Participatory Economy – An Alternative to the Always-Crisis

Fabian Scheidler: Welcome to Kontext TV. In the wake of the financial and economic crisis in the US and Europe as well as the social protests around the world a basic critique of capitalism and a discussion about alternatives has gained again some form of attention

David Goessmann: At the same time a lot of people in Europe and in the US are dissatisfied with the economic system. According to polls 80 per cent of Germans want a different economic system. 40 per cent of the population in the United States has a negative attitude toward capitalism. In a Pew Research Center poll a majority of young Americans prefered socialism over market economy.

Fabian Scheidler: In this broadcast we want to talk about alternatives. Our guest is US writer, activist and economist Michael Albert. More than 20 years ago he already outlined an alternative economic system which he calls Participatory Economy or Parecon. Recently he founded the International Organization for a Participatory Society. It should be a global network for movements, activists and dissidents with national chapters around the world, also in Europe.

David Goessmann: Michael Albert is Co-founder of the alternative publishing House South End Press and ZNet, one of the most renowned global platforms for left critique, social change and activism, where dissidents like Noam Chomsky, Arundhati Roy, John Pilger, Naomi Klein or Tariq Ali are regularly publishing articles and essays. Albert is author of many books, among them “Realizing Hope: Life Beyond Capitalism”.

David Goessmann: You have outlined an alternative economic system not only to capitalism but also to a centrally planned socialism and bio-regionalism. You call it a participatory economy. Explain exactly what you mean by that.

