Participative Economics

Parecon: Life after Capitalism
by Michael Albert;
Verso 2003;
pp 311, $16.

Capitalism rules triumphant today all over the world in the era of globalisation. It has been left with no rival or alternative after the collapse of communism in the erstwhile Soviet Union and other eastern European countries. Soviet Union has disintegrated and many eastern European countries have joined NATO and have whole-heartedly accepted American leadership. Marxism is dead and its battle-cry ‘workers of the world unite’ no longer inspires. It was against this context, therefore, that the American writer Francis Fukuyama had announced the end of history. History had ended in the sense that search for alternative to capitalism had ended.

But Fukuyama might have spoken to soon. Capitalism has not solved all the economic problems of humanity nor is it a system without severe failings. Michael Albert quotes the words of John Maynard Keynes, the leading economist of the early 20th century who said “Capitalism is not a success. It is not intelligent. It is not beneficial. It is not just. It is not virtuous and it does not deliver the goods. In short, we dislike it and we are beginning to despise it. But when we wonder what to put in its place we are extremely perplexed”. Michael Albert’s Participative Economics is an attempt to answer the question raised by Keynes – “what to put in place of capitalism?”

It is not as though Albert’s is the first attempt to provide an alternative to capitalism or to highlight its shortcomings. Such attempts have been made from early years of capitalism when industrial capitalism first came to be established in Great Britain during the period 1760 to 1820. It was marked by exploitation of the working classes in the form of ‘iron law of wages’ that existed at subsistence level and long hours of work. The worst exploited were women and children. A large hearted capitalist Robert Owen sought to find an alternative in the form of a cooperative community. The textile workers known as Rochdale pioneers set up consumer cooperative shops to escape the exploitation of shops run by capitalist owners. The emancipated farmers of Germany organised credit cooperatives under the leadership of Raiffeisen in order to escape the exploitation of moneylenders. The cooperative organisation was an alternative to capitalist enterprise. While the latter was based on shareholding, the former was based on membership. Cooperative organisations were association of members that were to be managed democratically on the basis of ‘one member one vote’. Membership was based on participation in appropriate manner. Cooperatives were economic democracies based on the principle of self-help and mutual help not profit or charity but service was to be the goal of cooperative enterprise. In cooperatives there was no scope for profit to be appropriated by the owner of capital. On the other hand, the surplus was to be used for the distribution of dividend to members in proportion to participation, for generation of resources for further development and for common use. It was expected that cooperatives could be established in myriad activities of economic life and the cooperative visionaries dreamt of a cooperative commonwealth. These hopes were not been realised and instead of emerging as an alternative system cooperatives remained as islands in capitalism. In order to survive and succeed in the capitalist system, cooperatives perforce have to adopt the principles of management of capitalist enterprise.

Inequality, disregard for social costs and social benefits, instability caused by ups and downs of business cycle and unemployment came to be recognised as the failings of capitalism even as it established its hold on the entire economic system. There were two alternatives – either to mend capitalism or to end it. The idea of welfare state or social democracy emerged in many European countries. The welfare state used the state’s resources to provide comprehensive social securities to citizens from hazards to the earning capacity caused by sickness or accidents, unemployment or old age. John Kenneth Galbraith in his book The Affluent Society drew attention to yet another failing of capitalism, viz, promoting private opulence at the cost of public squalour and made a case for massive state investment in public goods. Keynes and many other economists showed that unemployment, chronic to capitalism was caused by deficiency of demand and advocated that the countervailing power of the state must be used to boost consumption and investment in order to revive economic activity.

Socialism aimed at ending capitalism and replacing it by social ownership of means of production. Marx had predicted that socialist economic system would first come into existence in a country of most advanced capitalism, which would collapse as a consequence of inner contradictions. Socialism did come into existence but not in the most advanced capitalistic country as predicted by Marx. It came into existence in Russia after the October revolution of 1917, which had a backward capitalist economy. After second world war socialism spread to many eastern European countries which came under Russian domination and to China. The socialist economies were managed by central planning. The planners decided what to produce, how much to produce, when to produce, where to produce and for whom to produce. Economists like Ludwig Von Mises and Fredrick Von Hayek had predicted from the very beginning that centrally planned economy would be incapable of taking rational economic decisions and would therefore be unworkable. Moreover, imposition of planners’ decisions on all consumers and producers would be a road to serfdom. It took 70 years for their prophecy to come true. The Soviet Union economy started stagnating and could not withstand competition with capitalism and collapsed in Soviet Union and other eastern European countries. The road to its replacement by capitalist economy has proved to be tortuous and painful. In contrast, the Chinese Communist Party while retaining its hold on political power started from the year 1979 to reform the communist economy and today has virtually dismantled it and replaced it by capitalist economy and succeeded in attaining impressive high rates of growth.

