🔗 Share this article

For many Americans, the economic climate over the last half-decade has been challenging. Prices have skyrocketed while pay remains flat. High mortgage rates have made buying a home a dismal prospect. The jobless rate has been creeping up.

The majority of individuals have reported they're delaying major life decisions, including having kids or changing careers, because of financial volatility. But for a select few of people, the last five years couldn't have been any better.

Fortune Expansion

The assets of the world's billionaires grew 54% in 2020, at the height of the pandemic. And even during all the economic instability, the stock market has only persisted in expanding. This expansion has largely benefited 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 economic framework working as it is existing today.

"Affluent individuals have bought their jets, they've acquired their multiple houses and mansions, but now they're acquiring senators and media outlets," stated inequality researcher Chuck Collins. "We're now stepping into this other chapter of extreme wealth extraction where the wealthy are exploiting the system of inequality."

Analyzing Income Brackets

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

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

• At the lowest tier, Affluent Town, are the 10 million Americans who have a annual salary of at least $110,000 and an net worth 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.

Altogether, the residents of these villages constitute 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 said. "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 shuts down – 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 wealthiest. The control that this group has substantially outweighs those who are simply well-off, let alone the average American who doesn't inhabit "Richistan" at all.

But Collins thinks the political catchphrase "billionaires shouldn't exist" fails to address the core issue and has a "hint of elimination" to it.

"It's the difference between individual behaviors and a system of rules," Collins said. "We should be concerned about an economic system that funnels 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, securing fortune, 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 limited sum of wealth through starting or running a successful business, which could get them admission in Affluent Town.

But getting to Billionaireville requires serious investment and planning 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 financial instruments, international 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 political support. Wealth of over $40m converts to political power, Collins says, and can be used to protect assets and protect its accumulation.

The final phase 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' 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 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 parked 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 boost their expenses."

Tangible Effects

The results 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 oligarchs understand people are being left behind [and] are financially struggling," Collins said, adding that Republicans have been good at connecting with a potent "false common-man appeal".

Political Reality

The paradox, Collins points out in his book, is that political leaders have appointed a succession 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 political landscape, along with help from political partners, helped pass major tax legislation, which will make enduring decreases for the wealthy and corporations.

Future Solutions

While legislative bodies continue to argue that border policies and poor economic deals are the source of everyone's economic problems, "the challenge is: Will the opposing party, which has also been controlled by the billionaires and big money, be able to effectively tackle 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, boosting the minimum wage and empowering worker groups.

"It was so, so close, and the bill really did embody the will of the majority of people who really want lawmakers to address some of these urgent problems," Collins said. "Wealthy influence is not about creating so much as blocking. It's easier to block than it is to make something significant occur, but the muscle memory is there. We know what that looks like."

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

"It may be sooner than expected that the pendulum swings back, 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."