Participatory Economics As An Alternative: A Vision for the 21st Century

(This is an updated version of an article that first appeared on ZNet on January 29, 2008. It is updated mainly to include more on strategy, and to be put in the context of the economic crisis)


Margaret Thatcher is credited for coining the phrase, “there is no alternative”, or TINA for short, referring to her assertion that there is no alternative to capitalism and, specifically, its latest form, neoliberalism—meaning that economic activity is better left to the dictates of unrestricted capitalism and the market. And we heard this echoed by Bush and Obama as the financial crises unfolded. Though what she really meant is “there is no better alternative,” or TINBA, because obviously there have been social democratic economies and non-capitalist economies.  Thatcher said this in the 1980's, and if one were to look at the economic state of the world, up until the recent crisis, one might think that she was right.  We are said to live in a “flat world”–one where globalization has made countries, companies, and individuals more interdependent on one another; therefore allowing a greater possibility for countries, companies, and individuals to prosper.  However, even though neoliberalism has wreaked havoc upon the great majority of the world’s population and struggles to expand during the current crisis, resistance and struggle against it grows.  Millions across of the globe have seen and felt its effects—ones that do not mirror prosperity, but rather, misery and despair.  Every time that a country “liberalizes” its economy under the supervision and advice of institutions such as the International Monetary Fund (IMF), World Bank, and World Trade Organization (WTO), or neoliberal rules and regulations are implemented through “free trade agreements,” we see public services outright destroyed, natural resources depleted, and other horrific effects, while the pockets of transnational and multinational corporations get fatter. 

Likewise, the popular movements against neoliberalism are continuously getting stronger. One of the most well known examples of resistance even happened here in the United States, in 1999, during the meeting of the World Trade Organization (WTO) in Seattle; and all across the Global South, in countries from Bolivia to Bangladesh, people’s movements have fought courageously to not only repel neoliberal policies but transcend them. In place of this form of capitalist globalization, activists advocate new international institutions that would be transparent, participatory, and bottom-up, with local, popular, democratic accountability.  As Michael Albert puts it, “The problem is that capitalist globalization seeks to alter international exchange to further benefit the rich and powerful at the expense of the poor and weak.  In contrast, internationalists (anti-capitalist globalization activists) want to alter international exchange to weaken the rich and powerful and empower the weak and poor”.[i][i] Subsequently, the gaps between the rich and the poor are diminished, rather than enlarged.  

However, it is after this point that many activists fighting against neoliberalism fall into trouble because of a lack of vision; what are they for? Put more succinctly, what would they like to see replace capitalism, beyond just a set of values—not only globally but domestically? The average person, someone who is not an activist, tends to associate the neoliberal institutions that activists oppose—IMF, WTO, and Word Bank—correctly, as products of the dynamics of the domestic economy. Therefore, if these institutions are replaced with new international bottom-up, democratic institutions, which serve to merely balance out and regulate corporations and multinationals, would the problem be solved—even though they would be radically different than the current ones? Or would these corporations and multinationals that are left intact by leaving domestic capitalism intact try to exert influence to return to the neoliberal model that is trying to be done away with? Most likely the latter will be true. As Noam Chomsky says, “A corporation is a form of private tyranny. Its directors have a responsibility to increase profit and market share, not to do good works. If they fail that responsibility, they will be removed”.[ii][ii]

Moreover, if opponents of neoliberlaism truly want to put an end to the suffering and inequity, and ever increasing ecologically devastation caused by capitalist globalization, capitalism, in all its forms, must be replaced; and they must propose a vision of an alternative to capitalism. Some look to experiments going on in South America and South Asia, rightfully, as models for what an alternative can be.  It is the search for a 21st century Socialism—one that actually realizes the goal of true human emancipation and ecological balance.  But these social revolutions also lack clarity, as far as making clear what institutions they would like to replace capitalism.  I propose that our answer to TINBA, and to the question of 21st century Socialism, be Participatory Economics.

Participatory Economics?

