The Sad Truth: We Shouldn’t Need Hillary’s Great Economic Proposal

In an article written by Daniel Altman on 7/22/2015, “Hillary Clinton’s Bad Economics,” it was argued that there is no evidence that Hillary’s plan to incentivize companies to share profits with workers will work.

Hillary’s edited remarks, courtesy of the Wall Street Journal:

I submit to you that Hillary’s proposal is a great idea. It does not matter if Atlman thinks her plan will work or not; it should not have to.

I want to set the stage first, so that there is no misunderstanding as to the nature of the environment being addressed.

Most, if not all, companies are in business to make profits. Profits for themselves, their stakeholders, their shareholders, whomever owns a piece of the pie, but profits none the less. The very basis of capitalism is that the market regulates, through a system of supply and demand, the amount of profits that can be made in any particular industry.

The thing is, no one expects anything different. No one is expecting companies to suddenly turn into benevolent benefactors of their employees or of society in general. However, there is an argument to be made that profits should not be at the expense of the workers either, for if the workers are mistreated, unhealthy, lacking in basic life necessities, they are unable to work as well.

In fact Hillary is trying to create an environment where the profits are being shared with the workers, who directly influence the company’s ability to gain profits through their ability to work and work effectively.

Consider, for a moment the following quote, “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own self-interest. We address ourselves not to their humanity but to their self-love, and never talk to them of our own necessities, but of their advantages” Adam Smith An Inquiry into the Nature and Causes of the Wealth of Nations – Book 1 – Chapter 8

Hillary Clinton said in her speech at New York City’s New School that,

The defining economic challenge of our time is clear. We must raise incomes for hard-working Americans, so they can afford a middle-class life. We must drive steady income growth that lifts up families, and lifts up our country.

And while Adam Smith agrees that companies are in business for their own self-interest, to make a profit, he also agrees with Hillary. In fact, her words could have come out of his mouth.

In the same book and chapter, Smith goes on to say,

The liberal reward of labour, as it encourages the propagation, so it increases the industry of the common people. The wages of labour are the encouragement of industry, which, like every other human quality, improves in proportion to the encouragement it receives. A plentiful subsistence increases the bodily strength of the labourer, and the comfortable hope of bettering his condition, and of ending his days perhaps in ease and plenty, animates him to exert that strength to the utmost. Where wages are high, accordingly, we shall always find the workmen more active, diligent, and expeditious than where they are low: in England, for example, than in Scotland; in the neighbourhood of great towns than in remote country places. Some workmen, indeed, when they can earn in four days what will maintain them through the week, will be idle the other three. This, however, is by no means the case with the greater part. Workmen, on the contrary, when they are liberally paid by the piece, are very apt to overwork themselves, and to ruin their health and constitution in a few years.

Here Adam Smith supports Hillary’s proposal that sharing the profits with the workers on every level, will increase productivity, which will increase profitability for the company and better the society in general. Adam Smith argues that there is more tendency towards workahol-ism than slacker-ism.

With this in mind, let us consider Daniel Altman’s argument that incentivizing companies through a tax deduction, to share profits could create wage instability. Daniel argues that we need to consider the possibility of the profit shares replacing existing compensation and the potential for wages to become volatile.

My argument is that if a company realizes the connection between their profits and their workers, they won’t institute any such changes that would jeopardize the labor wage in the first place. In fact, if companies recognized the direct tie between the wage of their labor force, productivity and the cost of turn over due to an unhappy labor force, they wouldn’t require incentivizing to share a portion of the profits.

Adam Smith addresses this concept in this fashion, in the same section as before,

Is this improvement in the circumstances of the lower ranks of the people to be regarded as an advantage or as an inconveniency to the society? The answer seems at first sight abundantly plain. Servants, labourers, and workmen of different kinds, make up the far greater part of every great political society. But what improves the circumstances of the greater part can never be regarded as an inconveniency to the whole. No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable. It is but equity, besides, that they who feed, clothe, and lodge the whole body of the people, should have such a share of the produce of their own labour as to be themselves tolerably well fed, clothed, and lodged.

In essence, if those that provide the goods and services that we as a general society require to live, cannot afford those goods and services themselves, how can we expect them to continue to provide those goods and services with any level of proficiency to which we have become accustom?

