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

For many individuals in the United States, the economic climate over the last half-decade has been tough. Expenses have skyrocketed while wages remains stagnant. High mortgage rates have made homeownership a grim prospect. The jobless rate has been gradually increasing.

Many Americans have stated they're postponing major life decisions, including raising children or switching jobs, because of the instability. But for a tiny fraction of people, the recent half-decade couldn't have been any better.

The Billionaire Boom

The wealth of the world's billionaires expanded 54% in 2020, at the height of the pandemic. And even during all the economic instability, the stock market has only kept rising. This growth has primarily advantaged just a small number of Americans: 10% of the population holds 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," commented wealth disparity expert Chuck Collins. "We're now entering this other chapter of hyper-extraction where the wealthy are taking advantage of the system of inequality."

Mapping Economic Classes

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 "Wealthville" villages: Wealth Borough, Lower Richistan, Middle Richistan, Upper Richistan and Billionaireville.

To contemporize the concept, Collins organizes 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 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.

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 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 separate reality. You fly private, you have no interest in the commercial aviation system. You don't care if the whole system collapses – 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 greatly exceeds those who are simply affluent, let alone the ordinary person who doesn't reside in "Richistan" at all.

But Collins thinks the progressive slogan "end extreme wealth" misses the point and has a "whiff of exterminism" to it.

"It's the separation between private conduct and a system of rules," Collins said. "We should be focused on an economic system that funnels so much wealth upward to the billionaires."

Wealth Accumulation Mechanisms

To understand how wealth at the billionaire level works, Collins divides it into four parts: acquiring fortune, protecting assets, government influence and hyper-extraction.

When many Americans think about wealth, they usually think only 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 residency in Affluent Town.

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

"Wealth defense professionals use a wide variety of tools such as trusts, international accounts, secret corporations, charitable foundations and other methods to hold assets," he explains.

Government Power and Extreme Wealth Removal

To enhance a wealth defense strategy, a family needs policy assistance. Wealth of over $40m converts to political power, Collins says, and can be used to defend wealth and ensure continued growth.

The ultimate step is a different kind of wealth accumulation, one that Collins calls "extreme removal" to describe how the wealthy have come to touch nearly every single part of an Americans' daily existence largely through investment firms, which allows wealthy individuals to invest in private companies.

"Private equity is searching for those corners 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 accumulated 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 boost their expenses."

Tangible Effects

The consequences 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 substantial income improvement. 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 left behind [and] are monetarily hurting," Collins said, adding that right-leaning leaders have been good at connecting with a potent "phony populism".

Political Reality

The contradiction, Collins points out in his book, is that government officials have appointed a series 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 administrative framework, along with help from legislative supporters, helped pass significant fiscal policies, which will make permanent tax cuts for the wealthy and corporations.

The Path Forward

While government groups continue to argue that foreign entry and unfavorable commercial treaties are the source of everyone's economic problems, "the challenge is: Will the alternative political group, which has also been influenced by the billionaires and big money, be able to effectively tackle the underlying harms?" Collins said.

Progressive politicians, he argues, know what policies are needed to "alter economic flow", including significant reforms to the tax system, boosting the minimum wage and empowering worker groups.

"It was so, so close, and the law really did embody the will of the majority of people who really want lawmakers to fix some of these critical challenges," Collins said. "Wealthy influence is not about creating 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 balance shifts, and then it really is about maintaining a continuous public campaign to make progress on this profound imbalance we're living in," he said. "We can fix this. It is fixable."