Boom Time for US Billionaires: Why the System Sustains Wealth Inequality

Among countless US citizens, the economic climate over the past five years has been difficult. Costs have soared while pay remains stagnant. High mortgage rates have made purchasing property a dismal prospect. The rate of unemployment has been gradually increasing.

The majority of individuals have reported they're postponing major life decisions, including raising children or moving to new employment, because of financial volatility. But for a select few of people, the recent half-decade couldn't have been more prosperous.

The Billionaire Boom

The wealth of the world's billionaires grew 54% in 2020, at the peak of the pandemic. And even amid all the economic instability, the stock market has only kept rising. This expansion has primarily advantaged just a tiny percentage of Americans: 10% of the population controls 93% of stock market wealth.

Despite the imbalance as this allocation seems, it's the system working as it is presently configured.

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

Understanding Wealth Tiers

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, envisioned the different levels of wealth as "Affluencia" villages: Prosperity Village, Lower Richistan, Middle Richistan, Upper Richistan and Billionaireville.

To contemporize the concept, Collins organizes these "economic communities" 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 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.

Collectively, 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 sitting in the coach section of a commercial plane," Collins noted. "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 collapses – you're set."

Extreme Affluence Consequences

The highest hill in "Richistan" is Billionaireville, which is made up of about 800 American billionaires who are some of the world's wealthiest. The power that this group has substantially outweighs those who are simply wealthy, let alone the average American who doesn't inhabit "Richistan" at all.

But Collins thinks the political catchphrase "end extreme wealth" fails to address the core issue and has a "whiff of exterminism" to it.

"It's the distinction between private conduct and a structure of regulations," Collins commented. "We should be worried about an economic system that channels 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: accumulating assets, securing fortune, government influence and maximum resource extraction.

When many Americans think about wealth, they usually think solely 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 admission 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 expertise to ensure that the super rich are being deliberate about their taxes.

"Wealth defense professionals use a wide variety of tools such as financial instruments, offshore bank accounts, anonymous shell companies, charitable foundations and other methods to hold assets," he details.

Government Power and Extreme Wealth Removal

To enhance a wealth defense strategy, a family needs government backing. Wealth of over $40m translates to political power, Collins says, and can be used to secure fortune and maintain expansion.

The ultimate step is a different kind of wealth accumulation, one that Collins calls "maximum taking" to describe how the wealthy have come to influence nearly every single part of an Americans' everyday life largely through private equity, which allows wealthy individuals to fund private companies.

"Private equity is searching for those corners of the economy where they can squeeze things a little bit harder," Collins said. "One thing I don't think people understand 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 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 paying more for their healthcare, rent and vet bills without seeing any meaningful wage increases. And Collins said the pain and frustration of this kind of society can lead to profound dissatisfaction.

"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".

Policy Situation

The contradiction, Collins points out in his book, is that government officials have appointed a series of billionaires to cabinet positions. Along with wealthy entrepreneurs who had brief but powerful roles overseeing massive cuts to the federal workforce, other important roles for commerce, treasury, education and the interior are also all billionaires.

This political landscape, along with help from congressional allies, helped pass significant fiscal policies, which will make lasting reductions for the wealthy and corporations.

Potential Changes

While legislative bodies continue to argue that immigration and unfavorable commercial treaties are the source of everyone's economic problems, "the question becomes: Will the alternative political group, which has also been influenced by the billionaires and big money, be able to meaningfully address the underlying harms?" Collins said.

Progressive politicians, he argues, know what policies are needed to "reverse the updraft of wealth", including significant reforms 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 bulk of people who really want lawmakers to fix some of these critical challenges," Collins said. "Elite control is not about developing 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 hopeful that there can be change, but said it would require continuous government action.

"It may be quickly that the tide turns, 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 address this. It is fixable."