🔗 Share this article

To numerous US citizens, the economy over the past five years has been difficult. Expenses have soared while pay remains unchanged. High mortgage rates have made homeownership a dismal prospect. The rate of unemployment has been creeping up.

Many Americans have indicated they're postponing major life decisions, including raising children or changing careers, because of economic uncertainty. But for a tiny fraction of people, the recent half-decade couldn't have been any better.

Wealth Explosion

The assets of the world's billionaires increased 54% in 2020, at the climax of the pandemic. And even during all the financial uncertainty, the stock market has only continued to grow. This expansion has largely benefited just a tiny percentage of Americans: 10% of the population controls 93% of stock market wealth.

However unequal as this division seems, it's the financial structure working as it is presently configured.

"The wealthy have bought their jets, they've bought their multiple houses and mansions, but now they're buying senators and media outlets," commented inequality researcher Chuck Collins. "We're now moving into this other chapter of extreme wealth extraction where the wealthy are taking advantage of the system of inequality."

Mapping Economic Classes

To help others understand what exactly it means to be "wealthy" 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 modernize the concept, Collins categorizes these "affluence districts" based on income levels:

• At the foundation, 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 select 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 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 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."

Extreme Affluence Consequences

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 wealthy, let alone the average American who doesn't live in "Richistan" at all.

But Collins thinks the activist mantra "billionaires shouldn't exist" misses the point and has a "suggestion of eradication" to it.

"It's the difference between personal actions and a structure of regulations," Collins explained. "We should be focused on an economic system that channels 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, government influence and hyper-extraction.

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

"Wealth defense professionals use a wide variety of tools such as legal entities, international accounts, anonymous shell companies, charitable foundations and other vehicles to hold assets," he details.

Government Power and Extreme Wealth Removal

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

The final phase 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 support private companies.

"Private equity is searching for those sectors 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 essentially pivot and say, 'Where else can we squeeze money 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 affluent rulers understand people are being excluded [and] are monetarily hurting," Collins said, adding that right-leaning leaders have been good at accessing a potent "fake grassroots movement".

Policy Situation

The paradox, Collins points out in his book, is that elected representatives have appointed a succession of billionaires to government roles. Along with tech billionaires who had short yet influential roles overseeing massive cuts to the federal workforce, other important roles for commerce, treasury, education and the interior are also all billionaires.

This government structure, along with help from political partners, helped pass significant fiscal policies, which will make lasting reductions for the wealthy and corporations.

Future Solutions

While legislative bodies continue to argue that immigration and unfavorable commercial treaties are the source of everyone's economic problems, "the challenge is: 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.

Progressive politicians, he argues, know what policies are needed to "alter economic flow", including deep changes to the tax system, boosting the minimum wage and empowering worker groups.

"It was so, so close, and the legislation really did reflect 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 substantial take place, but the historical precedent is there. We know what that looks like."

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

"It may be sooner than expected that the tide turns, and then it really is about maintaining a sustained really popular movement to make progress on this severe disparity we're living in," he said. "We can solve this. It is addressable."