🔗 Share this article

For many US citizens, the economy over the recent five-year span has been difficult. Prices have soared while wages remains stagnant. Steep mortgage rates have made homeownership a grim prospect. The rate of unemployment has been slowly rising.

The majority of individuals have reported they're postponing major life decisions, including raising children or moving to new employment, because of the instability. But for a select few of people, the last five years couldn't have been more prosperous.

Wealth Explosion

The assets of the world's billionaires expanded 54% in 2020, at the climax of the pandemic. And even during all the market volatility, the stock market has only kept rising. This increase has mostly helped just a small number of Americans: 10% of the population controls 93% of stock market wealth.

As uneven as this division seems, it's the financial structure working as it is existing today.

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

Understanding Wealth Tiers

To help others grasp what exactly it means to be "wealthy" 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 update the concept, Collins classifies these "wealth villages" 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 total assets of over $1.5m.
• The villages get more exclusive 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.

Altogether, 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 sitting in the coach section of a commercial plane," Collins said. "Whereas in Upper Richistan, you're using a private jet. That's a really separate reality. You fly private, you have no investment in the commercial aviation system. You don't care if the whole system shuts down – you're set."

Extreme Affluence Consequences

The highest hill in "Richistan" is Billionaireville, which is made up of about 800 American billionaires who are some of the world's richest. The control that this group has substantially outweighs those who are simply wealthy, let alone the typical citizen who doesn't reside in "Richistan" at all.

But Collins thinks the activist mantra "end extreme wealth" misses the point and has a "hint of elimination" to it.

"It's the difference between individual behaviors and a system of rules," Collins explained. "We should be worried about an economic system that directs so much wealth upward to the billionaires."

Wealth Accumulation Mechanisms

To understand how wealth at the billionaire level works, Collins breaks it down into four parts: accumulating assets, protecting assets, political capture and maximum resource extraction.

When many Americans think about wealth, they usually think exclusively about the first step, Collins said. People can create a reasonable quantity of wealth through creating or operating a successful business, which could get them membership in Affluent Town.

But getting to Billionaireville requires substantial commitment and tactics in those next three steps. Collins describes what he calls the "wealth defense industry": the tax lawyers, accountants and wealth managers who use their skills to ensure that the super rich are being deliberate about their taxes.

"Wealth defense professionals use a broad range of tools such as trusts, foreign deposits, undisclosed businesses, charitable foundations and other mechanisms to hold assets," he writes.

Government Power and Extreme Wealth Removal

To enhance a wealth defense strategy, a family needs government backing. Wealth of over $40m translates to political power, Collins says, and can be used to secure fortune and protect its accumulation.

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' 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 stored in so few hands, and they can basically shift 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."

Tangible Effects

The effects 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 significant salary growth. And Collins said the hardship and discontent of this kind of society can lead to profound dissatisfaction.

"The most powerful affluent rulers understand people are being left behind [and] are financially struggling," Collins said, adding that Republicans have been good at tapping into a potent "false common-man appeal".

Political Reality

The irony, Collins points out in his book, is that political leaders have appointed a string of billionaires to cabinet positions. Along with wealthy entrepreneurs who had brief but powerful roles overseeing substantial reductions 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 political partners, helped pass huge tax bills, which will make lasting reductions for the wealthy and corporations.

Potential Changes

While legislative bodies continue to argue that foreign entry and bad trade agreements are the source of everyone's economic problems, "the question becomes: 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.

Progressive politicians, he argues, know what policies are needed to "reverse the updraft of wealth", including substantial modifications to the tax system, increasing the minimum wage and supporting labor organizations.

"It was so, so close, and the bill really did reflect the will of the majority 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 substantial take place, 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 sooner than expected that the tide turns, and then it really is about preserving a ongoing grassroots effort to make progress on this extreme inequality we're living in," he said. "We can address this. It is addressable."