Everyday Life

Disney seems to have alot of new comers of the music industry. Everyone starts out young and then Disney seems to replace them with even younger more talented kids, who not only can sing but can act too. Disney makes money, not only by making mini-series of their popular teen shows, but with movies and merchandises such as dolls, lunchboxes, clothes, just anything that can sell bearing the teens’ face on it.

Teen idols are a whole industry of their own, making more money than those of movie stars. Pop sensation Miley Cyrus just recently started out in the Disney scene in the popular show known as Hannah Montana. Disney had a break with her because she can act and sing; but they were concern though about her age when she audition for the part. She was only 13 years old when she auditioned, but Disney did not cast her at first and went through alot of other girls before finally making the final decision.

Disney tends to cast younger kids for shows or movies before eventually they all will gow up. Since they started out very young, then Disney can make thier money very quickly by merchandising them as a brand. For example, there are Hannah Montana backpacks, clothes, dolls, makeup, books, movies, anything and everything bearing the Hannah Montana name makes money for Disney and of course Miley Cyrus gets her cut too. Department stores such as Walmart and Target all sell Hannah Montana merchandises.

According to People’s magazine Miley Cyrus is the richest teen celebrity, making more money than the Jonas Brothers, Selena Gomez, The High School Musical cast (all which are teen idols that first appeared on Disney shows).

NEW YORK —  Miley Cyrus is already way richer than her dad, Billy Ray, and she’s only 15.

People magazine reports that the Miley Cyrus franchise will be worth a projected 1 billion dollars by the end of the year. She tops the magazine’s list of the richest teen celebrities.

Not that Miley is seeing much of the money. Her mom says most is invested and Miley can’t touch it until she’s 18.

The Jonas Brothers are also on the list, making 12 million dollars a year. Fourteen-year-old Dakota Fanning makes 4 million dollars a movie.

This was an article on the radical perspectives website which discusses Carl Marx’s theory of fictitious capital. As we all know Carl Marx was very critical of Capitalism and how he believed it only produces class struggles and inequalities. In this particular article, Michael Egoavil discusses Marx’s views on a particular aspect of Capitalism, securities, and why he felt it only produced fictitious capital.

   In the third volume of Capital, Marx discusses what he calls “fictitious capital” – what we know as “securities.”  Essentially these are titles to streams of income, which are treated as commodities and bought and sold on financial markets.  There are significant differences between types of securities.  Some represent corporate debts, as with bonds, some represent consumer debts, as with mortgage backed securities, and others represent capital investments, as with shares of stock.  But the common aspect of all these different securities is that they all give their owners a right to a stream of income, hopefully leaving them with more money than they started off with.  The security owner therefore looks upon his security as capital.

Securities are basically instruments representing financial value. Although you aren’t really purchasing real capital, you are still purchasing some form of value in the form of a legal title. You are only given claim on a stream of income and aren’t producing income yourself. This is what is meant by it being “fictitious”. Also, money never passes hands. When these legal entities are sold, you are only receiving claim to income that exist elsewhere.

Marx gives his three reasons for calling securities fictitious capital:

The first reason is specific to shares of stock.  With the creation of shares of stock, it appears as if capital has doubled; as if capital is not only the real capital that firms possess, but also the property titles created to represent that capital.  So for Marx, shares of stock are fictitious capital because while they merely represent real capital, they also seem to multiply that capital.

So stock allows the creation of additional capital that may not necessarily have any value. So for Marx, you are essentially taking something that doesn’t represent immediate value, and then continuously manipulating it to “increase” its value.

The second reason Marx calls securities “fictitious capital” is that their value can fluctuate in ways that are entirely independent of the real capital that they represent.  A change in interest rates, a rise or fall in profits, the inability of a borrower to repay debt – all of these things lead to a change in the market-value of fictitious capital without at all effecting the value of a firm’s real capital – the cash the firm has on hand, its machinery, buildings, and so forth.  The value of all those things can remain constant while the value of a firm’s stocks and bonds rise or fall.

So again, with this additional value created from securities, only the “fictitious” aspect of the value can be drastically changed and manipulated. The real value a firm or corporation possesses will remain unchanged. And this is a major aspect of securities, as markets are created. With Securities there exist both primary and secondary markets, where in the primary markets money is received by the issuer from investors in initial public offerings (this is where stock is issued), and in secondary markets simple assets exchange hands between investors.

 And lastly, a security may never have represented any capital at all.  Take the case of residential mortgage-backed securities.  The income that accrues to their holder is derived from the repayment of a home loan.  The home was not capital for the homebuyer – he did not create surplus-value with it.  It was just a dwelling.  So the initial sum of money advanced was never used as capital at all, although the holder of the security views it as his “capital”.

So you can see how securities gives the illusion of possessing actual capital and value. These particular types of securities are backed by the mortgage payments on the home and are offered as alternatives to more traditional forms of debt and equity financing. What this also does is create an additional market for these types of securities.

