Boom Time for American Billionaires: Why the Economic Structure Sustains Income Disparity

To numerous individuals in the United States, the economic climate over the past five years has been challenging. Expenses have escalated while salaries remains unchanged. Elevated mortgage rates have made purchasing property a bleak prospect. The jobless rate has been gradually increasing.

The majority of individuals have reported they're delaying major life decisions, including having kids or changing careers, because of economic uncertainty. But for a tiny fraction of people, the recent half-decade couldn't have been more successful.

The Billionaire Boom

The wealth of the world's billionaires grew 54% in 2020, at the peak of the pandemic. And even throughout all the market volatility, the stock market has only kept rising. This growth has largely benefited just a small number of Americans: 10% of the population controls 93% of stock market wealth.

Despite the imbalance as this allocation seems, it's the system working as it is presently configured.

"Affluent individuals have acquired their jets, they've bought 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 maximum resource removal where the wealthy are preying on the system of inequality."

Mapping Economic Classes

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

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

• At the base level, Affluent Town, are the 10 million Americans who have a household income of at least $110,000 and an net worth 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.

Collectively, the residents of these villages make up 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 noted. "Whereas in Upper Richistan, you're flying in 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 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 affluent, let alone the ordinary person who doesn't inhabit "Richistan" at all.

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

"It's the distinction between private conduct and a system of rules," 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 divides it into four parts: accumulating assets, defending the wealth, policy control and hyper-extraction.

When many Americans think about wealth, they usually think exclusively 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 residency in Affluent Town.

But getting to Billionaireville requires substantial commitment and tactics 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 extensive selection of tools such as trusts, offshore bank accounts, anonymous shell companies, philanthropic entities and other vehicles to hold assets," he writes.

Political Influence and Hyper-Extraction

To advance a wealth defense strategy, a family needs policy assistance. Wealth of over $40m becomes political power, Collins says, and can be used to defend wealth and ensure continued growth.

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' daily existence largely through private equity, which allows wealthy individuals to support private companies.

"Private equity is searching for those corners 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 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 boost their expenses."

The Real Consequences

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

"The most powerful affluent rulers understand people are being excluded [and] are monetarily hurting," Collins said, adding that conservative politicians have been good at connecting with a potent "phony populism".

Government Truth

The contradiction, Collins points out in his book, is that political leaders have appointed a series of billionaires to administrative posts. Along with affluent innovators 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 political landscape, along with help from legislative supporters, helped pass huge tax bills, which will make enduring decreases for the wealthy and corporations.

Future Solutions

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 "reverse the updraft of wealth", including significant reforms to the tax system, boosting the minimum wage and strengthening unions.

"It was so, so close, and the legislation really did embody the will of the most of people who really want lawmakers to fix some of these urgent problems," Collins said. "Wealthy influence is not about creating so much as stopping. It's easier to block than it is to make something meaningful happen, but the historical precedent 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 quickly 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 fix this. It is addressable."