🔗 Share this article

For many US citizens, the economy over the last half-decade has been tough. Expenses have skyrocketed while salaries remains flat. Steep mortgage rates have made homeownership a bleak prospect. The rate of unemployment has been gradually increasing.

Most people have indicated they're putting off major life decisions, including starting a family or switching jobs, because of the instability. But for a very small group of people, the last five years couldn't have been more successful.

Wealth Explosion

The wealth of the world's billionaires expanded 54% in 2020, at the height of the pandemic. And even amid all the market volatility, the stock market has only persisted in expanding. This expansion has primarily advantaged just a limited group of Americans: 10% of the population owns 93% of stock market wealth.

However unequal as this allocation seems, it's the system working as it is currently designed.

"Rich elites have purchased their jets, they've purchased their multiple houses and mansions, but now they're securing senators and media outlets," commented economic inequality analyst Chuck Collins. "We're now moving into this other chapter of hyper-extraction where the wealthy are exploiting the system of inequality."

Mapping Economic Classes

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

To contemporize the concept, Collins classifies these "wealth villages" based on income levels:

• At the base level, Affluent Town, are the 10 million Americans who have a household income of at least $110,000 and an overall wealth 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.

In total, 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 flying in the coach section of a commercial plane," Collins noted. "Whereas in Upper Richistan, you're flying in 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 shuts down – you're set."

Extreme Affluence Consequences

The peak in "Richistan" is Billionaireville, which is made up of about 800 American billionaires who are some of the world's most affluent. The control that this group has far surpasses those who are simply well-off, let alone the typical citizen who doesn't live in "Richistan" at all.

But Collins thinks the activist mantra "abolish billionaires" doesn't capture the real problem and has a "whiff of exterminism" to it.

"It's the separation between private conduct and a structure of regulations," Collins explained. "We should be concerned about an economic system that channels so much wealth upward to the billionaires."

The Four Pillars of Billionaire Wealth

To understand how wealth at the billionaire level works, Collins breaks it down into four parts: getting the wealth, defending the wealth, policy control and extreme wealth removal.

When many Americans think about wealth, they usually think solely about the first step, Collins said. People can create a reasonable quantity of wealth through creating or operating a successful business, which could get them membership in Affluent Town.

But getting to Billionaireville requires significant resources and planning in those next three steps. Collins describes what he calls the "asset protection sector": 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 wide variety of tools such as financial instruments, offshore bank accounts, secret corporations, charitable foundations and other mechanisms to hold assets," he writes.

Political Influence and Hyper-Extraction

To further a wealth defense strategy, a family needs government backing. Wealth of over $40m becomes 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 "maximum taking" to describe how the wealthy have come to affect nearly every single part of an Americans' routine activities largely through investment firms, which allows wealthy individuals to support private companies.

"Private equity is searching for those corners of the economy where they can increase profits 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 accumulated 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."

Actual Impacts

The effects of this inequality go beyond the wealth getting wealthier. It's about people facing higher costs for their healthcare, rent and vet bills without seeing any substantial income improvement. And Collins said the pain and frustration of this kind of society can lead to profound dissatisfaction.

"The most powerful wealthy elites understand people are being excluded [and] are financially struggling," Collins said, adding that Republicans have been good at tapping into a potent "fake grassroots movement".

Policy Situation

The contradiction, Collins points out in his book, is that elected representatives have appointed a series of billionaires to administrative posts. Along with tech billionaires who had brief but powerful roles overseeing massive cuts 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 legislative supporters, helped pass major tax legislation, which will make enduring decreases for the wealthy and corporations.

Future Solutions

While political parties continue to argue that immigration and unfavorable commercial treaties are the source of everyone's economic problems, "the issue remains: Will the other major party, which has also been captured 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 "change wealth distribution", including substantial modifications to the tax system, boosting the minimum wage and supporting labor organizations.

"It was so, so close, and the law really did represent the will of the most of people who really want lawmakers to solve some of these critical challenges," Collins said. "Wealthy influence is not about developing so much as stopping. It's easier to block than it is to make something significant occur, but the institutional knowledge is there. We know what that looks like."

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

"It may be quickly that the tide turns, and then it really is about preserving a continuous public campaign to make progress on this severe disparity we're living in," he said. "We can solve this. It is fixable."