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Anarchist Accounting


Earlier this year my book Anarchist Accounting: Accounting Principles for a Participatory Economy was released in both a Swedish and an English version (www.anarchistaccounting.info). The book outlines a proposal for an accounting system in a post-capitalist economy.

Do we really need accounting in a Libertarian Socialist Economy?

Do we really need an accounting system, or even accounting, in a democratic, post capitalist libertarian socialist economy, and if so what would be the main challenges in designing such a system?

Every economy – be it capitalist, communist, libertarian socialist, participatory or any other type of economy – will need to prioritise what it wants to produce and consume, and decide how to allocate resources and consumption rights among individual producers and consumers, as long as productive resources are scarce. Different economies will make different decisions, of course, and they will go about making decisions differently, depending on their values and goals, but they all need to choose some alternatives over others.

In order to make efficient decisions when choosing between different possible alternatives – which means making decisions that promote society’s goals, whatever they may be, without wasting resources – decision makers, whomever they may be, will need information about the opportunity costs for available options. An opportunity cost is the potential alternative benefit that is sacrificed when a productive resource is used in a specific way. Prices that producers are charged for using productive resources should reflect opportunity costs, and prices for intermediate and final goods and services should reflect social costs. Without such information there is no way for decision makers to make fair and efficient decisions regardless of how well intended they may be.

Accounting can be defined as “the registration, summarisation and reporting of economic transactions in order to provide the necessary information for making, and evaluating, economic decisions.” Economic transactions of course can refer to both planned transactions and actual transactions. When thinking about how accounting in general and, more specifically, an accounting system could look like in a participatory economy some unique accounting issues arise, which all need to be thought through if we want our accounting system to produce the necessary information for decision makers to be able to make efficient and fair decisions. Before listing some of the most important accounting issues it makes sense to take a closer look at how resources, goods and services are allocated in a participatory economy.

The case against Markets

Advocates of Participatory Economics believe that a democratic, fair and efficient economy is impossible as long as goods and services are allocated via markets, i.e. as long as individual buyers and sellers negotiate prices and deliveries, while all other affected parties are excluded from influence. Markets encourage egoism and undermines solidarity while rewarding those that most effectively exploit their fellow human beings. In a “best” case scenario, income is allocated on the basis of the size of a person’s contribution to production irrespective of her effort. Markets often create huge wealth disparities, which often are inherited from generation to generation, that not only manifest itself in great differences in living conditions but also in political influence preventing real political democracy in the sense of one person – one vote. And finally, markets are economically inefficient from a social perspective since they distort production and allocation when externalities, lack of competition and short-term speculation exist, which is the rule, not the exception.

Participatory Economics

In a participatory economy there are no private owners of capital or shareholders who own factories and other production facilities, who control what is produced and how it is produced, and who seek the maximum rate of return on their private investments without regard to possible negative effects on others in society. Prices of goods and services are not set on a market where individual buyers and sellers try to maximize their own profits at the expense of society. Nor are there any private banks or other creditors that control access to credit and thus investment opportunities for all those who do not have access to private fortunes. There are no groups of workers whose only duty is to obey orders or to exclusively perform monotonous and repetitive tasks, while other workers make all the decisions and monopolize tasks involving access to information and power. And there are no workers who earn hundreds of times more than other workers. Any differences in compensation are relatively small and based on differences in effort or sacrifice.

The allocation procedure in a participatory economy is called participatory planning, which is a decentralized planning process whereby worker and consumer councils and federations, negotiate a viable plan by proposing and adjusting their own production and consumption plans based on estimates of the social costs and benefits of their activities. Consumers propose and adjust their consumption – both private and public – through their consumer councils and federations, and assess whether other consumers’ suggested consumption is fair, i.e. if it is proportionate to effort and sacrifice. Producers propose and adjusts their output via their worker councils and industry federations, and consider other worker councils’ proposed production to see if produced social benefits exceed social costs. Representatives of both consumers and producers plan the long term development of the economy and decide on investments in future production capacity. Society’s productive resources in the form of manufactured and natural capital belong to everyone and to get access to these commonly owned resources, producers have to demonstrate that their production is efficient.

Accounting challenges for a participatory economy

What does all this mean for the design of an accounting system whose aim it is to facilitate participatory planning and the implementation of plans? What unique accounting issues does a participatory planning procedure as described above create?

An often expressed objection to the participatory planning procedure is that it would be virtually impossible for consumers to plan their consumption a year in advance and to relate to the huge amount of varieties of goods and services available in a modern economy. Consumers and producers no doubt have different needs and requirements regarding how the classification of goods and services should look when preparing proposals for the planning procedure. Consumers presumably want few coarse categories with as few details as possible to consider when preparing their consumption proposals. Producers, on the other hand, need to consider the amount and quality of resources it takes to produce various types of goods and services when preparing their production proposals and therefore need more detailed information. The accounting system must accommodate these different requirements.

A second important issue for the accounting system to consider is that the cost a worker council is charged for the use of various categories of labor does not correspond to the compensation workers receive for work performed as in capitalist or socialist market economies. The fees that worker councils are charged for access to different categories of labor should reflect the labor’s opportunity cost as determined by demand and supply in the annual planning procedure, while the compensation members in a worker council receive are based on effort and sacrifice.

Thirdly, the cost that a worker council is charged for access to productive capital is not, as in capitalist market economies, the same as the acquisition cost of capital (or depreciation thereof). In a participatory economy worker councils do not own productive capital, it belongs to all residents in society. The fees for user rights to different categories of capital reflect opportunity costs as determined by supply and demand in the annual planning procedure, while the decisions to produce productive capital (and thus determine the supply) are handled in the investment planning by representatives of consumers and producers based on assessments of the investments’ social return.

And finally, in a participatory economy the cost to society of harmful effects on the environment as a result of producers’ and consumers’ activities are borne by those who cause them, and not, as in capitalist and socialist market economies, by the society. And those who suffer the damages are compensated. A participatory economy accounting system must deal with all these, and several other, accounting issues.

The introduction of a new financial accounting system is obviously not a task that has, or should have, a high priority in a situation where the daily struggle against capitalism is mainly aimed at mitigating its worst effects. But in a situation where we can start building alternative economic institutions such as self-managed workplaces or consumer associations, or various forms of participatory budgeting processes for parts of our collective consumption, visions and ideas about how we could gather, organize and present financial information in order to promote democratic decision-making and economic cooperation could have a positive and beneficial impact on the development of these institutions. In any event, any future accounting system, in the sense of society’s set of accounting principles will likely be constantly changing and evolving, and will be reflecting but also influencing the development and design of the economy’s key institutions, such as ownership of productive capital, allocation systems, compensation models and job sharing.

(Anarchist Accounting: Accounting Principles for a Participatory Economy is available to buy as ebook and paperback across all major distributors (Lulu, Amazon, Barnes & Noble, Ingram…))

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