Guest Blog: The perceived wisdom is that movies thrive when the economy tanks. Not so — although the “why” is more complex than you think
Among the things Willard “Mitt” Romney gets wrong — foreign affairs, social issues, immigration — is the economy, supposedly his area of expertise. Consider: A month ago, he was decrying President Obama’s energy policies, claiming (falsely) that they were responsible for the run-up in gas prices and for killing the nascent economic recovery.
So much for predictions. Whatever harm he thinks the price spike did isn’t reflected in the numbers — the GDP rose more than 2% in the quarter in which the spike hiked to its highest, while on Tuesday the Dow Jones hit a post-recession high of 13,250.
I’d like to say I told you so … but, well, I did. Three years ago, at the urging of friends, I created a ‘blog called “Smarter Than You.” In the first editions, I urged students to take out Stafford loans (if they qualified) whether they needed them or not. Since the interest was deferred ‘til graduation, it amounted to 'free' money. You could repay it upon graduation and be debt-free. If you didn’t, you were still paying a ridiculously low rate — a far better deal than most students get.
And, I pointed out, it was the first thing (because it made too much sense) that the Republicans would kill. They didn’t want you invading their country clubs.
Also in that initial surge of articles was “Buy Stocks Now.” Too esoteric for most (it relied upon the theories of an obscure Russian economist named Nikolai Kondratiev, whom Stalin murdered because he didn’t support state socialism), it was right. If you’d taken my advice in 2009, when the stock market was at 7,000, you would have virtually doubled your money while cutting your kids’ college fees by one quarter.
Typically for Google, that was too much. Since they were selling a ton of adds against my blog, a phenomenon they couldn’t explain, they cancelled it.
Understand, in the monopolistic Google-verse, there is no appeal. I got a notice saying that I had 11,000 regular readers, impossible for a four-week old blog, and I was, therefore, banned. (I’m sure some Google police will show up at my house after this is posted to take me away to … what was it in “The Prisoner” with Patrick McGoohan — the "Island"?)
They accused me of scheming to have thousands of friends log in — though I suspect the number of true friends who actually read the blog were three: My wife, her mother and my ill-starred director friend George Francisco (although even he couldn’t follow the Kondratiev logic, he took my word for it and doubled the 30 cents he had to invest!).
Had the monolithic Google algorithms worked as they were supposed to, they would have discovered that I’d been promoting the same drivel as a reporter for Newsweek, Forbes, the (august) New York Times and the (slightly less august) Los Angeles Times for a quarter century. And some of those outlets had well over 11,000 readers, maybe many millions more. But hey — I put my money where my mouth was and “bought stocks now” at 7,000. Nah-hah, Google!
How does that affect the cost of gas — and the box office?
Quite a bit. I know this is heresy to say in Tinseltown, but Hollywood depends on the general economy more than anyone would believe. That sounds counterintuitive; the perceived wisdom is that movies thrive when the economy tanks. Not so, although the “why” is more complex than you think.
It’s mostly economics. Let’s take the gas hike. Romney is not wrong on the surface — since that knee-jerk “flip-flopper” has the memory of a newt (and I don’t mean Gingrich, who has a fairly good memory), he looks back at what happened in 2008-9 when gasoline first touched $4 per gallon and, because that coincided with the crapola economy his friends on Wall Street left us with, it was a proximate cause of the recession.
But that was unusual. In normal times, it’s not the price of gas that’s the problem, but the availability (cf. the “gas crises” of 1973 and ’79). We’ve endured plenty of price spikes without going into recession. Think of the early ‘00s, when prices roared from under $2 per gallon (remember those halcyon days?). Still, the economy soared.
What happened in 2008 was unique — but not incomprehensible. First, the proportionate change was much more severe, with the price almost doubling in a matter of months. Take $700 billion in disposable income out of an already-teetering economy and you have a recipe for the disaster that occurred.
Thankfully, smart people prevailed, Obama was elected and, as a first order of business, decided to save the America auto industry. That served two goals. First, it kept a million workers on the job. (Can you imagine an economy with that many more newly unemployed? Romney didn’t care.)
Moreover, it gave the industry time to regroup (truth in advertising here—I was a Ford assembly-line worker during college: Local 904, UAW). In that regrouping, they introduced a new line of fuel-efficient alternative-energy vehicles that are now the global standard.
In addition, the so-called “price hike” this time was much less severe, only something over 30%, compared to the near-doubling in’08. Finally, as part of Obama’s stimulus bill, the wildly popular “Cash for Clunkers” program had taken tens of thousands more gas-guzzlers off the road, further ameliorating the impact of the price hikes.
But that seems to have escaped Cassandra’s notice. Shame on you, Willard Romney.
Now that the economy is on track, how does that affect Hollywood? Well, as Francisco points out (those USC Film School sheepskins mean something!), with the opening of “Avengers” this week, followed by Johnny Depp in “Dark Shadows” and the third “Men in Black”, we’re looking at the greatest box office in history.
The reason isn’t that we’re better filmmakers. Rather, it's that the economy affects the box office in ways Tinseltown Tonys will never understand.
Let me lay it out: Historically, the box office has followed the economy … no, it has led the economy. For example, despite what you may think, box-office receipts from the 1930s show that — good pictures (“Scarface,” starring Paul Muni) or bad — from 1929 to 1932, it sank some 60%.
We may remember the ‘30s as a great time for film, but that’s because it was the only good thing going. Remember “Dish Night” at your theater? They weren’t giving out dishes because too many people were coming. (Similarly, the ‘30s were considered the Golden Age of baseball — how memories lie — MLB admissions sank from 10,000 per game in ’29 to 6,000 in ’32, almost exactly mirroring the box office.)
Worse, as a leading indicator, Hollywood was prescient — the bankruptcy of Universal Pictures was one of the first big bankruptcies of the Depression, foreshadowing dozens more.
More recently, box-office declines have preceded major economic fiascos since the ‘60s, including the ‘90s recession, the “dot-com” bust of 2000-1, and the Great Recession of 2008-9. Seems like, good movies or bad (and this hurts Hollywood egos), when times are tough, people cut back on discretionary items like movies and sports first.
Thanks to Obama, times are looking better. And thanks to the filmmakers and studios behind “The Avengers,” “Dark Shadows” and “MIB 3”, we not only have a chance at a record year, but if movies (like the Dow) are a “leading economic indicator,” then all is looking up.
No wonder Hollywood turns out for Barack and not Willard. And, as I said in ’09, when I told you to buy stocks, you read it here first!