Michael Albert: It means to be an alternative to capitalism which is just the system we live on in the United States, you live onto in Germany. It means to be an alternative to the system called central-planned economy, it is typically called centrally planned socialist economy, I call it centrally planned economy, we will come to that in a second, what was in East Germany, Soviet Union and so on. It is also an alternative to that. And, as you say, it is also an alternative to another idea as it existed, bio-regionalism, a concept that a region should be self-sufficient and should function sort of autonomously from one another. Okay, so participatory economics basically is not a blueprint. It says, here are some key institutional commitments at the heart of an economy which is, if we have these then we will have an economy which is desirable. We all have an economy which does not have classes. It does not have one set of people dominating, ruling  aggrandising  themselves of the expenses of another set of people. Moreover, it will help people controlling their own life, manage themselves. It will have diversity of outcomes, it will have solidarity between people and otherwise it won’t have as markets do for example a context in which to get ahead you have to trample on others. Rather it will have a context in which there is mutual aid. So, what kind of institutions accomplishes these kinds of ends? Equitable distribution, so it is fair. Participatory economics advocates just a few simple institutions. One, worker and consumer assemblies or councils. In some places you would call it council, I call it. They are self-managing. That just means that in the workplace, for example, the workers which is everybody in the workplace, constitute a council or an assembly of the workplace and they are the decision-making body. And they make decisions in a manner that is organized by the principle of self-management. And the principle means, I should have a say decisions in proportion to how I am effected by them. And so should everybody else. So there is not somebody who has way disproportionate to say and other people have less say. So that is one institution. We can talk more about if you want. Second institution has to do with income distribution. Society and economy produces a lot of stuff. Think of this as a giant pie. When we talk about the income distribution we are talking about which slice of the pie you get, maybe the quality of the slice. So it is the amount and the quality. Your share of the social output. And there are lots of norms that you could have for that. You could say people should get a slice that is proportionate to the amount of productive assets, of means of production that they own. So in that case Bill Gates is worth more say than the population of Norway that I do not know, but it is probably close to true, and more than the population of few countries in Central America. That is why I do not like that option. These are values. It is not like two and two is four. It is not true or false. You either like it or you do not like it. I do not like it. It is not equitable, it is not fair, it is not just, it is not humane. Another possible norm that you could have is that people get the income based on the power: I am more powerful and I can take more, I get more. It is a bargaining process, so your power determines your income. So that is actually operative in market systems. That is quite typical in Germany, say, and in the United States. Both the property and the power norm come into play. Another norm which people think is at play, which I do not like anyway but a lot of socialists like it, a lot of market socialists, socially-planned socialists like, it says that you get back in proportion to the amount that you contribute. So if I produce by my efforts, by my labor a certain amount of that social pie I should get back essentially the equivalent amount. Not same stuff. Maybe I produce only bicycles then I do not get back only bicycles, but I get back an amount that is comparable in value to the amount I produce. This means that Michael Jordan was under paid when he was earning 20, 30 mio dollars a year, because the value of his product way more. Leftist do not want to hear this, but the value of his product in terms of how much people wanted to see Michael Jordan play basketball was way more than 20 mio dollars. Who else got it? The people with property. The owners of Nike, the owners of the basketball team, TV network. Lots of owners got it, people who had more power than him. He did not have enough power to take a lot. But if you paid him according to output he would have gotten even more. And I do not like that, I do not think people should on top of being lucky enough to be born with some incredible talent: Frank Sinatra’s voice, Michael Jordan´s athletic powers, Chomsky’s Brain, whatever. To be lucky enough to be born with these attributes, showered with wealth on top of this makes no sense to me. You should not get an award for having won in the genetic lottery. So, if you are not going enumerate for power, and you are not going to enumerate for output, and you are not going to enumerate property, what are you going to enumerate for? Well, the second institutional commitment of participatory economics is to enumerate for how long you work, for how hard you work, and for the intensity of your work, so how hard you work. So it is duration and intensity and then the onerous conditions. So in other words if I work longer I get more, if I work harder I get more, if I work under worse conditions I get more. As long as I am producing something valuable. I cannot produce junk and get enumerated for it. I cannot be the Goldie for the German national soccer team and get enumerated for it because it is worthless, so I cannot do that. But I can do something that I can do and get enumerated for how long I do it, how hard I do it and the conditions. That is the second institutional commitment. Third institutional commitment is about balanced job complexes. This one gets slightly more complicated but not much. In contemporary economies like Germany and the United States there is the owning class. Occupy movement to say the 1 %, it is actually like 2 % I think, who basically own the productive assets of society and who are incredibly powerful and incredibly wealthy. And then there are working people who have no say, have no power, have no circumstances that give them an ability to take much of income. But in between those two there is another group. And that other group is call the coordinator class. And that other group does have something. The owners have a monopoly on property. The coordinator class has a monopoly of empowering tasks and positions in an economy, so lawyers and doctors and engineers, various other actors, accountants and so on, high level managers who have the empowering work and the power that comes with the empowering work which gives them the ability to take from that social product that pie a lot of income and to have a lot of say about the direction of the economy. That class in between labor and capital, the coordinator class can become the new ruling class. That is the system called centrally-planned socialism and market socialism. Does away with owners, does away with capitalists, but it leaves that 20 % and that is what it is, roughly 20 % in charge. So, participatory socialism wants that wants classlessness. But it not only wants to get rid of private ownership of all the workplace and all the resources and everything else that are in the hands of 2 %. But it wants also to get rid of 20 % monopolizing all the empowering work. And there is only one solution. And that is get rid of it. You cannot have 20 % monopolizing all the empowering work. This is not complicated. So that means you must distribute it among the population. So you must have something which we call balanced job complexes, which simply means that everybody in the economy who is working does a mix of responsibilities and tasks and activities. And the mix is such that each person has comparable empowering work. So you no longer have somebody who is doing only empowering tasks. All get supported equally. You have still people who do surgery and there are still people who do calculations and etc. But they also do dis-empowering tasks. And they do a mix. And the mix is such for each person. We all from our work are comparably empowered. So that means we are all going to participate rather than some of us being exhausted, dead, having no information, no knowledge, nothing to bring to the table and others doing all the deciding. So that is balanced job complexes. Finally, get rid of markets and central planning. And the reason why you have to get rid of those without going to long is that their structures and their implications that is built into the dynamics of markets and central planning are working precisely the way they are supposed to work. They are not corrupted, not taken over by a bad person but doing what they are structurally inclined to do. They are horrifically destructive. They destroy self-management, they destroy justice, they destroy equity and so on and so forth. They destroy all these values that we are inspired to. So participatory economics comes up with something like participatory planning. The idea is that the workers and consumers councils cooperatively negotiating they engage in a process with each other that arrives at inputs and outputs. Central planning arrives at inputs and outputs by way of command, reaction, command, obedience. Markets arrive at it by the way of competition that is very screwed to the powerful. Participatory planning arrives at it, the final results, what is going to get out of the economy, what is produced here what is consumed there by a way of negotiation among the actors. It is consistent with self-management, it is consistent with the other institutions. So that is it: Just workers and consumers self-managing councils, equitable enumeration for the ratio of intensity and onerousness of socially valued labor, balanced job complexes and participatory planning. Beyond that everything else varies from place to place, from time to time and country to country. Even the implementation of those four will take on various different attributes but the basics of those four I think will be the same in participatory economy. And this is what will allow and indeed propel that economy of being classless and to being equitable and treating people like people instead of means to the end of the empowerment and the enrichment of the few. So that is participatory economics as an alternative.


