🔗 Share this article

For many Americans, the economic climate over the past five years has been difficult. Costs have escalated while wages remains unchanged. Steep mortgage rates have made buying a home a grim prospect. The jobless rate has been slowly rising.

Most people have stated they're postponing major life decisions, including having kids or switching jobs, because of financial volatility. But for a very small group of people, the past five-year period couldn't have been any better.

Wealth Explosion

The fortune of the world's billionaires expanded 54% in 2020, at the height of the pandemic. And even amid all the market volatility, the stock market has only continued to grow. This increase has largely benefited just a limited group of Americans: 10% of the population controls 93% of stock market wealth.

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

"Affluent individuals have acquired their jets, they've acquired 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 hyper-extraction where the wealthy are preying on the system of inequality."

Mapping Economic Classes

To help others comprehend what exactly it means to be "rich" 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: Wealth Borough, Lower Richistan, Middle Richistan, Upper Richistan and Billionaireville.

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

• At the foundation, Affluent Town, are the 10 million Americans who have a household income of at least $110,000 and an overall wealth 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 constitute the top 10% of the wealth income distribution, about 14 million Americans altogether, though their lifestyles vary dramatically.

"You could be in Lower Richistan, and you're still traveling 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 different cultural experience. You fly private, you have no investment in the commercial aviation system. You don't care if the whole system collapses – you're set."

The Billionaireville Effect

The highest hill 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 greatly exceeds those who are simply well-off, let alone the typical citizen who doesn't reside in "Richistan" at all.

But Collins thinks the activist mantra "end extreme wealth" doesn't capture the real problem and has a "hint of elimination" to it.

"It's the difference between personal actions and a structure of regulations," Collins explained. "We should be worried about 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, protecting assets, 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 modest amount of wealth through creating or operating a successful business, which could get them membership in Affluent Town.

But getting to Billionaireville requires significant resources 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 expertise to ensure that the super rich are being strategic about their taxes.

"Wealth defense professionals use a broad range of tools such as financial instruments, international accounts, secret corporations, charitable foundations and other vehicles to hold assets," he explains.

Government Power and Extreme Wealth Removal

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

The last stage is a different kind of wealth accumulation, one that Collins calls "extreme removal" to describe how the wealthy have come to influence nearly every single part of an Americans' routine activities largely through capital management, which allows wealthy individuals to invest in private companies.

"Private equity is seeking those sectors of the economy where they can increase profits 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 stored in so few hands, and they can kind of turn around 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 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 significant salary growth. 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 marginalized [and] are financially struggling," Collins said, adding that conservative politicians have been good at tapping into a potent "false common-man appeal".

Government Truth

The paradox, Collins points out in his book, is that government officials have appointed a string of billionaires to cabinet positions. Along with wealthy entrepreneurs 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 congressional allies, helped pass huge tax bills, which will make permanent tax cuts for the wealthy and corporations.

The Path Forward

While legislative bodies continue to argue that immigration and bad trade agreements are the source of everyone's economic problems, "the challenge is: Will the alternative political group, which has also been controlled by the billionaires and big money, be able to effectively tackle the underlying harms?" Collins said.

Liberal leaders, he argues, know what policies are needed to "change wealth distribution", including significant reforms to the tax system, raising the minimum wage and empowering worker groups.

"It was so, so close, and the bill really did represent the will of the majority of people who really want lawmakers to solve some of these critical challenges," Collins said. "Elite control is not about building so much as preventing. 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 sustained political momentum.

"It may be sooner than expected that the tide turns, and then it really is about preserving a continuous public campaign to make progress on this severe disparity we're living in," he said. "We can fix this. It is fixable."