🔗 Share this article

To numerous Americans, the economy over the recent five-year span has been challenging. Costs have soared while pay remains stagnant. Elevated mortgage rates have made purchasing property a dismal prospect. The rate of unemployment has been slowly rising.

Most people have stated they're delaying major life decisions, including raising children or moving to new employment, because of the instability. But for a very small group of people, the past five-year period couldn't have been more prosperous.

Wealth Explosion

The wealth of the world's billionaires increased 54% in 2020, at the climax of the pandemic. And even during all the market volatility, the stock market has only continued to grow. This growth has primarily advantaged just a small number of Americans: 10% of the population controls 93% of stock market wealth.

Despite the imbalance as this allocation seems, it's the financial structure working as it is presently configured.

"The wealthy have acquired their jets, they've bought their multiple houses and mansions, but now they're acquiring senators and media outlets," commented wealth disparity expert Chuck Collins. "We're now stepping into this other chapter of maximum resource removal where the wealthy are exploiting the system of inequality."

Analyzing Income Brackets

To help others grasp 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, imagined the different levels of wealth as "Affluencia" villages: Prosperity Village, Lower Richistan, Middle Richistan, Upper Richistan and Billionaireville.

To modernize the concept, Collins organizes these "affluence districts" 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 exclusive 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.

Collectively, the residents of these villages make up 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 traveling in the coach section of a commercial plane," Collins noted. "Whereas in Upper Richistan, you're traveling via a private jet. That's a really distinct lifestyle. You fly private, you have no interest in the commercial aviation system. You don't care if the whole system fails – you're set."

Ultra-Wealth Impact

The highest hill in "Richistan" is Billionaireville, which is made up of about 800 American billionaires who are some of the world's wealthiest. The influence that this group has greatly exceeds those who are simply well-off, let alone the typical citizen who doesn't live in "Richistan" at all.

But Collins thinks the political catchphrase "billionaires shouldn't exist" doesn't capture the real problem and has a "suggestion of eradication" to it.

"It's the separation between private conduct and a framework of policies," Collins said. "We should be focused on an economic system that directs so much wealth upward to the billionaires."

Fortune Building Strategies

To understand how wealth at the billionaire level works, Collins divides it into four parts: accumulating assets, protecting assets, government influence and extreme wealth removal.

When many Americans think about wealth, they usually think exclusively about the first step, Collins said. People can create a reasonable quantity of wealth through establishing or managing a successful business, which could get them residency 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 expertise to ensure that the super rich are being calculated about their taxes.

"Wealth defense professionals use a broad range of tools such as financial instruments, foreign deposits, secret corporations, philanthropic entities and other vehicles to hold assets," he explains.

Political Influence and Hyper-Extraction

To advance a wealth defense strategy, a family needs government backing. Wealth of over $40m translates to political power, Collins says, and can be used to defend wealth and maintain expansion.

The last stage is a different kind of wealth accumulation, one that Collins calls "hyper extraction" to describe how the wealthy have come to influence nearly every single part of an Americans' routine activities largely through investment firms, which allows wealthy individuals to invest in private companies.

"Private equity is seeking those areas of the economy where they can extract value a little bit harder," Collins said. "One thing I don't think people comprehend is these billionaire private-equity funds are what happens when so much wealth is stored in so few hands, and they can kind of turn around and say, 'Where else can we generate returns out of the economy?' Healthcare? Great. Mobile home parks? These people can't go anywhere, [so] you can raise their rents."

The Real Consequences

The results of this inequality go beyond the wealth getting wealthier. It's about people paying more for their healthcare, rent and vet bills without seeing any substantial income improvement. And Collins said the hardship and discontent of this kind of society can lead to deep discontent.

"The most powerful oligarchs understand people are being excluded [and] are economically suffering," Collins said, adding that right-leaning leaders have been good at tapping into a potent "false common-man appeal".

Policy Situation

The contradiction, Collins points out in his book, is that government officials have appointed a string of billionaires to cabinet positions. Along with affluent innovators who had temporary but significant roles overseeing substantial reductions to the federal workforce, other key positions for commerce, treasury, education and the interior are also all billionaires.

This government structure, along with help from congressional allies, helped pass huge tax bills, which will make lasting reductions for the wealthy and corporations.

Potential Changes

While legislative bodies continue to argue that foreign entry and poor economic deals are the source of everyone's economic problems, "the question becomes: Will the alternative political group, which has also been influenced by the billionaires and big money, be able to meaningfully address the underlying harms?" Collins said.

Left-leaning officials, he argues, know what policies are needed to "reverse the updraft of wealth", including significant reforms to the tax system, boosting the minimum wage and strengthening unions.

"It was so, so close, and the bill really did reflect the will of the majority of people who really want lawmakers to address some of these urgent problems," Collins said. "Elite control is not about creating so much as stopping. It's easier to block than it is to make something substantial take place, but the institutional knowledge is there. We know what that looks like."

Collins is optimistic that there can be change, but said it would require sustained political momentum.

"It may be sooner than expected 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."