Marketplace - American Public Media

Subscribe to Marketplace - American Public Media feed
Updated: 54 min 55 sec ago

The music industry's cassette comeback

Fri, 2015-03-13 14:44

The way Popeye is about spinach or Jane Goodall is about chimpanzees is how Mike Haley is about cassette tapes. Haley’s got a podcast called Tabs Out and it’s all about cassettes. Haley lives in Wilmington, Delaware, and every few weeks or so he gets his friends together and talks tape.

“[We] sit around, and drink some beers, play some tapes, and ramble on about whatever dumb thing you can think about to critique a cassette tape, I think we’ve talked about it already,” says Haley.

While Haley features indie, quirky and unique artists who release cassettes, some big players are getting into the cassette game. Disney sold about 2,500 copies of the "Guardians of the Galaxy" soundtrack on tape, according to Nielsen. Then, there are indie labels like Burger Records, which claims to have sold more than 300,000 cassette tapes since 2007.

What’s driving this cassette tape renaissance? Well, tapes are cheap. Jessica Bordeaux is co-owner of Portland-based New Moss Records. Boudreaux says tapes are a low-risk gamble.

“We don’t know realistically how many people are going to buy [releases],” Bordeaux says. “And I think tapes do lend themselves to more creative packaging then … and a lot of the record stores aren’t going to sell your tapes, and so you can be more weird and creative.”

That creativity can help keep super fans interested in a band — and those super fans really matter for the $15 billion global music industry. According to Nielsen, which tracks music sales, about 70 cents of every music dollar comes from a super fan. So, if a band like Metallica puts out rare or hard to get material, there’s a good chance super fans will snatch it up.

If that material is on cassette — with its high profit margins — cha-ching.

For collectors, tapes are so much better than digital music, says label Kill Rock Stars' production manager, James Reling, since you can actually hold them.

“Things have become so disposable, when you see something that is so obviously not disposable, it has that much more appeal as something that is kinda precious or special,” Reling says.

That tangibility also has some data geeks are clamoring for these cassettes, as well. That’s because Sony, IBM and other hardware companies have developed tapes that aren’t your grandma’s tapes. They can store about 185 terabytes of data, the equivalent all the printed collected works in the Library of Congress times 18.5.

Graeme McMillian writes for Wired magazine, and he says cassette tapes are appealing for the same reason music collectors might like them — they exist in real life.

“If you have a glitch with your digital storage, it could be gone,” says McMillian. “Whereas with tape, it’s tangible. It’s right there.”

So, does all this mean we really do have a cassette tape renaissance? Mike Haley thinks probably not, they're just a fad.

“Metallica, and Jeff Bridges are making thousands and thousands of tapes or whatever,” Haley says. “I think they’ll eventually figure out that this isn’t really working. I think that enough people wrote think pieces that cassettes are making a comeback, to make people think cassettes are making a comeback, when in reality writing about cassettes are making a comeback.”

Wait a minute ... writing about cassette tapes was once a thing?

This story comes to us from The Future of What, a new public radio program focusing on the music industry.

'Going Clear' explores the finances of Scientology

Fri, 2015-03-13 11:38

Marketplace's Lizzie O'Leary speaks to filmmaker Alex Gibney and author-producer Lawrence Wright about their HBO documentary, "Going Clear: Scientology and the Prison of Belief."

"Going Clear" opens in Los Angeles, San Francisco and New York on Friday, March 13, with a broadcast release on HBO on March 29th.

More information about the Scientology response to the film is available at the Church of Scientology Freedom Magazine website

Listen to the full interview with Alex Gibney and Lawrence Wright in the player above.

Pope pushes on with Vatican financial reforms

Fri, 2015-03-13 11:33

Friday marks the second anniversary of the election of Pope Francis. In just two years, he’s credited with breathing new life into the Catholic Church with his focus on reform and repairing the church's reputation.

One priority has been cleaning up the Vatican Bank, created during World War II to manage money for the Catholic Church. Over the years it became mired in allegations of money laundering and tax evasion.

“So far, he’s been the new sheriff in town,” says Gerald Posner, author of the book “God’s Bankers: A History of Money and Power at the Vatican." “He’s really passing reforms that—if he’s there long enough—will change this bank into a boring, mid-level, sort of government bank, and the wild, crazy days of the past will be over.”

