Boom Time for US Billionaires: Why the Economic Structure Sustains Wealth Inequality

To numerous individuals in the United States, the economy over the past five years has been tough. Expenses have escalated while salaries remains unchanged. High mortgage rates have made homeownership a grim prospect. The unemployment rate has been slowly rising.

The majority of individuals have stated they're postponing major life decisions, including having kids or moving to new employment, because of financial volatility. But for a very small group of people, the past five-year period couldn't have been more successful.

Wealth Explosion

The fortune of the world's billionaires grew 54% in 2020, at the peak of the pandemic. And even throughout all the financial uncertainty, the stock market has only continued to grow. This expansion has primarily advantaged just a limited group of Americans: 10% of the population holds 93% of stock market wealth.

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

"The wealthy have purchased their jets, they've bought their multiple houses and mansions, but now they're buying senators and media outlets," stated economic inequality analyst Chuck Collins. "We're now entering this other chapter of hyper-extraction where the wealthy are taking advantage of the system of inequality."

Analyzing Income Brackets

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

To contemporize the concept, Collins organizes these "affluence districts" based on income levels:

• At the base level, Affluent Town, are the 10 million Americans who have a family earnings 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.

In total, the residents of these villages constitute 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 explained. "Whereas in Upper Richistan, you're flying in a private jet. That's a really distinct lifestyle. You fly private, you have no stakes in the commercial aviation system. You don't care if the whole system fails – 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 most affluent. The influence that this group has far surpasses those who are simply affluent, let alone the average American who doesn't reside in "Richistan" at all.

But Collins thinks the progressive slogan "end extreme wealth" fails to address the core issue and has a "whiff of exterminism" to it.

"It's the separation between personal actions and a system of rules," Collins said. "We should be concerned about an economic system that funnels so much wealth upward to the billionaires."

The Four Pillars of Billionaire Wealth

To understand how wealth at the billionaire level works, Collins breaks it down into four parts: accumulating assets, securing fortune, policy control and extreme wealth removal.

When many Americans think about wealth, they usually think only about the first step, Collins said. People can create a reasonable quantity 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 "fortune security field": the tax lawyers, accountants and wealth managers who use their knowledge to ensure that the super rich are being calculated 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 writes.

Government Power and Extreme Wealth Removal

To further a wealth defense strategy, a family needs policy assistance. 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 "hyper extraction" to describe how the wealthy have come to affect nearly every single part of an Americans' everyday life largely through capital management, which allows wealthy individuals to invest in private companies.

"Private equity is looking for those sectors of the economy where they can squeeze things 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 parked in so few hands, and they can basically shift 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 boost their expenses."

Tangible Effects

The effects 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 meaningful wage increases. And Collins said the pain and frustration of this kind of society can lead to deep discontent.

"The most powerful affluent rulers understand people are being marginalized [and] are financially struggling," Collins said, adding that conservative politicians have been good at connecting with a potent "fake grassroots movement".

Government Truth

The irony, Collins points out in his book, is that political leaders have appointed a string of billionaires to administrative posts. Along with wealthy entrepreneurs who had temporary but significant roles overseeing significant decreases to the federal workforce, other crucial appointments for commerce, treasury, education and the interior are also all billionaires.

This government structure, along with help from political partners, helped pass huge tax bills, which will make permanent tax cuts for the wealthy and corporations.

Potential Changes

While political parties 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 controlled by the billionaires and big money, be able to meaningfully address 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, raising the minimum wage and strengthening unions.

"It was so, so close, and the law 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 building so much as stopping. It's easier to block than it is to make something meaningful happen, but the institutional knowledge is there. We know what that looks like."

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

"It may be quickly that the balance shifts, 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 fixable."