🔗 Share this article

Among countless individuals in the United States, the economic climate over the last half-decade has been tough. Costs have skyrocketed while salaries remains stagnant. Steep mortgage rates have made buying a home a dismal prospect. The rate of unemployment has been creeping up.

Most people have indicated they're postponing major life decisions, including having kids or changing careers, because of financial volatility. But for a very small group of people, the past five-year period couldn't have been more prosperous.

Fortune Expansion

The wealth of the world's billionaires grew 54% in 2020, at the height of the pandemic. And even during all the financial uncertainty, the stock market has only persisted in expanding. This expansion has largely benefited just a small number of Americans: 10% of the population owns 93% of stock market wealth.

However unequal as this allocation seems, it's the economic framework working as it is presently configured.

"The wealthy have bought their jets, they've bought their multiple houses and mansions, but now they're acquiring senators and media outlets," stated economic inequality analyst Chuck Collins. "We're now stepping into this other chapter of hyper-extraction where the wealthy are taking advantage of the system of inequality."

Analyzing Income Brackets

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

To modernize the concept, Collins classifies these "affluence districts" based on income levels:

• At the base level, Affluent Town, are the 10 million Americans who have a family earnings 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 comprise the top 10% of the wealth income distribution, about 14 million Americans altogether, though their circumstances vary dramatically.

"You could be in Lower Richistan, and you're still flying in the coach section of a commercial plane," Collins explained. "Whereas in Upper Richistan, you're using a private jet. That's a really distinct lifestyle. You fly private, you have no stakes in the commercial aviation system. You don't care if the whole system collapses – you're set."

Ultra-Wealth Impact

The summit 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 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 "abolish billionaires" misses the point and has a "hint of elimination" to it.

"It's the distinction between individual behaviors and a structure of regulations," Collins said. "We should be focused on an economic system that funnels so much wealth upward to the billionaires."

Wealth Accumulation Mechanisms

To understand how wealth at the billionaire level works, Collins breaks it down into four parts: acquiring fortune, defending the wealth, policy control and maximum resource extraction.

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

But getting to Billionaireville requires serious investment 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 knowledge to ensure that the super rich are being deliberate about their taxes.

"Wealth defense professionals use a wide variety of tools such as trusts, offshore bank accounts, secret corporations, charitable foundations and other methods to hold assets," he explains.

Political Influence and Hyper-Extraction

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 final phase is a different kind of wealth accumulation, one that Collins calls "hyper extraction" to describe how the wealthy have come to affect nearly every single part of an Americans' everyday life largely through private equity, which allows wealthy individuals to support private companies.

"Private equity is looking for those corners 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 accumulated 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 increase their costs."

The Real Consequences

The consequences 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 meaningful wage increases. 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 marginalized [and] are monetarily hurting," Collins said, adding that conservative politicians have been good at tapping into a potent "phony populism".

Policy Situation

The contradiction, Collins points out in his book, is that political leaders have appointed a series of billionaires to government roles. Along with tech billionaires who had temporary but significant 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 huge tax bills, which will make lasting reductions for the wealthy and corporations.

The Path Forward

While legislative bodies continue to argue that immigration and poor economic deals are the source of everyone's economic problems, "the issue remains: Will the other major party, which has also been influenced by the billionaires and big money, be able to effectively tackle the underlying harms?" Collins said.

Left-leaning officials, he argues, know what policies are needed to "alter economic flow", including deep changes to the tax system, increasing the minimum wage and strengthening unions.

"It was so, so close, and the legislation really did reflect the will of the most of people who really want lawmakers to fix some of these pressing issues," Collins said. "Elite control is not about creating so much as blocking. It's easier to block than it is to make something meaningful happen, but the historical precedent 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 before we know it that the pendulum swings back, and then it really is about sustaining a continuous public campaign to make progress on this profound imbalance we're living in," he said. "We can fix this. It is solvable."