The return of the debt limit

Fri, 2015-03-13 11:33

This Sunday the United States' statutory debt limit will once again go into effect, essentially reinstating the debt ceiling at the level of the U.S. debt on Sunday, probably around $18 trillion.

The reason the debt limit is returning to haunt our fiscal dreams is because Congress kicked the can down the road when it passed a suspension of the debt limit in February, 2014. 

But it's hard to know how long the Department of Treasury can use "extraordinary measures" to keep paying its bills before it begins to risk defaulting on its debt. That's because government revenues are lumpy — lots comes in during tax season, for example. The best estimate sets the new deadline at some time in October or November.

My money story: When family values battle happiness

Fri, 2015-03-13 11:32

Betty Ming Liu's parents immigrated to the United States in the mid-1940s to escape political turmoil in China. Liu grew up in New York's Chinatown, where her father owned a book-keeping business.

She explains her outlook on money, and her experience growing up with immigrant parents.

Betty Ming Liu is a blogger, journalist, and professor in the New York City area. To hear Betty Ming Liu's full story, listen using the audio player above. 

Arianna Huffington wants you to sleep more

Fri, 2015-03-13 11:09

After collapsing from exhaustion eight years ago, Arianna Huffington had a realization that re-shaped her way of life.

The media guru who founded The Huffington Post now touts the importance of sleep in her latest book, Thrive. She has installed nap rooms for employees at the Post’s office and encourages disconnecting from technology — but could she have gotten to the place she’s at now if she had followed her own advice at the beginning of her career?

Huffington seems to think so.

“I would not only be where I am, I would be where I am with less damage to my health, my relationships, less worry and anxiety,” she says.

Huffington is excited that conversations surrounding meditation and sleep have become more mainstream

“We are all living a little bit under the collective delusion that burnout is the essential price for success, and all the modern scientific findings make it very clear that that’s not the case,” she says. “New science is validating ancient wisdom about the importance of sleep, of renewal, of what we are calling unplugging and recharging.”

However, Huffington's own media channel might be, in part, to blame for the obsession with being interconnected and constantly in the digital world.

Ryssdal: You start your book writing of an incident in which you basically woke up to this realization. Describe me for that, would you?

Huffington: It was about 8 years ago when I collapsed from exhaustion, burnout, and sleep deprivation… hit my head on the way down, broke my cheekbone, got four stitches on my right eye. That was the beginning of this journey that I’ve been on, of really coming to… in my own pool of blood. And nobody had shot me! And asking the question, “is this what success is?” We are all living a little bit under the collective delusion that burnout is the essential price for success, and all the modern scientific findings make it very clear that that’s not the case. In fact, that’s one of the exciting things about the times we’re living through – that new science is validating ancient wisdom about the importance of sleep, of renewal, of what we are calling unplugging and recharging.

Ryssdal: Without discounting any of that, I mean that is all important and we all have to do it, but I wonder if it’s easy for you to say – a woman of some means who’s had a lot of success in her life and who got there by burning out and who is now saying “Oh, wait a minute. Let’s not do it this way anymore.”

Huffington: Well, it’s hard because our culture is so screwed up. There is that prevalent assumption that if you burn out…that if you’re up all night…you’re going to be better at finding a job or making ends meet when, in fact, the opposite is true. You can tell…each one of us can tell from our personal experience when we’re exhausted, when we’re burnt out, we are less creative. We are much more reactive. So the truth is, we have all the evidence in front of us that that’s not the case. But nevertheless, it is a very very entrenched collective delusion, so I can understand why you’re asking this question.

Ryssdal: Do you think the company you founded, do you think the Huffington Post, helped get us where we are today with needing to be plugged in?

Huffington: Unfortunately, this is just something that happened because of so many factors and so many companies. It’s our smartphones. It’s Facebook. It’s Twitter. It’s the Huffington Post. It’s every digital media company. It’s really the times we’re living through. But what is great is that in the last year, we’ve begun to have a fascinating conversation around the need to disconnect. Suddenly, these things – meditation, sleep, renewal - have gone from the pages of the Yoga Journal to the front pages of the Wall Street Journal and The Economist. We are going to see many more people adopting these new practices, which are actually very old.

