Getting to grips with the economy

[Contribution to the Reimagining Society Project hosted by ZCommunications]


Does any proposal exist for a libertarian economy? Examining what the “Founding Fathers” of Anarchism have to say on the question we get contradictory answers. After decades of silence we now see a burgeoning of ideas to build a non-exploitative economic system through libertarian economic planning. But just how much distance do these proposals actually succeed in taking from centralized planning? All too little. Maybe the line to take is a (this time truly libertarian) reappraisal of the market, as the place of competition, certainly not of freedom. The idea would be to make of it the arena for a plurality of places, of economic areas, able to include both competition and solidarity in an ever broadening sequence, thereby enhancing all the possible relationships, all the possible interconnections between agents. Stretching the economic sphere to its limits to reduce its social predominance.


“If the market forces are given free rein, even though in the economic and financial sphere alone, they will produce chaos”. This is not the point of view of a “dangerous” subversive or, simply, a “timorous” critic of the current economic and social situation, but was actually stated by a champion of financial speculation, the famous George Soros (“The Crisis of Global Capitalism”, Perseus Books, 1998), who forced the Italian lira and the pound sterling to their knees with his investment fund  maneuveres some years ago. Incredible as it may seem, the market comes under the fire of one who lives on it and accumulates riches with its mechanisms.  Not, of course, to mention the enemies this society founded on inequality and exploitation. In short the market is the ‘boogeyman’ of the forces of the left, the new-no global and the vast majority of anarchists. Can you blame them? The market is the founding and constitutive element of capitalism, that social and economic system that sees unlimited growth of production and consumption as the sole means of socialization. However, if we reject the market as a source of inequality, the only other economic system we know of is planning, the major historic endeavour to supersede market logic – an essentially political formula to bring  back  within the bounds of human decision-making the disruptive drift of the economic sphere towards autonomy from society. An immense bureaucratic  state apparatus was thus created to take all those decisions that market operators took individually and independently within the supply-demand dynamics. What came of it? The rise of a class as exploitative (if not more so, remember Mikhail Bakunin’s prophetic pages on “red bureaucracy”?) as the capitalist one, a dearth of necessary goods, a plethora of unwanted goods and economic inequality. And this was not all. Central planning turned out to be a means of totalitarian domination: the managers decide what and how much (always little) their subjects can consume. And what was actually going on in the minds of the planning theoreticians? Suffice it to quote one of them, Polish theoretician Janusz Zielinsky:”An operational plan must be complete. Being a set of interdependent decisions, it cannot omit any factor or sphere of activity that could influence the decisions contemplated” (“Lectures on the Theory of Socialist Planning”, Oxford University Press, 1968). Well, it is on this type of delusion of omnipotence (a true social and economic absurdity) that the political response to the capitalist market was founded. The collapse (or, rather, implosion) of the communist regimes finds also in centralized planning one of the reasons for the debacle. This made room for a form of capitalism even more savage and crude than the brand consolidated in the western world, although, of course, western capitalism reserves its most  savagely brutal dosage to the South of the world.


Thus we come to the question that prompts this article: which economic system can best befit a libertarian vision of society?



The Parecon solution


Recently we have seen various proposals advanced for a participatory economy (parecon: participatory economics) capable of moving beyond capitalism. The idea has been most thoroughly thought out by Michael Albert, editor of Z magazine and in charge of the Z Net network. In his books “Parecon. Life after Capitalism” (Verso Books, London, 2003) and “Realizing Hope. Life beyond Capitalism” (Zed Books, 2006) Albert traces out a horizontal economic system founded on equity, solidarity, diversity, worker self-management and social balance. In practice we might define Parecon as a libertarian radicalization of the democratic planning that had so fueled economic debate during the fifties and sixties. Here is a summary of Albert’s economic proposals:


        Every work place must be owned in equal parts by all the citizens to prevent ownership from becoming a source of privileges or higher incomes.


        Workers and consumers express their preferences through democratic councils, with which the decision-making power lies.


        The councils work at various levels: from small and large work groups to big industries, from individual consumers to neighborhoods, towns, provinces, etc.


        Voting can be by simple majority, three-quarter, two-third or unanimous.


        Rejection of the current division of labor by balancing the tasks performed by each worker, thus eliminating the monopoly in duties conferring authority as well as the repetitive, subaltern and dangerous tasks. The balancing of duties is decided by the workers themselves in their councils.


        Remuneration for work is proportional to the effort made, the time dedicated to work and the sacrifice involved, without taking into account greater or lesser ability, or more or less refined or advanced techniques.


