Clinton, raising the right issues

Daniel Altman argues that Hillary Clinton is asking the right questions in her main economic speech, “Hillary Clinton gave arguably the first 21st-century economic stump speech in American presidential politics. Issues that had been festering for years, hidden behind a veil of partisan language and confusion, were finally called by their names. Deep problems with the way the economy works, not just the results it produces, were addressed at long last”.

Altman points out that “She said that inequality in America was largely a phenomenon of globalization and technological change, exacerbated by the erosion of workers’ bargaining power. She accused a culture of short-termism of ruining American businesses and fiscal policy by making long-term investments impossible — and pointed out that social investments by companies needn’t be just charity. She pledged to bring together public and private capital to renew the nation’s infrastructure. She proposed giving companies tax credits for training workers and also lamented the millions of talented Americans being left on the sidelines of the labour market because of inequality. She warned about the lack of oversight and accumulation of systemic risks in the shadow banking industry, and she said corporate criminals had to be held personally responsible for their misdeeds rather than being shielded by their employers”.

However, Altman fairly notes that Clinton missed some significant issues during her speech, “The first was an acknowledgment of the place of the United States in the global economic order. The American economy is not a closed system, so policies aimed at changing the behaviour of its businesses and households can have unintended effects. For example, several of the proposals Clinton mentioned as solutions to the problem of stagnant wages — restoring unionization, raising the minimum wage, cracking down on the classification of regular workers as contractors — might just encourage firms to move more jobs abroad. She also said she wanted to prevent American multinationals from keeping their profits overseas, but that might only push them to move their headquarters out of the United States”.

He correctly notes that “Actual mentions of international economic policy were few and far between, too. Though Clinton identified immigration as an engine of economic growth, she offered only a quick applause line on trade and nothing on the global financial system, not even easy targets like rigged interest rates or tax shelters for American companies. Perhaps more on these topics would have been heavy lifting for a lay audience, but it’s worth reminding any audience — particularly given the economy’s reactions to tumult in Greece and China — that the United States does not make economic policy in a vacuum”.

Altman makes the interesting point that “Also absent from Clinton’s speech was a consistent underpinning of economic logic. For instance, one of her few new proposals for increasing wages despite labour’s dwindling bargaining power was to foster profit-sharing by firms. Though this sounds like an overdue redistribution of income from shareholders to workers, it is in fact an extremely dangerous proposal for workers. Replacing steady salaries with pay that rises and falls with a company’s fortunes adds risk that many workers can’t afford, especially when they’re already living close to the limits of their budgets. Moreover, tying an individual worker’s pay to the entire company’s profits doesn’t necessarily create an incentive to perform, unless that worker is a top executive. Again, it was a case of right question, wrong answer”.

It may be that Altman simply misunderstands Clinton and that the profit sharing is in addition to the regular salaries of workers. If this is the case it would do even more to boost Clinton’s credentials in this important area. If Clinton proposes to replace a regular wage with profit sharing then it would as Altman argues, be a dangerous and unfair policy.

He goes on to mention that “Clinton also came close to some economic contradictions. She disdainfully referred to arbitrary targets for growth — an obvious jab at the Republicans’ growth numbers arms race — though it was obvious she, too, thought the economy could grow much faster. And she excoriated Jeb Bush, a leading Republican candidate for president, for suggesting that Americans needed to work longer hours, but she also said that more women needed to enter the workforce; in both decisions, there is an element of choice as well as the constraints of family and other obligations”.

He ends correctly noting that “Clinton was short on solutions. Instead, she exhorted the public to join with her and do its part to meet the challenges. It’s true that crowdsourcing is a big deal in the 21st century, but she may have to pull a bit more weight herself”.

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