David Goessmann: We see at the moment the dysfunctionalities of capitalism. Couldn’t it be a good chance for implementing a participatory economic system as an alternative?


Michael Albert: One thing that always strikes me as strange: We are told that these current epics these last few years since the bubble  – and so on and with the recessions and maybe the depression and in Europe, you know all kinds of mess that makes it evident that capitalism does not work. Well, it is certainly true that it makes evident that capitalism does not work in a moment of its discombobulation. But nothing works when it is discombobulated. What is really critical about capitalism is that it is always in crisis. The difference between this crisis and the always-crisis is that this crisis is affecting the powerful and the rich also, which is why it is talked about and publicly discussed, why there has to be an agenda to deal with it. Before this mess, right, there were still, I don´t know, 10 million people a year dying of preventable death around the world, probably more than a hundred million dying of preventable disease and of starvation and so on. That is a crisis, isn´t that a crisis? Am I missing something some place? No it is not a crisis for mainstream media. Because it is the others who are dying. That is not a crisis. The fact that people work with no dignity and no control over their life, that is not a crisis. Because me, journalist extraordinaire, I have control over my life. Right and I do not pay attention to the plight of those people. So, when this current crisis comes along and it starts to make inroads against my comfort, my meaning the elites, it becomes a crisis. So that is the first thing to notice. That, what you say is absolutely true, the current situation makes it even worse and therefore breaks the normal mode and opens people’s eyes, it is all true. But there is something strange about it also. People who live in the inner cities in the United States are always in crisis. People who live under the poverty line live always in crisis, right? So it does not require sort of a disruption of the system, which is what we have now, to create their pain. Their pain is the normal order of business. Okay that said, it is true that what is going on now creates a context in which a great many people are thinking in a way that they have not before, well, maybe we need an alternative. Maybe we need something else. Maybe we need to get on about differently. So there are two ways of looking at the current crisis. One way is to say, how do we get out of it and get back to a situation where the elites, the constituencies of people who have the wealth and the power are in the same place they were before or even better off. That is the way of getting out of the current crisis that is being followed by governments who represent those elites. That is what is going on throughout Europe and the United States. There a slight arguments about it. (…) But now there is another way to come with the crisis and to say, wait a minute, your question, can we get out of this crisis in a way which is not about getting back to the way we were before but is about getting forward to a situation in which we have real equity and we have real justice? In which those who have for so long gotten the short end of the stick get a fair deal. Can we reverse the situation can we reduce the disparities, or even eliminate the disparities and have something equitable. So that is a different way of approaching the crisis. And the more people think about it that way the more people think about not only dissenting, whether it is in the streets of Madrid or Berlin or in Wisconsin, New York, not only being dissenting, not only being dissident, but maybe trying to conceive where do we go, what changes do we require, what demands can we make, what structures can we build to push through a whole new society. And that is obviously where my inclinations are.


David Goessmann: In a certainly limited form the principles of a participatory economy already exist in our societies. We have cooperatives, worker owned and worker managed facilities in Latin America, Europe and also the US. There is Mondrogan in Spain. Which experiences were made there?

