In the shadow of the collapse of Communism, and very far from the public eye, a debate over what is a desirable economy has rekindled among a few who cannot convince themselves that human beings are not deserving and capable of better than capitalism. In the past decade a small torrent of books, articles, and symposiums have been published. Conferences of academics and activists have hosted the debate on panels in numerous cities. And the debate erupts periodically on a number of forums sprinkled over the Internet. As defenders of central planning fade into the dust bin of history, anti-capitalists have divided into two camps proponents of some version of market socialism versus proponents of some kind of democratic planning. One model of democratic planning, that we call “participatory economics” has received considerable attention, and by now a great deal of criticism from the market socialist camp. The defining institutions of a participatory economy are: 1) democratic councils and federations of workers and consumers, 2) job complexes balanced for desirability and empowerment, 3) remuneration according to effort or personal sacrifice, and 5) allocation or coordination by means of a social, iterative, decentralized planning procedure we call “participatory planning.” A participatory economy is a non-hierarchical, non-market economy in which worker and consumer councils propose and revise their own activities through a procedure designed to achieve both equity and efficiency. We take this opportunity to clarify misconceptions about our model and defend participatory economics against the most common criticisms.
Critics claim participatory economics sacrifices personal freedom to attain other goals: In the words of Tom Weisskopf: “The issue is how much value we should attach to libertarian rights such as freedom of choice, privacy, and the development of one’s own specialized talents and abilities — as compared to the more traditional socialist goals of equity, democracy and solidarity…. Replacement of markets with a participatory economic system would arguably contribute to a more egalitarian, democratic and solidaristic society, but would appear to do so at a cost in terms of libertarian objectives.” (Weisskopf 1992: 21-22)
Participatory economics was the result of a self-conscious attempt to designing an economy that allows people to control their own economic lives in a context of equitable cooperation with others. Consequently, if we were convinced that our model failed to serve libertarian goals, we would be the first to disavow it no matter how well it served equity, democracy, and solidarity. But we find criticisms that participatory economics is “unfree” to be based on either a misreading of our proposal, or a shallow and indefensible conception of libertarianism. Besides putting major economic decisions in the hands of the citizenry rather than in the hands of an elite, freedom of choice of consumption, employment, career, and residence, as well as personal privacy are fully guaranteed in a participatory economy — contrary to critics’ claims.
· People in a participatory economy are free to consume whatever goods and services they wish, and consumer preferences determine what will be produced.
Everyone is free to consume whatever goods or services she wants. Of course an individual’s overall consumption is constrained in a participatory economy, by her effort or sacrifice, just as an individual’s overall consumption is constrained in a market economy, by her income, which is usually not the same as her effort or sacrifice. But there is complete freedom of choice in a participatory economy regarding what one wishes to consume. Moreover, consumers’ preferences determine what will be produced in a participatory economy, just as they supposedly do in a market economy. The difference is that markets bias people’s choices by overcharging for goods whose production or consumption entail positive external effects, undercharging for goods with negative external effects, and by over supplying private goods relative to public goods. Participatory planning is carefully designed to eliminate these important infringements on “consumer sovereignty.” People in a participatory economy are also free to choose more consumption and less leisure, or visa versa, simply by working more or fewer hours, and are free to distribute their effort and consumption over their lives as they wish. To accomplish this in market economies people must deal with banks and loan officers, whereas borrowing and saving is handled by consumer councils and federations in participatory economies.
Critics misinterpret our proposal that consumers submit their consumption requests to their neighborhood consumption councils which we believe has several advantages and none of the disadvantages critics fear. 1) It affords people an opportunity to get feedback from their neighbors if they wish. (After all, not everyone is estranged from her neighbors, and many value their advice.) 2) It permits people to present a case to their “peers” that special needs warrant relaxing the rule that a person’s effort ratings must be sufficient to cover the social cost of her consumption request. For all who do not work and have no effort ratings, there must be consumption allowances determined democratically for the entire economy. But besides regular consumption allowances for the young and retired, and for students and the disabled, our procedure allows for consideration of individual’s special needs. And 3) it permits the entire economy to reap the efficiency gains of a coordinated plan and avoid inefficiencies that arise from market disequilibria.
Critics charge that neighbors’ opinions will prove intrusive, that consumers cannot foresee what they will want for a whole year, and that making changes in consumption will prove frustrating. But neighbors can only offer suggestions. They are not permitted to reject consumption requests on grounds of content — only if social cost exceeds effort. And if anyone does not wish to hear her neighbors’ opinions, she can submit an anonymous consumption request to a consumption council composed of anonymous members who are not her neighbors. We are well aware that all consumers will misestimate what they ask for and need to make changes during the year, and that some will prove more reliable and others more fickle. The easiest way to think about this is to imagine each consumer with a swipe card that records what they consume during the year, and compares their rate of consumption for each item against the amount they asked for. If rates of consumption deviate by say 20% from the rate that was requested, consumers could be “prompted” and asked if they needed to request a change. If at the end of the year the total social cost of someone’s actual consumption differed from the social cost of what they had asked for they would be credited or debited appropriately. One of the functions of consumer councils and federations is to coordinate changes in consumption, if possible with other consumption federations, and if unsuccessful, with workers federations as well. To whatever extent consumers do foresee their needs, a participatory economy is constituted to capture the efficiency gains of planning over market disequilibria. To the extent that consumers cannot accurately gauge their desires, councils and federations will have to negotiate mid-course adjustments. No doubt there will be less fluctuations in indicative prices than market prices since adjustments in production will be negotiated directly between the national consumer federation and industrial federations. But a participatory economy is certainly not powerless to respond to changes in consumer desires. Is it possible that some consumer may not receive some particular item exactly when they want it if it was not in their original order? Yes. But that is highly unlikely, and, memory serves not every child found a cabbage patch doll under her Christmas tree a few years back.
We should also point out that consumer councils and federations afford consumers much greater clout vis a vis producers over quality and defects than consumers have in market economies. Critics of participatory economics mistakenly assume it is no different from Soviet style command planning in this regard. It is true the consumer was even more disenfranchised in the centrally planned economies than in market economies. The individual Soviet (Chinese, Cuban, Polish, etc.) consumer not only confronted huge state enterprises aided by the state distribution system alone, but faced a “take it or take nothing” proposition. In market economies the individual consumer faces powerful corporations alone, most of whom devote significant resources to manipulating her. The advantage is she can walk away from one corporate behemoth and buy from another which mouths the double speak mantra “the customer is always right” with equal insincerity. But in a participatory economy neighborhood consumer councils and larger federations put consumers on an even playing field with producers and each consumer has freedom of exit. Instead of relying on advertisements of profit seeking producers, consumers in a participatory economy will get information from their consumer councils and federations. It is the difference between getting information about the likelihood of washing machines breaking down from GE or from Consumer Reports. It is the difference between GM having to hoodwink Robin Hahnel or Ralph Nader and his research associates about automobile safety. Workers councils don’t get credited for goods returned. And every neighborhood consumer council should have a “quality committee” that monitors deliveries and returns questionable merchandise before it is picked up by individual consumers. If a consumer is unsatisfied with a product she only has to refuse it and have it returned as unacceptable by the consumer council. Then it is between the consumer council, or federation, and the worker council, or federation to settle the issue of whether the product was up to standards or not. In either case, the individual consumer in a participatory economy bears none of the burden of any hassle. She has organizational muscle behind her as well as an immediate exit option. Finally, for those who enjoy the pleasures of “malling it,” there can be malls and expos where consumers roam and place orders for delivery or take out. The difference is “displays” will be run by consumer federations responsible to consumers rather than producers.
· People in a participatory economy are free to apply to work wherever they want, free to bid on any job complex at their work place they want, free to organize a new enterprise to produce whatever they want, by any means they want, in cooperation with whomever else they want, and free to live wherever they want.
Of course, workers councils are also free to hire whomever they want from those who apply; fellow qualified workers are also free to bid on any job complex they want; and new workers councils must be certified by their industry federation as “competent” to deliver what they promise in the planning procedure. But constraints on individual work choices are necessary in any social division of labor, and analogous constraints are present in market economies. Whether job complexes balanced for empowerment and desirability, and restriction of private enterprise comprise violations of libertarian values, we take up below.
· Students are free to apply to any educational institution and degree program they want, and if accepted, pay no tuition and receive a living stipend appropriate to their age and needs. Workers are free to bid on any training program offered outside or inside their workplace all of which are free of charge.
In a participatory economy educational opportunities are allocated by merit with no chance that a more promising but less affluent applicant will be passed over by one who is less qualified but better able to pay. But equal educational opportunities will not lead to equal amounts of education for all. Isn’t it inequitable if some receive more education at public expense than others? In a market economy it would be since education is correlated with income. However, since consumption is based on effort in a participatory economy, rather than one’s marginal revenue product, consumption opportunities will not be unfairly affected by the fact that some receive more education than others, just as they will not be unfairly affected by morally arbitrary differences in human capital due to the genetic lottery.
· People are free to live wherever they choose.