Ryssdal: I want you to do something for me. Think for a minute about the Arianna Huffington of 2005, as she was launching the Huffington Post. Now take the Arianna Huffington of today, and tell me what you would tell yourself from 10 years ago, having come through this and now found your moment of zen, if you will.

Huffington: I would tell myself to stop worrying and get more sleep.

Ryssdal: But would you be where you are today? That’s the point.

Huffington: Oh, absolutely! I would not only be where I am, I would be where I am with less damage to my health, my relationships, less worry and anxiety. I have 55 pages of scientific add. notes in the book so this is not a matter of one woman’s opinions or one woman’s experience. This is simply collecting all the data. We see all around us casualties, people who are willing to sacrifice their wellbeing on the altar of success. And if you go back and study where that started, it started with the Industrial Revolution when we thought we could really emulate machines and have a hundred percent up-time, and human beings were not designed that way.

Ryssdal: What’s it like to work for you? If I walk into the Huffington Post today, am I going to see this all reflected?

Huffington: Yes, absolutely. First of all, four years ago, we opened two nap rooms and I encourage everybody who starts during the day to have a nap instead of a fifth cup of coffee or a third cinnamon bun.

Ryssdal: Have you ever used those nap rooms?

Huffington: Well actually I have, but I also have a couch in my office, and I don’t want to occupy the nap room. My office has all glass, and when I would have a nap, I would normally close the curtain, and now I don’t. Because I feel like it’s a really good message, when I’m seen actually napping on the job to actually make it clear that it’s perfectly ok.

Ryssdal: Arianna Huffington, you know her from The Huffington Post. Her book is called Thrive. Arianna, thanks very much.

Huffington: Thank you so much, thank you.

How money gets burned

Fri, 2015-03-13 09:33

What happens to money after it becomes too old and worn to be useable?

Until just a few years ago, most of it was sent to landfills. Now, as part of a recycling initiative at the Federal Reserve, hundreds of tons of shredded bills are burned each year to generate electricity.

Officials at the Federal Reserve in Los Angeles said that the program — which has increased the percentage of recycled cash from 30 percent to more than 90 percent since 2010 — has multiple benefits for the region.

“We’re able to divert the shredded currency away from landfills, we have done so at lesser cost to the Fed, and the County of Los Angeles now has an additional source of fuel,” says Deborah Awai, a group vice president at the Federal Reserve Bank of San Francisco.

Deep within the Federal Reserve’s cash-processing facility in Los Angeles on a recent Monday morning, employees were loading bundles of currency into sorting machines that determine whether a bill is still fit enough to stay in circulation, is too old and worn, or is counterfeit.

The Los Angeles branch received 3.1 billion notes of currency in 2014. Good bills are set aside to await their return to circulation. Counterfeit ones are sent to the Secret Service. Lousy notes are shredded.

Nationwide, about 5,000 tons of currency are shredded annually. The shredded currency is recycled in various ways, including composting and manufacturing. About one-third is burned to generate electricity.

The Los Angeles branch burns more currency than any of the other 27 cash processing facilities in the nation.

The conversion occurs at the refuse-to-energy facility in the City of Commerce near Los Angeles. Five days a week, trucks back into the plant’s warehouse and dump garbage into an enormous pit inside.

Matt Eaton, a division engineer with the Los Angeles County Sanitation Districts, said that the facility receives about 100,000 tons of waste from various sources each year. The heat generates enough electricity from its steam turbines to provide power for 20,000 homes.

The approximately 535 tons of shredded money from the Los Angeles cash-processing branch only constitutes a minuscule percentage of the total waste the facility receives. Still, Eaton estimated that energy provided by the burned cash is enough to power 100 homes.

The money is also valuable because it acts as kindling for messier garbage.

“It does burn really well, and it helps support the combustion of some waste we get in that may be wetter or doesn’t burn as easily,” Eaton said.

He said the fact that the cash was recently worth millions of dollars doesn’t phase employees when it arrives.

“It’s treated like any other source of waste. People don’t come out running when we see the currency. If it wasn’t shredded, maybe, but because it’s shredded, no. It’s like any other waste,” Eaton said.

Burning Money

Fri, 2015-03-13 09:33

What happens to money after it becomes too old and worn to be useable?

Until just a few years ago, most of it was sent to landfills. Now, as part of a recycling initiative at the Federal Reserve, hundreds of tons of shredded bills are burned each year to generate electricity.

