Did you know the economy has been saved by a Hobbit? The dumbing down of economic literacy has lead to this; Perhaps the saddest part of all of this is that even this utterly inconsequential number is itself based on basic three-card monte level sleights of hand and statistical fraud that even a grade schooler should be able to see through.
Rejoice! The economy has been saved and the world is back in good financial stead!
What allows me to make this bold proclamation, you ask? Has there been some fundamental transformation in the global economy? Has the sovereign debt crisis been resolved by a giant debt jubilee? Have the central banksters finally been apprehended and shown to their rightful place behind bars? Have the people of the world finally seen through the debt-based fiat money delusion and, all at once, dropped their dependence on Federal Reserve Notes in favor of alternative currencies, self-issued credit, and local exchanges?
Of course not. No, I am referring to this headline from the Daily Mail: “The Hobbit smashes U.S. box office records to become biggest Christmas film of ALL TIME.” Sadly, all capitalization in that headline is exactly as it appears in the original.
Yes, once again erstwhile “news” sources are trumpeting the box office returns of the latest Hollywood blockbuster as if it were some important piece of information. Amidst the doom and gloom of depressing headlines about the continuing Euro debt crisis or the impending currency war that newly-elected Japanese Prime Minister Shinzo Abe is getting set to kick off comes this diversionary fluff piece about how great a sign it is that some over-bloated Hollywood fantasy flick is raking in the dough. Perhaps they're hoping that people won't remember that the heyday of Hollywood was back during the Great Depression, when people flocked to the theater in record numbers to immerse themselves in The Wizard of Oz or Gone With the Wind in the hopes of forgetting their troubles for an hour or two, and when the most identifiable face on the planet was that of Charlie Chaplin's homeless, jobless, luckless Tramp.
This phenomenon of reporting box office returns as important business news is nothing new, of course. In recent decades there has been a growing obsession with the grosses of films that would be hard to explain on the surface. Surely there aren't that many more producers or investors whose financial fortunes are dependent on the profitability of the latest Tom Cruise vehicle or the newest big budget sequel/prequel/remake/spinoff. So what is the media's fascination with ranking the weekend intake of each movie as if they were reporting the latest sports results?
Well, for starters it's the easiest story for an over-worked, under-staffed, under-funded “news” team in the increasingly penny-pinching offices of a dinosaur mainstream news outlet to report. More troublingly, though, it's part of a longer-term trend in the dumbing down of basic economic literacy that allows the financial controllers to keep the public distracted by shiny baubles while they get to work looting and plundering the economy behind the scenes. In this new paradigm of mainstream “business” reporting, stories of almost no consequence whatsoever can be focused on as if they are bellwethers of the economy: if box office hauls are forever trending upward, after all, then how bad can the economy really be? The setting of box office record after record seems to be a rising economic indicator, if only in the minds of that section of the public whose greatest acquaintance with the economy is the weekly ranking of movie ticket returns.
Perhaps the saddest part of all of this is that even this utterly inconsequential number is itself based on basic three-card monte level sleights of hand and statistical fraud that even a grade schooler should be able to see through. Just as CPI is kept artificially low by excluding those things that people actually buy in favor of more obscure (and less obviously inflating) commodities, and just as unemployment figures of today are compared with unemployment figures of decades past without noting the complete changes in unemployment calculation that make such a side-by-side comparison meaningless, so too are box office intakes of modern Hollywood movies favorably compared to the ticket sales of years gone by without noting the complicating factors in such a comparison. Have you ever seen a list of “highest grossing films of all time” that failed to include information about whether or not the films were being ranked in inflation-adjusted terms? Or how rising ticket prices factor into these numbers? Or why these “records” aren't measured in ticket sales instead of gross revenue? Never mind all that, BusinessInsider.com has a new angle on the tale of The Hobbit's “record smashing” performance: “The Hobbit didn't break $100 million” in its opening weekend. The horror.
If only this phenomenon of trivialization were limited to Hollyweird. Alas, this is not the case.