There are no “internal passes” that restrict movement in a participatory economy as there were in the Soviet Union under Stalin, in China under Mao, and in South Africa under apartheid. Neighborhoods will probably be more important to people in a participatory economy because the neighborhood consumption council is an important institution where preferences regarding individual and collective consumption are expressed and debated. So if one is disappointed often by being out voted in such matters, there may be a greater incentive to find neighbors whose collective consumption values are closer to one’s own. One moves to a new neighborhood simply by requesting living space in a different neighborhood instead of renewing the option on your current address. Federations of neighborhood councils without the hidden agendas of realty companies will assist those searching for more compatible neighborhoods. Moreover, people can relocate in a participatory economy without fear of negatively affecting their wealth or income. There are no worries about changing property values that might adversely affect long-run economic security or ability to finance children’s education in a participatory economy, because there is no housing market and education is entirely at public expense. And even if moving requires changing one’s work site this does not affect the expected value of one’s effort rating and therefore one’s consumption opportunities.
The view that “certain libertarian objectives associated with personal freedom of choice can best be satisfied only if individuals have the kind of opportunities for choice and for exit that a market system alone can provide” (Weisskopf 1992:22) is simply untrue. Choice of consumption, work, and residence, as well as opportunities for exit, are as great or greater in a participatory economy than market systems. In capitalist economies what can workers do who don’t like their boss? In market socialist economies what can workers do who don’t like the majority decisions of their work mates? Switching work places or starting up a new enterprise is the exit option in those economies. In a participatory economy, workers are free to resign from one workers council and apply for work in another. Iteration Facilitation Boards in a participatory economy would make finding a more compatible work site far easier than finding one in capitalism, and at least as easy as finding one in a market socialist economy aided by a Swedish style Labor Market Board that takes retraining and relocation seriously. As far as starting a new enterprise is concerned, convincing an industry federation of the usefulness of a new enterprise is similar to convincing loan officers at a bank and managers of financial institutions crucial to the success of any initial public stock offering that a new enterprise will prove profitable. And, as we have seen, consumer sovereignty is better served, and residential relocation less problematic in participatory economies than market economies.
We wish to address a related concern head on: “A participatory system is likely to require people to justify many of their choices to some kind of collective decision-making body, which in turn is bound to limit the extent to which people can really get their choices accepted — no matter how democratically decision-making bodies are constituted. By enabling individuals to make most choices without reference to what others think about their decisions, a market system provides much greater freedom of this kind.” (Weisskopf 1992: 19)
In a participatory economy only people affected by decisions have influence over those decisions, and only to the degree they are affected. Since life style, social identity, and what goods to consume are decisions that mainly affect an individual, individuals will have control over those decisions in a participatory economy. But there are many decisions individuals make in a market system that affect other people as well, who are effectively disenfranchised. A participatory economy is designed to correct this infringement on people’s freedom by providing the appropriate degree of decision making authority to those affected by what are externalities in a market system. It is predictable that this would seem intrusive to people in market systems who are in the habit of making decisions without regard for the opinion of others who are also affected by the outcome. Businesses used to being “free” to pollute in market economies predictably chafe under environmental regulations they find intrusive. And employers accustomed to making changes in the work place without consulting their employees balk when unions insist on a say. Those who enjoy disproportionate power in market systems are used to being “free” from the opinions and influence of others, and predictably object to a system that would no longer permit them to be so. But those affected by decisions in a market system who have neither voice nor influence are the ones whose freedom is curtailed. Market systems are necessarily accompanied by a particular property rights system to determine whose freedom takes precedence over whose when multiple parties are affected. A participatory economy addresses the issue directly by attempting to achieve self-management decision making authority in proportion to the degree one is affected in all situations.
So why do some persist in believing participatory economies sacrifice libertarian values? Misconceptions about what we have actually proposed aside, the issue reduces to different conceptions of libertarianism. What is a libertarian economy? If people are not free, for example, to buy another human being, is the economy not libertarian? Surely there are circumstances that would lead people knowingly and willingly to sell themselves into slavery, yet few would refuse to call an economy libertarian because slavery was outlawed. If people are not free to hire the services of another human being in return for a wage is the economy not libertarian? There are familiar circumstances that lead people knowingly and willingly to accept what “traditional socialists” called “wage slavery.” Does this mean that market socialism is not libertarian because the employer/employee relation is outlawed? In our view equating libertarianism with the freedom of individuals to do whatever they please is a shallow interpretation that robs libertarianism of the merit it richly deserves. Similarly, equating economic freedom with the freedom to buy or sell anything and everything is a distortion of the idea of economic freedom.
It is, of course, a good thing for people to be free to do what they please but only if what they choose to do does not infringe on more important freedoms or rights of others. I should not be free to kill you because that would be robbing you of a more fundamental right to life. I should not be free to own you because that robs you of a more fundamental right to decide how to live your own life. Socialists of all varieties once believed that I should not be free to employ you because my freedom of enterprise, or property right, robs you of a more fundamental human right to manage your own laboring capacities. Most socialists and some liberals once believed I should not be free to bequeath substantial inheritance to my children because that robs the children of less wealthy parents of their more fundamental right to an equal economic opportunity in life. We can formulate a general principle: Restrictions on the right of some individuals are justified when they are necessary to protect more fundamental rights of others, and since such restrictions do not reduce, but increase individual freedom en toto, they are fully consistent with libertarian values. But besides the right to life, the right to manage our own labor, and the right to equal economic opportunity, are there additional rights that others should not be free to violate when choosing to do what they please?
Let’s go straight to heart of the matter. Suppose I’m intellectually gifted, score high on standardized tests, do well in my undergraduate studies, attend medical school, followed by a specialty in brain surgery — all paid for at public expense. Should I be free to sell my talents and skills to whomever I wish? In a free market economy there would be others willing to pay me a great deal for my services. But the high value of my contribution is not based on my effort alone. It is the joint product of genetic talent and education at public expense, in conjunction with my effort. So if remuneration is according to the value of contribution I will receive more than my efforts warrant, and other less talented and educated people will receive less than their efforts, or personal sacrifice warrant. There is no way around it: If all are free to sell their services: 1) Remuneration will be based on the market value of contribution, and some will receive more than their efforts warrant while others receive less than their efforts warrant. 2) Those who receive less than justified by their efforts do so because others receive more than justified by their efforts. And 3) this means those who receive more than their efforts warrant whether they intend to or not are exploiting those who receive less than their efforts warrant. Not a pleasant thought for capital rich proponents of market socialism!
Apparently we must decide if people who participate in economic cooperation with others have a right to a fair outcome, a right to an equitable distribution of the burdens and benefits of social cooperation, a right be free from exploitation. And we must decide if this right is more fundamental than the right of individuals to charge what the market will bear for the exercise of their human capital. Freedom of choice over the roles people play in the division of labor is not the issue here. The issue is how people free to choose their economic roles should be compensated. We think a good case can be made that people have a right to equitable compensation. But we see no reason why people should have a “right” to the compensation the market would award them. (What would be the basis of such a “right?”) In sum, we believe people should be free to do what they want. But this does not mean they should be free to exploit others. That is why the freedom to pursue education and employment according to one’s preferences is protected in a participatory economy, but the freedom to exploit morally arbitrary advantages in human capital by consuming more than others who made equal sacrifices is not.
Or, suppose I’m particularly competent and energetic, and more than willing to spend all my work time analyzing and evaluating different options for my workers council. Should I be free to work in a job complex where I am engaged full time in analytical and decision- making activities? As Weisskopf puts it: “Many people are likely to prefer doing more specialized work activities than would be permitted under a balanced job-complex requirement which means that enforcement of the requirement might well involve implicit or explicit coercion.” (Weisskopf 1992: 20) But if I am permitted to work at a job complex significantly more empowering than others, then others must work in job complexes that are less empowering, and before long my work mates’ formally equal opportunities to participate in economic self-management will not be effectively equal to mine. I will exert more influence over economic decisions than the degree to which I am affected because my work life was particularly empowering, and others will exert less influence because their work life disempowered them relative to me.
Advocates of participatory economics think everyone should have opportunity to participate in making economic decisions in proportion to the degree they are affected by those decisions. As explained above, we think this is the only way to interpret what “economic freedom” means without having one person’s freedom conflict with another’s, and we call this goal economic “self-management.” We think self-management, in this sense, is a fundamental right of people who engage in economic cooperation with others. So when people are free to do what they want, this does not mean they should be free to infringe on the self-management rights of others.
Moreover, notice who balances the job complexes. They are not balanced by some national bureaucracy and imposed on workers councils. Each workers council has a job balancing committee, just as they have an effort rating committee and a host of other “standing” and temporary committees responsible for particular concerns. Membership and policy of the job balancing committee, like every other committee, is determined democratically, and time any individual spends on this committee is treated as one task in their job complex. A participatory economy is simply an economy in which the vast majority of its members have agreed to try to organize their economic affairs so as to promote economic self-management understood as decision making input in proportion to the degree affected and equity understood as payment according to effort or sacrifice as well as efficiency. Moreover the vast majority have agreed that the institutions of workers and consumers councils, participatory planning, and balanced job complexes are the best ways they know to achieve these goals. But precisely how to group tasks into job complexes in each workplace is entirely up to those serving on the job balancing committee in that workplace under the general supervision of the entire workers council. There is no outside agent who oversees this operation with power to dictate or veto outcomes. No doubt different workers councils, particularly in the same industrial federation, will find reason to share experiences and information. But job complexes in each enterprise are created by the job balancing committee of that enterprise. And no doubt complexes will be different in different work places something prospective employees will take into account when deciding where they want to apply to work in a participatory economy.