A Possible Alternative

With the collapse of the alternative model, corporate capitalism fully assisted by the international institutions, viz, IMF, World Bank and the WTO and supported by the governments of the affluent countries knows as G7 has started a comprehensive process of globalisation, However, at a time when no governments are in the position to halt or restrain the process of globalisation, different people’s movements have come forward to oppose globalisation. The participants in the movement are a variety of institutions and NGOs which have come together under the auspices of the World Social Forum. The have successfully held demonstrations against the meetings of the G7 countries, WTO and the financial institutions held at various places in the world. The movement has forcefully pointed out that corporal globalisation has subordinated the welfare of the whole population of the developing countries and of ordinary peoples in the developed countries to the advantage of western corporate capitalism. It has promoted global trade at the expense of local economic activity. It has led to environmental degradation and indiscriminate exploitation of natural resources to the detriment of sustainable development. It has fostered authoritarian political state structures to put down popular movements. It has threatened diversity and traditional lore. It has aggressively violated the values of equity, diversity, solidarity, self-management and ecological balance. It has created huge difference in wealth and income and shifted financial resources from productive activities to speculative profit-seeking. The popular movements aimed at fighting all these ills of global capitalism and bettered the lives of the disenfranchised and exploited population around the globe. It stands therefore for economic justice.

But it is not enough for the popular movements to oppose global capitalism. It has to provide an alternative. In this book, the author who has been associated for several years with the popular movement has tried to present a comprehensive and coherent blue print of a participative economy. The logic of participative economy requires the end of the basic institutions of capitalism, viz, (i) private ownership of means of production (ii) allocation of resources for private profit at the cost of the needs of the people, and (iii) hierarchical decision-making without the participation of the disenfranchised working class.

Participative economy builds on an alternative set of institutions. The following are the characteristics of the participative economy as conceived by the author. First there would be social ownership of the productive assets so there would be no class of private proprietors or of capitalist owners. Nor, secondly, would there be a separate class of coordinators, managers or decision-makers. This is because the work organisation in a participative economy would be entirely different. There would be balanced job complexes to replace the present division of labour where the coordinating class performs only the fulfilling and empowering task of decision-making while the working class engaged in the drudgery of debilitating and depressing task of routine work, the day-to-day grind without any access to information or knowledge of the overall goals. Everyone would have his or her share of routine task and decision-making. Thirdly, the reward system would also be entirely different. In the capitalist economy the reward system is based on ownership of property, bargaining power, difference of circumstances or different characteristics of individuals. On the other hand, in the participative economy the reward would be for effort and sacrifice. This is despite the fact that there may be differences in talent or in education or training. Training and educational opportunities would be socially provided and would be available to all. Similarly, healthcare and social amenities like public parks would be free for all, special needs of people like the handicapped would also be taken care. Thus the reward system would aim at justice for all. Fourthly, the participative economy would be self-managed through decisions by workers’ and consumer’s councils helped by cooperative communication and facilitation boards. The decisions would be based on indicative prices reflecting social opportunity costs and benefits. They would be arrived at through a process of successive iteration and approximation to a balance between demand and supply.

The author has given a detailed picture of how the system would function and how consumers and producers could participate cooperatively in planning and coordinating joint endeavours without central planning and without markets. The councils would function at various levels and would take both production and investment decisions. The author has illustrated the working of the system of the participative economy with various work units like a publishing house, a steel plant, or a city planning office. The consumer councils would take decisions not only about the consumer needs of individual families but also of collective consumption needs like airports, roads, fire stations, etc. The producer’s councils would not only do work planning but also take decisions regarding job transfers, overtime work, etc.

The author has tried to meet possible objections to his concept of participative economy. One possible objection is the idea of reward in proportion to effort or sacrifice. Effort and sacrifice are difficult to measure. The author shows how this can be done and at the same time points out that the economist’s concept of marginal productivity is also in practice difficult to measure. He does not agree that the proposed reward system would not provide necessary incentive if allocation duties, responsibilities and rewards are fair as contemplated in participative economy. It would promote a strong sense of social duty and no additional external motivation would be necessary.

The author has claimed that the participative economy would remove the shortcomings of capitalist economy. It would promote equity, diversity, solidarity, mutual concern and empathy. It would eschew the typical tendencies of individualism and egoism leading to taking undue advantages of fellow citizens. It would end the dichotomy between owners and workers, buyers and sellers. It would internalise the external costs like pollution and therefore lead to greater efficiency as measured by social costs and benefits. In a participative economy there would be widespread opportunities to fulfil needs and desires. There would be economic security for all. There would be no monopoly of ownership and coordination, no domination of political and economic elite, no autocratic decision-making by privileged individuals. There will be improved conditions of work, dignity for all and improved quality for life. There will be greater expenditure on public goods and reduced military expenditure; because of economic security, there would be no compulsive need for accumulation.

Michael Albert’s participative economy is indeed an ambitious utopia. But how will it be brought into existence? In the past attempts in that direction have been made but have not been successful. Polish economist Oscar Lange had provided a detailed blueprint of market socialism. Erstwhile Yugoslavia had experimented economic decision-making through workers’ councils. But neither the blueprints nor the experiments have been a practical success.

The coming into existence of participative economy would require a socio-economic revolution to end private ownership; a social psychological revolution for people to accept balanced job systems as well as self-management and socio-organisational revolution to end hierarchical decision-making. Who would bring about these revolutions and where? Perhaps the NGOs who gathered together at the World Social Forum could make a small beginning in their own area of influence. In that endeavour, the book can provide them with a sense of direction. One of the demonstrators at the siege of Genoa in 2001 carried a placard “capitalism should be replaced by something nicer”; the participative economy is that ‘something nicer’. The logic of participative economy rejects the proposition that an economic system expressly working for the promotion of common good is not workable. It shows how this can be accomplished provided revolutionary changes can be brought about to serve as the foundation of the participative economy.

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