Michael Albert: One of the problems is suppose you create an institution, so it might be a small publishing house it might be a big institution let’s say it is an auto plant and the owners who were there before leave or it is done from scratch on. So in Argentina that happened in many many work places. Basically the economy goes down, the owners decide that they are going to get out. When they go interestingly enough the coordinator class, the engineers and the managers they go also. Because they think, oh this is going to fall apart. So they leave also. So now the workers are left and they want to keep their jobs. So they take over the work place and that happened all over Argentina. Not in all of it but in many many firms, hundreds. In Argentina, and or it could happen elsewhere, the same outcome but different roots, it could happen by people just getting together and forming a workers club. Or by workers perhaps buying a work place and putting it under the control of the whole work force. So it is a good thing and it is moving in a kind of direction, I think you are right, that is participatory or pareconish, let’s call it, but there are dangers. So for instance, you can do that and you can keep the old division of labor. And in keeping the old division of labor you can wind up with something that is, that is not capitalist in a way it used to be because the owners were gone. But is horrible in the way that East Germany was, or the Soviet Union was. So in other words you can set up institutions that do not have owners but they do have 20 per cent ruling over 80 per cent. And in fact it is hard to avoid. If you are operating within a market system, if you are dealing with banks, if you are dealing with all kinds of institutions and cultural assumptions in a society, which take for granted that there will be a few leaders, that there will be some people who are responsible and other people who are obedient, that there will be huge disparities in income, and so on and so forth. So, if you think of something like a non-profit, the Ford foundation or some non-profit institution. It is not owned, it is not privately owned, but it can look marginally different from a privately owned institution. And that is because it retains that. So, my answer is yes, I think that the existence of a huge number of co-ops particularly in the United States, actually there is a huge number in the United States, a large number of co-ops, a large number of non-profits, a large number of institutions that are attempting to be alternative in some way or another, is a wonderful thing. But it becomes powerful if they do not operate only independently but have some degree of unity, and if the unity comes from an understanding of what they are trying to achieve. And what they are trying to achieve has to be real classlessness, not just the elevation of the 20 percent. Once that understanding is in place, then you really have something. In Argentina I was in a glass factory, visiting. And I am talking to some of the people and I ask who is doing the finances now, because in the glass factory the owners left, the engineers left, the accountants left, the 20 per cent left, it was not just the owners who left but it was the 20 percent of the coordinator class that had left and what you had, what remained was the people who are doing the work labor. And it was about 80 per cent of the work force with very very little education and with very little confidence and with very little knowledge of the characteristics of the firm. And yet they had to keep it going. Well, they did keep it going. And in fact they made it even more successful than before. And so I asked, but how are you doing the books, how are you doing the accounting, how are you doing that stuff and they pointed to this women and said, she is doing it. It was not that big a firm but it was not tiny but, she was doing it. So, I said to her so what was your prior job? And she said: Well I was working furnace and she showed me the furnace and she was working at this furnace in front of this open fire all day long. I couldn’t stand it ten minutes. So it was an incredibly horrible kind of labor to be doing all day long. And certainly a job where you are not able to have a thought, or to have a bit of energy at the end of the day. Anyways, she became the person who is going to do the books. I knew she probably did not have a lot of education. So I said: what was the hardest thing to learn? And she said … she did not want to answer, she was hemming and hauling, she was embarrassed a little bit, but I kept pushing and she still did not want to answer and so I said, “Well, was it learning how to do the accounting, tasks, was it learning accounting”? She said, “No”. And I said, “Was it learning the computer and the software?” She said “No”. I said, “Well was it learning how to interact with the other people who are make decisions?” She said, “No”. I said, “Well I do not get it, what was the hardest thing?” She said, “First I had to learn to read”. So, the idea that people cannot have…, you know, working people are incapable of doing the empowered tasks, the tasks that involve concepts , that involve thinking and that involve engaging with others and so on and so forth, and working people cannot do that and all they can do is simple labor is totally nonsense, it is totally nonsense. It is just as much nonsense as it was nonsense 50 years ago, 60 years ago to say women could not do that kind of labor. Women could not be doctors, women could not … That is what everybody thought, it was the case. That was nonsense, so is it nonsense that workers cannot do other work. Okay, so here you have a work place in which that nonsense is dealt with to a certain degree. But if you look closely you discover, wait, there is a problem. She is the new accountant. In other words, there is somebody working at that furnace where she was working, doing the same job she was doing before. And now she is the account. And for a while she is going to be a wonderful and humane person. But over time the fact that she is not doing any onerous work and that she is doing this more relaxed labor in an environment that is more comfortable, where the gap between everyone else and her in terms of the knowledge she has over the disposal in the democratic assembly means she is going to have more and more say and they are going to have less and less say, and slowly but surely she is going to get tired to deal with them because she knows everything and along with the others who are in those positions. And slowly but surely the position creates a new person. She is not genetically any different than she was, but she is … It is like getting a job as a prison guard. The nicest person in the world gets a job as a prison guard and two years later that person is probably a different person because of all the pressure and because of all the constrains, and because of how you have to behave, and so on and so forth. It is just unavoidable. So, same thing here. So the point of this story is that when we take over a work place or when we start a work place from scratch or we are trying to create something that will be exemplary and something that can provide a model and something that can even melt into a  better future, we have to not only get rid of ownership, but we have to get rid of that division of labor. Because that will corrupt us. And it will undo everything and the same thing is true for markets.  So we have to deal with those self- consciously and being aware of it. We have to just offset the ills rather than celebrating them. Another quick story: On that same trip to Argentina I am sitting in a room with about fifty representatives of these factories around Argentina. And they want to talk about participatory economics, that is what it is been called for and if you are not familiar with that lets have some reports about what you are doing and where you are. So we start to go along and we start with the reports. And at first everybody is very lively and upbeat because they meet people across whole Argentina who are doing thinks like they are doing, occupying a factory, trying to create something more just and humane. But after a while it starts to get pretty depressed. And then people start crying. And the reason was because people were very honest. It was a context in which people were with like-minded people and in which they could be honest. And they started telling the truth. A man who spoke put it this ways, he said, “You know, I never believed that I would say anything like this, but I am afraid, maybe Margaret Thatcher was right. The British Prime Minister who said there is no alternative. We took over the work place, we equalized the wages, we instituted a democratic assembly to make decisions, we were incredibly energetic and exited, we made it work. But now two years later all the old crap seems to be coming back. It is beginning to feel the way it felt before. None of any owners but the alienation and differences and hostility and class kind of dynamics are coming back. And it just seems to be built into who we are. So after a while then I talked about balanced job complexes and I talked about markets and said, “Look, what I think happened here is that not human nature is overcoming your desires. Rather what is overcoming your desires is that you hung on with an old institution, the old corporate division of labor. And you hung on with markets and those two old institutions are swamping your operations and are undoing what you accomplished. And it does not say that it is impossible, it just says that if you want to create a new work place, if you want to create a new kind of productive environment which is classless you have to get rid of those old institutions or pressures. And you have to create an alternative to that, too.” I think that it is very, very good that all kinds of experiments are being done from co-ops to participatory budgeting, a kind of tiny aspect of participatory planning, also other things. But to unite them with a clear coherent understanding of what the alternative that they are moving toward is so that they can keep moving toward it and that they can come beyond all the obstacles that come along their way is a crucial ingredient to being sustainable when they are going forward.

