What the Hollywood Writers Strike Says About How Much Trouble Our Economy’s Really In
Leave it to Bernie Sanders to sum it up best. “Last year, 8 Hollywood CEOs made nearly $800 million, yet pay for TV writers has fallen by 23 percent over the last 10 years.” Ouch. That’s a concise description of the reason more than 11,000 writers are now on strike. And in America? That’s a big deal, because the Writers’ Guild is one of the few labour organizations which still functions. You don’t see a strike at this scale often, even in Europe — but especially not in America.
All of this is a perfect metaphor for where our economies are. What went wrong with them. Why they feel so…hopelessly broken. Let me begin at the beginning.
Think about what it means to have your income fall by 25% or so over a decade. Your income should grow. Over time. As you gain experience, as you gain skills, as you learn how to be more “productive,” and I’ll come back to that. But we all know — at least those of us who aren’t billionaires — that…that doesn’t really happen anymore.
What does happen? Well, what happens is exemplified by the flipside of the writers on strike — Big Tech. The dawn of streaming brought with it huge monopolies. Those huge monopolies pay…pennies…to artists, writers, musicians. This is a huge issue in music, too, where even the world’s top artists, LOL, can’t make a living off what they stream, because the monopolies have set the rates that low. Meanwhile? From Spotify to YouTube, they’re making a killing.
But even that hasn’t brought with it anything resembling job security in tech. Instead, while the writers’ strike shows the grim reality of life in our economies at the everyday level — stagnation, shrinking income — the tech industry shows the upside. And even the upside isn’t that good. Tech workers can stumble into a high-paying job, sure. But those don’t last forever, and there’s no guarantee of the kind of steady upward mobility that used to once to be the norm in a healthy economy. Instead, now? Zuck or Elon or whomever the creepy tech baron is can lay you off — snap!! — just like that. And you don’t just naturally fall into another high-paying job at another mega-firm, because, well, those layoffs come in industry-wide waves. So: high-reward, but high-risk. And the high-reward lasts for a relatively short time across a lifetime — it’s not a gentle, steady rise in earning power, which leads to savings, and so forth.
The downside? It’s bad. The upside isn’t great, either. Those tech workers then have to…LOL…try to buy or rent houses in San Francisco. So in this way, for the vast, vast majority of people, the economy is failing, and it’s failing incredibly badly. Gone are the days of work hard and get ahead. Instead, now? The economy is basically a thing of insecurity. For almost everyone.
Of course, some have it worse — much worse — than others. But even at the upper echelons? I don’t mean the CEOs and billionaires, just the average person, who’s done well. There’s still little security. It’s hard to build a life, savings, own much — and I mean really own it, as in outright, not just rent it from the bank on credit, which is better than nothing, but it’s still far from the kind of outright ownership that’s far more the norm in Europe.
Now. We may all have become a little inured to this. But let me, as your friendly neighborhood economist, point out, and assure you. When an economy only offers insecurity for everyone but CEOs and billionaires, it is a deeply, deeply unhealthy one.
Because you know what? These are all hard-working people we’re talking about. Watch much TV? I’m sure you do, we all do. Life is bleak these days, and binge-watching a show is everyone’s favorite escape. No judgment from me, I do it too. So if all those hard-working people are making things that the rest of us need — and yes, we do need things like a vibrant culture, just as much as food and water, unless you like living in, say, Afghanistan these days — why can’t they make ends meet? You see, there’s something wrong with this set of outcomes, and I mean both at moral and economic levels: they’re making stuff we need, maybe more than ever, given the political and social climate — and yet their incomes are falling. They’re making stuff for which demand is higher than it’s ever been — and yet their incomes are falling.
And then there’s the moral level, which is simply that everyone should be able to have a decent life.
So what happened here? The way that Bernie summed it up isn’t an exaggeration. It’s in fact very, very good economics.
We’ve developed what’s known as a winner-take-all economy. We’ve had one for a while. But now? It’s reached grotesque, obscene, staggering proportions. Think back to, say, the late 80s or 90s. That was the age in which everyday millionaires — the winners of the economy — started to become multimillionaires. And by the 2000s, they’d become multi-multi-millionaires. Today? 8 CEOs of Hollywood studios earn more than $800 million. A year. That’s more than $100 million each.
Meanwhile, America’s median income is a little over…LOL…$30K. That means these CEOs are earning almost 3000 times the median income. Every year.
What kind of sense…does that make? You see, there are two ways to think about this economically. One is to throw your hands up in the air, and say something like “free markets reward competition!! The most skilled earn the most!!” But…LOL…that’s not really thinking about any of this, that’s just a cop out. These aren’t free markets in any real sense of the word, they’re monopolistic ones. And it’s hard to say that said CEOs have any real skills outside of navigating the corporate world — mastering its politics, and learning how to climb the ladder. Certainly, I doubt whether they’d be able to…write a watchable show.
The better way to understand all this, economically, is that in our economies, if you ascend to the top of an institution, well, something incredible happens. You earn incredible amounts of money for doing…not a whole lot. What does a CEO actually do? It’s not that it’s not hard work, but it’s not…brain surgery. It’s just deal-making and accounting and hiring and firing. Pretty mundane, humdrum stuff. And yet because these are monopolies, competition doesn’t really apply. Get to the top, and you’ll just be showered with a fortune, no matter what. Run the company successfully? Here’s a hundred mil, and a bonus. Tank it? Here’s a hundred mil.
That’s the clearest signal that something is wrong here. At an economic level. Reach this level of the game, and you can never do any wrong. You can run a company into the ground, still walk away with a Versailles-level fortune, and worse, headhunters will be knocking on your door tomorrow…offering you a new job. That’s…surreally ridiculous.
