The Peterson Institute released its new study, Rich People Poor Countries: The Rise of Emerging-Market Tycoons and their Mega Firms, by Caroline Freund, on February 11, 2016. Freund presented her innovative take on corporate innovation, growth, and inequality, which combines insights from new trade research, growth theory, and an original dataset of global business founders and billionaires. Tyler Cowen of George Mason University, and Tarun Khanna, Director, South Asia Institute, and Jorge Paulo Lemann Professor, Harvard Business School, provided comments.
In Rich People Poor Countries, Freund examines how a large and expanding group of businesspeople from developing countries have accumulated billion-dollar fortunes to uncover the type of activities that are well rewarded in different corners of the world. She classifies the world’s billionaires on the Forbes World’s Billionaires list as company founders, executives, financiers, politically-connected, or inheritors. Two important findings are: (i) a rising share of the global superrich are from emerging markets, and (ii) the fastest growing group are company founders. Linking the individual-level data with data on the largest global companies, she shows that these captains of industry are propelling poor countries out of small-scale production and agriculture and into a future of multinational industry and service-based mega firms. The making of extreme wealth is a very positive sign for a country’s modernization when it is associated with the creation of large and fast-growing firms, especially those closely integrated into the globalized economy. Freund also explores differences across regions, highlighting East Asia as the most dynamic region and the Middle East and North Africa as being trapped in a business model reliant on bequests and political connections. This story of emerging-market entrepreneurs and the global businesses they create dramatically illuminates the process of industrialization in the modern world economy.
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