Demographics of the Oligarchs
By Bryan Caplan
You’ve heard about the Russian “oligarchs,” right? They’re the richest men in Russia. The insinuation is almost invariably that they owe their riches not to entrepreneurial ability, but to political connections. It’s not “what you know,” but “who you know,” right?
If this theory were true, you would expect the oligarchs to have unusual demographics for business leaders. In particular, they should be:
Both predictions are wrong.
Most of the oligarchs are too young to have been Communist Party bigwigs. As one interesting paper explains, “Most of the individuals… are relatively young: nine of them are in their 30s, and 13 are in their 40s.” The older oligarchs generally had Communist backgrounds, but were hardly leading figures in the Party: “The older oligarchs have typically come from Soviet-era nomenklatura. Prior to transition, they were either managing the respective enterprises or working in government agencies supervising the enterprises, and when the Soviet-era firms were privatized, they converted their de facto control into ownership rights.”
Even more striking: The oligarchs are disproportionately Jewish. 90% of Russian Jews have left the country over the last 30 years, but 6 out of the 7 leading oligarchs have Jewish ancestry. This would be hard to explain if their success were primarily due to political connections – but expected if their success largely reflected entrepreneurial ability.
Of course, in a corrupt and chaotic environment like post-Communist Russia, no successful businessman is going to have a perfectly clean record. You’ve got to compromise with the system to get by, and cut corners to get ahead. The real question is: “How much of the oligarchs’ success stems from entrepreneurial ability, and how much from political connections?” Demographic information alone can’t resolve the question, but it does tilt the scales in the direction of ability.