🔗 Share this article

Among countless US citizens, the economy over the past five years has been tough. Expenses have skyrocketed while pay remains stagnant. Steep mortgage rates have made homeownership a dismal prospect. The unemployment rate has been gradually increasing.

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

Fortune Expansion

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

However unequal as this division seems, it's the economic framework working as it is currently designed.

"Rich elites have purchased their jets, they've bought their multiple houses and mansions, but now they're securing senators and media outlets," stated economic inequality analyst Chuck Collins. "We're now moving into this other chapter of hyper-extraction where the wealthy are preying on the system of inequality."

Understanding Wealth Tiers

To help others grasp 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 "Richistan" 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 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 traveling in the coach section of a commercial plane," Collins said. "Whereas in Upper Richistan, you're flying in 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 summit 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 well-off, let alone the typical citizen who doesn't inhabit "Richistan" at all.

But Collins thinks the progressive slogan "end extreme wealth" doesn't capture the real problem and has a "hint of elimination" to it.

"It's the separation between individual behaviors and a structure of regulations," Collins commented. "We should be worried about an economic system that directs 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, 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 reasonable quantity of wealth through starting or running a successful business, which could get them admission in Affluent Town.

But getting to Billionaireville requires substantial commitment 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 knowledge to ensure that the super rich are being deliberate about their taxes.

"Wealth defense professionals use a wide variety of tools such as trusts, offshore bank accounts, undisclosed businesses, non-profit organizations and other mechanisms to hold assets," he writes.

Government Power and Extreme Wealth Removal

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 defend wealth and protect its accumulation.

The final phase is a different kind of wealth accumulation, one that Collins calls "hyper extraction" to describe how the wealthy have come to affect nearly every single part of an Americans' daily existence largely through investment firms, which allows wealthy individuals to fund private companies.

"Private equity is searching for those sectors of the economy where they can extract value a little bit harder," Collins said. "One thing I don't think people understand is these billionaire private-equity funds are what happens when so much wealth is stored 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 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 significant salary growth. And Collins said the hardship and discontent of this kind of society can lead to deep discontent.

"The most powerful wealthy elites understand people are being left behind [and] are monetarily hurting," Collins said, adding that Republicans have been good at connecting with a potent "false common-man appeal".

Political Reality

The irony, Collins points out in his book, is that government officials have appointed a succession of billionaires to cabinet positions. Along with tech billionaires who had brief but powerful roles overseeing substantial reductions to the federal workforce, other important roles for commerce, treasury, education and the interior are also all billionaires.

This administrative framework, along with help from legislative supporters, helped pass huge tax bills, which will make enduring decreases for the wealthy and corporations.

Potential Changes

While political parties continue to argue that immigration and poor economic deals are the source of everyone's economic problems, "the challenge is: Will the other major party, which has also been influenced 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 "alter economic flow", including deep changes to the tax system, raising the minimum wage and strengthening unions.

"It was so, so close, and the legislation really did reflect the will of the majority of people who really want lawmakers to solve some of these urgent problems," Collins said. "Oligarchic power is not about building so much as blocking. 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 positive 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 preserving a continuous public campaign to make progress on this extreme inequality we're living in," he said. "We can solve this. It is addressable."