        The linkage between producers and consumers to match overall quantity produced with overall quantity consumed is achieved through participatory planning. This system is based on cooperative communication of preferences through a set of organizational and communication tools and principles: indicative prices, support committees, cycles of adjustment to new data and so on.



As can be seen, Parecon is a structure predicated on councils and the exchange of information to arrive at formulations of non-rigid, libertarian planning ever open to changing conditions and consumer and worker preferences. Parecon thus offers a third way between market capitalism and centralized planning. But is it really a third way? How practicable is it? How does it effectively answer to the needs of a libertarian society? It is certainly an interesting and pragmatic solution, but how much does it reflect of the social values of Anarchism? To what extent does the proposal configure an economy functional to a libertarian society?


Here we stumble on the first great problem – the problem of problems, actually – because anarchist and libertarian thought is seriously wanting in economic contents: in fact, it focuses analysis primarily on political power. Perhaps rightly so, taking the economic dimension to derive from the political. Perhaps…



The economics of the “founding fathers”


Let us examine, then, the main economic ideas aired in the anarchist field. In anarchist canon until the nineteen sixties the economy was not conceived as an aspect of social life split away from it but exclusively as a tool of the masters to exploit workers, the people. This observation expresses in all its simplicity an undeniable fact while ignoring its more complex aspects. And this canon comes from the partially misinterpreted writings of the most influential anarchist between the end of the 19th century and the early decades of the 20th: Errico Malatesta. However, Malatesta while recognizing that he had “very little competence” in economics (“L’Agitazione”, 14 October 1897), held economic form to be unimportant and focused his attention on the ethical and social context within which the economic form is found. Here we must point out, starting with Malatesta, that talking of anarchist theory and economics means delineating more of an absence than a presence. In anarchist imaginings the social revolution would settle all economic problems: economics would be unknown to the new society, being the science of domination-based society.


Weighing heavily on this approach is the figure and thought of Malatesta, albeit “reappraised and interpreted” by anarchist militants. Malatesta’s writings, already simple enough (as distillation of knowledge and experience) were further simplified (i.e. rendered banal) through propaganda activity. Of course we have to recognize that Malatesta inhabited a theoretical area quite foreign to economics, holding that social transformation is not conditioned by economic form and that social structure is not dependent on the economy.  In 1929 he wrote:”What forms will production and exchange take? Will it be the triumph of communism (…), or collectivism (…), or individualism (….) or of other composite forms that social instinct and individual interest, enlightened by experience, may prompt? Probably all of them (…) until practice has taught us which are the best form or forms (…). Actually, however, more important than the practical forms of economic organization is that they be guided by the spirit of justice and desire for the good of all and that that they always be arrived at freely and voluntarily. (“Qualche considerazione sul regime della proprietà dopo la rivoluzione”, Il Risveglio, 30 November 1929).


Alongside this position, however, Malatesta also offers deeper reflections that contradict even his “popularizing” exponents. In 1922 Malatesta wrote: “It is habitual for our side to settle question  simplistically by asserting that money must be abolished…But today the question is far more complicated. Money is a powerful means of exploitation and oppression; but it is also the only means (outside of the most tyrannical dictatorship or of the most idyllic harmony) that has so far been devised by human intelligence, to regulate production and distribution automatically. (“La rivoluzione in pratica”, “Umanità Nova”, 7 October 1922).


With disarming simplicity (which implies a profound knowledge of the problem, at least from the social point of view) Malatesta suggests the possibility of various, conteporaneous forms of economy. The «political» pluralism of anarchism  issues into economic pluralism. Here Malatesta checkmates everyone and  even anticipates the current critique of the “no alternative” laissez-faire dogma: not “one” economic form but a “plurality” of forms. It is precisely this composite approach that contrasts “totalizing” solutions (only market or only planning) gives anarchist economic thought issue in post-globalization. With rare insight he offers us an exceptionally clear vision of the irrrelevance of economics to social transformation.


It hasn’t always been so. Pierre-Joseph Proudhon was among the first thinkers to use the term Anarchy positively, founding a large part of his proposals for social transformation on economic structures. A society formed by free producers, developed on free agreements within a federated context is, according to Proudhon, the first step to reconcile socialism and market, market and mutualism. From here stems a dynamic view of the economy: free competition as the motor of social development, but competition that finds a corrective  in mutualism to avoid lapsing into monopoly. Proudhon introduces the market into the logic of a libertarian society because he holds as insuperable the law of value in its twofold sense as use value and exchange value: “The capacity for all products, whether natural or industrial, to contribute to man’s subsistence is specifically termed use value; their capacity to be given in exchange for one another, exchange value…. Consequently, the distinction established in value is based on facts, and is far from arbitrary: it is for man, in submitting to this law, to use it to increase his welfare and liberty.” (in “System of economic contradictions. Philosophy of Misery”, 1846).