Officials at the Federal Reserve in Los Angeles said that the program — which has increased the percentage of recycled cash from 30 percent to more than 90 percent since 2010 — has multiple benefits for the region.

“We’re able to divert the shredded currency away from landfills, we have done so at lesser cost to the Fed, and the County of Los Angeles now has an additional source of fuel,” says Deborah Awai, a group vice president at the Federal Reserve Bank of San Francisco.

Deep within the Federal Reserve’s cash-processing facility in Los Angeles on a recent Monday morning, employees were loading bundles of currency into sorting machines that determine whether a bill is still fit enough to stay in circulation, is too old and worn, or is counterfeit.

The Los Angeles branch received 3.1 billion notes of currency in 2014. Good bills are set aside to await their return to circulation. Counterfeit ones are sent to the Secret Service. Lousy notes are shredded.

Nationwide, about 5,000 tons of currency are shredded annually. The shredded currency is recycled in various ways, including composting and manufacturing. About one-third is burned to generate electricity.

The Los Angeles branch burns more currency than any of the other 27 cash processing facilities in the nation.

The conversion occurs at the refuse-to-energy facility in the City of Commerce near Los Angeles. Five days a week, trucks back into the plant’s warehouse and dump garbage into an enormous pit inside.

Matt Eaton, a division engineer with the Los Angeles County Sanitation Districts, said that the facility receives about 100,000 tons of waste from various sources each year. The heat generates enough electricity from its steam turbines to provide power for 20,000 homes.

The approximately 535 tons of shredded money from the Los Angeles cash-processing branch only constitutes a minuscule percentage of the total waste the facility receives. Still, Eaton estimated that energy provided by the burned cash is enough to power 100 homes.

The money is also valuable because it acts as kindling for messier garbage.

“It does burn really well, and it helps support the combustion of some waste we get in that may be wetter or doesn’t burn as easily,” Eaton said.

He said the fact that the cash was recently worth millions of dollars doesn’t phase employees when it arrives.

“It’s treated like any other source of waste. People don’t come out running when we see the currency. If it wasn’t shredded, maybe, but because it’s shredded, no. It’s like any other waste,” Eaton said.

Fun Fact Friday: Uber might be ruining our economy

Fri, 2015-03-13 09:29

Kai sat down with Linette Lopez of Business Insider and Sudeep Reddy from the Wall Street Journal for a look at the week that was. Here's what else we learned listening to Marketplace this week: 

Fun Fact: There are rules to duplicating dollar bills, even on movie sets.

In preparing for the climax of the film Rush Hour 2, a prop maker discovered the legal implications in creating a billion dollars in fake money. In fact, there's a law that states, when duplicating dollar bills, they must be either 75 percent smaller than or 150 percent larger than the size of a real bill. The tricky business behind fake Hollywood money

Fun Fact: Millennials and women are responsible for our shift towards fresher foods.

Gone are the days of Chef Boyardee and Ramen noodles. Sales of some of the top brands at General Mills, Kraft, and the Campbell Soup Company have been slumping. Food analysts claim the change in consumption habits is due to recession-born millennials and mothers concerned about the additives and preservatives perverting their children's foods.  Why sales of packaged or processed foods are declining

Fun Fact: The Social Security "Death Master File" features more than six million people born before 1901 as still alive.

A recent audit by the Inspector General revealed the inefficient record keeping. This is problematic for many federal agencies that rely on this file for paying out refunds and pensions. The cost of inefficient Social Security record keeping

Fun Fact: The U.S. economy includes some 2.8 million temp workers -- a number much larger when you include people working in the "gig economy."

The gig economy, or “Uberification” of the labor force, in which companies hire locals to complete a quick task at hand, has in fact made it frighteningly easy for companies to offload jobs that would otherwise go to full-time staff. It's created a loophole for labor regulations that some feel is creating a speedy race to the bottom. Is the Uber economy bad for workers?

Fun Fact: We created this quiz to find out which Apple Watch is right for you. 

Apple CEO Tim Cook took the stage this week to unveil updates of existing products and show off new products, most notably the Apple Watch, which ranges in price from $349 to more than a whopping $10,000. We created a quiz so you could determine which watch is right for you. Is it time for the Apple Watch?        