David Goessmann: This was Kontext TV with Michael Albert. Thanks for watching and listening. You can get more information on Kontext on www.kontext-tv.de. My name is David Goessman with Fabian Scheidler.



  1. David Dobe March 16, 2014 3:32 pm 

    James, I take all your points but am still left with doubts about the mechanism by which human creativity can find full and free expression in a new system based solely, on planning.
    I come at this from the perspective of an architect who has spent much of a long life theorising a system for building eco-cities that privileges small self governing community formation. There is an inherent problem for the planner of cities if the aim is to construct an infrastructure capable of allowing fully participating citizens, in all future generations, to have maximum freedom to decide how they should live in association with their neighbours.
    What it comes down to is the planner, to some extent, is forced to play God. Say the planner is an atheist but believes the traditional nuclear family is always going to be normative for free people. Is such a planner going to be able to rise above his/her prejudices and allow for communities in which the majority are devotees of a religion, or several religions, each demanding a dedicated place of worship? Is such a planner going to provide flexibility for communities that are, perhaps matriarchies, living in large all female households each member of which is allowed a roster of male lovers living in their own separate quarters but visiting at night as and when invited? And the answer to this question is not satisfied by the dictum: all planning should be participatory. Full participation by existing people may produce a perfect environment for those participating but are they any better equipped to prophesy the needs and desires of future generations as yet unborn, than one or two professional planners with their own prejudices but strong imaginations and unusual degrees of tolerance for ways of living unsympathetic to them personally?