What appear to be “simple” personal freedoms are not always so simple. Whenever a decision affects more than one person, allowing a single person to make the decision as a matter of exercising their “personal freedom” amounts to disenfranchising all other affected parties. But there is another way to see the logic of participatory economics: from the bottom up. The first priority is to guarantee economic justice for those who have never enjoyed it by making sure that people’s consumption is commensurate with their sacrifices; and to make sure that people’s work experience equips them to be able to participate in economic decision making should they want to do so. And there is another way to look at talent and education. A participatory economy encourages every person to develop and use her talents as she sees fit, and awards ample social recognition to outstanding abilities that create great social benefits. But there is no material reward for anything other than effort and sacrifice since this would be inequitable. And while those with greater talent and education may perform the role of expert to analyze complicated consequences, or may have their opinion more highly regarded than others in discussions because historically their opinions have proven more valuable, they are not given greater decision making authority in a participatory economy because this would infringe on the self-management rights of others.
Too Many Meetings? Cybernetic Overload?
“Wouldn’t the allocation of resources in a complex economy by means of participatory decision-making institutions place impossible demands on information processing and inordinate demands on people’s time? The mere listing of the requirements for decision- making in a participatory economy is enough to generate skepticism about whether and how they can possibly be met. Even if, in principle, institutions and processes can be developed to accomplish the necessary tasks (and Albert & Hahnel and Devine have advanced some ingenious ideas to do so), one is bound to wonder whether the whole system would actually function in practice. Assuming that computer technology could be relied upon to process and disseminate the enormous amount of information needed to make the system work, how would people be persuaded to provide the needed information in an unbiased and disinterested manner? And even if all the needed information could be accurately compiled, wouldn’t participatory planning require each individual to dedicate so much time, interest and energy to assessing the information and participating in decision-making meetings that most people would get sick and tired of doing it?” (Weisskopf 1992: 14-17)
Information processing and meeting time is far from zero in existing economies, which critics of participatory economics conveniently ignore. But for a participatory economy we can break the issue down into meeting time in workers councils, meeting time in consumers councils, meeting time in federations, and meeting time in participatory planning.
Conception and coordination is part of the organization of production under any system. Under hierarchical organizations of production relatively few employees spend most, if not all of their time thinking and meeting, and most employees simply do as they’re told. So it is true, most people would spend more time in work place meetings in a participatory economy than a hierarchical one. But this is because most people are excluded from work place decision making under capitalism and authoritarian planning, as they would be under market socialism. It does not necessarily mean the total amount of time spent on thinking and meeting rather than producing would be greater in a participatory work place. And while it might be that democratic decision making requires more “meeting time” than autocratic decision making, it should also be the case that less time is required to monitor and enforce democratic decisions than autocratic ones. Moreover, meeting time is part of the normal work day in a participatory economy, just as it is for managers and supervisors in existing economies, not an infringement on people’s leisure.
Regarding the organization of consumption, we plead guilty to suggesting that these decisions be arrived at with more social interaction than in market economies. In our view one of the great failures of market systems is that they do not provide a suitable vehicle through which people can express and coordinate their consumption desires. Social consumption is disadvantaged compared to individual consumption in market economies precisely because appropriate institutional vehicles to make social choice easy and efficient are lacking. It is through a layered network of consumer federations that we propose overcoming alienation in public choice joined with isolated expression of individual choice that is the hallmark of market systems. Whether this will take more time than the present organization of consumption depends on a number of trade offs.
Presently economic and political elites dominate local, state, and national public choice. For the most part they operate relatively free from restraint by the majority, but periodically time consuming campaigns are mounted by popular organizations in attempts to rectify matters when they get grossly out of hand. In a participatory economy people would vote directly on matters of public choice. But that doesn’t require a great deal of time, or require attending meetings. Expert testimony and differing opinions would be aired through a democratic media. Individuals with strong feelings on particular issues would participate in such forums, but others would be free to pay as much or little attention to these debates as they wished.
But how much meeting time is required by participatory planning, which we proudly call a “social, iterative, procedure?” Contrary to critics’ presumptions, we did not propose a model of democratic planning in which people, or their elected representatives, meet face to face to discuss and negotiate how to coordinate their activities. Instead we proposed a procedure in which individuals and councils submit proposals only for their own activities, receive new information including new prices indicative of social costs, and submit revised proposals only for their own activity Nor did we suggest meetings of constituents to define feasible overall options and plans to be voted on. Instead we proposed that after a number of iterations had already settled the major contours of the plan, the professional staffs of iteration facilitation boards would define a few feasible plans within those contours for constituents to vote on without ever meeting and debating with one another at all. Finally, we did not propose face to face meetings where different groups would plead their cases for consumption or production proposals that did not meet normal quantitative standards. Instead we proposed that councils submit qualitative information as part of their proposals so that higher level federations could grant exceptions should they choose to. Moreover, the procedure for disapproving proposals is a simple up, down vote of federation members rather than a rancorous meeting.
But while we do not find the criticism “too many meetings” compelling, neither do we want to be misleading. Informed, democratic decision making is different than autocratic decision making. And conscious, equitable coordination of the social division of labor is different than the impersonal laws of supply and demand. Supporters of participatory planning obviously think the former, in each case, is much preferable to the latter. But this is not to say we do not understand this requires, almost by definition, more meaningful social intercourse.
But Weisskopf also asked “how would people be persuaded to provide the needed information in an unbiased and disinterested manner?” implying we had no answer to this question and had naively assumed everyone would behave truthfully in a participatory economy. Quite the contrary. At least in this respect, our proposal and presentation were much more thorough than our critics give us credit for. In market economies the most serious “incentive incompatibility” regards consumers’ expression of preferences for public goods known as the free rider problem. In central planning the most serious “incentive incompatibility” regards enterprise management deceiving central planners about the true productive capabilities of the enterprise. We do not repeat here our explanation why neither of these incentive compatible problems that plague other economies exists in a participatory economy. Suffice it to say that in a participatory economy individual consumer’s would rationally expect to lose well being (as they define it) by misrepresenting their preferences for public goods, and workers councils would rationally expect to diminish the likelihood of being allocated the productive resources they want by misrepresenting their true productive capabilities. If critics have more specific criticisms about any incentive incompatibilities they believe they have detected in participatory economies, we would be most interested in hearing them.
Misfocused Priorities? Dictatorship of the Sociable?
“Isn’t the practice of participatory democracy sufficiently difficult, time-consuming and emotionally draining that it would in practice have to be limited to a relatively small range of decisions? In practice such a system might well enable some people to exercise much greater influence over decisions than others. Disproportionate influence would not arise from disproportionate wealth or income, but from disproportionate interest in and aptitude for the relevant decision-making processes. These kinds of concerns about the operation of democratic decision-making processes should not of course be read as a condemnation of democracy…. Rather, such concerns suggest that democratic political institutions ought to focus on a critical and manageable range of decision-making areas, rather than be used for all kinds of economic as well as political decisions.” (Weisskopf 1992: 15-16)
Obviously, we do not want our economic system to divert people’s participatory energies from more to less important issues. But our procedures facilitate participation in local and national economic decisions, and in short-run and long-run planning. Regarding long-run planning the options are: 1) relegate long run planning to the vagaries of the market place, 2) entrust long run planning to a political or technical elite, or 3) permit federations of workers and consumers to propose, revise, and reconcile the different components of the long run plan. There is an extensive literature suggesting that laissez faire market systems are least appropriate for long run development decisions. Traditional socialist critics of capitalism such as Maurice Dobb and Paul Sweezy were most convincing when arguing the theoretical advantages of planning over markets to achieve growth and development. And even the terribly flawed Soviet version of planning demonstrated significant advantages over market economies in this regard. Moreover, every historical case of rapid economic growth by a “late comer” has been testimony to the efficacy of planning as compared to laissez faire — the “Asian Tigers” being no exception — despite what itinerant preachers for the free market faith proclaim. If the planning elite is not chosen democratically, the dangers and disadvantages are obvious. But even if those who are entrusted to conceive and coordinate the long term plan are chosen democratically, there would be far less room for popular participation than under the procedures of participatory planning. Since we agree that choosing between: (1) transforming coal mining so as to dramatically improve health and safety, (2) replacing highway travel with a high-speed rail system, or (3) transforming agriculture to conform to ecological norms — not all of which can be done at once — has an important impact on people’s lives, we are anxious that popular participation be maximized in these matters. And the best way to do that is to use participatory planning procedures for developing the long-run plan.
The issue boils down to how can ordinary people best become involved in a particular kind of decision making? In our view the federations of coal miners, of rail workers, of automobile workers, of agricultural workers, and the transportation, food, and environment departments of the national federation of consumers should all play a prominent role in formulating and comparing the above alternatives. Even regarding major, long term choices, we think people participate best in areas closest to their personal concerns, and participatory planning is designed to take advantage of this. This is not to deny that everyone would vote on major alternatives. Nor do we deny there is an important role for expertise. But besides the professional staffs of the IFBs, professionals in R&D units working directly for the above federations would play an active role in defining long term options for their members to consider. And with the aid of accurate estimates of social costs and benefits, we believe workers and consumers through their councils and federations can play a prominent role in long term planning as well as annual planning and managing their own work and consumption.
