The Luddites Of Today

Watching the ongoing strikes in both Hollywood and the automotive industry both leave me shaking my head.

This is a situation where we are seeing anti-technology sentiment rearing its head. It is a tough situation since many are being threatened. However, fighting it is foolishness.

In this article we will discuss the realities of technology and what is likely the outcome of these battles between unions and companies.

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Technology Is Deflationary

Technology, by its nature, is deflationary. This means that it tends to affect the working class more than any other.

Deflation is a misunderstood concept. Many feel inflation bad, deflation good. After all, if the price of milk goes down, that is a good thing.

Well, it really isn't.

If prices drop too much, incomes end up being hit. How so? Simply by the fact that companies start to let employees go. A 2% drop in the price of milk is not positive if one losses 100% of his or her income.

This is true across an economy. As unemployment increases and work hours are cut, people take home less money. During periods of increases, people write about how prices are outpacing wages. However, when the opposite happens, it is even worse.

Technology only adds fuel to this, if 10% of the population loses their jobs, this means the wage decline is at least that much. Actually, it is greater since those still working find themselves moved from full time to part time hours.

Overall, this is a horrific situation.

It can be pushed by a number of factors but with technology, we can see entire industries wiped out.

Hollywood

Right now, both the writers and actors are on strike. This is a problem since they are fighting a losing battle. In fact, both sides of this contest could be coming to an end.

The Internet changed how information, including video, was distributed. It allowed entry into the world of content creation that was not previously possible. What was once a monopoly suddenly opened up to anyone with a laptop or smartphone.

We are now embarking upon another technological jump, one the unions are fighting. Software is starting to allow for the creation of scripts and even video without humans. It is in the embryotic stage but is only going to improve.

Here is the dilemma for Hollywood.

As the software improves, more people will be able to create studio quality products for a fraction of the cost of Hollywood. Naturally, the studios will want to implement the same technology.

The problems is the unions are fighting it because it affects their members. Here is another part of the challenge. If the studios give in, there is no stopping other entities from doing it. This could come from companies outside the US or even smaller players not in Hollywood.

This is how disruption takes place.

UAW Fighting Legacy Auto

We could see the same situation with the strikes starting to spread throughout the Big Three.

The UAW has staged strategic strikes with the promise to keep it spreading. We know this is a fight over wages and other benefits.

A problem with this process is the union might be negotiating with dead entities. Legacy auto is going to come under extreme pressure. They have completely botched the transition to EVs, with Tesla and the Chinese auto makers having a significant lead.

While it looked like they were serious a while back, many have stepped back their efforts. Ford's numbers are revealing how much they are losing on each vehicle. Because of this, it is simply not cost effective to go forward.

Adding more salary is only going to make the situation worse. Of course, from the union's perspective, this is dire since EVs require less manufacturing than the ICE counterpart. To it, this means less jobs.

Stopping the transition is not going to be an option. The Chinese companies are already starting to make noise in Europe, with the establishment looking at ways to protect its auto industry (mostly the Germans). This will get touchy since much of the EU likes to ship to China.

It is hard to argue with the growth rate in EVs. While global penetrate (of new sales) is less than 10%, it is growing quickly.

Production appears to be ramping up at all the Chinese facilities. BYD is one of the companies looking to penetrate the EU. While this could set off a trade war, we have to keep in mind the region has targets for fossil fuel elimination.

We are nearing the 4th quarter of 2023 and none of the legacy automakers is even coming close to 1M EV production. This is a major problem.

Will this affect the unions? At some point, some of these companies are going to find bankruptcy no matter what agreement is handed out.

It is the same as the movie studios. All sides to these fights are luddites, resisting the change that is taking place.

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