Golden Era for American Billionaires: Why the Economic Structure Sustains Wealth Inequality

For many US citizens, the economic climate over the past five years has been difficult. Prices have soared while pay remains stagnant. High mortgage rates have made homeownership a grim prospect. The unemployment rate has been gradually increasing.

The majority of individuals have reported they're delaying major life decisions, including starting a family or switching jobs, because of economic uncertainty. But for a very small group of people, the recent half-decade couldn't have been more successful.

The Billionaire Boom

The assets of the world's billionaires increased 54% in 2020, at the peak of the pandemic. And even amid all the financial uncertainty, the stock market has only kept rising. This expansion has mostly helped just a small number of Americans: 10% of the population controls 93% of stock market wealth.

Despite the imbalance as this division seems, it's the system working as it is existing today.

"Rich elites have bought their jets, they've bought their multiple houses and mansions, but now they're acquiring senators and media outlets," commented wealth disparity expert Chuck Collins. "We're now stepping into this other chapter of hyper-extraction where the wealthy are preying on the system of inequality."

Understanding Wealth Tiers

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, conceptualized the different levels of wealth as "Wealthville" villages: Affluent Town, Lower Richistan, Middle Richistan, Upper Richistan and Billionaireville.

To modernize the concept, Collins categorizes these "affluence districts" 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 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.

In total, the residents of these villages comprise 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 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 interest in the commercial aviation system. You don't care if the whole system fails – you're set."

The Billionaireville Effect

The peak in "Richistan" is Billionaireville, which is made up of about 800 American billionaires who are some of the world's wealthiest. 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 "billionaires shouldn't exist" fails to address the core issue and has a "hint of elimination" to it.

"It's the distinction between individual behaviors and a structure of regulations," Collins explained. "We should be worried about an economic system that channels 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: getting the wealth, securing fortune, policy control and maximum resource extraction.

When many Americans think about wealth, they usually think solely 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 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 expertise 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, international accounts, undisclosed businesses, charitable foundations and other mechanisms to hold assets," he explains.

Political Influence and Hyper-Extraction

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

The last stage is a different kind of wealth accumulation, one that Collins calls "hyper extraction" 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 seeking those areas of the economy where they can squeeze things 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 accumulated in so few hands, and they can kind of turn around 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 boost their expenses."

Tangible Effects

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 pain and frustration of this kind of society can lead to serious unrest.

"The most powerful wealthy elites understand people are being excluded [and] are financially struggling," Collins said, adding that conservative politicians have been good at accessing a potent "fake grassroots movement".

Political Reality

The irony, Collins points out in his book, is that government officials have appointed a series of billionaires to government roles. Along with affluent innovators who had short yet influential roles overseeing massive cuts to the federal workforce, other crucial appointments for commerce, treasury, education and the interior are also all billionaires.

This administrative framework, along with help from political partners, helped pass major tax legislation, which will make permanent tax cuts for the wealthy and corporations.

Potential Changes

While political parties continue to argue that immigration and unfavorable commercial treaties are the source of everyone's economic problems, "the issue remains: Will the other major party, which has also been controlled by the billionaires and big money, be able to seriously confront the underlying harms?" Collins said.

Progressive politicians, he argues, know what policies are needed to "reverse the updraft of wealth", including substantial modifications to the tax system, boosting the minimum wage and strengthening unions.

"It was so, so close, and the legislation really did represent the will of the most of people who really want lawmakers to address some of these critical challenges," Collins said. "Oligarchic power is not about developing so much as preventing. It's easier to block than it is to make something significant occur, 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 sustained political momentum.

"It may be sooner than expected that the tide turns, and then it really is about preserving a ongoing grassroots effort to make progress on this profound imbalance we're living in," he said. "We can solve this. It is solvable."