Having established the terms of the problem of value Proudhon goes on to the founding element of the market, “trade”: “Supply and demand, are merely two conventional forms that serve to bring use value and exchange value face to face and reconcile them. They are the two electric poles which, on acting together, produce the phenomenon of affinity called trade." (ibid)  In this vision the market becomes the place where “economic affinities” are manifested and not a place for conflict. But for the market to achieve this dimension it must be recognized that: “It is labor, labor alone, that produces all the elements of wealth, and that combines them to their very last molecules according to a law of variable, but certain, proportionality.” (ibid)


Here Proudhon keeps wholly within the labor theory of value; his position is more ideological than scientific, he adheres to a Socialism that reappraises labor as the only (or principal) creator of social wealth. This position is also present in American Anarchism which is often hastily labeled the liberal version of Anarchism, and which – as things turn out – is now embraced in its entirety by Albert who, takes his place in the wake of the American anarchist Josiah Warren. For Warren the price of a good should not be determined by its utility but according to the principle of labor. That is the time employed and the difficulties encountered in the production of goods determine their price. Warren defined his theory as “equitable exchange based on cost as a limit to price”. To give concrete substance to his ideas Warren opened up a small shop, the ”Time Store”, where he sold all the goods of daily use. At what price? A tag indicated the hours required for production, to which was added 4% to cover managing costs.


These may seem extravagant ideas (like the bank founded by Proudhon that lent money at o% interest) but in some parts of the USA these ideas are still working: one need only consider the circulation of ‘hours worked’ vouchers used as  “parallel money” alongside the customary dollar.


These two thinkers (Proudhon and Warren) bring into the early formulations of Anarchism the concept (liberal at first sight) of economic competition, but aobe all Proudhon (and afterwards Warren’s disciple, Benjamin Tucker) also show the ability to show up the harmful effects of competition:”Competition kills competition” because “monopoly is the inevitable end product of competition, which generates it through a constant self-negation” (“System of contradictions…”).


Anarchist theory is manifold and pluralist, and thus alongside “liberal” thinkers we also find “communists”. The quotation marks are necessary in both cases because these terms are obviously to be seen as very approximate indications.


The champion of anarchist communism is certainly Pëtr Kropotkin. This great thinker, in some ways the founder of the positivist trend of Anarchism, has an approach to economics that is not far from common sense (maximum result for minimum effort) while set within a humanitarian framework. That a worker must invest the least possible amount of energy in no way contradicts the fact that Kropotkin’s positivism is in the final analysis essentially in harmony with the economists of his time and of our time, but also able to anticipate by several decades the studies associated with the theory of needs. Kropotkin writes:”Is it not the study of needs that should govern the economy?” (“The conquest of bread”, 1892). Here Kropotkin, even if he keeps to a very sui generis economicist approach, turns the question upside down: it is not the market that determines the quantities to be produced and exchanged but what and how much is manifested by the desiring agent. ‘Homo oeconomicus’ is substituted by the human being taken in and for himself/herself: a free agent that freely manifests his/her preferences. “But when we consider production from this point of view, political economy entirely changes appearance. It ceases to be a simple description of facts and becomes a science, like physiology: we may define this science as the study of the needs of mankind and the means of satisfying them with the least possible waste of human energy. Its true name should be physiology of society. It constitutes a science parallel to the physiology of plants and animals, which is the study of the needs of plants and animals, and of the most advantageous ways of satisfying them.” (Ibid) The organicist dimension of Kropotkin at this stage embraces the entirety of human knowledge and even a “science” like economics which was meant to be deployed for very different ends, is bent to serve his holistic vision.


Following this direction Kropotkin’s “communism” ultimately accounts for and justifies the pursuit of luxury:”If we wish for a Social Revolution, it is clearly to guarantee  bread for everyone, first of all; to transform this execrable society… But we expect far more from the Revolution… And as all men cannot and must not be alike (the variety of tastes and needs is the chief guarantee of human progress) there will always be, and it is desirable that there should always be, men and women whose needs will go beyond those of ordinary individuals in one direction or another.”