It's pi day ... with a twist

Fri, 2015-03-13 08:51

This is either incredibly geeky, incredibly cool or more likely a combination of the two.

Saturday is, as you've no doubt heard, "Pi Day." March 14th, 3/14, 3 ... 1 ... 4. Pi: 3.14

It is also 2015, which makes it 3/14/15. 3.1415 is Pi to the fourth decimal.

Here comes the cool part (and if you've read this far, thank you).

Saturday at 9:26 am, the Massachusetts Institute of Technology is going to announce its admissions decisions. That's 3/14/15, 9:26.

Pi to the 7th decimal?3.1415926.

Pretty cool. 

Despite headwinds, tobacco industry is still thriving

Fri, 2015-03-13 08:45

When you’re in the tobacco business, controversy is all part of the game. And it’s been rough sledding for the industry this week.

First came the Institute of Medicine report pushing to increase the tobacco purchase age from 18 to 21. Today, a group of public health experts writing in the British medical journal "The Lancet" called for a tobacco-free world by 2040.

At this point, you could quickly stack up the public health arguments like matchsticks to condemn the $100 billion U.S. tobacco industry.

Every year, 500,000 Americans die as a result of smoking. Nine million are sick from their smoking. And then, Stanford professor Tom Glynn says the CDC estimates we’re spending $300 billion a year dealing with the fallout from smoking.

“When someone goes into a store and buys a pack of cigarettes, it costs the American taxpayer about $10 every time in lost wages, lost productivity and healthcare,” he says.

And market data shows fewer people are smoking – just 18% of adults. And those who do smoke are smoking less. That said, University of Michigan economist Ken Warner says profits are strong, companies have cut costs, and they have expanded into things like e-cigarettes.

“We need to be aware that the industry has been thriving throughout this tough period, and they’re thriving now,” he says.

But Warner says there may be a chink in the industry’s armor, he says he’s seeing manufacturers do something he hasn’t seen before: They’re raising prices.

“With an addictive product, you want to pick a price that is not only going to keep your smokers smoking, but in particular is going to encourage kids to smoke. So if I’m right about this, they are probably taking the view that the cigarette market is not going to be a terribly strong one a few decades down the line here,” he says.

Capitol Securities Management analyst Steve Marascia says he’s not ready to bet against big tobacco. 

“It’s a smart cat with nine lives, and it’s a product people still which people want,” he says.

Teach For America is getting fewer applicants

Fri, 2015-03-13 08:43

Recruiting teachers to work in low-income communities is not as easy as it used to be. 

Teach For America reports that it has received 44,100 applications this year for its program of training professionals and college graduates, and placing them in two-year teaching commitments at schools. The education non-profit says that less than 15 percent of those applicants will be chosen for its highly-selective program. 

Those numbers sound impressive until you consider Teach For America's recent past. The group's applicant pool ballooned tenfold in the last 15 years to a peak of 57,266 applicants in 2013. It has since declined 23 percent. 

The organization attributes its recruiting challenges to an improving job market, and more competition for college graduates and professionals. 

"We are looking for the same kinds of young leaders... that many of the top corporations and best places to work are looking for," says Massie Ritsch, a spokesperson for Teach For America. 

But the headwinds Teach For America is facing are not from an improving economy alone.

Sara Mead, a consultant with Bellweather Education Partners who helped author an internal study for Teach For America, says while the economy is by far the top reason, Teach For America also is battling negative perceptions. 

Some of the non-profit group's alumni have advocated for things like standardized testing and other educational reforms that Mead describes as "polarizing."

"Some of the critics of those changes have really focused on Teach For America in a negative way," Mead says. 

There are anecdotal reports that some professors have dissuaded their students from applying to Teach For America and that some recruiters have faced negative responses on campuses, says Mead. 

"We are definitely having to answer harder questions and more questions," says Ritsch. 

But those questions aren't about Teach For America alone. They are also about the teaching profession, as a whole. 

"Millenials tend to have a pretty poor perception of the teaching profession," says Tamara Hiler with the education think tank Third Way, who conducted a survey of college undergraduates. "They want to be entering careers that are going to be seen as sort of opening doors for them and a lot of times they see teaching as actually closing doors." 