Here’s an illustration showing how it all works:  

Looking at the NBA today, it is easy to see that the game has gone through a major change since its inception in 1946. One such change has been the role that owners play in the game and for the cities whom their teams represent. It used to be that owners of NBA teams acquired teams to bring notoriety to their cities and to serve a sort-of civic service. A city that has an NBA team is always recognized as a major metropolitan city, and the the hometown pride that comes from winning a major sports championship can be as great as hosting an Olympic Games. Owners did not see their ownership in an NBA franchise as a source of profit, and rather saw it as an avenue to bring pride to their city, and pride to themselves by owning and operating another succesful enterprise. Essentially, they could make their money and profits from their original businesses, and the NBA team could be their hobby.

This is changing however, in an NBA market where owners are buying teams less for the will to win a championship, and more to use the team as a new investment to add to their portfolio. Donald Sterling, owner of the Los Angelous Clippers is one of these types of owners. One of the largest property holders and landlords in LA, he bought the Clippers for 12.7 million dollars in 1981. Since his acquisition of the Clippers, they have been the worst team in the NBA. The statistics are astonishing, “2008-09 marks the seventh time the Clippers have lost 60 games in a season and the 17th time they’ve lost 50 (they play 82 games a season)” and “The Clippers have reached the second round of the playoffs just once in that time, going 701-1,317 overall, for a .347 winning percentage that is easily the worst among the four major sports”. Sterling employs many cost cutting strategies like “declining to replace injured Clippers” and even had the Clippers playing in the “Los Angeles Sports Arena (they have since moved to Staples Center), a facility so outdated that the Lakers had abandoned it nearly 20 years earlier…even though the team averaged fewer than 8,500 fans per game in its first three years in LA — among the worst attendance in the league, the arena charged the Clippers just a few thousand dollars per game in leasing fees, making profitability easy”. With these cost cutting strategies, in the last nine years the Clippers have “made $140 million in profits”. Compare that with teams such as the Dallas Mavericks who try to win championships, and the Mavs have lost 137 million over the same period.

Sterling “runs a low-risk, sure-reward game” and this has been the trend in the NBA for a number of years. Just last year, the SuperSonics moved to Oklahoma City (a metropolitan city??) because they thought they could make bigger profits there than in Seattle, their home for over 40 years. Owners now see their ownership of teams as profitable investments, and now groups of people buy teams (such as Professional Basketball Club LLC, owners of the Oklahoma City team) to add it to their portfolios. Teams make cost-cutting moves that hurt their championship aspirations in order to save money and capital losses. This is just one of the many things that are currently being finnancialized by the NBA, but it is also one of the most major.

http://sports.espn.go.com/nba/news/story?id=4187729

Mattick: “Ups and Downs – The Economic Crisis (pt. 3)”
http://sites.google.com/site/radicalperspectivesonthecrisis/crisis-for-beginners/mattickupsanddowns%E2%80%93theeconomiccrisispt3

This articles focuses on understanding the “business cycles” of our country. The United States has been going through “Boom and Bust” cycles ever since the colonial era. Building up to a strong economy and then failing only to become stronger a certain period later was thought to have been put to an end when dramatic overhauls took place after the great depression.

Before that, of course, economic life was disrupted by a variety of disturbances: war, plague, bad harvests. But the coming of capitalism brought something new: starvation alongside good harvests and mountains of food; idle factories and unemployed workers in peacetime despite need for the goods they produced.

We find ourselves in a different place today as the economic status of the country does not become disrupted in the same ways it once was. We also find our economies acting similarly to other countries—more so than when the world was not as interdependent.

Clegg notes various issues concerning a Capitalist economy. All of these issues eventually lead back to credit, decline of profits, stagnant investments and the decline in value of capital. The article is to be followed up by one that addresses the problems proposed that cause a capitalist economy to fail.

Neoliberal educational reforms

In the article, Neoliberalism and education reform, E. Wayne Ross and Rich Gibson argue that public education is a key target of the neoliberal project because of its market size, its centrality to the economy and its potential challenge to corporate globalization.

Neoliberal educational reforms emphasize opening up the educational services market to for-profit education management organizations (such as Edition Schools) and via international trade and investment agreements such as GATS, which in turn affects the scope of collect agreements.

With global spending on education as more than $1 trillion, it makes sense why there is such a big push for the commodification or privatization of public education. Instead of expanding services and resources to all students, the same government has produced policies that are destroying and making education less accessible.

Efforts are made to reduce educational costs, often through economies of scale. Closing school libraries, reducing the number of special needs teachers, increasing class size, expanding online learning programs are examples.

The No Child Left Behind Act in the United States has been instrumental for the commodification of public education by reducing learning to bits of information and by marketizing education through programs that promote privatization.

Neoliberal educational reform policies focus on creation of curriculum standards (where the state defines the knowledge to be taught) and “accountability.” The dominant approach to educational accountability is an “outcomes-based bureaucratic” one.

The No Child Left Behind Act seems to have further solidified corporate control of education for profit by framing it in the language of accountability and choice

Four crises of modern capitalism

In the article, four crises of the contemporary World Capitalist System, William K. Tabb examines the four areas of crisis in modern capitalism: Financialization and financial meltdown, U.S. led Imperialism is losing its predominant influence, the rise of new centers of power, and resources and sustainability.