Participatory economics was first put forth by Michael Albert and Robin Hahnel in Looking Forward: Participatory Economics for the Twenty-first Century, which was for us lay people, and then in The Political Economy of Participatory Economics, which targeted professional economists—both published in 1991.  It is an economic vision that has its roots in libertarian socialist and radical democratic ideals and practices; however, it has sought to fill a void left by “these economic visionaries” that “had failed to provide a coherent model explaining precisely how their alternative to capitalism could work”.[iii][iii] Still drawing from this great and extensive tradition, participatory economics' framework is built around a certain set of values, and from these values, the economic institutions are developed. Though before values and institutions are spelled out, the question of what an economy is must be answered. 

We can define an economy as a set of institutions concerned with production, allocation, and consumption; and within this framework there are identifiable divisions of labor, norms of remuneration, methods of allocation, and means of decision-making.  With that noted, the values ingrained in and promoted by a participatory economy are: solidarity, self-management, equity, diversity, and efficiency. Basically, the values will help guide in determining what institutions we want to fill the necessary roles in the economy, favoring those that produce outcomes that are complimentary to the values.  These values led to the basic institutions of a participatory economy: workers and consumer councils, balanced job complexes (BJCs), remuneration for effort/sacrifice, and participatory planning. Using this methodology when developing an economic vision is crucial. We must begin with determining what an economy is and what institutions currently fill the roles of its functioning, determining what values we aspire to be reproduced in an economy, and then decide what our attitude is to exiting options that we could retain.

Towards Solidarity, Diversity, Equity, Self-management, and Efficiency

To understand the rationale and function behind participatory economics' purpose and institutions, the values must be explained more thoroughly.

The first value is solidarity. At first glimpse it is simple: it is better if people get along with one another rather than violating one another. This is contrary to what capitalism promotes—competition and greed, because it is a zero sum game. In capitalism, one is encouraged and often required to ignore and/or promote human suffering and pain on path to their own advance. In other words, in capitalism, “nice guys finish last,” or even more fitting, “garbage rises!”  Usually, this value is uncontroversial because its basic premise is to promote empathy and sociality, as opposed to hostility and anti-sociality. Even to those who think an economy cannot produce solidarity, they still believe it would be desirable.

The second value is diversity. It is argued that contrary to the popularly held belief that capitalism promotes diversity and a wide range of options, capitalist markets really homogenize options: “They trumpet opportunity but in fact curtail most avenues of satisfaction and development by replacing everything human and caring with only what is most commercial, most profitable, and especially most in accord with the maintenance of domineering power and wealth”.[iv][iv] As one might see, by diversity, we do not merely mean the range of products one can choose to purchase—though capitalism does not adequately fill that function either because it tends to produce false wants, instead of actually reflecting the desires of consumers. However, by diversity, we mean that an economy should allow numerous economic life options for people to pursue without undue economic constraints—what job they really want, what education they really want to pursue, etc.

For example, for three generations, the men on my father's side of the family, who are from Irish decent, have all worked on the railroad.  To be clear, they did not own a railroad company and then pass down ownership generation after generation, or anything of that sort; they were workers, and to narrow down the diversity even more, most of them started as laborers and then became electricians.  Moreover, I know for a fact, working on the railroad is not what all of them wanted to do. In the case of my father, he wanted to be a lawyer.  Therefore, institutions in a participatory economy have an emphasis on finding and respecting diverse channels and solutions to problems, as well as recognizing that life would be boring without diversity of options. Again, this value tends to be uncontroversial.

The third value is equity. Equity entails how much should people get and why? Most will say that having an equitable or fair economy is uncontroversial, but what is fair?  Participatory economics' answer to what is fair, however, does tend to be more controversial, even among leftists.  Economies can have four possible distributive norms: 1) remunerate according to the contribution of each person's physical and human assets, 2) remunerate according to the contributions of each person's human assets only, 3) remunerate according to each person's effort or personal sacrifice, and 4) remunerate according to each person's need.