Los Angeles is definitely ready for some football

Fri, 2015-03-13 08:43
$521,294,275

That's how much the city of Chicago shelled out for expenses related to police misconduct from 2004-2014. About a fourth of that is tied up in attorney's fees, both for the plaintiffs and the police, who have been historically unwilling to settle.

2038

The year the gender wage gap would close in Florida if it continues to narrow at the current rate, according to an analysis from the Institute for Women's Policy Research reported by the Washington Post. Florida would be the first state to close the gap. The last? Wyoming in 2159.

12/24/1994

The last time Los Angeles hosted its own pro-football home game, the Atlantic's CityLab reported. LA is the largest city without a professional football franchise by a significant margin, and no less than 15 teams have been rumored or out-and-out threatened to move there since then.

Seven

"Mad Men" wraps up its seven-season run this spring, with the last batch up episodes starting in April. The Hollywood Reporter has an exhaustive oral history of the show, which propelled AMC from a minor movie channel into a prestige drama juggernaut. It's a great weekend long read.

Five

The number of flavors available for the powdered alcohol product "palcohol." The Alcohol and Tobacco Tax and Trade Bureau approved the freeze-dried product on Thursday, which comes in vodka, rum, cosmopolitan, margarita and lemon drop flavors.

PODCAST: The annual dance with default

Fri, 2015-03-13 07:35

First up: After a rally Thursday, the stocks were trending down in the first hours of trading Friday. We check in with Christopher Lowe from FTN Financial to talk falling wholesale prices, raising oil production and reading the Fed's tea leaves. Then, the federal government will begin its almost-annual dance with default on Sunday: the debt ceiling is back. Finally, on the second anniversary of Pope Francis' election, we look at how the Pope has reformed the Church's finances and the work he has yet to do on the Vatican Bank.

Silicon Tally: SXSW Edition

Fri, 2015-03-13 04:53

It's time for Silicon Tally! How well have you kept up with the week in tech news?

This week, we're joined by Will Hurley, also known as Whurley, CEO of Honest Dollar.

var _polldaddy = [] || _polldaddy; _polldaddy.push( { type: "iframe", auto: "1", domain: "marketplaceapm.polldaddy.com/s/", id: "silicon-tally-sxsw", placeholder: "pd_1426251195" } ); (function(d,c,j){if(!document.getElementById(j)){var pd=d.createElement(c),s;pd.id=j;pd.src=('https:'==document.location.protocol)?'https://polldaddy.com/survey.js':'http://i0.poll.fm/survey.js';s=document.getElementsByTagName(c)[0];s.parentNode.insertBefore(pd,s);}}(document,'script','pd-embed'));

Two Profiles of China's Economy

Fri, 2015-03-13 02:32

It’s 3:00 a.m. in the most populated city of the world’s most populated country. Most of Shanghai’s 24 million inhabitants are fast asleep, but it’s rush hour inside the city’s largest wholesale fish market.

The Tongchuan Road market supplies the metropolis with one of its most popular staple foods. Vendors wearing rubber boots rush through miles of twisting, cramped corridors covered with a thick film of fish guts. It’s a slimy, lively labyrinth that’s difficult to navigate, not unlike finding one’s way into China’s elusive middle class.

Zhang Wenquan knows this all too well. The tall,  muscular 47-year old kicks off his sneaker. He pulls on a pair of camouflaged rubber boots before entering the sprawling market, oblivious to the calls from competing vendors. Zhang grew up in the impoverished countryside of Anhui province. When he turned 17, he came to Shanghai to work on an assembly line. He met his wife at the factory, and they now sell fish at a small neighborhood market. Zhang wakes up at midnight each day to buy his merchandise here.

And “buy” might not be the right term, constant haggling is more like it.

“How much?” Zhang asks a vendor as he plunges his strong hands into a box of live shrimp.

“Fifty,” the woman barks back.

“Fifty? Yesterday you sold them for 48! These are too small!” Zhang says.

He repeats this with every vendor: Too small, too expensive, too ugly – at one stall he takes one look at a tank of fish and declares: “They’re all dead.”

“Buying fish is tougher than raising children,” Zhang says. “By this afternoon, everything I just bought will be dead and worthless.”

His children, on the other hand, could someday be the family’s ticket into China’s middle class. “I’m not working this hard so that my daughters end up working as fish sellers like me,” Zhang says. “They’ve got to go to good colleges and find good jobs with good salaries.”

