🔗 Share this article

For many Americans, the financial landscape over the recent five-year span has been difficult. Costs have escalated while pay remains flat. Elevated mortgage rates have made buying a home a dismal prospect. The rate of unemployment has been gradually increasing.

Many Americans have stated they're postponing major life decisions, including starting a family or switching jobs, because of economic uncertainty. But for a select few of people, the last five years couldn't have been more prosperous.

Fortune Expansion

The fortune of the world's billionaires expanded 54% in 2020, at the peak of the pandemic. And even throughout all the economic instability, the stock market has only persisted in expanding. This increase has mostly helped just a tiny percentage of Americans: 10% of the population owns 93% of stock market wealth.

However unequal as this allocation seems, it's the system working as it is existing today.

"The wealthy have acquired their jets, they've purchased their multiple houses and mansions, but now they're buying senators and media outlets," commented inequality researcher Chuck Collins. "We're now entering this other chapter of hyper-extraction where the wealthy are preying on the system of inequality."

Understanding Wealth Tiers

To help others understand 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, conceptualized the different levels of wealth as "Wealthville" villages: Affluent Town, Lower Richistan, Middle Richistan, Upper Richistan and Billionaireville.

To contemporize the concept, Collins classifies these "economic communities" 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 total assets 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.

In total, the residents of these villages comprise 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 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 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 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 well-off, let alone the ordinary person who doesn't reside in "Richistan" at all.

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

"It's the separation between private conduct and a framework of policies," Collins explained. "We should be worried about an economic system that directs 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: getting the wealth, securing fortune, policy control 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 starting or running a successful business, which could get them residency in Affluent Town.

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

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

Political Influence and Hyper-Extraction

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

The last stage is a different kind of wealth accumulation, one that Collins calls "hyper extraction" to describe how the wealthy have come to affect nearly every single part of an Americans' everyday life largely through capital management, which allows wealthy individuals to support private companies.

"Private equity is searching for 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 parked in so few hands, and they can basically shift 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 increase their costs."

Actual Impacts

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

"The most powerful affluent rulers understand people are being excluded [and] are monetarily hurting," Collins said, adding that right-leaning leaders have been good at tapping into a potent "false common-man appeal".

Government Truth

The irony, Collins points out in his book, is that government officials have appointed a series of billionaires to administrative posts. Along with wealthy entrepreneurs who had brief but powerful 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 legislative supporters, helped pass major tax legislation, which will make permanent tax cuts for the wealthy and corporations.

Future Solutions

While political parties continue to argue that foreign entry and bad trade agreements 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 effectively tackle the underlying harms?" Collins said.

Liberal leaders, he argues, know what policies are needed to "alter economic flow", including significant reforms to the tax system, raising the minimum wage and strengthening unions.

"It was so, so close, and the law really did represent the will of the bulk of people who really want lawmakers to solve some of these urgent problems," Collins said. "Elite control is not about developing so much as preventing. It's easier to block than it is to make something significant occur, 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 sustained political momentum.

"It may be quickly that the pendulum swings back, and then it really is about sustaining a sustained really popular movement to make progress on this profound imbalance we're living in," he said. "We can fix this. It is fixable."