Golden Era for US Billionaires: Why the Economic Structure Sustains Wealth Inequality

For many US citizens, the economic climate over the recent five-year span has been challenging. Expenses have escalated while wages remains stagnant. Elevated mortgage rates have made buying a home a grim prospect. The jobless rate has been gradually increasing.

Most people have reported they're postponing major life decisions, including raising children or changing careers, because of economic uncertainty. But for a tiny fraction of people, the past five-year period couldn't have been more prosperous.

Fortune Expansion

The assets of the world's billionaires increased 54% in 2020, at the peak of the pandemic. And even throughout all the financial uncertainty, the stock market has only persisted in expanding. This expansion has primarily advantaged just a limited group of Americans: 10% of the population controls 93% of stock market wealth.

However unequal as this distribution seems, it's the economic framework working as it is currently designed.

"The wealthy have bought their jets, they've bought 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 preying on the system of inequality."

Understanding Wealth Tiers

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

To modernize the concept, Collins categorizes 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 net worth of over $1.5m.
• The villages get more restricted 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.

Collectively, 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 noted. "Whereas in Upper Richistan, you're using a private jet. That's a really separate reality. You fly private, you have no stakes 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 most affluent. The control that this group has far surpasses 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 "billionaires shouldn't exist" misses the point and has a "whiff of exterminism" to it.

"It's the distinction between individual behaviors and a structure of regulations," Collins commented. "We should be concerned about 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 divides it into four parts: getting the wealth, defending the wealth, political capture and extreme wealth removal.

When many Americans think about wealth, they usually think exclusively about the first step, Collins said. People can create a reasonable quantity of wealth through starting or running a successful business, which could get them admission 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 skills 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, anonymous shell companies, non-profit organizations and other vehicles to hold assets," he explains.

Government Power and Extreme Wealth Removal

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

The final phase 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 capital management, which allows wealthy individuals to fund private companies.

"Private equity is looking for those sectors 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 essentially pivot 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."

Tangible Effects

The results 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 meaningful wage increases. And Collins said the suffering and anger of this kind of society can lead to profound dissatisfaction.

"The most powerful affluent rulers understand people are being marginalized [and] are financially struggling," Collins said, adding that conservative politicians have been good at accessing a potent "false common-man appeal".

Policy Situation

The paradox, Collins points out in his book, is that elected representatives have appointed a series of billionaires to administrative posts. Along with wealthy entrepreneurs who had short yet influential roles overseeing massive cuts 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 legislative supporters, helped pass significant fiscal policies, which will make enduring decreases for the wealthy and corporations.

Potential Changes

While government groups continue to argue that immigration and poor economic deals are the source of everyone's economic problems, "the issue remains: Will the opposing party, which has also been influenced by the billionaires and big money, be able to effectively tackle the underlying harms?" Collins said.

Left-leaning officials, he argues, know what policies are needed to "alter economic flow", including significant reforms to the tax system, boosting the minimum wage and empowering worker groups.

"It was so, so close, and the law really did represent the will of the majority of people who really want lawmakers to address some of these urgent problems," Collins said. "Oligarchic power is not about building so much as preventing. It's easier to block than it is to make something meaningful happen, but the institutional knowledge 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 sooner than expected that the balance shifts, and then it really is about maintaining a sustained really popular movement to make progress on this extreme inequality we're living in," he said. "We can fix this. It is addressable."