NCPA - National Center for Policy Analysis

Consolidate Control And Corrupt Capitalism

September 27, 2000

Since the times of feudal lords, most free nations have kept a watchful eye of the consolidation of money into a small number of hands. Many believe that this excessive wealth concentration results in a corrupt system of government. A recent study analyzes the consolidation of wealth in the East Asian part of the world. The study found that:

  • The top 15 East Asian families control from 20 percent of corporate assets (Taiwan) to 64 percent (Indonesia).
  • A single family in both Indonesia and the Philippines owns about 17 percent of all corporate assets.
  • The top 15 East Asian families control from 18 percent of the gross domestic product GDP (Taiwan) to 82 percent of the GDP, while the United States' top 15 families control less than 3 percent of the U.S. GDP.

The study finds that the difference in company law and the level of economic development determine the consolidation of wealth. It also claims that financial markets and corporate governance are compromised by this concentration of power. Ultimately, government's development will be crippled as powerful families lobby governments for preferential treatment, crushing the idea of rule of law. At worst, these families will gain control of the government and have a large amount of corruption, like the Suharto regime in Indonesia and the Marcos regime in the Philippines.

Source: "Corporate Control and Crony Capitolism," Economic Intuition, Summer 2000. Based on Stijn Claessens, Simeon Djankov and Larry H.P. Lang, "The Separation of Ownership and Control in East Asian Corporations," Journal of Financial Economics, forthcoming.


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