Golden Era for US Billionaires: How the Economic Structure Perpetuates Income Disparity

To numerous individuals in the United States, the economy over the past five years has been challenging. Prices have skyrocketed while wages remains unchanged. High mortgage rates have made purchasing property a dismal prospect. The jobless rate has been creeping up.

The majority of individuals have reported they're delaying major life decisions, including starting a family or moving to new employment, because of the instability. But for a select few of people, the last five years couldn't have been any better.

The Billionaire Boom

The wealth of the world's billionaires grew 54% in 2020, at the height of the pandemic. And even amid all the financial uncertainty, the stock market has only continued to grow. This expansion has primarily advantaged just a limited group of Americans: 10% of the population controls 93% of stock market wealth.

As uneven as this allocation seems, it's the economic framework working as it is existing today.

"Affluent individuals have acquired their jets, they've acquired their multiple houses and mansions, but now they're securing senators and media outlets," stated 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."

Understanding Wealth Tiers

To help others grasp what exactly it means to be "wealthy" 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: Prosperity Village, Lower Richistan, Middle Richistan, Upper Richistan and Billionaireville.

To modernize 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 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 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."

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 influence that this group has greatly exceeds those who are simply wealthy, let alone the average American who doesn't live in "Richistan" at all.

But Collins thinks the activist mantra "billionaires shouldn't exist" misses the point and has a "suggestion of eradication" to it.

"It's the separation between individual behaviors and a system of rules," Collins said. "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 breaks it down into four parts: acquiring fortune, securing fortune, government influence and hyper-extraction.

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

But getting to Billionaireville requires significant resources 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 expertise to ensure that the super rich are being strategic about their taxes.

"Wealth defense professionals use a wide variety of tools such as legal entities, foreign deposits, secret corporations, philanthropic entities and other vehicles to hold assets," he writes.

Government Power and Extreme Wealth Removal

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

The last stage is a different kind of wealth accumulation, one that Collins calls "maximum taking" to describe how the wealthy have come to touch nearly every single part of an Americans' routine activities largely through investment firms, which allows wealthy individuals to fund private companies.

"Private equity is seeking those areas of the economy where they can increase profits 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 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 raise their rents."

Actual Impacts

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 significant salary growth. And Collins said the suffering and anger of this kind of society can lead to serious unrest.

"The most powerful oligarchs understand people are being excluded [and] are economically suffering," Collins said, adding that Republicans have been good at connecting with a potent "fake grassroots movement".

Political Reality

The contradiction, Collins points out in his book, is that elected representatives have appointed a succession of billionaires to administrative posts. Along with wealthy entrepreneurs who had temporary but significant roles overseeing substantial reductions to the federal workforce, other important roles for commerce, treasury, education and the interior are also all billionaires.

This government structure, along with help from legislative supporters, helped pass significant fiscal policies, which will make enduring decreases for the wealthy and corporations.

Future Solutions

While government groups continue to argue that border policies and unfavorable commercial treaties are the source of everyone's economic problems, "the issue remains: Will the alternative political group, which has also been controlled by the billionaires and big money, be able to seriously confront the underlying harms?" Collins said.

Left-leaning officials, he argues, know what policies are needed to "change wealth distribution", including substantial modifications to the tax system, raising the minimum wage and empowering worker groups.

"It was so, so close, and the legislation really did represent the will of the bulk of people who really want lawmakers to address some of these pressing issues," Collins said. "Wealthy influence is not about creating so much as preventing. It's easier to block than it is to make something meaningful happen, 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 continuous government action.

"It may be before we know it that the balance shifts, and then it really is about maintaining a ongoing grassroots effort to make progress on this profound imbalance we're living in," he said. "We can solve this. It is fixable."