Boom Time for American Billionaires: How the Economic Structure Perpetuates Wealth Inequality

To numerous individuals in the United States, the economic climate over the last half-decade has been difficult. Expenses have skyrocketed while salaries remains unchanged. Elevated mortgage rates have made buying a home a bleak prospect. The unemployment rate has been slowly rising.

The majority of individuals have reported they're postponing major life decisions, including having kids or switching jobs, because of the instability. But for a tiny fraction of people, the last five years couldn't have been more successful.

The Billionaire Boom

The assets of the world's billionaires grew 54% in 2020, at the climax of the pandemic. And even during all the market volatility, the stock market has only kept rising. This expansion has primarily advantaged just a small number of Americans: 10% of the population holds 93% of stock market wealth.

As uneven as this division seems, it's the system working as it is currently designed.

"Rich elites have acquired their jets, they've purchased their multiple houses and mansions, but now they're acquiring senators and media outlets," explained wealth disparity expert Chuck Collins. "We're now moving into this other chapter of hyper-extraction where the wealthy are taking advantage of the system of inequality."

Understanding Wealth Tiers

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

To update the concept, Collins organizes these "wealth villages" based on income levels:

• At the foundation, 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.

Collectively, the residents of these villages comprise 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 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 peak 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 substantially outweighs those who are simply affluent, let alone the ordinary person who doesn't reside in "Richistan" at all.

But Collins thinks the political catchphrase "abolish billionaires" fails to address the core issue and has a "whiff of exterminism" to it.

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

The Four Pillars of Billionaire Wealth

To understand how wealth at the billionaire level works, Collins divides it into four parts: accumulating assets, protecting assets, policy control and maximum resource 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 starting or running a successful business, which could get them admission in Affluent Town.

But getting to Billionaireville requires significant resources and strategy in those next three steps. Collins describes what he calls the "asset protection sector": 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 financial instruments, foreign deposits, secret corporations, philanthropic entities and other vehicles 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 defend wealth and protect its accumulation.

The ultimate step is a different kind of wealth accumulation, one that Collins calls "maximum taking" 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 fund private companies.

"Private equity is seeking those sectors of the economy where they can extract value 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 extract profits out of the economy?' Healthcare? Great. Mobile home parks? These people can't go anywhere, [so] you can boost their expenses."

Tangible Effects

The consequences of this inequality go beyond the wealth getting wealthier. It's about people facing higher costs 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 "false common-man appeal".

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 affluent innovators who had short yet influential roles overseeing substantial reductions 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 congressional allies, helped pass significant fiscal policies, which will make lasting reductions 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 issue remains: Will the opposing 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 "alter economic flow", including substantial modifications to the tax system, boosting the minimum wage and strengthening unions.

"It was so, so close, and the bill really did embody the will of the majority of people who really want lawmakers to solve some of these critical challenges," Collins said. "Oligarchic power is not about building so much as blocking. It's easier to block than it is to make something meaningful happen, 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 continuous government action.

"It may be sooner than expected that the balance shifts, 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."