    • avatar
      James Wilson March 17, 2014 9:49 am 

      Not sure how to answer really David. I can give another quote from the Parecon quote regarding innovation within the workplace- an hypothetical example of what might happen. Not sure if that would help.

      I mean if full participation by “existing people” produces a “perfect environment for those participating” then I guess the general consensus would be that things are pretty “perfect “, so therefore a pretty positive environment in which to bring new generations of people into the world. And one would only know after future generations are born and are able to articulate their concerns whether they are happy or not about the decisions made by their forebears. And no, everyone wouldn’t necessarily be better at “prophesy” than two professional planners. But so what, no-one would be.What you need are democratic, self-managed decision making processes that involve or enable full involvement form all, so no-one is left out in the cold when ideas are put forth within communities or workplaces regarding living arrangements, workplace improvements or whatever. Then you need ideas, innovations to be assessed regarding the social costs and benefits, for consumers and workers, within their particular councils or federations, to decide which are the most beneficial or appropriate, via the planning process, within which, everyone or just those most effected in the relevant councils, is involved. I don’t see a problem here. I do see you perhaps trying to project or “prophesy” some perfect type of system that goes far beyond the minimalist/maximalist institutional structure of a Parecon.

      Below is the link to the hypothetical planning process regarding innovation within a workplace. I’ve left of the 1st -7th iterations. You can find it here,http://zcomm.org/life-after-capitalism/ then scroll down the contents menu to WORKING, click on Decision making at Northstart and scroll down to Northstart Innovation and read from there. Below is just the first bit.

      Northstart Innovations

      Before following Northstart’s planning further, however, we should note one very important aspect of settling on plant organization and technology. Each worker decides the alterations in plant operations she or he wants to request and registers related preferences for investments. The ensuing changes might, for example, diminish the output-to-input ratio to improve the quality of work life, or might change how much work she or he has to do given the demand for books. Whatever changes Northstart workers finally decide they want, they also have to get an okay from the system as a whole if they need additional inputs from outside sources.

      The important thing to note is that if Northstart workers request and receive significant workplace changes that dramatically improve the quality of work life at Northstart, this benefit will eventually be shared with other workers. How much work anyone does away from his or her main workplace depends on differences between the quality of work at that main workplace and society’s average. Thus, when innovations significantly decrease how burdensome work is at one plant, the result, after job balancing committees have time to assess the change, will likely be that each employee spends fewer hours at that plant and more hours elsewhere. Innovations that make Northstart a relatively more pleasurable place to work will change the time Northstart workers work there and elsewhere. So because of the principle that all workers enjoy comparable overall job responsibilities, gains accruing from Northstart investments manifest themselves in slightly improved conditions for all workers rather than in dramatically improved conditions only for Northstart employees. Therefore, workers have little reason to urge innovations in their own plants at the expense of innovations that could be enacted elsewhere with a more dramatic effect on overall quality of work life.

      Traditional economists will argue that this will diminish workers’ incentives to improve the quality of work life, since workers will not monopolize the gains they engineer. But this view conveniently ignores that in competitive models of capitalism, technological gains are assumed to spread instantaneously to all producers in an industry. If this were not assumed, it could not be claimed that these models yield efficient results. But when this is assumed, incentives to innovate diminish since benefits spread first to other firms in the industry, and later through lower costs of production and lower price for the industry’s output, to all producers and consumers. Of course, in real capitalism, as opposed to economists’ models, improvements do not spread and the benefits of innovation accrue almost exclusively to a small number of owners—certainly not to workers—and there are consequent inefficiencies. In any case, since in an equitable economy technological improvements must rebound to everyone’s benefit, we consider it a virtue that in a parecon innovations in thousands of plants change the overall societal average workload and work quality norms, and that those changes in turn rebound equally to everyone’s benefit.