When we see winner-take-all effects, we know something isn’t working. We should never really see them happening outside of a very few peculiar situations — like a pandemic that needs a vaccine, misfortunes like that, which, yes, create sudden, huge imbalances in supply and demand. But to see an entire economy dominated by winner-take-all effects? Which just get worse and worse over time?
To the point that by now, the average person can’t make ends meet, while CEOs walk away with massive, groaning fortunes so big that bank accounts are barely big enough to hold them…whether or not they do a good job, or a terrible one? That says that the fundamental equation of economics — work hard, earn a fair reward — is being violated, in a really egregious way.
All this is rent-seeking, AKA, I take as much as I can, because I have power — not because I’m doing a particuarly good or necessary job. It’s just that my position or rank gives me power, and I use it to just grab outsized rewards. What am I not doing? The fundamental equation of economics — it says that you should get a fair share of the wealth or value you create. Not that you should take all of it.
Or more than all of it.
Which is what’s happening here. When CEO pay explodes to an amount that absurd — more than $100 million a year — while pay at the average level actually falls, in this case, for Hollywood writers, then we know that there is a game of value extraction happening. Those at the top are taking more than 100% of the value created, which is why everyone else’s income is falling.
Now, if I put this to those CEOs, they’ll start crying, and plead that they’ve done a really good job, because, well, the rise of streaming has left the entire industry much poorer. That’s true, it has. But how, LOL, badly is an industry doing, really, when it can still afford to pay CEOs more money than 99.999999% of human beings who have ever lived will ever have seen…in one year? Don’t buy the crocodile tears. Sure, streaming’s been a disaster. But it’s been a disaster precisely because said CEOs haven’t negotiated better deals with Big Tech, and so media’s been ripped off royally. The CEOs, meanwhile, earned billions for…doing that bad a job.
That’s a little bit of industry gossip. I digress. Let me come back to the point and place all this in a larger context for you. After all, it’s hardly just about Hollywood. It’s every industry, really, from finance to marketing to housing and beyond. Winner-take-all effects of extreme, outsized kinds, dominate. The average person can’t make ends meet, and meanwhile, incomes at the top just keep on skyrocketing, to bizarre, surreal levels. What do you even do with a hundred million dollars…a year?
That’s not a rhetorical question. All this is bad for the economy. Why? Well, what do normal people do when they get raises? They spend. They save. They invest. And all of that is what a healthy economy is. I spend, and jobs are created, businesses have demand, new industries blossom. I save, and there’s security and stability. I invest, and fuel new wealth and productivity. But when a tiny, tiny handful of winners are taking all? None of that happens.
They just hide their surreal levels of wealth offshore, mostly. What, after all, can you do with a hundred million dollars a year? You can put it in a normal bank, and pay the tax-man, which nobody wants to do. You can put some of it in stocks, I guess, but even then, it’s just too much money. You can buy more mega-mansions than you can live in and still barely make a dent. So this money just…sits there. In its weird offshore “special purpose vehicles,” mostly. Nobody knows where it is. The Caymans? Switzerland? And just sitting there, it does the economic equivalent of rotting. It doesn’t circulate through the rest of the economy, as much as it should, in a virtuous cycle of spending and saving and investment. It’s just…hoarded.
Do you know why, for example, feudal societies never developed higher living standards? Because the kings would literally hoard all the wealth — they’d keep it in hoards. That starved the rest of society of investment. Spending power. Saving power. And so peasants were trapped, tilling the soil, for millennia — and then handing half their harvest over to the sheriff. They had no surplus left over. Because all the wealth in their societies was literally being hoarded.
So everyone else had basically three choices: become a priest, a warrior, or a farmer. That was it. What’s not on that list? Doctor, scientist, engineer, neurosurgeon, researcher, novelist, writer. These modern pursuits were made possible because wealth was liberated from being hoarded, and as it began to circulate, societies could spend, save, invest. They could build things like hospitals, trains, factories. Or televisions and transmission towers. Because it wasn’t just locked up away in the coffers of a tiny, tiny handful winners, who’d decided that more than 100% of everything belong to them.
More than 100%. I keep the hoard — and I take half your harvest, every year, too. I “earn” a hundred million dollars a year (for negotiating a terrible deal that wrecked my industry, with the sharks of Big Tech) while your income goes down. The principle remains the same.
This principle is at work in our economy, too, all over again. And it’s why society seems to be heading right back to a feudal, medieval time, a regressive, destructive craving pulsing through it. When people lose stability and security, they lose trust and confidence, in themselves, among their neighbors, in institutions.
When an economy’s just a handful of winners, who take more than 100% of everything, everyone else loses. They begin to feel like it. Along come demagogues, who prey on those feelings, and point the finger of blame at innocents. This is how the fanatics and lunatics in the GOP are rising to power, and doing worse every day. Just today? They want to take divorce away from women, and train kids…in battlefield trauma…to deal with school shootings. Crazy town.
But this is how it happens. Regress. When only a tiny, tiny number of people in an economy are winners, everyone else is a loser. And that? That demon sings to us from the beginning of time, in a banshee howl, of rage, vengeance, spite, and hatred. Take it out on them!! The innocent ones! Those dirty, filthy subhumans!! Just annihilate them, says the demon, and you will be something even better than free. You’ll be powerful again. You’ll be Great Again. You loser.
So yes. The writers strike in Hollywood — more than you think. It’s a perfect example of how got here — and why things are this bad, not just economically, but politically and socially, too.
Umair
May 2023
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