You've heard of the McDonaldization of the economy? George Ritzer uses the term to describe how both the labor market and the products they produce are increasingly being standardized in the name of efficiency. But there is a more literal level at which we can say the economy has been McDonaldized. It has long been discussed how McDonald's has applied the concept of “artificial scarcity” to raise interest in (and sales of) the McRib, a sandwich consisting of “restructured meat product” that has been molded into the pattern of a slab of ribs. The description of the product's creation is enough to turn one's stomach (and as a hint, scalded stomach is one of the ingredients), but it has achieved cult-like status amongst some McDonald's aficionados for its scarcity. So rare is its seemingly random appearance on the menu that there are entire websites devoted to tracking sightings of the sandwich at restaurants across America. (This despite the fact that it is available on the menu year-round in Germany.) What many don't know is that its sudden appearance and disappearance from the menu in America may not be so random after all. Willy Stanley of The Awl makes a convincing case that the McRib is actually a study in pork price arbitrage. As Stanley demonstrates, nationwide reappearances of the sandwich coincide precisely with troughs in the US hog market. Every time the price of pork bottoms out, it seems, McDonald's goes on a buying spree, reintroducing the McRib to the menu. In other words, they're playing customers like fools, purposefully keeping alive the “mystique” (and keeping aloft the price) of a sandwich they could sell at any time, waiting for pork prices to hit bottom. As Stanley points out, this works because McDonald's is such a market-moving force that “it’s more useful to think of it as a company trading in commodities than it is to think of it as a chain of restaurants." McDonaldization indeed.
Or take Instagram. This is a popular photo-sharing service that allows users to take and share pictures on social media via their cell phones. As near as I can determine, its appeal comes from its ability to add digital filters to the pictures to make them look more artistic and to confine the photographs to a square shape that is more reminiscent of a Polaroid than a cell phone photo. For some reason, Facebook saw so much potential in this service that they purchased it for $1 billion, surely a staggering sum of money for a 13-employee operation that deals solely in helping people share photos. In this day and age of bloated tech valuations, few even bothered to bat an eyelid over the deal...until they discovered how Facebook might be planning to recoup its money. Earlier this week, Instagram issued a change to its Terms of Service that granted the company the right to sell users' photos to third parties without notification or compensation. This set off a storm of controversy (with National Geographic notably suspending its own account in protest of the move), threatening to cause a mass exodus from the service. Instagram immediately issued a retraction and is currently rewording the update to remove the offensive clause. Why this move would come as a surprise to anyone familiar with Facebook's own privacy controversies (with CEO Mark Zuckerberg having famously proclaimed in January 2010 that privacy is no longer a social norm) is as puzzling as why anyone would expect an online giant like Facebook to spend $1 billion on a photo-sharing service without expecting them to monetize the only product that service has: its users' photos. Still, this is what passes for economic reasoning in our present-day economy.
It's too harsh to simply blame the consumers for this sorry state of affairs, though. After all, the entire economy has been structured around things of no lasting significance for so long now that it's hardly fair to blame today's youth for mistaking these diversions for reality. Take the phenomenon of “YouTube celebrity.” Ever since Google took over YouTube and attempted to find ways of making it pay for itself, the site has been offering deals with popular content producers to receive a share of the advertising revenue their videos generate. So has this led to the rise of a thriving, independent video production industry? Not exactly. Instead, it wasn't long before users found a way to game the system by leaving “reply videos” to the site's most popular videos, guaranteeing them hundreds of thousands of views for videos that are often little more than a scantily clad woman confirming that she had indeed watched the popular video in question. The most popular of these “reply girls” was able to earn a living off of this scam until YouTube changed its algorithm, making users less likely to find her replies in the “related videos” of trending viral videos. Now, the various “reply girls” find themselves out of a job. Talk about boom and bust.
These are the trivialities upon which our economy increasingly turns. Box office revenues. Artificially withheld pork sandwiches. Photo sharing services. Reply videos. These are all further signs of an economy in decline, one that has gone from the manufacture of important products to one that is increasingly geared toward providing the public with ever more diversion and fluff. It often takes an economic crisis to shake a people out of their collective complacency, and to give them an opportunity to once again discover what a sound economy is really based on. Time will tell whether the current financial crisis will be that wake up call for the Instagram generation.