Historically, economies, especially here in the United States, have rewarded people through norm one.  Norm one argues that people should be rewarded for the contribution that their private capital makes to output because people should get out of an economy what they and their productive/private assets put in. Hahnel puts it:

In other words, if we think of economies as a giant pot of stew, the idea is that individuals contribute to how plentiful and rich the stew will be by their labor and by the nonhuman productive assets they bring to the economy kitchen. If my labor and productive assets make the stew bigger or richer than your labor and assets,… it is only fair that I eat more stew, or richer morsels, than you do.[v][v]


Though this norm would seem to have some initial appeal, it suffers from what Albert and Hahnel call the “Rockefeller's grandson problem.” Subsequently, according to norm one, Rockefeller's grandson should eat an astronomically higher amount of stew than a highly trained, highly productive, hard-working daughter of a janitor would, even if Rockefeller's grandson doesn't work a day in his life. This is unacceptable because it puts people at an economic disadvantage, right from the start, that do not inherit the proper tools or assets, and it rewards those who do.[vi][vi] Clearly, one can see how this is unfair.

Additionally, there is a second line of defense for norm one. It is based on the concept of  “free and independent people,” each with their own property. It is argued that people would refuse to enter a social contract that was not beneficial or harmful to them in any way. Though this scenario would benefit those with a great deal of productive property who could afford to hold out for a better social contract, we have to ask ourselves, “why wouldn't those who have little or no property have a good reason to hold out for a different arrangement that doesn't penalize them for not owning property? And if this is true, then how come those with property get the norm they want, and those without property do not?”[vii][vii]  The fact is that those with property can afford to wait while waiting for agreements to be reached, whereas those without property cannot.  The result is an unfair bargaining situation, in which those with property have more bargaining power.  This also implies that those with more luck, and better talent and genetics can acquire more bargaining power through accruing productive property.  Participatory economics holds that just because someone is born with better tools—the genetic lottery—or that someone makes a certain decision or their work is valued more—luck—they should not be remunerated more.

Norm two says that remuneration should be according to the contributions of each person's human assets only; basically, advocates of norm two find most property income unjustifiable, and in turn, hold that all have the right to the “fruits of their own labor.” This sounds appealing; however, some of the same reasons for rejecting norm one apply to norm two. The stew analogy can be used again, but this time only taking human assets into account: you get back what you put in. If you get less you get ripped off. 

We can use the example of the Boston Celtics great, Larry Bird. Adhering to norm two, Bird would be considered dramatically underpaid and undervalued.  The rationale is as follows: our population—especially in the New England area where I am from—then and now, and the sport of basketball highly value Bird's work. He has contributed an enormous amount to both—an amount that some say can only be matched by a few. Therefore, if we give Bird what he puts in, he should own something the size of Massachusetts or Vermont—something huge.  In contrast, if we take the lifetime performance of Kenny Smith—now a TV sports personality—people would probably say that they enjoyed watching him and acknowledge that he was a clutch three-point shooter, but they will say he was nothing compared to Bird. Here lies the problem.  No matter how much Smith tried, no matter how much he practiced, his performance would never amount to that of Bird; he just didn't have the abilities to, nor did he have the hall of famers Kevin McHale and Robert Parish as teammates.  Therefore, what we put into an economy is a function of tools, doing something of more value, working with people who are more competent, and possessing skill or talent others don't have. As Milton Friedman, the conservative economist, once asked the Left, “Why should we reward people for luck of the genetic lottery?” So, since people do not have control over these circumstances, participatory economics rejects norm two as inequitable.

In a participatory economy, remuneration is for effort and sacrifice, norm three. Effort and sacrifice encompasses length of hours (duration), intensity, onerousness of work, and level of empowerment of the work. This, one could say, means that people should eat from the stew pot according to the sacrifices they made to cook it. According to norm three, the only thing that can justify one able-bodied person eating more or better stew than another is differential sacrifice in useful production. The rationale is that the only thing that people can control is their effort and sacrifice, so that is how they should be rewarded. Norm three is controversial; however, the breaking down of norms one and two show its desirability and level of equity (More on this remuneration norm will be explored later).

