🔗 Share this article

To numerous Americans, the economic climate over the past five years has been tough. Expenses have skyrocketed while salaries remains stagnant. Elevated mortgage rates have made homeownership a grim prospect. The rate of unemployment has been slowly rising.

The majority of individuals have indicated they're delaying major life decisions, including raising children or moving to new employment, because of the instability. But for a tiny fraction of people, the past five-year period couldn't have been more prosperous.

Wealth Explosion

The fortune of the world's billionaires grew 54% in 2020, at the climax of the pandemic. And even amid all the market volatility, the stock market has only continued to grow. This expansion has largely benefited just a tiny percentage of Americans: 10% of the population owns 93% of stock market wealth.

Despite the imbalance as this division seems, it's the economic framework working as it is presently configured.

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

Understanding Wealth Tiers

To help others understand what exactly it means to be "wealthy" in the US, Collins borrows a concept from journalist Robert Frank who, in a 2007 book on the rich, imagined the different levels of wealth as "Affluencia" villages: Wealth Borough, Lower Richistan, Middle Richistan, Upper Richistan and Billionaireville.

To contemporize the concept, Collins classifies 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 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 make up the top 10% of the wealth income distribution, about 14 million Americans altogether, though their experiences 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 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 collapses – you're set."

Ultra-Wealth Impact

The peak in "Richistan" is Billionaireville, which is made up of about 800 American billionaires who are some of the world's wealthiest. The control that this group has greatly exceeds those who are simply well-off, let alone the typical citizen who doesn't inhabit "Richistan" at all.

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

"It's the difference between individual behaviors and a system of rules," Collins said. "We should be focused on an economic system that funnels 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: acquiring fortune, protecting assets, political capture and hyper-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 establishing or managing a successful business, which could get them membership in Affluent Town.

But getting to Billionaireville requires serious investment and strategy in those next three steps. Collins describes what he calls the "fortune security field": the tax lawyers, accountants and wealth managers who use their skills to ensure that the super rich are being calculated about their taxes.

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

Government Power and Extreme Wealth Removal

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

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

"Private equity is looking for those areas of the economy where they can extract value 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 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."

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 meaningful wage increases. And Collins said the hardship and discontent of this kind of society can lead to serious unrest.

"The most powerful oligarchs understand people are being excluded [and] are financially struggling," Collins said, adding that right-leaning leaders have been good at accessing a potent "fake grassroots movement".

Policy Situation

The contradiction, Collins points out in his book, is that government officials have appointed a series of billionaires to government roles. Along with wealthy entrepreneurs who had brief but powerful roles overseeing massive cuts to the federal workforce, other key positions for commerce, treasury, education and the interior are also all billionaires.

This political landscape, along with help from legislative supporters, helped pass significant fiscal policies, which will make permanent tax cuts for the wealthy and corporations.

Potential Changes

While political parties continue to argue that foreign entry and bad trade agreements are the source of everyone's economic problems, "the challenge is: Will the alternative political group, which has also been controlled by the billionaires and big money, be able to meaningfully address the underlying harms?" Collins said.

Left-leaning officials, he argues, know what policies are needed to "change wealth distribution", including significant reforms 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 most of people who really want lawmakers to fix some of these critical challenges," Collins said. "Oligarchic power is not about developing 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 optimistic that there can be change, but said it would require continuous government action.

"It may be quickly that the tide turns, and then it really is about sustaining a continuous public campaign to make progress on this profound imbalance we're living in," he said. "We can solve this. It is fixable."