Golden Era for US Billionaires: How the Economic Structure Perpetuates Wealth Inequality

For many individuals in the United States, the economic climate over the past five years has been challenging. Expenses have soared while salaries remains stagnant. High mortgage rates have made buying a home a grim prospect. The rate of unemployment has been slowly rising.

Many Americans have reported they're putting off major life decisions, including having kids or changing careers, because of financial volatility. But for a very small group of people, the recent half-decade couldn't have been more prosperous.

The Billionaire Boom

The assets of the world's billionaires grew 54% in 2020, at the peak of the pandemic. And even amid all the financial uncertainty, the stock market has only kept rising. 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 division seems, it's the system working as it is presently configured.

"The wealthy have bought 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 extreme wealth extraction where the wealthy are preying on the system of inequality."

Analyzing Income Brackets

To help others comprehend 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, conceptualized the different levels of wealth as "Wealthville" villages: Wealth Borough, Lower Richistan, Middle Richistan, Upper Richistan and Billionaireville.

To contemporize the concept, Collins classifies these "economic communities" based on income levels:

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

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 flying 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 investment in the commercial aviation system. You don't care if the whole system fails – 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 wealthiest. The control that this group has substantially outweighs those who are simply well-off, let alone the typical citizen who doesn't inhabit "Richistan" at all.

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

"It's the distinction between personal actions and a system of rules," Collins commented. "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, defending the wealth, policy control and hyper-extraction.

When many Americans think about wealth, they usually think only about the first step, Collins said. People can create a limited sum of wealth through starting or running a successful business, which could get them residency in Affluent Town.

But getting to Billionaireville requires serious investment and tactics in those next three steps. Collins describes what he calls the "asset protection sector": the tax lawyers, accountants and wealth managers who use their expertise to ensure that the super rich are being calculated about their taxes.

"Wealth defense professionals use a extensive selection of tools such as trusts, international accounts, undisclosed businesses, non-profit organizations and other vehicles to hold assets," he writes.

Political Influence and Hyper-Extraction

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

The last stage is a different kind of wealth accumulation, one that Collins calls "maximum taking" to describe how the wealthy have come to touch nearly every single part of an Americans' routine activities largely through investment firms, which allows wealthy individuals to fund private companies.

"Private equity is seeking 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 stored in so few hands, and they can essentially pivot and say, 'Where else can we generate returns out of the economy?' Healthcare? Great. Mobile home parks? These people can't go anywhere, [so] you can increase their costs."

Actual Impacts

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 substantial income improvement. And Collins said the suffering and anger of this kind of society can lead to deep discontent.

"The most powerful oligarchs understand people are being marginalized [and] are financially struggling," Collins said, adding that Republicans have been good at accessing a potent "phony populism".

Policy Situation

The contradiction, Collins points out in his book, is that political leaders have appointed a string of billionaires to cabinet positions. Along with tech billionaires who had short yet influential 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 congressional allies, helped pass huge tax bills, which will make lasting reductions for the wealthy and corporations.

The Path Forward

While legislative bodies continue to argue that foreign entry and bad trade agreements are the source of everyone's economic problems, "the issue remains: Will the other major party, which has also been influenced by the billionaires and big money, be able to seriously confront the underlying harms?" Collins said.

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

"It was so, so close, and the law really did reflect the will of the majority of people who really want lawmakers to fix some of these pressing issues," Collins said. "Elite control is not about creating so much as blocking. It's easier to block than it is to make something substantial take place, but the muscle memory is there. We know what that looks like."

Collins is hopeful that there can be change, but said it would require ongoing legislative effort.

"It may be quickly that the pendulum swings back, and then it really is about sustaining a continuous public campaign to make progress on this extreme inequality we're living in," he said. "We can fix this. It is fixable."