The last norm left is norm four: remuneration according to each person's need. However, as Hahnel argues, norm four is “in a different logical category than the other three, and expresses a commendable social value, but a value beyond economic justice.”[viii][viii] Say we did remunerate for “need.” How would that play out in an economy? Would people just take however much they saw fit, leaving others with less than they need? Obviously, advocates of remuneration for need are striving for equity and would not want this to happen. Then, how do you prevent this from happening?  Or even beyond safeguarding against fostering this kind of competition and greed, how do you not waste scarce and finite resources? As stated, this norm is just not compatible with a functioning economy, never mind an equitable one. In a participatory economy, people who are unable to work for whatever reason would be remunerated for need; and just as greater sacrifice should receive greater reward, greater need should receive greater reward.  Subsequently, our norm remains remunerating for effort and sacrifice but tempered by need.  The outcome would effectively give people what they actually need but would be measured otherwise.

Now, we arrive at our fourth value, self-management. This has to do with how decisions are made in an economy. The primary options that exist for decision-making are: 1) Vest most power in a few actors and leave the rest very little say over decisions that affect them; 2) Distribute power more equally, with each actor always having one vote in a majority-rules process; and  3) Vary the way power is distributed depending on the relation of each actor to specific decisions. Sometimes you get more say; sometimes I get more say.  The issue then becomes defining the criteria that determine how much say any of us have in one decision as compared to another.[ix][ix]

The first option, if it is in the political realm, would be characteristic of a dictatorship or oligarchy, and in any case, it would be considered authoritarian. However, it is what we have in much of our economic life. For example, in Soviet Russia, Stalin himself would never have dreamed of demanding that the workers should have to ask permission to go to the bathroom; in capitalism, this is a condition that very often prevails for workers in corporations.  The second option is often called democracy, but this term has little meaning as a norm for decision-making. Should everyone have a say in every aspect of economic life, even if it doesn't affect them? Should workers in one factory have a say in whether the workers of another factory go on strike? Of course not. Subsequently, a participatory economy favors decision-making where each actor in the economy should have input in proportion to the degree they are affected. This falls in line with the third option.

Along with the values already mentioned—solidarity, diversity, equity, and self-management— participatory economics also stresses efficiency. Some people cringe at this word, but more often than not, this is because they associate it with capitalist efficiency, a very scary thing.  Efficiency merely means attaining desirable outcomes without wasting things that we value.  In capitalism, this means maximizing profit while maintaining high productivity and a disempowered workforce, among other things.  Contrarily, in a participatory economy, because the aim is to meet peoples’ needs and develop their potentials, efficiency would look very different.

With the aforementioned values in mind, participatory economics is built on a few centrally defining institutional choices.  First, the options rejected should be discussed for clarification.  Albert says quite succinctly:

Briefly, to judge existing options – private ownership economics, market economics, centrally planned economies, economies with corporate divisions of labor, and economies that reward property or power or even output – all fail to propel the values we now hold dear. These are anti-social economies, authoritarian economies, inequitable economies, un-ecological economies, un-caring economies, and class-divided and class-ruled economies. They are oppressive and unworthy economics. They destroy solidarity, diminish diversity, annihilate equity, and they don’t even comprehend self-management. So we reject capitalist ownership, markets, central planning, corporate divisions of labor, and remuneration for output or power.”[x]

In place of capitalist ownership, there should be public/social property relations where all citizens own each workplace and resource in equal part.  Next, people would be organized into democratic workers and consumer councils, or assemblies. Within these councils the decision-making would adhere to the value that each person should have input in proportion to the degree of how it affects them, resulting in each worker and consumer having the same overall decision-making rights as anyone else. As discussed, decision-making could be done by majority rule, two-thirds, consensus, or other possibilities. These councils would become the “seat of decision-making power” and they would exist at various levels, including individual workers and consumers, subunits such as work groups and work teams, and supra units such as divisions and workplaces and whole industries, as well as neighborhoods, counties, etc. Such councils and assemblies have historically been the organizational form taken up by people engaging in popular power.