      So what does this lead to in practice? If Larry works at Northstart and a proposal for a technological change there and throughout publishing would improve the average job complex for society by one hundredth of a percent, while a proposal for the steel industry (requiring the same investment expenditure) would improve the average by two hundredths of a percent, Larry will eventually benefit more from the steel innovation than from the publishing change. Likewise, Northstart workers have a greater long-term interest in an innovation in coal mining that greatly improves that industry’s quality of work than in an innovation in publishing that would require an equivalent investment but improve the quality of publishing work to a lesser degree.

      Larry’s tastes are therefore added to those of all other publishing workers and embodied in the evaluation of possible publishing industry alterations before any comparison with other industry proposals occurs. If Larry’s views differ dramatically from the collective result, Larry will not necessarily like the final outcome. But the choice will reflect a fair balance of the tastes of all workers in both industries. Larry should vote as he likes, and if he does so, and all other workers do so as well, the collective implications noted earlier will apply. The war of each against all for who will benefit from innovations gives way to a community of shared interests. Competition is replaced by cooperation. Shortening work hours to achieve the same output anywhere eventually benefits all. Improving work life anywhere eventually benefits all. An equitable economy requires all this, but to increase individual incentives job balancing committees could calibrate the speed of adjustments to provide temporary “material incentives” to innovators. Or, alternatively, and more positively in my view, teams could be assigned whose job was to develop potential innovations. Innovations would be the “output” by which their social usefulness would be judged. The equity implications of this way to stimulate innovation—essentially assigning more resources to innovation and holding those who use them socially accountable—has desirable human repercussions. In any event, in deciding on innovations, each person chooses between proposals as they wish, but everyone has an incentive to choose what is best for the whole economy because that is what is ultimately best for all. Ironically, the claim made for markets—that pursuit of individual interests coincides with the social interest—actually holds for participatory planning. Pursuit of self-fulfillment under equitable arrangements in a socially conscious way really does yield socially optimal outcomes.

      Parecon’s solidarity does not derive from a presumed biological transformation of our genetic characteristics, but from the concrete implications of its social relationships. Results promoting solidarity, equity, diversity, and collective self-management are not due to a postulated suddenly beatific human nature, but arise from the structure and incentives of participatory planning. Besides linking individual and collective well being, parecon promotes sociability and the qualitative side of life denigrated by capitalism.

    • avatar
      Michael Albert March 17, 2014 2:30 pm 

      David – what is the new system based solely on planning? It certainly isn’t parecon…In fact, there is no such thing…because any economic system has various institutions not just an allocation institution – and they operate as a whole.

      That said, the word “planning” connotes a group of planners, typically quite exalted, making decisions for everyone else, who ofr the most part live very different lives in different conditions. That is subject to many criticisms and why that type planning is not part of parecon.

      If you call what does on in parecon to determine allocation participatory planning, perhaps it conjures that image for you. Sorry. What if you call it cooperative negotiation?

      You pose a kind of alternative – everyone cooperatively engaging in a negotation of inputs and ouputs, and people who have spent lots of time developing insights bearing on future prospects doing so. Basically true and worthy expert, versus true and worthy affected party. But why do you think the expert’s insights cannot inform the cooperative negotation by the people truly affected?

      Take something really simple – should we paint the wall with lead paint, or something, that, say, costs a bit more. At first thought about it, let’s say 908% of the workforce in the plant making the decision thinks, they look the same, opt for cheaper. But then David stands and says, hold on, and explains the effects of lead paint. Now the result presumably reverses, or maybe people aren’t totally sure about Dave’s expertise and they pause to investigate further, and then the preferences change.

      In most issues, the insights of the planner who is dissociated from those affected, is in fact usually flawed. If we have planners who live like everyone, that problem is diminished. If we have everyone manifesting their preferences, then the problem of their being excluded and dominated is diminished. If we add good communication of expert insights – we have something worthy.

  2. David Dobe March 15, 2014 9:45 pm 

    In an economic system that is planned rather than relying on markets how does innovation occur?
    If a community compiles a list of products it wants
    (non food products) and the list goes to the factory that makes the products which then supplies them,
    in such a demand side situation, we can only express a need for products that we already have used before or know all about. In an era before there were smart phones ordinary people would never imagine needing or wanting something which does not exist. In a market system you invent something, you talk a banker into lending you money to manufacture it and then you pay some agency to advertise it. Then people think…lets try that. There is much wrong with this system but at least it progresses in a narrowly technological sense. What would prevent a pareconomy from stagnating?