Finally, Nancy Folbre worries that making the economy more participatory will only give rise to a new class of oppressors: “One perverse incentive could be labeled ‘The Dictatorship of the Sociable.’ Some people really like meetings. They like to talk, to negotiate, to debate. As a result, they often attend meetings enthusiastically, and they often prevail at them.” (Folbre 1991: 69) We have agreed “the Dictatorship of the Sociable” is a potential problem in any participatory social arrangement. That is why we suggested procedures for protecting the less sociable, such as BJCs, and educational campaigns around the democratic virtues of closure and quorum rules. No majority need permit itself to be railroaded or manipulated by a minority of “sociables” if the majority is armed with sufficient protection. But we are sympathetic with concerns that economic change might only replace one ruling class with another. As a matter of fact, participatory economics began as a thought experiment to design an economy that would be truly classless in response to the realization that public ownership and central planning had only replaced capitalists with commissars. But if it came down to it, we would shout “Long Live the dictatorship of the sociable!” — if it were the only way to avoid the dictatorship of the wealthy, or the mighty, or the knowledgeable. Fortunately, we do not believe in the “iron law of oligarchy” and are confident the sociable can be prevented from usurping power in a participatory economy.
Inefficient? Insufficient Incentives?
Motivational incentives: Critics worry that effort is impossible to measure and that rewarding effort rather than contribution is inefficient:
“Albert & Hahnel propose that the consumption opportunities available to individuals be linked to an individual’s input into the production process — in the form of personal effort made or personal sacrifice endured… Albert & Hahnel’s proposal would surely lead to greater equity in the reward for labor than the market-based alternative, but their claim of greater efficiency is misguided…. First of all, it is very difficult to observe and measure an individual’s sacrifice or work effort…. And any input-oriented incentive scheme would tend to encourage the substitution of quantity for quality of effort. Moreover, people would have an interest in understating their natural talents and abilities…. Second, while it would presumably elicit greater work effort and sacrifice on the part of individuals, it would do nothing to assure that such effort and sacrifice were expended in a desirable way. The social good is best served by encouraging activities the results of which are highly valued relative to the cost of undertaking those activities. In order to motivate people to expend their efforts in a desirable way, it is therefore necessary to reward activities according to the value of work output rather than according to the quantity of work input.” (Weisskopf 1992: 16-17)
“Because success, even in a non-capitalist order, may easily turn on talent, luck, and other morally undeserved factors, it is easy for the authors to show that equity favors distribution according to effort. My question, however, is whether they succeed in showing that distribution according to effort achieves efficiency alongside equity…. A society seeking optimum production needs to discourage clumsy effort and encourage proficient effort so as to avoid waste. Otherwise, the less successful have no material incentive to modify bungling methods or to seek work where their comparative advantage in contribution is greater. For efficiency, one must at least reward efforts to improve the success of efforts, and rewarding contribution may be the only feasible way to do so.” (Hagar 1991: 71)
A participatory economy is designed to maximize the motivating potential of non-material incentives. First, there is reason to hope jobs designed by workers will be more enjoyable than ones designed by capitalists or coordinators. Second, there is reason to believe people will be more willing to carry out tasks they have proposed and agreed to themselves than assignments handed them by superiors. Third, there is reason to believe people will be more willing to perform unpleasant duties conscientiously when they know the distribution of those duties as well as the rewards for people’s efforts are equitable. But this is not to say there are no material incentives in participatory economies. People’s efforts will be rated by their peers who have every interest in seeing that their work mates work up to their potentials. And people’s effort ratings in work directly affect their consumption rights.
Notice that in a participatory economy, while individuals consume according to their work effort, users of scarce labor resources — the workers councils — are charged in the participatory planning procedure according to the opportunity costs of employing different kinds of workers. This avoids the contradiction between equity — wages based on sacrifice, or effort — and allocative efficiency — labor costs that reflect social opportunity costs — that plagues market economies. But what about the concern expressed above by Weisskopf and Hagar that only reward according to the value of contribution provides efficient personal incentives while reward according to effort does not?
Differences in the value of people’s contributions are due to differences in talent, training, job placement, luck, and effort. Once we clarify that “effort” includes personal sacrifices incurred in training, the only factor influencing performance over which an individual has any discretion is effort. By definition, neither talent nor luck can be induced by reward. Rewarding the occupant of a job for the contribution inherent in the job itself does not enhance performance. And provided that training is undertaken at public rather than private expense, no reward is required to induce people to seek training. In sum, if we include an effort component of training in our definition of effort, the only discretionary factor influencing performance is effort, and the only factor we should reward to enhance performance is effort — which certainly turns common wisdom on its head! Not only is rewarding effort consistent with efficiency, but rewarding the combined effects of talent, training incurred at public not private expense, job placement, luck, and effort, is not.
Suppose we wanted to induce maximum effort from runners in a 10 kilometer race. Should prize money be awarded according to place of finish, or according to improvements in personal best times? Rewarding outcome provides no incentive for poor runners with no chance of finishing “in the money” and no incentive for a clearly superior runner to run faster than necessary to finish first. Paying in accord with improvements in personal best times gives everyone an incentive to maximize her effort.
And notice who is charged with measuring efforts a committee of work mates. Is there any incentive for one’s work mates to reward “clumsy” or “bungling” effort rather than proficiency? Wouldn’t the workers serving on the effort rating committee have every incentive to reward “effort to improve the success of efforts” since this would rebound to their advantage as well? Why would one’s fellow workers have any less incentive to discourage ineffective and encourage effective effort on the part of coworkers than capitalist employers? So why do many like Weisskopf and Hagar believe that equity conflicts with efficiency? There are three concerns that merit response.
(1) If consumption opportunities are essentially equal, people will have no reason to work up to their capabilities.
Where solidarity is insufficient to elicit effort without material reward, it would be inefficient to award equal consumption opportunities to those exerting unequal effort. But, as already explained, this is not what happens in a participatory economy. People receive effort ratings from their peers in their work place and are awarded consumption rights in their neighborhood consumption councils according to their effort ratings. However, differences in peoples’ efforts will certainly not lead to the extreme income differentials characteristic of market economies today. So the question arises, with no sky to reach for, will people lift their arms?
In a society that deprecates esteem deriving from anything other than conspicuous consumption, it is not surprising that large income differentials are seen as necessary to induce effort. But to assume that only conspicuous consumption can motivate people because under capitalism we have strained to make this so is unwarranted. There is plenty of evidence that people can be moved to great sacrifices for reasons other than a desire for personal wealth. Family members make sacrifices for one another without the slightest thought of material gain. Patriots die to defend national sovereignty. And there is good reason to believe that for non-pathological people, wealth is generally coveted only as a means of attaining other ends such as economic security, comfort, social esteem, respect, status, or power If accumulating disproportionate consumption opportunities is often a means of achieving more fundamental rewards, as I believe, there is every reason to believe a powerful system of incentives need not be based on widely disparate consumption opportunities. If expertise and excellence are accorded social recognition directly, as it will be in a participatory economy, there will be no need to employ the intermediary of conspicuous consumption. If economic security is guaranteed, for everyone and for their children, as it will be, there will be no need to accumulate out of fear for the future. If people participate in making decisions, as they will in a participatory economy, they will carry out their responsibilities with less recourse to external motivation. If the distribution of burdens and benefits is fair, and seen to be fair, as will be the case, sense of social duty will be a more powerful incentive than it is today. In sum, if a fair share of effort and personal sacrifice are demanded by work mates who must otherwise pick up the slack, if additional effort is appreciated by one’s companions, recognized by society, and awarded commensurate increases in consumption opportunities, and if people planned and agreed to their tasks themselves, as they all will be in a participatory economy, we see no reason incentives will be lacking.
(2) If payment is equal on average in all professions, there is no incentive for people to train themselves in the ways they can be most socially useful.
It is true we do not recommend paying those with more education and training higher wages since it would be inequitable to do so. But that does not mean people would not seek to enhance their productivity. The cost of education and training would be born publicly, not privately. So there are no material disincentives to pursuing education and training. And since a participatory economy is not an “acquisitive” society where people are judged by their belongings, but rather a society in which esteem and respect are based on “social serviceability,” there are strong incentives to develop one’s most socially useful potentials through education and training.
(3) Effort is difficult to measure while outcome is not, so rewarding performance is the best system in practice.
Neither half of this proposition is as compelling as usually assumed. Assigning responsibility for outcome in group endeavors is not always unambiguous. Sports teams are more suited to such calibration than production teams. And it is more difficult to calibrate individual contribution in football, soccer, and basketball than baseball. But even in baseball, arguably the easiest team sport to assign individual responsibility for group achievements, debates over different measures of offensive contribution — batting average, on base percentage, runs batted in, slugging percentage, etc. — debates over the relative importance of pitching versus hitting versus fielding, and acknowledgment of the importance of “intangibles” and “team chemistry,” testify to the difficulty of assigning individual responsibility for group outcomes.
Nor is measuring effort always so difficult. Anyone who has taught and graded students for long knows there are two different ways to proceed. Teachers can compare students’ performances to each other, or to how well they expected a student to do. Admitting the possibility of grading according to “improvement” is tantamount to recognizing that teachers can, if they choose, measure effort. Given a student’s level of preparation when she or he entered the class, given a measure effort. Given a student’s level of preparation when she or he entered the class, given a student’s natural ability, is this an A,B, or C effort, are not questions teachers find impossible to answer. And remember who is judging worker effort in a participatory economy. Who is in a better position to know if someone is only giving the appearance of trying, or engages in “clumsy effort” than the people working with her on the same task? While teachers don’t see students’ preparation,
workers do see work mates’ work. It is not as easy to pull the wool over the eyes of one’s work mates as of one’s supervisors — or teachers.
