Boom Time for American Billionaires: How the System Perpetuates Wealth Inequality

To numerous individuals in the United States, the economy over the last half-decade has been difficult. Prices have soared while salaries remains stagnant. High mortgage rates have made homeownership a grim prospect. The jobless rate has been creeping up.

The majority of individuals have indicated they're putting off major life decisions, including raising children or moving to new employment, because of the instability. But for a tiny fraction of people, the past five-year period couldn't have been any better.

The Billionaire Boom

The fortune of the world's billionaires increased 54% in 2020, at the peak of the pandemic. And even during all the financial uncertainty, the stock market has only kept rising. This growth has primarily advantaged just a tiny percentage of Americans: 10% of the population holds 93% of stock market wealth.

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

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

Mapping Economic Classes

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, conceptualized the different levels of wealth as "Affluencia" 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 foundation, Affluent Town, are the 10 million Americans who have a annual salary of at least $110,000 and an overall wealth 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.

Collectively, 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 sitting in the coach section of a commercial plane," Collins explained. "Whereas in Upper Richistan, you're flying in a private jet. That's a really separate reality. You fly private, you have no interest in the commercial aviation system. You don't care if the whole system collapses – you're set."

Ultra-Wealth Impact

The highest hill in "Richistan" is Billionaireville, which is made up of about 800 American billionaires who are some of the world's most affluent. The power that this group has substantially outweighs those who are simply affluent, let alone the ordinary person who doesn't inhabit "Richistan" at all.

But Collins thinks the activist mantra "end extreme wealth" misses the point and has a "suggestion of eradication" to it.

"It's the difference between individual behaviors and a framework of policies," Collins said. "We should be focused on 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 breaks it down into four parts: acquiring fortune, protecting assets, political capture and maximum resource extraction.

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

But getting to Billionaireville requires substantial commitment and planning in those next three steps. Collins describes what he calls the "fortune security field": the tax lawyers, accountants and wealth managers who use their knowledge to ensure that the super rich are being strategic about their taxes.

"Wealth defense professionals use a wide variety of tools such as legal entities, offshore bank accounts, secret corporations, non-profit organizations and other vehicles to hold assets," he explains.

Government Power and Extreme Wealth Removal

To advance a wealth defense strategy, a family needs political support. Wealth of over $40m becomes political power, Collins says, and can be used to defend wealth and protect its accumulation.

The final phase is a different kind of wealth accumulation, one that Collins calls "maximum taking" to describe how the wealthy have come to influence 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 areas of the economy where they can increase profits 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 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 boost their expenses."

Actual Impacts

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 significant salary growth. And Collins said the hardship and discontent of this kind of society can lead to serious unrest.

"The most powerful wealthy elites understand people are being left behind [and] are financially struggling," Collins said, adding that conservative politicians have been good at connecting with a potent "false common-man appeal".

Government Truth

The irony, 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 significant decreases to the federal workforce, other important roles for commerce, treasury, education and the interior are also all billionaires.

This administrative framework, along with help from congressional allies, helped pass significant fiscal policies, which will make permanent tax cuts for the wealthy and corporations.

Potential Changes

While legislative bodies continue to argue that border policies and bad trade agreements are the source of everyone's economic problems, "the question becomes: Will the alternative political group, 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 "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 legislation really did reflect the will of the majority of people who really want lawmakers to address some of these critical challenges," Collins said. "Oligarchic power is not about developing so much as stopping. It's easier to block than it is to make something significant occur, 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 tide turns, 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 solve this. It is addressable."