequence, the distribution of income and wealth.
Broadly speaking, billionaires come in two types – those who would not have made it without political connections (ie political cronies), and those who became billionaires because of their ingenuity, ability to innovate and willingness to take risks (ie the politically unconnected).
These two types of billionaires may have very different effects on the economic performance of countries. While politically connected billionaires are found in many countries, they are disproportionately represented also in the post-communist countries, including Russia where many emerged as political cronies of Boris Yeltsin, as well as in China.
Dividing the world’s billionaires into these two categories, one must obviously take particular care to assign the “politically connected” category of billionaires only to the most clear-cut cases, such as the Yeltsin-related oligarchs or Suharto-related nouveaux riches.
Those such as Bill Gates and Warren Buffet surely also have extra political influence because of their wealth, but political connections aren’t the source of their wealth.
We discovered that billionaire wealth that arises from being politically connected has a strongly negative effect on growth. In contrast, the effect of politically unconnected billionaire wealth on the overall economy is indistinguishable from zero. That means

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