Superseding economics with the physiology of society we comme to the summa of the “economy that is not there” in anarchist thought. Such thought is expressed in Proudhon’s approach with the economy as a constitutive element of the society of free producers and consumers in competition among themselves, and in Kropotkin superseding economics in a society based on mutual support and projected towards a harmony that precludes competition. And finally we have the pragmatic approach of Malatesta, which subsumes the economy entirely within the social sphere.



A matter of choice


From our review of the anarchist proposals on the economy there emerges, then, a threefold answer. It would be a mistake to conceive of them as mutually exclusive solutions. The pluralism of Anarchism and of libertarian thought is discernible also in these three formulations. After all they are also the expression of different aspects of sociality. Here, perhaps, by gathering them within the same context, we grasp the most innovative indication of the three anarchist thinkers: the nature of the problem is not so much purely economic as social, of social relations, of social engineering, without overlooking the psycho-anthropological dimensions.


But there  is still a fundamental question to answer: does the economy have a place in libertarian society? Is it compatible with Anarchism, with the values of equality, liberty and diversity? From here stems another question: how does an egalitarian society founded on freedom regulate relations bound up with the production and distribution of material goods? Does it maintain an autonomous sphere to regulate these relations or does it concentrate them in other institutions?  Proudhon accords validity to competition among free producers and consumers while being aware of the risks and the harm of competition, but with an antidote: it’s not about killing individual liberty but about socializing it” (“System of contradictions…”). The thinker from Besancon places himself to some extent among those who recognize that the “Italian businessmen of the Middle Ages” (Yves Renouard, “Les hommes d’affaires italiens du moyen age”, Libraire Armand Colin, 1968) had given rise to a form of social relations capable of emancipating humanity from feudal slavery.ItHe is also aware of having been brought into a new dimension characterized by profit and the expansion of production. Kropotkin, including economics in his holistic vision, goes further: society beyond domination is naturally harmonious and economic relations are at one with the community dimension. Malatesta, looking to the future, rediscovers the typical situations of societies defined as “archaic”: the economy does no longer has any reason to exist because it is subsumed into the other social institutions ; it has lost its autonomous path.


Michael Albert, rightly or wrongly, does not take into consideration these three indications and chooses the participatory economy, “libertarian planning”, as the only possible solution : «What, rather, is to be said of participatory planning, seeing that one way or another we will have to embrace it entirely?» (“Parecon..:”)This he affirmed in answer to possible criticisms by those who might think of bringing forms of mercantile trade into an  economy broadly based on participatory planning.  “Having a bit of market in a parecon is like having a bit of slavery in a democracy. The logic of markets contradicts the logic of participatory planning and of parecon as a whole, and it is also imperialist; once it’s let in, it tries to spread as far and wide as it can” (“Parecon…”).


Albert’s critique of the market can be shared but it does not completely dispose of the problem.




Beyond the capitalist market


Albert does not seem to take into account the twofold configuration of the market:


the market as a social-historical human creation that accompanies humans in their relations with each other, and the market that takes on an exceptional and particular dimension capable of redefining the nature of society: market society. The former is the market of the ancients, the latter the so called self-regulating market, the one that drives the economic sphere to autonomy from the social, that is to say, the very foundation of capitalism. In fact, capitalism is the institutionalized form of the market. As an institutionalized form, capitalism is the negation of what instituted it to begin with. It becomes something completely different. When the market is one of the “places” of society (the place of trade and competition, not freedom) it performs a function of human activity but is unable to configure society, whereas when the market becomes the referend of society we witness a revolution that creates market society.  It is an epoch-making transition that sees in the supremacy of power. “The market is the result of a conscious and often violent intervention by the state in order to impose market organization on society for non-economic ends” (Karl Polanyi, “The Great Transformation”, Rinehart, New York, 1944). And, finally, when the institutionalized form of the market, capitalism, comes to operate together with liberalism we come to a further stage of domination: the economic sphere defines and limits modern rationality. By such stages we arrive at the current type of domination: the market of transnationals, the global market (here I draw om some ideas in “Utopista dunque laico”, “Libertaria” n.3/2003).


Criticism of the market is wholly justified, it has a legitimacy that only the defenders of exploitation and oppression would call into question. Furthermore, the capitalist market defines all the areas of associational life.


Is it, then, possible to emerge from this logic also with the market? I believe so, because even if it might seem absurd after so many centuries, the market has not yet been fully explored in all its possible manifestations. It really does sound absurd, doesn’t it ?


