This comes from a friend of ACC Alejandro Chafuen. He argues, as we did a while back, (Chafuen does it more elegantly here) that The Economist Index of Crony Capitalism is not very good. In fact it’s pretty darn bad.
Earlier this year “The Economist” magazine released an index of crony capitalism. The index had Hong Kong with the worse score. In the article “The Economist” acknowledged the weakness of the methodology but still made it the cover story. As Hong Kong has consistently ranked as number one in economic freedom, the fact that “The Economist” ranked it as the most “crony” does great damage to the defense of the morality of capitalism or free enterprise.
In many countries, considerable amount of profits result from contracts with totalitarian structures such as state owned companies, or access to under-valued foreign currencies. One of the negative effects of cronyism is that it can lead to an unequal distribution of economic freedom, a concept that I have addressed before. The inequalities in income and opportunity produced by cronyism and an unequal distribution of economic freedom are not due to God, natural endowments, or personal effort. As such, many times they are scandalous.