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How healthy is a country's economy?

To see how healthy a country's economy is, commentator Ruchir Sharma says just look at how its billionaires made their money.

I doubt Forbes Magazine ever intended its annual list of billionaires as anything, but a celebration of wealth. But this list reveals a lot about the economic prospects of a country. Take Russia and India, for example.

Between 2006 and 2011, only one new name cracked the top 10 of billionaires in India, and only two in Russia. That's a red flag. It's a sign those economies are generating too little competition with great wealth amassing in the hands of a few. If the average wealth of these tycoons climbs too high, the threat of political instability grows. Witness Russia's recent protest movement.

Healthy economies should, of course, produce billionaires. But these tycoons should face competition and ideally emerge from cutting-edge industries, not sectors where political connections are key to success. Nearly 80 percent of Russia's billionaires got rich off commodities, a sector that is closely tied to political patronage. In fact, many of Russia's tycoons are holdovers from the post-Soviet fire sale of state assets.

And India may be best known for its dynamic software and technology industries, but its billionaires list shows wealth shifting from entrepreneurs. It's increasingly dominated by provincial kingpins who have cut deals with state governments to seize control of local industries like mining and real estate.

Still, editors at Forbes might be glad to know the billionaire situation isn't all bad in emerging markets. In China, the super-rich face tremendous turnover: only one name on the 2006 list survived to 2011. And not one has a fortune of more than $10 billion. This is because the Chinese government intervenes to prevent private empires. Capitalists might call that the heavy hand of socialism, but it's far preferable to governments like Russia's that conspire to concentrate unproductive fortunes among a privileged few.

About the author

Ruchir Sharma is the head of emerging market equities at Morgan Stanley and the author of "Breakout Nations: In Pursuit of the Next Economic Miracles."

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