In place of corporate divisions of labor, balanced job complexes (BJCs) would be introduced. This institutional feature is one of the most important aspects of a participatory economy. It serves to ensure that the differentiation between each worker's effort rating would be relatively small, and is in place to prevent class divisions from arising.   Participatory economics holds that class divisions are not solely the result of property relations, as is traditionally held by many on the Left. Rather, class divisions can arise from a group's position in an economy—other than owning productive property—that give it interests collectively different and contrary to other classes, and that its position gives it potential to “rule economic life.” This new class distinction arises from the division of labor, giving a group the relative monopoly of empowering work, knowledge, and skills, and as a result have considerable say over their own jobs and the jobs of workers below them. 

Hence, participatory economics recognizes a group between labor and capital called the coordinator class—usually 15 to 25 percent of the population. These are the wage and/or salaried high-level managers, engineers, doctors, lawyers, and other professionals.  Their monopoly of empowering work, knowledge, skills, decision-making power, and their shared interests—all institutionalized by the corporate division of labor wherein the bulk of empowering tasks are grouped together to create their specific jobs—grants them a position in the economy that gives them power and makes them capable of becoming a ruling class. On the other hand, workers can be understood as not only those who work for a wage, but rather, actors within an economy that do mostly rote, onerous, and disempowering work. Balancing jobs institutionally rearranges work tasks and responsibilities balanced for comparable quality of life and empowerment effects.

This will be done within and across workplaces. If work is only balanced in individual workplaces, those workers in industries with more pleasant and empowering conditions will have an advantage. Think of a coal mine versus an air-conditioned school building. Again, the appropriate level council will deal with the arranging of the tasks. There will most likely be “Job Complex Committees” both within each workplace and the economy as a whole. The basic idea is simple: “people should rotate in some reasonable time period through a sequence of tasks for which they are adequately trained so that no one enjoys consistent advantages over others.”[x][xi]  However, having someone who sweeps floors spend one day a week in an office, and having a manager spend one day sweeping floors, will not rectify the inequalities in responsibilities. That is why each balanced job will include a mix of tasks as a worker's primary work in day-to-day life.

Remuneration for property, output or power would be replaced by remuneration for effort and sacrifice.  Workers will receive an amount based on how hard they worked (intensity), how long they worked (duration), and how unpleasant their work is (onerousness). The rationale for this has already been stated. However, the question does arise concerning who decides how hard someone works, etc?  Workers councils will decide this in the context of the broad economic setting established by other institutions as well. These councils would then decide on effort ratings for each worker. Since balanced jobs are required, the onerousness and empowerment of work will be relatively equal; but what about measuring intensity? Like all other workplace decisions, the workers council would decide the approach to this, but one way would be to measure output. If a person normally produces X amount of oranges and now is producing less, then obviously they are not working as hard. The degree to which this affects a person's effort rating would be left up to the workers council. Then there is duration, which can be easily measured by hours worked. Most likely this is where most income differentials would occur—some people will decide that they value more leisure time over more consumption power and work less hours, or vice versa; however; differentials would be minimal and not nearly enough to lead to gross inequality.

In place of central planning and markets, the final participatory economics institution regards allocation and is called participatory planning. Participatory planning is a system in which “worker and consumer councils propose their work activities and their consumption preferences in light of accurate knowledge of local and global implications and true valuations of the full social benefits and costs of their choices.”[xi][xii] In addition to worker and consumer councils, a key feature participatory planning is the Iteration Facilitation Boards (IFBs), which assist allocation by doing data handling. The workers who staff these, of course, will do this as part of their BJC.  The process begins when the IFBs announce indicative prices—the calculations are based on the experience and information from the prior year—for all goods, resources, categories of labor, and capital gains serving to give the workers and consumer councils an estimation of the true social benefits and opportunity costs of each.  With these prices in mind, individuals make consumption requests for their own private goods, and higher-level federations (“higher” in the sense that councils are federated to encompass a larger geographical area) would make proposals for collective consumption, as well as the approved requests for private goods. Keep in mind, in order for consumption requests to be approved, one cannot request more than their effort rating warrants. On the other hand, workers councils propose production plans based on inputs they want and the outputs they are willing to make available, providing both qualitative and quantitative information. The same goes for regional and industry federations where appropriate.   During the first iteration (or round), supply and demand is calculated by the IFBs, and indicative prices are adjusted based on the new data. With the new prices and full qualitative information, proposals are revised by workers and consumer councils and federations, and then are resubmitted. The back and forth iteration process continues until, in the end, there is a plan for social production and consumption that every person in society affected has had an informed say, and everyone has been remunerated justly for their efforts[xii][xiii]; that is Participatory Economics.