Balanced job complexes are inefficient because they do not economize on scarce talents and costly training, and encouraging all to participate in decision making fails to utilize expertise. “Personal endowments as well as preferences differ greatly. Up to a point, specialization provides important efficiency gains. A certain level of specialization and hierarchy seems necessary and functional to me.” (Folbre 1991: 69) And, “Apart from their inhibition of personal freedom, balanced
job complexes designed to avoid specialization seem likely to deprive society of the benefits of activities performed well only by people who have devoted a disproportionate amount of time and effort to them.” (Weisskopf 1992: 20)
Every economy organizes work tasks into “jobs” that define what tasks a single individual will perform. In hierarchical economies most jobs contain a number of similar, relatively undesirable, and relatively unempowering tasks, while a few jobs contain a number of relatively desirable and empowering tasks. But why should some people’s work lives be less desirable than others? Doesn’t taking equity seriously require balancing work for desirability, or else providing fully compensating
wage differentials? And why should work empower a few while disempowering most? If we want to ensure that formally equal rights to participate translate into effectively equal rights to participate — doesn’t this require balancing work for empowerment? If some people sweep floors all week, year in and year out, while others evaluate new technological options and attend planning meetings all week, year in and year out, is it realistic to believe they have an equal opportunity to participate simply because they each have one vote in the workers’ council? Doesn’t taking participation seriously require balancing work for empowerment? But the issue here is that Folbre, Weisskopf and others argue the efficiency loss from balancing job complexes for desirability and empowerment would be prohibitive.
First, balanced job complexes (BJCs) are not designed to avoid specialization. They are designed to avoid disparate empowerment. As already explained, this is to protect the freedom of those who otherwise would not have equal opportunity to participate in economic decision making. It is designed to prevent oppression and class divisions. But it does not curtail specialization as usually understood. We did not propose that everyone perform every task which is impossible and
undesirable in any case. Each person will still perform a very small number of tasks in her BJC. Some will still specialize in brain surgery, others in electrical engineering, others in high voltage welding, etc. But those who perform these specialized tasks if they are more empowering than average tasks will also perform less empowering tasks as well, and if they are more desirable than average, will also perform some less desirable tasks — unless they wish to work more hours or accept a lower effort rating. In any case, the tasks each performs do not have to be balanced for empowerment or desirability every hour, day, week, or even every month, and as explained above, this is all done by committees in each work place as they see fit. There is ample leeway in organizing work to accommodate technological and psychological considerations while eliminating large, persistent differences in empowerment and desirability. The economy we visualize is one that reaps the productivity awards of a very high degree of specialization but without the undesirable effects of permanent hierarchies.
Having clarified this misinterpretation of balanced job complexes, we reaffirm that the “scarce talent” argument about BJCs raises a valid point. However, we think the conclusion is usually overstated. It is true not everyone has the talent to become a brain surgeon, and there are social costs to training brain surgeons. Therefore, there is an efficiency loss whenever a skilled brain surgeon does something other than perform brain surgery. But most people have some socially
useful talent whose development entails some social costs. And an efficient economy would identify and develop everyone’s most socially useful talent. If this were done, there would be an opportunity cost no matter who changed bed pans, and the efficiency loss from brain surgeons changing bed pans from time to time would be less than in today’s economies where the talents of many go undeveloped. Moreover, countless studies confirm that participation increases worker productivity. If undeveloped. Moreover, countless studies confirm that participation increases worker productivity. If BJCs enhance effective participation as they are intended to do, whatever efficiency loss they entail should be weighed against the productivity gain they bring. The “expertise” argument against BJCs fails to distinguish between the legitimate role of expertise and an unnecessary usurpation of decision making power. In circumstances where the consequences of decisions are complicated and not readily apparent, there is an obvious need for expertise. But economic choice entails both determining and evaluating consequences. Those with expertise in a matter may well predict the consequences of a decision more accurately than nonexperts.
But those affected know best whether they prefer one outcome to another. So, while efficiency requires an important role for experts in determining complicated consequences, efficiency also requires that those who will be affected determine which consequences they prefer. This means it is just as inefficient to keep those affected by decisions from making them as it is to prevent experts from explaining consequences of complicated choices to those who will be affected. Self-managed decision making, defined as decision making input in proportion to the degree one is affected by the outcome, does not mean there is no role for experts. Instead it means confining experts to their proper role and keeping them from usurping a role that it is neither fair, democratic, nor efficient for them to assume.
In the end, all of us can only guess what the results of balancing job complexes would be, and there is certainly room for honest disagreement. We think that all who value economic justice and popular participation would hope for net efficiency gains, or at least minimal efficiency losses. Of course it would be up to the workers and consumers in a participatory economy to decide for themselves if job balancing was producing efficiency losses, and to what extent they wanted to slow their pursuit of equity and participation as a result.
Dynamic efficiency: Besides motivational and allocative efficiency lies the issue of dynamic efficiency. Do individuals have an incentive to search for innovations, and do workers councils have an incentive to implement productive ones once they’re found? These are important questions since even if people come to recognize that environmentally and socially destructive growth is no longer in their interests, raising living standards for everyone, reducing everyone’s work time, improving the quality of everyone’s working environment, and restoring the natural environment will require a great deal of innovation.
We do not support rewarding those who succeed in discovering productive innovations with vastly greater consumption rights than others who make equivalent personal sacrifices in work. Instead we recommend emphasizing direct social recognition of outstanding achievements for a variety of reasons. First, successful innovation is often the outcome of cumulative human creativity for which a single individual is rarely responsible. Furthermore, an individual’s contribution is often the product of genius and luck as much as personal sacrifice, all of which implies that recognizing innovation through social esteem rather than material reward is superior on ethical grounds. Second, we are not convinced that social incentives will prove less powerful than material ones. It should be recognized that no economy ever has, or could pay innovators the full social value of their innovations. If it did, there would be little left to pay those who apply them over long periods of time.
This means if material compensation is the only reward, innovation will be under stimulated in any case. Moreover, often material reward is merely an imperfect substitute for what is truly desired — social esteem. How else can one explain why those who already have more wealth than they, their children, and their children’s children can consume continue to strive to accumulate more? In any case, these are our opinions. Actual policy in a participatory economy would be settled
democratically in light of results.
Nor do we see why critics believe there would be insufficient incentives for enterprises to seek and implement innovations, unless they measure a participatory economy against a mythical and misleading image of capitalism. Sometimes it is presumed that innovating capitalist enterprises capture the full benefits of their successes, while it is also assumed that innovations spread instantaneously to all enterprises in an industry. When made explicit it is obvious these assumptions
are contradictory. Yet only if both assumptions hold can one conclude that capitalism provides maximum material stimulus to innovation and achieves technological efficiency throughout the economy. In reality innovative capitalist enterprises temporarily capture “super profits” which are competed away more or less rapidly depending on a host of circumstances including patent laws and the efficacy of enforcement of intellectual property rights. Which means that in reality there is a
and the efficacy of enforcement of intellectual property rights. Which means that in reality there is a trade-off in capitalist economies between stimulus to innovation and the rapid spread of innovations, or a trade-off between dynamic and static efficiency.
In a participatory economy workers do have a material incentive to implement socially useful innovations. Any change that increases the social benefits of the outputs they produce, or reduces the social costs of the inputs they use will increasing the workers council’s social benefit to social cost ratio. This makes it easier for the council to get its proposals accepted in the participatory planning process, can allow workers to reduce their effort, can permit them to improve the quality of
their work life, or can raise the average effort rating the council can award its members. But just as in capitalism, adjustments will render any advantage they achieve temporary. As the innovation spreads to other enterprises, as indicative prices change, and as work complexes are re-balanced across enterprises and industries the full social benefits of their innovation will be both realized and spread to all workers and consumers.
The faster the adjustments are made, the more efficient and equitable the outcome. On the other hand, the more rapid the adjustments, the less the “material incentive” to innovate and the greater the incentive to “ride for free” on the innovations of others. But a participatory economy enjoys advantages in managing this trade off compared to capitalism. Most importantly, direct recognition of “social serviceability” is a more powerful incentive to innovation in a participatory economy, which reduces the magnitude of the trade off since more innovation will occur in a participatory economy than in capitalism for the same speed of adjustments. Secondly, a participatory economy is better suited to allocating resources efficiently to research and development because R&D is largely a public good which is predictably under supplied in market economies but would not be in a participatory economy. Third, the only effective mechanism for providing material incentives for innovating enterprises in capitalism is to slow their spread, at the expense of efficiency. This is true because the transaction costs of registering patents and negotiating licenses from patent holders are very high. But while we would recommend it only as a last resort, the transaction costs of delaying the re-calibration of work complexes for innovative work places, or even granting extra consumption allowances for a period of time would be negligible in a participatory economy.
In general, we find much of what parades as scientific opinion about incentives flawed by implicit and unwarranted assumptions predictable in an era of capitalist triumphalism. We are not as pessimistic about the motivational power of non-material incentives in an appropriate environment as many of our progressive colleagues have become. Nor do we see any inappropriate obstacles to the deployment of material incentives in a participatory economy should its members decide they are warranted. In the end we are quite comfortable with the very traditional socialist view that a mixture of material and social incentives would be necessary during the process of creating an equitable and humane economy. But that social progress hinges, in part, on diminishing reliance on material incentives over time.
