🔗 Share this article

To numerous Americans, the economic climate over the recent five-year span has been difficult. Prices have soared while pay remains flat. Steep mortgage rates have made purchasing property a bleak prospect. The jobless rate has been creeping up.

Most people have indicated they're postponing major life decisions, including starting a family or moving to new employment, because of the instability. But for a select few of people, the last five years couldn't have been any better.

Wealth Explosion

The assets of the world's billionaires expanded 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 mostly helped just a small number of Americans: 10% of the population controls 93% of stock market wealth.

Despite the imbalance as this distribution seems, it's the financial structure working as it is currently designed.

"Rich elites have acquired their jets, they've acquired their multiple houses and mansions, but now they're acquiring senators and media outlets," explained wealth disparity expert Chuck Collins. "We're now entering this other chapter of hyper-extraction where the wealthy are exploiting the system of inequality."

Analyzing Income Brackets

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

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

• At the lowest tier, Affluent Town, are the 10 million Americans who have a household income of at least $110,000 and an total assets of over $1.5m.
• The villages get more restricted 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 said. "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 collapses – 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 richest. The influence 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 activist mantra "end extreme wealth" fails to address the core issue and has a "whiff of exterminism" to it.

"It's the difference between personal actions and a system of rules," Collins commented. "We should be worried 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 divides it into four parts: accumulating assets, protecting assets, government influence and extreme wealth removal.

When many Americans think about wealth, they usually think solely about the first step, Collins said. People can create a modest amount of wealth through creating or operating 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 skills 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, anonymous shell companies, charitable foundations and other vehicles to hold assets," he details.

Political Influence and Hyper-Extraction

To advance a wealth defense strategy, a family needs government backing. Wealth of over $40m translates to 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' everyday life largely through investment firms, which allows wealthy individuals to fund private companies.

"Private equity is seeking those areas of the economy where they can squeeze things a little bit harder," Collins said. "One thing I don't think people understand 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 squeeze money 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 paying more for their healthcare, rent and vet bills without seeing any significant salary growth. 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 left behind [and] are economically suffering," Collins said, adding that Republicans have been good at accessing a potent "phony populism".

Political Reality

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 brief but powerful roles overseeing substantial reductions to the federal workforce, other key positions for commerce, treasury, education and the interior are also all billionaires.

This administrative framework, along with help from political partners, helped pass significant fiscal policies, which will make enduring decreases for the wealthy and corporations.

Future Solutions

While legislative bodies continue to argue that foreign entry and bad trade agreements are the source of everyone's economic problems, "the question becomes: Will the opposing 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 "change wealth distribution", including substantial modifications to the tax system, raising the minimum wage and empowering worker groups.

"It was so, so close, and the law really did represent the will of the bulk of people who really want lawmakers to fix some of these urgent problems," Collins said. "Wealthy influence is not about building so much as blocking. It's easier to block than it is to make something meaningful happen, 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 ongoing legislative effort.

"It may be quickly that the tide turns, and then it really is about maintaining a sustained really popular movement to make progress on this extreme inequality we're living in," he said. "We can fix this. It is fixable."