Zhang has twin daughters, a stroke of luck in a country with a one-child policy. But that’s where he sees his luck ending. His girls are 16, they were born in Shanghai and call the city home. Yet, Zhang and his wife had to send the girls to the countryside last year so that they could finish their schooling.  “They can’t legally attend high school in Shanghai because they don’t have Shanghai Hukou,” he explains.

Hukou means ‘household registration’. If you don’t have Hukou for Shanghai – in other words if you’re not registered to live there – then you’re not eligible for social benefits like health insurance, a pension, or even a high school education for your children. You have to return to where your family originally came from to qualify for those benefits.

China’s modern Hukou system has its roots in the country’s old communist-style command economy. Former Chinese leader Mao Zedong revived the ancient household registration system in 1958 as a mechanism to restrict peasants from swarming into the country’s largest cities. After the economic reforms of the 1980s, the system was relaxed to allow migrants to move to the city, but strict rules remain governing where their children can attend school and take college entrance exams.

Hukou supporters say controlling China’s massive population has helped prevent the creation of slums around its biggest cities that are common sights in the developing world.

The Zhang family Hukou belongs to his wife’s ancestral village in the countryside of Jiangsu province, and that’s why the couple has been without their daughters for more than a year.

At 6:00 a.m., Zhang arrives to his stall at a wet market in the Xujiahui neighborhood of central Shanghai. He’s dropped off the fresh fish, and his wife, Shi Huiqun, takes over the work so that he can go home and sleep. The 42-year-old tells me business is tougher than it’s ever been: “Competition here is fierce," she says with a sigh. "We used to be able to save money, but now we’re paying for our daughters to attend school back in my hometown, so we’re close to breaking even.”

Shi and Zhang own an apartment in Shanghai, a house in the countryside, a foreign car, and they make around the equivalent of $15,000 a year – three times more than the average urban family makes in China. Yet when I ask her if she considers herself middle class, Shi shakes her head. “I don’t think small business owners like us belong to the middle class. We don’t make that much money. What is the middle class, anyway?” she asks.

“I don’t know if anybody knows what the middle class is in China,” says James McGregor, Asia Chairman of APCO and author of the book, "One Billion Customers."

McGregor says the first wave of China’s middle class were the 400 million people who grew up in China’s largest cities and are now – on paper – upper class. They became wealthy on China’s real estate boom and they now drink Starbucks, own iPhones, and drive imported luxury cars.  “Maybe the middle class is China’s next wave of migrant workers who are getting legal registration in the cities and getting city services and becoming the next consumers,” says McGregor. “Actually, if you look at studies of the future of Chinese economy, that group of people, if you can get 10 million of them a year and they can become consumers, you can have 6 percent growth in China for 20 years.”

And that’s why China’s government has launched an urbanization campaign with the goal of moving a 250,000 rural Chinese to the cities over the next decade. Government propaganda posters throughout the country advertise “The Chinese Dream,” the guiding principle of president Xi Jinping’s government.

Back at the market, I ask Shi if she’s pursuing the Chinese Dream.  

“What’s the Chinese Dream? Is that something from TV? I haven’t heard about it,” says Shi, embarrassed.

Instead, I ask her, “What’s your dream?”

“Originally, I dreamt that my girls could finish their schooling here in Shanghai,” Shi tells me, “but that dream never came true.”

Nearly half of Shanghai’s 24 million residents are in the same conundrum as Zhang and Shi: According to Shanghai’s municipal statistics bureau, nearly ten million children can’t attend Shanghai schools because they don’t possess city Hukou. Nationwide, it adds up to nearly a third of China’s urban population: A quarter of a billion Chinese lack legal rights to social welfare and high school for their children in the cities where they reside.

China’s leaders have vowed to reform the Hukou system, but so far, meaningful change hasn’t taken place. Meanwhile, migrants continue to move into the country’s largest cities.

Today, though, Shi Huiqun is heading in the opposite direction. She’s driving two hours north of Shanghai to her rural hometown to visit her twin daughters. Shi has rented a bare, unfurnished apartment for them located next door to their private middle school. The 16 year-olds have had to repeat the 9th grade, because the curriculum in their new school is a year ahead of that of their former middle school in Shanghai.