“Wouldn’t a participatory economic system be viable only if there were a prior transformation of people’s basic consciousness from one that is individually oriented to one that is socially oriented?”…. In order for mechanisms [of participatory economics] to add up to a workable system of motivation which could substitute for individual material incentives, there would surely have to be a wholesale conversion of human behavior patterns from homo economicus to what might best be
characterized as homo socialis — i.e. a person whose very consciousness was socially rather than individually oriented…. The first issue is whether and how people could be expected to change from homo economicus, as we know him/her in contemporary capitalist societies, to homo socialis, as he/she is depicted in the operation of participatory socialist societies…. If people act essentially as homo economicus, it follows that a significant amount of inequality, hierarchy, competition, etc. is a necessary ingredient of an efficient economic system.” (Weisskopf 1992: 17- 21)
Concerns that a participatory economy assumes people are altruists, or that a participatory economy requires a different set of human motivations than those people have actually have, are usually the penultimate line of defense against participatory economics. (The last line of defense, and the one we are most sympathetic to, is addressed in the final section below.) But not everyone and the one we are most sympathetic to, is addressed in the final section below.) But not everyone has misread our proposal in this way. Jason Pramus remarked: “Looking Forward is not a naive book. It is not even a utopian book. In its own way it is quite practical. It does not expect people in its hypothetical economy to behave like revolutionary saints. It lays out a system where people’s self-interest will very closely coincide with the interests of the larger society they are a part of. It does not expect greed and dishonesty to disappear, but it does present safeguards that should minimize the damage such tendencies would present.” (Pramas 1991: 74) In different terms, we rigorously defined an institutional context (that we called a Formal Model of a Participatory Economy, FMPE) and asked what individual rational behavior in that context would be. Having deduced what individually rational behavior would be in FMPE, we then analyzed that behavior to see if it coincided or deviated from socially efficient behavior (pareto optimality) and socially responsible behavior (equity defined as reward according to effort or sacrifice.) With the exception of the definition we chose for equity, our analysis was conducted according to the standard norms of the economics profession, and even in that regard, the profession permits analysts to specify their notion of equity.
We assumed people would be homo economicus, we deployed the standard analytical tools, and we adopted the profession’s definition of social efficiency. In short, we conducted a rigorous welfare theoretical analysis of a participatory economy according to the excepted standards of the profession. (We have as many reservations as any other progressive about scientific weaknesses in this methodology. But that is irrelevant here. We wish our critics would not, in effect, ignore that we
have conducted such an analysis.) We most emphatically did not engage in the exercise of assuming that individuals were “revolutionary saints” who act to promote the social interest (i.e. social efficiency and equity), and then tautologically proclaim that the social interest would, indeed, be served!
In brief, the principle mechanism that compels worker councils pursuing their own self interest to behave in a socially responsible way is that these councils must demonstrate to other worker and consumer councils that their proposals generate an acceptable excess of social benefits over social costs. For their part, consumer councils must demonstrate that the social cost of the goods they request is consistent with the average work effort ratings of their members. The principle
mechanism that compels individually responsible behavior are effort ratings by one’s work mates and consumption allocations based on effort ratings. The logic is to organize the economy in a way that ensures that the behavior of homo economicus will be indistinguishable from the behavior of homo socialis, or put differently, to reward socially responsible behavior and discourage socially irresponsible behavior.
While we assumed homo economicus and searched for institutions that would lead people to behave in socially responsible ways out of self interest, we do hold out hope that many years of practicing social responsibility, and observing that others have practiced social responsibility as well, will move people closer to homo socialis in their economic relations. There is plenty of evidence that people do behave as homo socialis today — toward family members, friends, and various communities where members feel solidarity for one another. So this is not behavior foreign to the human species when we have good reason to trust rather mistrust each other. But we most emphatically did not assume that people in a participatory economy would behave in accord with the social interest if this were in conflict with their individual self interest, for that would have been utopian.
No Way To Get There From Here?
Even if participatory economics is compatible with human nature, (i.e. is humanly feasible) that does not guarantee there is a way to get from here to there (i.e. there is a feasible transition.) Many are pessimistic that as attractive and humanly feasible as participatory economics may be, there is no way to climb out of the economics of fear and greed that has been tightening its grip on us for more than 400 years, and begin to practice the economics of equitable cooperation. “To transform homo economicus into homo socialis would involve a massive change in people’s mind-sets. Such a transformation might conceivably be imposed on a society by an authoritarian elite, but it is virtually impossible to imagine it being generated by a democratic process that respected the current attitudes and preferences of the general public.” (Weisskopf 1992: 21-22)
We explained above that participatory economics does not assume homo socialis. This is a misrepresentation of our proposal. But even if a participatory economy is both technically and misrepresentation of our proposal. But even if a participatory economy is both technically and humanly feasible, it is only of academic interest if there is no way to get there from where we are. Besides being humanly feasible, there must be a feasible transition from today’s economies based
on competition and greed to a system of equitable cooperation. The march may be long, but there must be a trail that leads from here to there.
We know a democratic economy will not result from a non-democratic political process. If the history of twentieth century Communism proves nothing else, it proves this. Only a social movement committed “body and soul” to democracy and justice in all spheres of social life, comprising at least a third of the population, and supported by at least another third of the population, can establish a participatory economy. This means the solid beginnings of a system of equitable cooperation that won the approval of an overwhelming majority of the population must be established during decades of struggle. But this is precisely the democratic process that can lead to a participatory economy. Those who are sufficiently oppressed or disgusted by the economics of competition and greed to struggle for the economics of equitable cooperation must demonstrate a “living proof” of the possibility and desirability of an economy based on those principles. That is also how they could win the approval of another third of the population. We always assumed a transition could require many decades of blood, sweat, and tears with no guarantees. But, for us, that is a better prospect than another 500 years of greed and exploitation.
Please notice that the third of the population that actively participates in the movement for social change does not impose a participatory economy on the rest of the population. Only when there is another third that votes along with the diehards to take the plunge, would a democratically elected government have a mandate to set up a participatory economy. While history indicates most citizens who disagree with their country’s economic or political system usually do not choose to
leave, our policy advice to such a government would be to allow who did wish to emigrate to a country with an economy more to their liking, to do so. In that way, all who began the process of developing a national economy of equitable cooperation would be doing so voluntarily albeit with different levels of commitment and reservations. But once again, what does the beginning of such a trail look like?
Make no bones about it: many current trends are bleak. Mindless equation of free market outcomes with efficiency and freedom in face of overwhelming evidence to the contrary, callous reductions in minimal programs for the needy and elderly, corporate merger madness, desperate scrambling to consolidate international trade blocs, worship rather than resentment of power and privilege, and a wholehearted embrace of social Darwinism in racial, class, and gender forms, all make late twentieth century US capitalism a closer relative of the Robber Baron capitalism of a hundred years ago than its “kinder and gentler” post New Deal cousin. Meanwhile, understandable disillusionment with non capitalist economies in the former Soviet Bloc, combined with unavoidable naivete about capitalism, promise a painful learning curve for the inhabitants of the second world, most of whom are finding themselves joining the third world rather than the first world, as they had hoped. Last, but not least discouraging, growing absolute as well as relative poverty is accelerating social dissolution in much of the third world. Obviously, none of this is moving us closer to democratic and equitable economic cooperation.
Moreover, we can find no solace in old left doctrines of inevitable collapse. Many twentieth century progressives sustained themselves emotionally and psychologically with false beliefs that capitalism’s dynamism and technological creativity would prove to be its weakness as well as its strength. Grandiose Marxist crisis theories — a tendency for the rate of profit to fall as machinery was substituted for exploitable living labor, or insufficient demand to keep the capitalist bubble afloat
as productive potential outstripped the buying power of wages — buoyed the hopes of the faithful in the face of crushing defeats of progressive causes. And less ideological reformers were still affected by the myth that capitalism organized its own replacement. Unfortunately, none of this was never true. Any more than it was true that public ownership and central planning would eliminate classes and solve people’s economic problems, or that incremental social democratic reforms would add up to a new economic system, superior to capitalism.
What is true is that capitalism either will not, or cannot satisfy essential human needs for the majority of people on the planet. Capitalism will not satisfy the need for basic economic security for most of the third world and a growing underclass in the advanced economies. Capitalism cannot satisfy the need for self-managed, meaningful work that an increasingly educated populace satisfy the need for self-managed, meaningful work that an increasingly educated populace demands. Capitalism cannot satisfy needs for community, dignity, and economic justice. And capitalism cannot keep itself from devouring the environment, or generating an international climate that fosters conflict and war instead of peace and cooperation. Moreover, the new Robber Baron capitalism that is currently unfolding virtually unconstrained on a global scale, gives every indication of escalating the pace of human emiseration and environmental degradation, which
means that most people will have to struggle harder than their parents to meet their economic needs.
