China’s billionaires, he says, never amass fortunes of more than $10 billion each and there is high turnover at the top. “There is reason to believe that Beijing is enforcing an unwritten rule that caps total wealth,” he writes. Meantime, there are far richer billionaires in far smaller economies, like India, Mexico, Russia and Nigeria.
In Russia, however, 100 billionaires control 20 percent of the country’s GDP (in the United States, billionaires control 10.6 percent). Russia’s billionaires also control twice as much total wealth as China’s billionaires – though their economy is one quarter the size. More than 80 percent of the Russian oligarchs' wealth comes from what Sharma calls “non-productive” industries like real-estate, construction and commodities.
In India, billion-dollar fortunes are often the products of government favoritism, he says. India’s tech moguls are being replaced by “provincial tycoons who have cut deals with state governments to corner the market in location-based industries like mining and real-estate.”
He adds that turnover of Indian billionaires is slowing, which doesn’t bode well for the economy.
America’s billionaires, he said, are rooted in “exactly the kind of productive companies (Microsoft, Berkshire Hathaway, and Walmart) that would make any economy ... more competitive.”
Sharma’s Billionaire Indicator is a fascinating theory. But billionaire lists suffer from a fatal flaw: accuracy. Determining people’s precise net worth is a difficult (and often misleading) endeavor. The game is even harder in emerging markets, where there is little transparency. History is filled with examples where so-called billionaires wound up being worth far more or far less than their rank on wealth lists implied.
The fact that China’s billionaires never report net worths over $10 billion is further evidence that the lists are managed.
Still, over time the lists may get better and larger, providing more data for the Billionaire Indicators.
Do you think billionaires tell us anything about an economy?
-By CNBC's Robert Frank
Follow Robert Frank on Twitter: @robtfrank