In the words of Cornelius Castoriadis: “What is required is a new imaginary creation devoid of possible comparisons with the past, a creation that places significance other than the expansion of production and consumption at the center of human life, that sets different life goals and such as can be recognized as valid by human beings. This would evidently require a reorganization of social institutions, of work relations, of economic, political and cultural relations. It means taking a direction probably very far from what people think and probably desire. This is the immense difficulty that we must face. We should strive towards a society in which economic values have ceased being so central (or the only ones), in which the economy is restored to its place as a simple means for human life and not its ultimate end.” (Cornelius Castoriadis, “La montée de l’insignifiance”, in “Les carrefours du labyrinthe IV”, Seuil, Paris, 1996).  The perceptive words of Cornelius Castoriadis, even if somewhat skeptical because written before the Seattle turning point of 1999, point to an important trajectory: working to bring the economic sphere back within a circumscribed area. Obviously, this operation is far from easy but it clarifies the approach to take to economic activity.



Mutualistic competition


I believe that the most pragmatic and at the same time, ideological approach (this is only an apparent contradiction) to the problem of the economy is to exit the monistic logic typical of the ‘no alternative’ approach, which regrettably seems to permeate even very well-meaning people like Michael Albert. This is to say that we cannot set against the current single form another single form, namely libertarian planning.  In a few words, planning, even the most democratic and libertarian possible, always has a very weak point in the interpretation of data. One never finds ‘expressed preferences’ automatically matched to supply of goods and services. At this juncture the decision on priorities (because setting priorities is inevitable) is essentially a political choice cloaked by technical neutrality.  Reading data aright calls for specific qualifications that are not possessed by the individual consumer-producer. Even libertarian planning needs agents who in practice exercise a managing function, legitimated by the capacity to find efficient solutions. Thus   this becomes a hotbed from which could spring a “libertarian bureaucracy”, or, in the language used years ago in anarchist circles, of “new masters”. (Collected documents, conference on techno-bureaucracy, “I nuovi padroni”, Edizioni Antistato, Milano 1978).


Thus the path that theoretically appears the roughest is instead more practicable  socially and, above all, productive. It is a matter of specifying the components already present in the human social dimension, of matching in all their possible and imaginable articulations the opposite poles of sociality: competition and solidarity. In such a vision the terms market and planning lose most of their characteristics to merge into new social imaginings that tend (according to the enlightening insight of Castoriadis) to circumscribe economic sphere.  The real problem resides in how people conceive of themselves and of society. Proceeding even further with our ‘heresies’, the inescapable economic laws are such only because we assign to economic rationality the place of social rationality. But the rationality, for example of capitalism (paraphrasing Castoriadis) is but one, historically affirmed, form of modern reason. On destructuring the ‘economic’ we can rediscover the market as a place of trade, competition and even challenge. Clearly competition breeds inequality and, as Proudhon warns, also leads to monopoly.  But solutions can be found to temper economic inequality. For example? Several years ago I was able to formulate a hypothesis which I feel may still have some validity  (Luciano Lanza, “Autogestione ed economia”, in “Interrogations”, n.17-18/1979). While maintaining the autonomy of every enterprise one could create a cross-network of participations: 50% of every firm is controlled and owned by its workers while the other 50% is held by the other firms in a given area – in short,every firm controls a share of all the others.  Thus inequalities can be considerably  reduced while keeping the ownership of the firms with those who work in them. Let us, for the sake of simplicity, take the case of ten firms with a net income per worker ranging from one to ten, and then make income adjustments among the ten firms by distributing dividends among all the firms, among all the shareholders. The result is that the one to ten income spread among workers is reduced to a ratio of one to two between the lowest and the highest paid.


But this is  only meant as a banal example of how intervention  could be made on the unequal impacts of the market without depressing competition – a first step in exploring market formulations reaching out beyond the capitalist market without atavic dreams of rediscovering ancient market forms. To put it in two, apparently contradictory, words: we should explore «mutualistic competitiveness ». But the pluralistic process must also move in other directions, taking in other dimensions. For example, agreements at the community (or more extensive) level for the creation of public goods or administration of collective services.  In sum, a range of places for the economy able to take in  ‘market’ and ‘gift’ in an ever broadening sequence, enhancing all possible relationships, all possible interconnections between agents: in a sense, stretching the economic sphere beyond its limits to reduce its social relevance, and thereby coming closer to the “great dream”: the economy no longer dominating but serving humanity.





                                translation from Italian into English by Pasqualino Colombaro

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