Republicans’ Sharing Economy Versus Hillary’s “Profit Sharing Economy”

Progressives should know something has gone terribly awry within their worldview when they stand athwart of progress. The word “progress” is quite literally built into the name they gave themselves, and yet in nearly every debate over technology and the future economy their instinct is to hunker down and advocate for the status quo.

Uber, which has become the key inflection point in the debate over the sharing economy, certainly noticed, saying recently that “there is nothing progressive about protecting millionaire taxi donors who mistreat drivers and discriminate against riders.” But that is what liberalism, progressivism, whatever you want to call it, has devolved into – a method of protecting the interests of a small sliver of their constituency, even if it means selling out on the ideas that animated their cause.

If there is any consistency in their motive, any tie that binds their economic policy preferences, it is the desire for control. The world has always moved far too fast for bureaucrats to get their brain and hands around. The liberal response has always been to throttle growth, lest the desires of consumers and the abilities of the market to meet those desires escape the shadow of government planners.

Conservatives, despite the name, are being downright foolhardy (in a good way) in support of the Uber, the sharing economy, and just innovative economic thinking more generally. That’s because they understand the power of consumer-driven innovations and they recognize the relative weakness of government to “control” the market.  As Charles C.W. Cooke writes for National Review:

In the eyes of us free-marketeers, the teams behind the host of new peer-to-peer services are no less than digital liberators. For us, the arrival of a system such as Uber is salutary, not scary: It is an end to waiting in the rain for a state-approved cab; it is the key to a transportation experience a cut above that which is provided by the cartels; it is the source of golden opportunities for those who wish to construct odd or custom-built work schedules or to make money without answering to a boss. That a few ingenious programmers have found a way around the artificial scarcity, state-union collusion, and high barriers to entry that The Man has seen fit to impose is, in our view, an extremely positive development. More of this, please.

The democratization of technology and the rapidity with which it has wrought disruptive change should have been enough to chasten the liberal worldview. It has only made them bolder.

Rather than nurture the sharing economy, progressives like Hillary Clinton are pushing for “profit sharing economy.”

“Studies show that profit sharing that gives everyone a stake in the company’s success can boost productivity and put money directly into employees’ pockets,” Clinton said in her recent economic address. “It’s a win-win.”

But is it really?

“No doubt profit sharing can have this effect,” writes Ramesh Ponnuru for the American Enterprise Institute. “But Clinton would have us believe that businesses are leaving money on the table, unable to see a profit opportunity or unwilling to take it, and are thus in need of a shove by the federal government, which knows their interests better than they do. Believe that if you will.”

The real hubris isn’t that bureaucrats think they are better at business than businesspeople are, it’s that they think a few lifelong government workers sitting in the Old Executive Office Building can maintain their grip on this incredibly complex, rapidly changing, extremely dynamic economy at all. And that’s where Clinton’s plan runs into problems. Robert Samuelson writes for the Washington Post:

Some companies would convert normal pay increases into profit-sharing to qualify for the tax break. This would save taxes, but workers wouldn’t benefit. The Clinton campaign pledges “to develop protections against [such] abuses.” More complex regulations. Similarly, the campaign says the tax credit “would phase out for higher-income workers.” How high? More regulations. The credit would also be capped for any one firm “to prevent an excessive credit for very large corporations.” More regulations.

All this would be nonproductive work — interpreting and manipulating rules. It would benefit tax lawyers and accountants. Whether their parasitic work would outweigh productivity gains from more profit-sharing is unclear.

Indeed, workers may actually be harmed by such a proposal. One of the benefits of an annual salary is that it allows you income predictability and insulation from economic fluctuations. Essentially, employers are bearing the risk of paying a worker in a down year and in return reap the reward in a good year. Clinton’s plan would incentivize variable pay, which is great for companies that are looking for salary flexibility in tough economic times, but potentially bad for middle-income workers who could have difficulty predicting their income and building a budget.

Did Clinton think of these problems? Probably. Has she probably convinced herself that she has solutions? Yes. Will that inevitably result in an endless cycle of more regulations? Absolutely. Is that an impediment to progress? Undoubtedly.