What About the Environment?

Notice that nowhere in my description of participatory economics was there a mention of growth or profit as a value or driving force.  The institutions outlined are meant to put the levers of economic decision-making in the hands of those affected by those decisions—self-management—at the same time as institutionalizing desirable values such as solidarity, diversity, equity, and efficiency.  Since growth and profit are not built-in driving forces of the economy, a participatory economy gives people the tools to interact with the environment in the most sustainable way possible. The participatory planning procedure, especially, allows for this:

The participatory planning procedure protects the environment in the following way. Federations of all those affected by a particular kind of pollutant are empowered in the participatory planning process to limit emissions to levels they deem desirable. A major liability of market economies is that because pollution adversely affects those who are "external" to the market transaction, market economies permit much more pollution than is efficient. The participatory planning procedure, on the other hand, guarantees that pollution will never be permitted unless those adversely affected feel that the positive effects of permitting an activity that generates pollution as a byproduct outweigh the negative effects of the pollution on themselves and the environment. Moreover, the participatory planning procedure generates reliable quantitative estimates of the costs of pollution and the benefits of environmental protection through the same procedures that it generates reliable estimates of the opportunity costs of using scarce resources and the social costs of producing different goods and services.[xiv]

Even with mandatory profit and growth taken out of the equation, we, as a people, will need to have the mindset and will to make use of our new economic tools in a way that reaches ecological balance.  There is nothing automatic about it; however, a participatory economy offers us the greatest opportunity to do so.  Luckily, it seems that if the great majority of the world’s population had control over the economy—which they do not currently—they would strive towards these ends.

Now, after presenting participatory economics as an alternative economic system, if we hear someone say TINA, or TINBA, and they're crying, then one might take what they have to say to heart.  It means they have looked over other options. It means they’ve seen the economic crisis and are hopeless. But it means that they really care.  If they are happy and smiling when they say it, then you know that they are trying to trample and deny hope, and make people stop trying to change the current system—neoliberal capitalism; or it could just mean that they know of no alternatives—something that is quite possible with our capitalist education system.  However, either way, TINBA is a lie.  People know this and they are acting out against it everyday, all over the world.  Hopefully, participatory economics can provide the vision needed to succeed.

The basic argument so far has been that the concept of TINA is wrong, and that there is a better alternative to neoliberal capitalism; and participatory economics has been proposed as this alternative. A participatory economy would value and foster solidarity, self-management, equity, diversity, efficiency, and ecological balance, as opposed to the competition, authoritarianism, inequality, homogeneity, and inefficiency that we have in our current system. However, there are important points that should be made concerning participatory economics.  We must remember that even though it will inevitably affect other spheres of life, it is only an economic alternative.  Replacing capitalism with a participatory economy would no doubt be an economic revolution, but the revolutions in how we handle other relations such as kinship and polity will also be needed—hence resulting in an entire social revolution and hopefully international social revolution. Merely doing away with capitalism will not end the oppressions stemming from other spheres of life.  Moreover, the basis of all of these revolutions is to change the power relations in each sphere of life to achieve full classlessness and liberation.  This idea of changing power relations in all aspects of life and obtaining full liberation—essentially eliminating hierarchies of rule— as well as how we might strive to get there, are what I want to discuss from this point on.[xiii][xv]

Human Nature