Boom Time for US Billionaires: Why the Economic Structure Perpetuates Income Disparity

Among countless individuals in the United States, the financial landscape over the recent five-year span has been tough. Expenses have escalated while wages remains unchanged. Steep mortgage rates have made homeownership a grim prospect. The jobless rate has been slowly rising.

Many Americans have reported they're putting off major life decisions, including having kids 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.

Fortune Expansion

The wealth of the world's billionaires grew 54% in 2020, at the peak of the pandemic. And even during all the economic instability, the stock market has only persisted in expanding. This growth has largely benefited just a limited group of Americans: 10% of the population controls 93% of stock market wealth.

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

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

Mapping Economic Classes

To help others understand what exactly it means to be "wealthy" 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 "Affluencia" villages: Wealth Borough, Lower Richistan, Middle Richistan, Upper Richistan and Billionaireville.

To contemporize the concept, Collins organizes these "affluence districts" based on income levels:

• At the base level, Affluent Town, are the 10 million Americans who have a household income of at least $110,000 and an overall wealth 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 comprise 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 flying in the coach section of a commercial plane," Collins said. "Whereas in Upper Richistan, you're using a private jet. That's a really distinct lifestyle. 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 richest. The control that this group has substantially outweighs those who are simply well-off, let alone the ordinary person who doesn't reside in "Richistan" at all.

But Collins thinks the progressive slogan "end extreme wealth" fails to address the core issue and has a "hint of elimination" to it.

"It's the separation between individual behaviors and a structure of regulations," Collins said. "We should be worried about an economic system that directs 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: getting the wealth, protecting assets, government influence and extreme wealth removal.

When many Americans think about wealth, they usually think exclusively about the first step, Collins said. People can create a limited sum of wealth through starting or running a successful business, which could get them residency in Affluent Town.

But getting to Billionaireville requires substantial commitment 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 deliberate about their taxes.

"Wealth defense professionals use a extensive selection of tools such as trusts, foreign deposits, secret corporations, charitable foundations and other vehicles to hold assets," he writes.

Government Power and Extreme Wealth Removal

To further 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 influence nearly every single part of an Americans' daily existence largely through capital management, which allows wealthy individuals to fund private companies.

"Private equity is seeking 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 parked in so few hands, and they can essentially pivot 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."

Actual Impacts

The effects 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 substantial income improvement. And Collins said the pain and frustration of this kind of society can lead to profound dissatisfaction.

"The most powerful oligarchs understand people are being marginalized [and] are economically suffering," Collins said, adding that conservative politicians have been good at tapping into a potent "fake grassroots movement".

Government Truth

The paradox, Collins points out in his book, is that elected representatives have appointed a succession of billionaires to government roles. Along with wealthy entrepreneurs who had brief but powerful roles overseeing substantial reductions to the federal workforce, other crucial appointments for commerce, treasury, education and the interior are also all billionaires.

This political landscape, along with help from political partners, helped pass huge tax bills, which will make lasting reductions for the wealthy and corporations.

Potential Changes

While legislative bodies continue to argue that foreign entry and bad trade agreements 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.

Left-leaning officials, he argues, know what policies are needed to "alter economic flow", including deep changes to the tax system, increasing the minimum wage and strengthening unions.

"It was so, so close, and the law really did embody the will of the bulk of people who really want lawmakers to solve some of these pressing issues," Collins said. "Elite control is not about building so much as preventing. It's easier to block than it is to make something meaningful happen, but the muscle memory is there. We know what that looks like."

Collins is hopeful that there can be change, but said it would require continuous government action.

"It may be sooner than expected that the pendulum swings back, and then it really is about preserving a ongoing grassroots effort to make progress on this extreme inequality we're living in," he said. "We can solve this. It is solvable."