Unfortunately, capitalism does not nurture the seeds of its own replacement in the way many twentieth century progressives hoped it would. Capitalism fosters commercial values and behaviors, rationalizes exploitation, and teaches myths about its own desirability and inevitability. The transition to a participatory economy consists precisely of dispelling myths about capitalism’s supposed virtues, challenging any and all forms of exploitation, rejecting commercial values, and developing
efficient democratic and cooperative behavior patterns despite the fact that these are penalized not rewarded by market competition. So there is less help here than our predecessors believed, leaving more hard swimming against the current. Enough of the bad news. Where can our “Long March” begin?
Pre-Capitalist Cultures of Cooperation: The transition will be quite different in different countries. In many third world settings strong cooperative traditions still remain and can be built upon as the Zapatistas have done in Mexico and the founders of the Grameen Bank have done in Bangladesh. It is nonsensical for progressives to denigrate pre-capitalist cultures and applaud when capitalism replaces older cooperative institutions with competitive behavior patterns, as twentieth century, Eurocentric progressives often did. Important elements in many pre-capitalist cultures should be protected and built on before they are destroyed.
Third World Immiseration: Marx’s prophesy of economic emiseration did not prove true for the first world. But capitalism has never delivered sustained growth, much less sustainable economic development in the periphery, and the prospects for countries that fail to extricate themselves from the increasingly exploitative international division of labor the powerful capitalist centers are currently organizing, are more bleak than ever. Junior status in the global capitalist system is hardly an attractive prospect as we enter the twenty-first century and the juggernaut of neoliberalism is turning “emerging markets” into casino economies that serve the interests of the international financial elite both when they soar and when they crash, but emiserate the majority of the population during both boom and bust. Consequently, the necessity of meeting minimal economic needs of the majority of the populace, and the negative track record of capitalism in the periphery
will be the strongest allies third world progressives can count on in their battle against international capital and local elites.
Consequently, there is every reason to expect third world movements to lead the opposition to global capitalism in the twenty-first century as they did during much of the twentieth century. Which is not to say that first world activists should concern themselves only with solidarity work, or wait for the “peasant periphery” to surround and capture the “capitalist center.” Abdicating responsibility for organizing oppressed first world constituencies was one of the strategic mistakes of the New Left we must learn to avoid in the century that comes. But organizational and intellectual leadership during the transition to equitable cooperation will certainly be strong in the third world.
A Legacy of Basic Need Provision: It is not so long ago that citizens in the second world enjoyed adequate universal health care, education, and public services, and secure, if not meaningful employment. And despite intense international propaganda and financial threats, wholesale privatization has proved difficult and largely degenerated into lawless barbarism. All this helps second world progressives organizing resistance to bitter IMF recipes. The major obstacles are the
negative legacy of non-capitalist institutions, and ideological disarray among second world progressives. But as the downside of subordinate capitalism becomes ever more apparent, and as second world progressives make clear that they stand for an economy that allows more freedom and greater opportunities for popular participation than capitalism, these liabilities should diminish. In the second world our participatory model has the political advantage of being easily
distinguishable from central planning and avoiding the contentious problem of assigning ownership of economic assets among the populace.
Unions: Union membership and political strength are at their lowest since World War II. Conditions for progressive organizing in the US union movement have not been this favorable for fifty years. Say what? Perhaps because things had gotten so bad, union leadership has embraced a program of revitalization with tremendous potential.
· The AFL-CIO has committed unprecedented resources to organize the unorganized prioritizing minorities, women, and workers in traditionally non- union sectors. The energy and enthusiasm at the Organizing Institute is one sign that this is not all hot air.
· The AFL-CIO has embraced a new educational program called Common Sense Economics.The goal is to educate its entire membership about why and how the US economy is not serving their interests and what they can start to do about it. The
projected scope and depth of the campaign is astounding, and the content of the curriculum is more radical and hard hitting than I would have ever thought possible.
· The generation of union leadership from the Vietnam War era has largely replaced the old Cold Warrior leadership at the same time the Cold War has ended. It is now easier to preach radical anti-capitalism and militancy in unions without being red baited than at any time in our life times.
· Union leadership is less hostile to political activity outside the Democratic Party, more critical of centrist Democratic Party politicians, and more aggressive at punishing Democrats who fail to vote pro-labor than at any time in recent memory.
· Labor led the unsuccessful fight against NAFTA, the successful fight against Fast Track, and shows no sign of relenting on this critical issue.
Clearly the union movement should be a high priority for progressive activism in the years ahead. But shouting louder that profits are too high and wages too low, that the ratio of CEO salaries to workers wages in the US is obscene, and to make a long story short, that the corporate political agenda sucks, isn’t going to be enough to revitalize American unions. More than anything else, revitalization hinges on the union movement once again becoming the hammer of economic justice.
Unions must teach their members that nobody deserves to be paid more than they are — unless they work harder and make greater personal sacrifices. Unions need to teach their members that as long as wages are determined according to the law of supply and demand in labor markets, members can’t expect their unions to do more than temporarily reduce the degree of economic injustice. Unions cannot become a moral hammer for justice until they believe, teach, and mean
that only effort deserve reward, and that everyone everywhere deserves to be rewarded according to the economic sacrifices they make. Wobblies believed, taught, and lived by that code when they organized in the labor movement early in the century. Rank and file socialists believed, taught, and lived by that code when they worked in the labor movement in the thirties and forties. Of course organizing the unorganized is a critical priority to reverse the downward trend in unionization of the work force. But we don’t have to wait on new organizing successes to teach present union members what economic justice is and is not. This is not ground that should be difficult to reconquer. The first step is to clear our own heads of cobwebs and relearn how to preach to the choir. In the advanced economies unions still provide institutional space for strengthening the “hammer of justice,” and their survival largely depends on whether or not they decide to re- tackle this task.
Cooperatives: The culture of capitalism is firmly rooted among citizens in the advanced economies. Most employees, not just employers believe that hierarchy and competition are necessary for the economy to run effectively, and that those who contribute more should receive more irrespective of sacrifice. And why shouldn’t people believe this? Even if you feel you haven’t gotten a fair shake, or that people born with a silver spoon in their mouth don’t deserve what they get, few are likely to reject a major linchpin of capitalist culture on their own. We should not fool ourselves that capitalism teaches people about its failings, or shows them how to live non-capitalistically — quite the opposite. The only sense in which capitalism serves as midwife for its heir is by forcing people to learn to think and live non-capitalistically in order to meet the needs it leaves unfulfilled. It falls to progressives to learn and teach others how to do this. And there can be no mistake about it, this is a monumental learn and teach others how to do this. And there can be no mistake about it, this is a monumental task. We can ill afford to repeat the error of our twentieth century predecessors who failed to face up
to the magnitude of this task, looking instead for short cuts and excuses for why it would not be necessary.
But where can a culture of equitable cooperation grow in modern capitalism? Thousands of producer and consumer cooperatives exist in the United States. Some were organized by employees who didn’t want to lose their jobs when their employer no longer found them profitable. Some were organized by independent farmers to withstand competition from agribusiness. Some were created by idealistic owners who relinquished ownership to their employees. Some were organized by consumers who couldn’t get credit from capitalist banks, and others by consumers who wanted to eat food that capitalist supermarkets wouldn’t provide.
The past ten years has witnessed a resurgence of cooperatives as governments at every level have abandoned social services and businesses have abandoned necessary, but unprofitable activities. Unlike cooperatives created thirty years ago as an outgrowth of the counterculture of the 1960s, the recent wave of cooperative formation is larger, less self-consciously progressive, and more driven by necessity. The possibility of linking producer and consumer cooperatives is particularly attractive. One example received national attention recently because of the research of an academic nutritionist. She pointed out that the nutritional quality of school lunch programs could be dramatically increased by replacing processed foods with locally grown vegetables and fruits, provided school cafeteria staffs were taught how to prepare seasonal menus. At the same time, advance contracts for local growers could provide much needed economic security, provided they
organized into cooperatives. Of course the largest and most advanced example of a successful network of industrial cooperatives is the well known Mondragon “experiment” in Spain which has survived and grown for almost fifty years and no longer deserves its “experimental” title.
The major problem is not lack of cooperatives, but failure to develop cooperative principles and practices within them. Progressives need to help sustain and expand self-management practices and develop more equitable internal wage structures within producer cooperatives. We need to create new organizational procedures that help members participate in consumer cooperatives without heavy burdens on their time. Cooperative members need to be taught how the competitive market environment limits the abilities of their cooperatives to deliver economic democracy and justice. Then, when this ground work has been laid, progressives need to start to link cooperatives together into networks that relate internally according to participatory rather than competitive norms. After strengthening cooperative principles and habits inside existing cooperatives, progressives can try to connect them into networks that function as participatory islands within the larger competitive economy.
Community Economic Development Projects: Many poverty stricken areas in the United States have community economic development projects. When employers, banks and developers withdraw from areas they consider less profitable than other alternatives, abandoned communities are left without jobs, adequate housing, or a tax base sufficient to provide basic social services. According to the logic of capitalism, people should not waste time whining about their fates, but get with the program and move to where the action is: Abandon your family and community roots in the rust belt and migrate to the sun belt — or you’re just a loser and deserve what you get. Community development projects are testimony to peoples’ unwillingness or inability to follow this advice. Community development projects respond to economic abandonment by trying either to change incentives to re-attract capitalist activity, and/or by substituting non-capitalist means of employment and housing for the capitalist activity that departed. Particularly community development programs that take the latter course are important areas where people are busy meeting needs capitalism leaves unfulfilled.
