Prosperous Period for US Billionaires: How the System Sustains Income Disparity

To numerous Americans, the economy over the last half-decade has been difficult. Expenses have escalated while pay remains stagnant. Steep mortgage rates have made purchasing property a grim prospect. The jobless rate has been slowly rising.

Most people have reported they're postponing major life decisions, including starting a family or switching jobs, because of economic uncertainty. But for a very small group of people, the recent half-decade couldn't have been more prosperous.

Wealth Explosion

The fortune of the world's billionaires increased 54% in 2020, at the height of the pandemic. And even amid all the market volatility, the stock market has only persisted in expanding. This expansion has primarily advantaged just a tiny percentage of Americans: 10% of the population holds 93% of stock market wealth.

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

"Affluent individuals 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 stepping into this other chapter of hyper-extraction where the wealthy are preying on the system of inequality."

Analyzing Income Brackets

To help others grasp what exactly it means to be "wealthy" in the US, Collins borrows a concept from journalist Robert Frank who, in a 2007 book on the rich, imagined the different levels of wealth as "Affluencia" villages: Wealth Borough, Lower Richistan, Middle Richistan, Upper Richistan and Billionaireville.

To modernize the concept, Collins categorizes these "wealth villages" based on income levels:

• At the lowest tier, Affluent Town, are the 10 million Americans who have a household income 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.

Altogether, 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 flying in the coach section of a commercial plane," Collins noted. "Whereas in Upper Richistan, you're using a private jet. That's a really distinct lifestyle. You fly private, you have no stakes in the commercial aviation system. You don't care if the whole system fails – you're set."

Ultra-Wealth Impact

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 control that this group has far surpasses those who are simply well-off, let alone the typical citizen who doesn't inhabit "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 structure of regulations," Collins said. "We should be focused on 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: 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 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 planning in those next three steps. Collins describes what he calls the "wealth defense industry": the tax lawyers, accountants and wealth managers who use their expertise to ensure that the super rich are being calculated about their taxes.

"Wealth defense professionals use a broad range of tools such as legal entities, international accounts, secret corporations, philanthropic entities and other vehicles to hold assets," he writes.

Political Influence and Hyper-Extraction

To advance 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 ensure continued growth.

The final phase is a different kind of wealth accumulation, one that Collins calls "extreme removal" 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 seeking those sectors 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 results 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 profound dissatisfaction.

"The most powerful wealthy elites understand people are being excluded [and] are monetarily hurting," Collins said, adding that Republicans have been good at accessing a potent "fake grassroots movement".

Government Truth

The paradox, Collins points out in his book, is that elected representatives have appointed a series of billionaires to government roles. Along with wealthy entrepreneurs who had short yet influential roles overseeing significant decreases to the federal workforce, other crucial appointments for commerce, treasury, education and the interior are also all billionaires.

This administrative framework, along with help from legislative supporters, helped pass huge tax bills, which will make permanent tax cuts for the wealthy and corporations.

The Path Forward

While political parties continue to argue that border policies and unfavorable commercial treaties are the source of everyone's economic problems, "the question becomes: Will the other major party, which has also been captured 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, raising the minimum wage and supporting labor organizations.

"It was so, so close, and the legislation really did reflect the will of the most of people who really want lawmakers to address some of these pressing issues," Collins said. "Elite control is not about building so much as stopping. It's easier to block than it is to make something significant occur, but the institutional knowledge is there. We know what that looks like."

Collins is optimistic 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 sustaining a sustained really popular movement to make progress on this severe disparity we're living in," he said. "We can address this. It is fixable."