Back in 2011, the conversation out of Davos, the annual gathering of the global elite in the Swiss Alps, was about the many virtues of state capitalism. China had just used massive state spending and lending to steer relatively unscathed through the Great Recession, and the Davoscenti were taking this as a lesson for other emerging nations: that state control can work. The problem was that beyond Davos, many emerging world leaders were coming to the opposite conclusion.In India, the talk in business circles was not about the virtues of state capitalism. It was about the growing power of the middlemen who hold court in the Tea Lounge of the Taj Mansingh hotel in Delhi. Long known as the place where wealthy families meet to introduce prospective marriage partners, the Tea Lounge had emerged as a hot spot to meet government fixers. At one table sat the middleman who could resolve delays in land purchases from the state; at another sat the go-to guy for cases stuck in the backlogged courts; at a third sat the fixer who could speed the approval of state bank loans. The evolution of the Tea Lounge into a kind of shadow cabinet office was seen as typical of the cronyism that often infects state capitalism, and which would soon discredit the then ruling government of Manmohan Singh.At that time, one scandal after another was exposing the corrupt ways of an old Indian elite which had wormed itself ever more deeply into parliament, into the world of Bollywood movies, and into the commanding heights of industry. More and more new tycoons seemed to be rising not on merit but on political connections, and many Indians were disgusted by the brazenness of these machinations. To check the popular impression, I did a quick scan of the 2010 billionaire list and found that the top ten Indian tycoons controlled wealth equal to 12 percent of GDP-compared to only 1 percent in China. A cover story I wrote for Newsweek International in September 2010 argued that the rise of crony capitalism was "India's fatal flaw."Since then, I have incorporated billionaire analysis into a system of rules for anticipating the rise and fall of nations because it is now widely accepted that extreme wealth imbalances can derail an economy. Widening inequality puts too much income in the pockets of the rich and in the worst case can incite demands that politicians intervene aggressively to redistribute rather than grow the national pie.It's hard to anticipate these revolts, since traditional measures of inequality are updated inconsistently and infrequently. That is where the annual Forbes lists come in. After figuring out how large billionaire fortunes are as a share of the economy, I dig into the sources of those fortunes, and how much of it is derived from family ties or political connections. It is the rise of shady characters in these rent-seeking industries that is most likely to stir self-destructive revolts, which have often convulsed emerging nations in Latin America and Africa.It's difficult to clearly define when the scale of billionaire wealth threatens to throw an economy out of balance, but comparing each country to its peers throws the outliers into stark relief. Total billionaire wealth in the past few years has averaged about 10 percent of GDP both in emerging countries and in developed countries. So if billionaire fortunes are more than 5 percentage points above that average, as is the case today in Russia, Taiwan, Malaysia, and Chile, that seems threatening. India is still high at 14 percent, or 4 points above the average, but trends are shifting for the better.Though new faces on the billionaire list can be a favorable sign for the economy, this holds true only if they are emerging outside what economists call "rent-seeking industries". These industries include construction, real estate, mining, oil, gas, and other commodity industries in which competition is often focused on securing access to a greater share of the national wealth in natural resources, not on growing the wealth in fresh, innovative ways. To make a rough qualitative judgment about the sources of great fortunes, I compare in my new book the total wealth of tycoons in these corruption-prone businesses to the total wealth of billionaires in the country. This yields the share of the wealth generated by "bad billionaires."The bad billionaire calculation no doubt does a disservice to the many honest real estate and oil tycoons, but even in nations where these industries are clean, they tend to make weak contributions to steady economic growth - either because they are relatively unproductive, or because they tie a nation's growth to the volatile swings of commodity prices. The assumption is that the rest of the billionaires make a greater contribution, but I reserve the label of "good billionaire" for tycoons in industries that are known to make the most productive contributions to economic growth or that make popular consumer products like smartphones or cars.The world is now seeing a global revival of good billionaires. Commodity tycoons had outnumbered tech tycoons by three to one in 2010, but then commodity prices started to fall, taking the commodity barons with them. Within two years, tech billionaires outnumbered their commodity peers 126 to 78 worldwide, and the revival spread even to economies that had appeared to be sinking into crony capitalism, including India.Between 2010 and 2015, India saw one of the world's sharpest gains in the clout of good billionaires who saw their total fortunes rise by 22 percentage points to 53 percent of total billionaire wealth. India's 2015 billionaire list is filled with new faces, and most of them are in productive industries like pharmaceuticals, education, and consumer goods. These trends may have taken the edge off the anticorporate, antigrowth sentiment that had been building in Delhi over the prior decade. Ambit, a brokerage firm, recently developed a "connected companies index" which monitors 75 firms that operate in rent-seeking industries and are believed to have benefited significantly from close ties to government officials. The stock prices for these companies have collapsed with the growing backlash against political influence peddling.Between mid-2010 and mid-2015, India's stock market rose 50 percent, while the connected companies index lost half its value, a sign that crony capitalism was in decline. Only a few years ago, the scions of Indian commodity billionaires were piling into the family businesses; now I hear some of them say they are keener on hot tech start-ups.Though the trends are for the better, it would be premature to declare victory in the war on crony capitalism in India. Bad billionaires often arise through family empires, particularly in the emerging world where weaker institutions make it easier for old families to cultivate corrupt political ties. Among ten of the largest emerging economies, the share of billionaire wealth built on inheritance ranged as low as 0 percent in Russia and 1 percent in China to more than 50 percent of billionaire wealth from South Korea to Indonesia, Turkey and India.The habits of the billionaire class matter because they tend to set the tone for the wider business culture. In India, many of the top tycoons command sprawling empires that often include at least one but often all four of the following businesses: a local hospital, a school, a hotel, and a local newspaper. One of India's top newspaper publishers recently pointed out to me that this rule of four now often holds true even for local kingpins in relatively small towns. The reason is simple. Most people In India understand it is wrong to take cash bribes, but few see much of a problem in accepting gifts in kind, even one as valuable as free medical treatment for a family member, free schooling for a child, free hotel banquet facilities for a niece's wedding, or favorable coverage for one's business or political ambitions in the local rag.I am wary of countries where bad billionaires are on the rise because they can reflect a deeper dysfunction: a culture in which cumbersome or nonexistent rules virtually invite corrupt behavior on the part of brazen business and complacent political leaders. I am also on the lookout for positive turns in countries that are responding to growing inequities by repairing the system: for example, by writing land acquisition laws that fairly balance the interests of farmers and developers as Indonesia has, or holding auctions for public goods like or wireless spectrum in a transparent manner that rules out backroom deals, as Mexico has. In this kind of changing environment, good billionaires can rise and help trigger a process of wealth creation that spreads its fruits more broadly, and returns institutions like the Tea Lounge to its pristine form.(This essay is adapted from Ruchir Sharma's new book, "The Rise and Fall of Nations: Ten Rules of Change in the Post-Crisis World", which you can order here . He is chief global strategist and head of emerging markets at Morgan Stanley Investment Management.)