So once again I say, Hillary’s idea is a good one. We as a society, as a governing body, should be encouraging, in whatever fashion is necessary, the companies that make up our society, to do right by the workers, that directly influence the very profits for which the company is in business. If the companies recognized the connection between profit and the quality of their labor force, which is directly influenced by the wages they provide, they will not hesitate to share profits to some degree with all levels of labor within the company, for their own sake if not for the worker’s sake.

Poverty benefits no one and paying workers a livable wage and sharing profits only benefits the entirety of our society. So I repeat, Hillary Clinton’s plan is a good one, but it should be unnecessary.

15 Replies to “The Sad Truth: We Shouldn’t Need Hillary’s Great Economic Proposal”

  1. The benefit of the working class and the oppressed is our ultimate and only goal. I do not care about profits as much as I care about fair treatment.

  2. Hillary Clinton’s capital gains tax reform, explained
    As part of her plan to reduce the impact of short-term thinking on corporate America, Hillary Clinton is proposing a revamp of how investment income is taxed in America. Right now, the tax code distinguished between a short-term investment held for less than a year and a long-term investment held for longer than that. She wants to replace that with a different system, featuring a six-year sliding scale of rates to give genuinely long-term investors a leg up.
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  3. Hillary Clinton wants to take on “quarterly capitalism” — here’s what that means

    In a speech today at NYU’s Stern Business School, Hillary Clinton plans to finger what she considers a key impediment to long-term economic growth: “quarterly capitalism.” It’s a brand of excessively short-term thinking in which Wall Street considerations end up doing too much to drive Main Street business decisions.

    It’s an intriguing way to drive a conceptually left-wing message that many business executives actually agree with, and a demonstration that there’s no necessary tension between a progressive economic approach focused on fairness and a more centrist one focused on growth.
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  4. SOS Clinton is on to something. I like to say that short-term management (at the company I work for) makes short-term decisions. They live quarter-by-quarter and for their yearly bonus. No matter they are ruining the company for any chance of longevity or sustainability. They don’t care; they won’t be around to see the doors close.

    Evidently, it’s en vogue to run companies (and our country) into the ground after you take them for all you can get.

  5. The Continuing Decline of Developed Nations 2/29/2014

    In 1776 Adam Smith explained the growth of the Wealth of Nations.

    One quote on the liberal reward of labour is:

    “The liberal reward of labour, therefore, as it is the necessary effect, so it is the natural symptom of increasing national wealth. The scanty maintenance of the laboring poor, on the other hand, is the natural symptom that things are at a stand, and their starving condition, that they are going fast backwards.”

    My Comment:

    I suggest that the Federal Safety Net provides food and other support to America’s low paid and minimum wage workers. If it did not, some, perhaps many, would now be starving!

    And so, we are “going fast backwards.”

    Indirectly, the Safety Net also enables employers to pay substandard wages to employees, and obtain greater profits. So it subsidizes our Plutocrats and Oligarchs!

    And they are OBLIVIOUS to their need to pay workers well. It would be in their…

  6. Adam Smith is today ignored, distorted and suppressed. Free download of his 1776 work, that I short title as “An Inquiry Into the Wealth of Nations”, is at
    READ the first few chapters!
    Nations gain wealth when workers are paid “LIBERALLY”! And, when we pay as we do now, by the Unfree Market, we will find we “are going fast backwards.” And we have been for decades.
    His example, in 1776? The American Colonies!
    The PITCHFORKS are Coming!

  7. It would be wonderful if HRC would quote Stephen Hawking:

    “During an interview with Stephen Hawking, he said something so very profound that everyone should know his words:

    Hawking was asked during an interview of One Shortcoming Humanity has, what would it be?

    “The human failing I would most like to correct is Aggression,” said Hawking.
    “It may have had survival advantage in caveman days, to get more food, territory or partner with whom to reproduce, but now it threatens to destroy us all.”

    Perhaps unsurprisingly, he focused on nuclear war being the trigger that “would be the end of civilization, and maybe the end of the human race.”

    In an effort to counter human aggression, the 73-year-old said the quality he’d like to magnify is EMPATHY, as “it brings us together in a peaceful, loving state.”

    Empathy…It’s the one thing American Conservatives are totally lacking! Wish I had a way to contact HRC. I have other ideas.

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