When their mother arrives, the twins are studying their textbooks side-by-side. Their grandmother, who can’t read or write, stands guard behind them, making sure they complete their homework.  Zhang Ming studies physics while Zhang Yue reads her English homework out loud. “Our own planet, the Earth is becoming more and more crowded and polluted because of the rapid increase of p ... population,” she says in broken English with help from her sister.

The two are identical twins, they wear identical jackets and identical hairstyles – it’s nearly impossible to tell them apart. Throughout our conversation, though, their mother recites their differences to me: Zhang Ming is ranked 4th in class, Zhang Yue is 15th; Zhang Ming’s eyesight is worse; Zhang Yue is quieter; Zhang Ming is temperamental; Zhang Yue is lazier. The girls nod in unison.

Shi’s daughters tell me school here is much more demanding than in Shanghai. They’re in class from 6:00 a.m. until 9:00 p.m., and they attend half days on Sundays.

“I’d prefer to be in Shanghai,” says Zhang Yue. “I feel like a foreigner here. I think China should allow children to attend school where they grew up. We consider ourselves Shanghainese, but according to our Hukou, we’re not.”

Despite what their Hukou says, the family has come a long way. Shi accompanies me to the farm she grew up on down the road from the school – a couple acres of crops, pigs, chicken, and sheep. “I grew up here in a house with a dirt floor,” Shi tells me.

Life is better now, but not for everyone. Hukou laws have forced parents throughout China to leave their children behind – they’re called ‘left-behind children,’ and there are an estimated 60 million of them, nearly as much as the entire population of the UK. Shi isn’t too worried about her daughters because she and her husband are just a two-hour drive away. But for most left-behind children, that’s not the case. With their parents in another part of China, many of them drop out of school, all but removing an entire population of Chinese from the dream of making it into the middle class.

But the story of the Chinese economy is also about the expansion of wealth and the business leaders who have paved their path to prosperity. How did a poor communist country transform itself into having the second most billionaires in the world, after the United States, in just over a generation? 

The Hurun Report is an annual survey of China's wealthy. Hurun identified 400 billionaires in China, but there are another 800 yet to be profiled. The report estimates that one in seven people in Shanghai and Guangdong are millionaires – and it's even higher in Beijing, where it's one out of six.

It's an extraordinary change from a centrally-planned economy where everyone was at least nominally equal. Hurun estimates that more than half of millionaires started their own businesses. Of the rest, 10 percent made their fortunes from the stock market, 15 percent from real estate, and 20 percent are highly-paid executives.

Of the super-rich – those with $16 million or more – the number of entrepreneurs stands out even more. Some 80 percent of the super-rich own their own firms and 15 percent made their money from real estate.

To put this in context, the self-employed make up only about 6 percent of the Chinese workforce. That's much lower than in developing countries such as India, where it's 82 percent.

The reason is because the market was only opened up to private enterprises in the past two decades when private firms were legally recognized and private contracts honored after the dramatic downsizing of the state-owned firms that have dominated since 1949. And those who took the plunge early on to start their own firms, such as Wang Jianlin, are among the richest people in China. 

Sixty-year-old Wang Jianlin is the biggest property tycoon in China. His company, Wanda, is the largest listed real estate company in China. His company has built housing complexes, entertainment and shopping centers.

His firm catered to the middle class, taking advantage of the developing consumer market in China.  

"Wanda is always trying to reinvent itself," says Wang Jianlin. "We are constantly changing our business model, for example, we started with residential property, then we turned to business centers. Now, we are tapping into culture, finance, and even e-business."

He believes that most Chinese companies are not reaching their potential.

“Currently, most Chinese companies are imitating. Innovative companies — be it technological innovation or business model innovation — are still lacking,” he says. “Chinese companies are still learning. I think it might take up to 10 years, or at least eight years, before Chinese companies can stop imitating their Western counterparts and become genuinely innovative.”

His desire for innovation has made his company invest in film production. The Wanda Studios in China will be the world's largest film and television studios in the world when it opens in 2017.

"We don't want to become another Disney," he says. "For one reason, Disney is too old. It already has an 80 year history. I don't want to be like that. I want to create a brand new Wanda Style entertainment project."

Wang Jianlin built his business anticipating the needs of the emerging middle class. But China is still a poor country – on par with Peru in terms of Gross Domestic Product per person – and there are still strict governing how ordinary people live their lives.

Pages