🔗 Share this article

To numerous US citizens, the economic climate over the last half-decade has been challenging. Prices have escalated while salaries remains flat. High mortgage rates have made buying a home a grim prospect. The rate of unemployment has been creeping up.

Most people have indicated they're putting off major life decisions, including raising children or moving to new employment, because of the instability. But for a select few of people, the last five years couldn't have been more successful.

The Billionaire Boom

The assets of the world's billionaires grew 54% in 2020, at the climax of the pandemic. And even amid all the economic instability, the stock market has only continued to grow. This growth has largely benefited just a small number of Americans: 10% of the population controls 93% of stock market wealth.

As uneven as this division seems, it's the financial structure working as it is currently designed.

"Rich elites have acquired their jets, they've acquired their multiple houses and mansions, but now they're securing senators and media outlets," commented inequality researcher Chuck Collins. "We're now entering this other chapter of extreme wealth extraction where the wealthy are exploiting the system of inequality."

Understanding Wealth Tiers

To help others comprehend what exactly it means to be "rich" in the US, Collins borrows a concept from journalist Robert Frank who, in a 2007 book on the rich, envisioned the different levels of wealth as "Richistan" villages: Wealth Borough, Lower Richistan, Middle Richistan, Upper Richistan and Billionaireville.

To modernize the concept, Collins organizes these "wealth villages" based on income levels:

• At the lowest tier, Affluent Town, are the 10 million Americans who have a household income of at least $110,000 and an total assets of over $1.5m.
• The villages get more select as wealth goes up: Lower Richistan has 2.6 million households who have wealth between $6m and $13m.
• Middle Richistan has 1.3 million households who have assets worth an average of $37m.
• Upper Richistan, made up of 130,000 Americans (roughly the size of a small city) has between $60m to $1bn in wealth.

Altogether, the residents of these villages constitute the top 10% of the wealth income distribution, about 14 million Americans altogether, though their experiences vary dramatically.

"You could be in Lower Richistan, and you're still sitting in the coach section of a commercial plane," Collins explained. "Whereas in Upper Richistan, you're using a private jet. That's a really different cultural experience. You fly private, you have no investment in the commercial aviation system. You don't care if the whole system shuts down – you're set."

Extreme Affluence Consequences

The highest hill in "Richistan" is Billionaireville, which is made up of about 800 American billionaires who are some of the world's richest. The power that this group has greatly exceeds those who are simply wealthy, let alone the ordinary person who doesn't live in "Richistan" at all.

But Collins thinks the political catchphrase "abolish billionaires" misses the point and has a "hint of elimination" to it.

"It's the distinction between personal actions and a structure of regulations," Collins explained. "We should be focused on an economic system that directs so much wealth upward to the billionaires."

The Four Pillars of Billionaire Wealth

To understand how wealth at the billionaire level works, Collins separates it into four parts: accumulating assets, protecting assets, government influence and maximum resource extraction.

When many Americans think about wealth, they usually think only about the first step, Collins said. People can create a modest amount of wealth through establishing or managing a successful business, which could get them membership in Affluent Town.

But getting to Billionaireville requires significant resources and strategy in those next three steps. Collins describes what he calls the "wealth defense industry": the tax lawyers, accountants and wealth managers who use their skills to ensure that the super rich are being strategic about their taxes.

"Wealth defense professionals use a broad range of tools such as financial instruments, foreign deposits, anonymous shell companies, philanthropic entities and other methods to hold assets," he writes.

Government Power and Extreme Wealth Removal

To enhance a wealth defense strategy, a family needs political support. Wealth of over $40m translates to political power, Collins says, and can be used to protect assets and maintain expansion.

The final phase is a different kind of wealth accumulation, one that Collins calls "maximum taking" to describe how the wealthy have come to touch nearly every single part of an Americans' everyday life largely through capital management, which allows wealthy individuals to fund private companies.

"Private equity is looking for those areas of the economy where they can extract value a little bit harder," Collins said. "One thing I don't think people realize is these billionaire private-equity funds are what happens when so much wealth is accumulated in so few hands, and they can basically shift and say, 'Where else can we extract profits out of the economy?' Healthcare? Great. Mobile home parks? These people can't go anywhere, [so] you can increase their costs."

The Real Consequences

The effects of this inequality go beyond the wealth getting wealthier. It's about people spending additional funds for their healthcare, rent and vet bills without seeing any meaningful wage increases. And Collins said the pain and frustration of this kind of society can lead to deep discontent.

"The most powerful wealthy elites understand people are being excluded [and] are financially struggling," Collins said, adding that Republicans have been good at connecting with a potent "false common-man appeal".

Policy Situation

The contradiction, Collins points out in his book, is that elected representatives have appointed a series of billionaires to government roles. Along with tech billionaires who had temporary but significant roles overseeing substantial reductions to the federal workforce, other important roles for commerce, treasury, education and the interior are also all billionaires.

This administrative framework, along with help from legislative supporters, helped pass major tax legislation, which will make lasting reductions for the wealthy and corporations.

Future Solutions

While legislative bodies continue to argue that foreign entry and bad trade agreements are the source of everyone's economic problems, "the question becomes: Will the opposing party, which has also been controlled by the billionaires and big money, be able to seriously confront the underlying harms?" Collins said.

Progressive politicians, he argues, know what policies are needed to "reverse the updraft of wealth", including significant reforms to the tax system, increasing the minimum wage and supporting labor organizations.

"It was so, so close, and the legislation really did embody the will of the most of people who really want lawmakers to solve some of these pressing issues," Collins said. "Wealthy influence is not about developing so much as stopping. It's easier to block than it is to make something substantial take place, but the historical precedent is there. We know what that looks like."

Collins is optimistic that there can be change, but said it would require continuous government action.

"It may be before we know it that the balance shifts, and then it really is about preserving a sustained really popular movement to make progress on this extreme inequality we're living in," he said. "We can address this. It is fixable."