Prosperous Period for US Billionaires: Why the System Perpetuates Wealth Inequality

Among countless individuals in the United States, the financial landscape over the past five years has been difficult. Costs have escalated while salaries remains stagnant. Steep mortgage rates have made buying a home a bleak prospect. The jobless rate has been gradually increasing.

The majority of individuals have reported they're delaying major life decisions, including starting a family or switching jobs, because of economic uncertainty. But for a very small group of people, the past five-year period couldn't have been more successful.

Wealth Explosion

The assets of the world's billionaires grew 54% in 2020, at the height of the pandemic. And even during all the financial uncertainty, the stock market has only continued to grow. This growth has primarily advantaged just a tiny percentage of Americans: 10% of the population holds 93% of stock market wealth.

However unequal as this distribution seems, it's the financial structure working as it is existing today.

"Rich elites have bought their jets, they've acquired their multiple houses and mansions, but now they're securing senators and media outlets," commented inequality researcher Chuck Collins. "We're now moving into this other chapter of maximum resource removal where the wealthy are exploiting the system of inequality."

Mapping Economic Classes

To help others grasp 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 "Richistan" villages: Wealth Borough, Lower Richistan, Middle Richistan, Upper Richistan and Billionaireville.

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

• At the foundation, Affluent Town, are the 10 million Americans who have a annual salary of at least $110,000 and an overall wealth of over $1.5m.
• The villages get more select 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 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 different cultural experience. You fly private, you have no stakes in the commercial aviation system. You don't care if the whole system fails – you're set."

The Billionaireville Effect

The summit in "Richistan" is Billionaireville, which is made up of about 800 American billionaires who are some of the world's most affluent. The power that this group has far surpasses those who are simply affluent, let alone the typical citizen who doesn't live in "Richistan" at all.

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

"It's the separation between personal actions and a framework of policies," Collins commented. "We should be concerned 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 separates it into four parts: getting the wealth, defending the wealth, government influence 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 residency in Affluent Town.

But getting to Billionaireville requires serious investment 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 skills to ensure that the super rich are being strategic about their taxes.

"Wealth defense professionals use a broad range of tools such as legal entities, international accounts, undisclosed businesses, non-profit organizations and other mechanisms to hold assets," he details.

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 "hyper extraction" to describe how the wealthy have come to influence nearly every single part of an Americans' routine activities largely through private equity, which allows wealthy individuals to invest in 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 accumulated in so few hands, and they can kind of turn around 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."

The Real Consequences

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 substantial income improvement. And Collins said the suffering and anger of this kind of society can lead to profound dissatisfaction.

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

Political Reality

The contradiction, Collins points out in his book, is that elected representatives have appointed a series of billionaires to cabinet positions. Along with tech billionaires who had short yet influential roles overseeing substantial reductions 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 congressional allies, helped pass major tax legislation, which will make enduring decreases for the wealthy and corporations.

Potential Changes

While legislative bodies continue to argue that immigration and bad trade agreements are the source of everyone's economic problems, "the challenge is: Will the alternative political group, which has also been captured 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 "change wealth distribution", including substantial modifications to the tax system, raising the minimum wage and strengthening unions.

"It was so, so close, and the law really did reflect the will of the most of people who really want lawmakers to address some of these critical challenges," Collins said. "Oligarchic power is not about building so much as preventing. It's easier to block than it is to make something substantial take place, but the muscle memory is there. We know what that looks like."

Collins is optimistic that there can be change, but said it would require sustained political momentum.

"It may be before we know it that the balance shifts, and then it really is about sustaining a continuous public campaign to make progress on this severe disparity we're living in," he said. "We can solve this. It is fixable."