Among countless Americans, the financial landscape over the recent five-year span has been difficult. Prices have skyrocketed while pay remains stagnant. Elevated mortgage rates have made purchasing property a bleak prospect. The rate of unemployment has been gradually increasing.
Many Americans have stated they're putting off major life decisions, including raising children or moving to new employment, because of financial volatility. But for a select few of people, the past five-year period couldn't have been any better.
Wealth Explosion
The wealth of the world's billionaires expanded 54% in 2020, at the height of the pandemic. And even amid all the market volatility, the stock market has only kept rising. This growth has largely benefited just a tiny percentage of Americans: 10% of the population owns 93% of stock market wealth.
However unequal as this division seems, it's the system working as it is existing today.
"Affluent individuals have purchased their jets, they've bought their multiple houses and mansions, but now they're buying senators and media outlets," explained wealth disparity expert Chuck Collins. "We're now entering this other chapter of extreme wealth extraction where the wealthy are taking advantage of the system of inequality."
Mapping Economic Classes
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, conceptualized 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 "affluence districts" based on income levels:
- At the lowest tier, 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 lifestyles vary dramatically.
"You could be in Lower Richistan, and you're still sitting in the coach section of a commercial plane," Collins explained. "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."
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 influence that this group has far surpasses those who are simply wealthy, let alone the ordinary person who doesn't live in "Richistan" at all.
But Collins thinks the progressive slogan "billionaires shouldn't exist" doesn't capture the real problem and has a "whiff of exterminism" to it.
"It's the separation between individual behaviors and a structure of regulations," Collins commented. "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 separates it into four parts: getting the wealth, defending the wealth, government influence and maximum resource extraction.
When many Americans think about wealth, they usually think only about the first step, Collins said. People can create a reasonable quantity of wealth through creating or operating a successful business, which could get them membership 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 wide variety of tools such as financial instruments, international accounts, anonymous shell companies, philanthropic entities and other vehicles to hold assets," he explains.
Political Influence and Hyper-Extraction
To further a wealth defense strategy, a family needs government backing. Wealth of over $40m translates to political power, Collins says, and can be used to defend wealth and protect its accumulation.
The ultimate step 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 private equity, which allows wealthy individuals to fund private companies.
"Private equity is seeking those sectors of the economy where they can increase profits 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 accumulated 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 increase their costs."
Tangible Effects
The results 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 hardship and discontent of this kind of society can lead to profound dissatisfaction.
"The most powerful wealthy elites understand people are being left behind [and] are monetarily hurting," Collins said, adding that conservative politicians have been good at tapping into a potent "false common-man appeal".
Government Truth
The paradox, Collins points out in his book, is that elected representatives have appointed a succession of billionaires to administrative posts. Along with affluent innovators 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 administrative framework, along with help from political partners, helped pass significant fiscal policies, which will make permanent tax cuts for the wealthy and corporations.
Potential Changes
While legislative bodies continue to argue that foreign entry and poor economic deals are the source of everyone's economic problems, "the question becomes: Will the alternative political group, which has also been captured 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 deep changes to the tax system, raising the minimum wage and empowering worker groups.
"It was so, so close, and the law really did embody the will of the most of people who really want lawmakers to solve some of these pressing issues," Collins said. "Wealthy influence is not about building 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 optimistic that there can be change, but said it would require sustained political momentum.
"It may be quickly that the tide turns, and then it really is about preserving a sustained really popular movement to make progress on this profound imbalance we're living in," he said. "We can solve this. It is solvable."