As with cooperatives and unions, more institutional space exists in existing community development projects than progressives presently make good use of. When working in these projects progressives need to reaffirm the right of people to remain in historical communities of their choice irrespective of the logic of profitability; point out the inefficiency and waste inherent in abandoning perfectly good economic and social infrastructure in existing communities to build socially costly and environmental damaging new infrastructure in new communities elsewhere; press for strategies based on non capitalist employment and housing since this provides more worker, resident, and community security and control than relying on newly courted capital; and, where non-capitalist institutions are security and control than relying on newly courted capital; and, where non-capitalist institutions are not possible or insufficient, progressives should work to maximize community control over employers and developers who benefit from incentives offered by community development initiatives. In sum, any and all institutions and initiatives that struggle to satisfy unmet needs through equitable democratic cooperation can be part of the transition to a participatory economy in the advanced economies.
The Environmental Movement: Pollution is one important kind of negative external effect and it is well known that markets lead us to over produce goods whose production or consumption entails negative external effects. Pollution reduction is a public good and it is well known that markets tend to under supply public goods. Much of the natural environment is a common property resource and it is well known that the individually rational strategy under free access is to over exploit a common property resource. Crucial choices about environmental preservation and restoration hinge on what rate of time discount we use to compare present costs and future benefits and it is well known that any reasonable estimate of the rate of growth of economic well being per capita is significantly lower than the normal rate of profit which means future environmental benefits are over discounted and present costs of environmental protection are over valued. And it is also well known that only meaningful social relations like peer monitoring and concern for one’s reputation and for the well being of others are capable of transforming important environmental situations from prisoner dilemma “games” into assurance “games” with more positive environmental outcomes. Yet the social effect of “anonymous” markets is precisely to undermine these kinds of social ties and replace them with individualistic, commercial values. Finally, the environment has existence and option value beside its use value and it is well known that market-based methods like hedonic regression and travel cost of estimating environmental benefits are inherently incapable of estimating these kinds of benefits. No wonder serious environmentalists consider markets and commercial values — along with corporate power and misguided technologies — as their major enemies!
In the short-run there are three policies to choose from: regulation, pollution taxes, or tradable pollution permits. Elsewhere I have explained why I believe pollution taxes are preferable: They embody the “polluter pays” principle, are always superior to regulations and tradable permits on efficiency grounds, and pose no different enforcement problems than other policies. And while regulations seem to have the ideological advantage of saying: “Thou shalt not abuse the environment beyond X” the regulation glass is always half empty as well as half full because regulations implicitly say: “Thou hast the right to abuse the environment up to X and free of charge!” There are two keys to making pollution taxes effective: (1) setting them high enough, and (2) enforcing them effectively. Setting them high enough requires: (a) accurate estimates of the true social costs of pollution which primarily means more extensive use of improved contingent valuation
survey techniques, and (b) sufficient political will and clout to overcome well financed opposition from polluters. Effective enforcement requires: (a) high penalties for violators, and (b) sufficient resources for monitoring. But besides being the most steadfast in the fight to make these policies to slow the rate of environmental degradation effective, progressives must lead the struggle to convince environmentalists that only replacement of market decision making by democratic, socially
responsible decision making will preserve, much less begin to restore the natural environment. The future of the environment does hinge on a successful transition from the economics of competition and greed to the economics of equitable cooperation. And unlike some leftist dogmas of the twentieth century, that will be proven true by the end of the twenty first century one way or the other.
Reform Campaigns: Where else and how should progressive organizers apply their energies? In an era of increasing corporate power, efforts to organize workers, strike support work, community economic development programs to prevent further destruction of poverty stricken communities, campaigns to shift government spending away from military spending and “corporate welfare” toward health, education, and human welfare must all be supported wholeheartedly by progressive organizations. Making the tax system and social security more, rather than less progressive, and substituting pollution efficient pollution taxes for taxes on labor income are other the major arenas in which progressive activists must continue to labor. But it should be made clear that the reason progressives support and work in “reform” campaigns is that everyone should control their own economic destiny — workers and communities in every country — and everyone should receive economic benefits commensurate with their effort and sacrifice. This means not only is dictatorship economic benefits commensurate with their effort and sacrifice. This means not only is dictatorship of the capitalists unacceptable, but dictatorship of the educated elite and experts is unacceptable as well. It means not only is profit income unfair, but salaries of movie stars, top professional athletes, and highly paid professionals are unfair as well. And it means that workers in less developed countries deserve incomes commensurate with their efforts just as workers in the US do, and that future generations have as much right to a productive and desirable natural environment as present generations.
It is also important for activists working in reform campaigns to make clear that victories can only be temporary as long as economic power is unequally dispersed and economic decisions are based on private gain and market competition. Otherwise, reform efforts give way to disillusionment, and weaken rather than strengthen the movement for progressive economic change when victories prove partial and gains erode. But while activists working in different areas must explain why reforms within capitalism can only be partial and temporary, they must also take time in their reform work to explain how more complete victories could be made more permanent if capitalism were replaced by a system designed to promote equitable economic cooperation in the first place.
Curbing the Market: Since the inefficiencies and inequities generated by market competition is as big a problem as private wealth and corporate power, activists must work especially hard in campaigns that oppose democratic to market decision making. This means working to keep areas like health and education within the purview of democratic decision making rather than abandoning them to the ravishes of the marketplace — which is what health insurance reform and school
vouchers amount to. It means fighting for efficient, democratic procedures for regulating use, and preventing abuse of the environment rather than embracing tradable pollution permits or relying on regulations administered by distant bureaucracies. It means eventually expanding the principle of self-management and rule of democracy over major investment decisions that are made today by private financial interests who are less accountable to the public than at any point since the Great Depression. It means fighting against the neoliberal policies of the US Treasury, IMF, and World Bank that turn “emerging markets” into pyramid, casino economies that are rapidly going up in smoke on after another. And it means making clear that the enemy in these fights is not only the international financial elite who benefit from the decisions they dominate, but also the rule of the market which must be curbed, tamed, brought to bay — and eventually replaced by democratic procedures — if victories are to be sustained.
Life Within the Movement: Besides working to curb the worst abuses of capitalism, progressive activists themselves must live according to the dictates of self-management and economic justice. Decision making in proportion to the degree one is affected, using expertise but limiting it to its proper role, and consumption according to effort cannot be demonstrated as desirable and viable within the workings of capitalism. The fact that capitalism makes all these things impossible to
sustain is precisely the reason it must be replaced! But sensible people do not endorse new ideas until they are sure they work. Especially in light of the twentieth century history of failed alternatives to capitalism, the progressive movement must respect people’s skepticism. This means testing the principles of a participatory economy and proving that they do work within the movement for economic change is especially important. Refining and defending the principles in ideological debate with opponents must be accompanied by testing them in the flesh in the only setting where they can operate for now. That is how to “keep hope alive,” and how the principles of economic justice and self-management can successfully challenge the hegemony of “might makes right.”
The question boils down to this:
Do we want to try and measure the value of each person’s contribution to social production and allow individuals to withdraw from social production accordingly? Or do we want to base differences in consumption rights on differences in personal sacrifices made in producing goods and services as judged by one’s work mates? In other words, do we want an economy that obeys the maxim “to each according to the value of his or her personal contribution,” or the maxim “to each according to his or her effort?”
Do we want a few to conceive and coordinate the work of the many? Or do we want everyone to have the opportunity to participate in economic decision making to the degree they are affected by the outcome? In other words, do we want to continue to organize work hierarchically, or do we want job complexes balanced for empowerment?
Do we want a structure for expressing preferences that is biased in favor of individual consumption over social consumption? Or do we want to it to be as easy to register preferences for social as individual consumption? In other words, do we want markets or nested federations of consumer councils?
Do we want economic decisions to be determined by competition between groups pitted against one another for their well being and survival? Or do we want to plan our joint endeavors democratically, equitably, and efficiently? In other words, do we want to abdicate economic decision making to the market place or do we want to embrace the possibility of participatory planning? As long as the problem is viewed as how to get an economic elite to make decisions in the public
interest rather than their own, we won’t get very far in thinking about a truly desirable economy. Whether they be capitalists, central planners, or managers of public enterprises, economic elites will imperfectly serve the public interest at best, and more often than not end by subverting it to their own interest. A desirable economy must be a classless economy. Moreover, the social process of consciously, democratically, and equitably coordinating our interconnected economic activities is fundamentally different from the social process of competing against one another in the exchange of goods and services. And while both “solutions” to the economic problem are feasible, only responsible cooperation is compatible with self-management (decision making input in proportion to the degree one is affected by the outcome), equity (to each according to personal sacrifice or effort), efficiency (maximizing the benefits from using scarce productive resources), solidarity
(concern for the well being of others), and ecological restoration.
Standing Fast: The next century will prove no easy road for progressive organizers. Capitalism does not dig its own grave, it loans and charges us dearly for the shovels we use to dig our graves. Only as enough of us come to our senses and put our shovels to better use will the increasing human misery and environmental destruction that marks the end of the century that should have been apitalism’s last, give way to a sustainable economy of equitable cooperation. Unfortunately, “coming to our senses” is easier said than done. It will come to pass only after more sweat and tears have flowed in more campaigns on more fronts than we can yet imagine. Fortunately, sweat and tears in the cause of justice and freedom are at the center of the human spirit, and the best of all ways of life.
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From: Z Net – The Spirit Of Resistance Lives