The first problem is the financial turbulence that has gripped the economy of the United States and has had widespread effects. It is a crisis that further discredits mainstream Anglo-American economics.

Some experts, including the authors, think that financialization has not only brought global crisis with the failure of financial markets but has also put the United States in a position like that of a poor nation in debt to foreign creditors.

A second crisis is that of U.S.-led imperialism, which has been discredited both in terms of its regime-change-wars-of-choice and the increasingly effective resistance to the international financial and trade regime we know as the Washington Consensus.

Neoliberalism may be on defense because of the harm it has done, and continues to do around the world through the mediation of “Washington’s arrogant militarism” and through the International Monetary Fund and World Bank.

A third point of crisis is the rise of new centers of power in what had been the peripheries of the capitalist system and the tensions this has unleashed, providing room to maneuver for countries wishing to break with the United States.

Emerging markets comprised over 50 percent of global output for the first in 2006. A 2006 study by PriceWatcherhouseCoopers projected that the “E-7” (Brazil, China, India, Indonesia, Mexico, Russia, and Turkey) will be about 25 percent larger than the current G-7, will be the driving global economic growth.

A fourth area of crisis has to do with resource usage, the uneven distribution of the necessities of life, and a growth paradigm that is no longer sustainable.

The availability and distribution of resources such as oil, food, and water may be the greatest crisis of all, yet “the sustainability of human life is simply not consistent with inherently wasteful capitalist growth.”

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“Financial: A primer” helped me understand what financialization is and this will help me in my paper. The author Ramaa Vasudevan states “You don’t have to be investor dabbling in the stock market to feel the power of finance” this tells me how finance applies to daily life. From the article I learned that financialization is changing the value of finance.

I think changing the value includes from income to some tradable like a bond or stock. The article also speaks of the dynamics of how corporations use stock and bonds freely. Finance is compared to a casino. Everyone places bets.

The casino comparison makes me remember about the use of futures and derivatives which was discussed in class. It is so funny that people are betting on something that is not so tangibles. I also believe this happens because it is very quick money. It has a huge outcome.

This affects the average American. The use of credit cards is also discussed. The credit cards allow people to think they have actual money like an asset but it is an actual loan. People forget that and get into trouble with debt. This is an example financialization.

Dhanha Bien-Aime

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It was hard to find articles about fashion but I found one in Naked Capitalism. The article was about American consumption. This connects to fashion. Shopping for clothes whether luxury or affordable is a way to buy into the idea of fashion. For many people buying expensive clothes shows their status.

The article is entitled “Is Retail Therapy Ending in America?” I found this article interesting because Americans like to go shop to feel better about themselves. This is increased with credit cards. It gives people license to shop for many things.

The one thing that is big expense is luxury goods such as designer clothing and luxury cars. Upper class and middle class Americans spend their wages with these types of commodities.

However the recession has given a shift in spending habits. According to the article consumption has gone down. According to Pamela Danziger president of Unity Marketing “Over the past year some affluent Americans have simply given up the fight to keep up with the Joneses” I think this quote sums up the article.

I believe that wealthy Americans are feeling the effects of the recession with their retail therapy. I think they can afford food insurance and other necessities. I think the extra miscellaneous hitting them hard financially. The fact that this group of people are going to outlet malls and looking sales just like the working class says something.

Dhanha Bien-Aime

Elizabeth Warren on Bill Maher

http://www.nakedcapitalism.com/2009/05/elizabeth-warren-on-bill-maher.html

Elizabeth Warren is a Harvard professor and the head of the “Congressional Oversight Panel”. This organization is a branch of the greater program known as “Oversight of the Troubled Asset Relief Program”. The Congressional Oversight Panel, and subsequently Elizabeth Warren, is charged with the role of reviewing the state of various markets. This includes monitoring the money given by the government in order to assist in repairing the economy, roughly 350 billion dollars.

During the interview Bill Maher asks Warren “So how’s that going, how are the banks doing?”, and Warren responded by saying, “Theres a little problem with the first 350 Billion dollars”. Warren says the majority of the money was given to banks but seems unsure as to the whereabouts of the remainder of that money.

The reassuring detail is that this panel of people will truthfully report back to Congress and does not seem to be tied down to a branch of government that will alter its opinion or cause it to give biased feedback to the American people; they merely report what they observe.

The two also talk about credit cards, and usury – meaning “the charging of interest on loans”. Every separate U.S. state determines how much interest is acceptable to charge before it is considered usurious/unlawful. Warren states that she feels this extends further than just credit cards, and delves into the realm of mortgages and the entire lending industry.

Instead of the once accepted model of borrowing money and having a reasonable amount of time to pay it back with a justified amount of interest, the lending industry has switched to trapping and tricking people into owing them an unreasonable amount of money that they will not possibly be able to pay back. This is a very real issue that is only hurting our economy, and anyone that has ever dealt with the dark side of fine print knows this to be true.