🔗 Share this article

To numerous individuals in the United States, the financial landscape over the past five years has been challenging. Costs have skyrocketed while salaries remains unchanged. High mortgage rates have made homeownership a grim prospect. The jobless rate has been gradually increasing.

The majority of individuals have reported they're postponing major life decisions, including raising children or moving to new employment, because of financial volatility. But for a very small group of people, the recent half-decade couldn't have been more successful.

Wealth Explosion

The fortune of the world's billionaires expanded 54% in 2020, at the peak of the pandemic. And even amid all the financial uncertainty, the stock market has only persisted in expanding. This increase has mostly helped just a limited group of Americans: 10% of the population owns 93% of stock market wealth.

As uneven as this distribution seems, it's the system working as it is currently designed.

"Affluent individuals have acquired their jets, they've bought their multiple houses and mansions, but now they're acquiring senators and media outlets," commented economic inequality analyst Chuck Collins. "We're now moving into this other chapter of maximum resource removal where the wealthy are taking advantage of the system of inequality."

Understanding Wealth Tiers

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

To contemporize the concept, Collins categorizes 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 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 separate reality. You fly private, you have no investment in the commercial aviation system. You don't care if the whole system collapses – you're set."

The Billionaireville Effect

The summit in "Richistan" is Billionaireville, which is made up of about 800 American billionaires who are some of the world's wealthiest. The power that this group has far surpasses those who are simply well-off, let alone the ordinary person who doesn't inhabit "Richistan" at all.

But Collins thinks the activist mantra "end extreme wealth" fails to address the core issue and has a "suggestion of eradication" to it.

"It's the difference between private conduct and a system of rules," Collins explained. "We should be concerned about 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 separates it into four parts: accumulating assets, defending the wealth, political capture and hyper-extraction.

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 starting or running 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 skills to ensure that the super rich are being deliberate about their taxes.

"Wealth defense professionals use a extensive selection of tools such as legal entities, offshore bank accounts, anonymous shell companies, non-profit organizations and other methods to hold assets," he details.

Government Power and Extreme Wealth Removal

To enhance a wealth defense strategy, a family needs government backing. Wealth of over $40m converts to political power, Collins says, and can be used to secure fortune and ensure continued growth.

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

"Private equity is searching for those sectors of the economy where they can squeeze things 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 essentially pivot 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 raise their rents."

Tangible Effects

The results 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 substantial income improvement. And Collins said the hardship and discontent of this kind of society can lead to serious unrest.

"The most powerful affluent rulers understand people are being left behind [and] are economically suffering," Collins said, adding that conservative politicians have been good at accessing a potent "phony populism".

Policy Situation

The contradiction, Collins points out in his book, is that government officials have appointed a string of billionaires to administrative posts. Along with wealthy entrepreneurs who had temporary but significant roles overseeing significant decreases to the federal workforce, other important roles for commerce, treasury, education and the interior are also all billionaires.

This political landscape, along with help from legislative supporters, helped pass significant fiscal policies, which will make lasting reductions for the wealthy and corporations.

Potential Changes

While government groups continue to argue that foreign entry and unfavorable commercial treaties are the source of everyone's economic problems, "the challenge is: Will the other major party, which has also been controlled 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 "change wealth distribution", including deep changes to the tax system, increasing the minimum wage and empowering worker groups.

"It was so, so close, and the legislation really did represent the will of the bulk of people who really want lawmakers to address some of these urgent problems," Collins said. "Elite control is not about creating so much as preventing. It's easier to block than it is to make something meaningful happen, 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 ongoing legislative effort.

"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 fix this. It is solvable."