    • avatar
      James Wilson March 16, 2014 7:04 am 

      I was just going to link it but then I thought nah.

      Here’s an excerpt from the book Life After Capitalism on innovation.

      The same logic as evidenced above applies to innovation, which explains why we lump meritocracy and innovation in a single chapter. A parecon does not reward those who succeed in discovering productive innovations with vastly greater consumption rights than others who make equivalent personal sacrifices in work but discover nothing. Instead a parecon emphasizes direct social recognition of outstanding achievements for a variety of reasons. First, successful innovation is often the outcome of cumulative human creativity so that a single individual is rarely entirely responsible. Furthermore, an individual’s contribution is often the product of genius and luck as much as diligence, persistence, and personal sacrifice, all of which implies that recognizing innovation through social esteem rather than material reward is ethically superior. Second, underneath the protestations, there is really no reason to believe that with changed institutional relations social incentives will prove less powerful than material ones. It should be recognized that no economy ever has paid or ever could pay its greatest innovators the full social value of their innovations, which means that if material com- pensation is the only reward, innovation will be under-stimulated in any case. Moreover, too 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 can ever use continue to accumulate more?

      Nor do we see why critics believe there would be insufficient incentives for enterprises to seek and implement innovations, unless they measure a parecon against a mythical and misleading image of capitalism. Typically, in economic analyses of markets it is presumed that innovative 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, however, it is obvious that these assumptions are contradictory since in capitalism for a company to reap the full financial benefits of an innovation it must keep all rights to it, even secretly, yet for other companies to benefit they must have full access. Yet only if both assumptions hold can one conclude that capitalism provides maximum material stimulus to innovation and also achieves maximum technological efficiency throughout the economy. In reality, innovative capitalist enterprises temporarily capture “super profits” also called “technological rents” which are competed away more or less rapidly depending on a host of circumstances. This means that in reality there is a trade-off in market economies between stimulus to innovate and the efficient use of innovation, or a trade-off between dynamic and static efficiency. It can’t be that firms monopolize their innovations, on the one hand, and that all innovations are utilized as widely in the economy as is beneficial for output and operations, on the other hand. But the former needs to occur for maximum incentive and the latter for maximum efficiency, in a market system.

      In a parecon, however, workers also have a “material incentive,” if you will, to implement innovations that improve the quality of their work life. This means they have an incentive to implement changes that increase the social benefits of the outputs they produce or that reduce the social costs of the inputs they consume, since anything that increases an enterprise’s social-benefit-to-social-cost ratio will allow the workers to win approval for their proposal with less effort, or sacrifice, on their part. But adjustments will render any local advantage they achieve temporary. As the innovation spreads to other enterprises, indicative prices change, and work complexes are re-balanced across enterprises and industries, the full social benefits of their innovation will spread equitably to all workers and consumers.

      The faster these adjustments are made, the more efficient and equitable the outcome. On the other hand, the more rapidly the adjustments are made, the less the “material incentive” (other than that afforded to the effort/sacrifice involved) to innovate locally, and the greater the incentive to coast along on others’ innovations. While this is no different than under capitalism or any market arrangement, a parecon enjoys important advantages. Most important, direct recognition of social serviceability is a more powerful incentive in a participatory economy than a capitalist one, and this considerably reduces the magnitude of the trade-off. Second, a parecon is better suited to allocating resources efficiently to research and development because research and development is largely a public good which is predictably under-supplied in market economies but would not be in a parecon. 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. Capitalist drug companies claim there is no incentive for them to develop new drugs unless they can reap vast profits by patenting their products. This may be true under market capitalism, but the patents that induce them to innovate also often keep the drugs out of the hands of those most in need, so this is hardly an efficient system. In a parecon, on the other hand, investment decisions are made democratically—so research and development will occur wherever there is a need, and no one has any incentive to keep innovations from being adopted by others—so there is maximum diffusion of new products and techniques.

      Of course, in a parecon, the rules of the game are subject to democratic adjustment. If it were determined that there was inadequate incentive to innovate—which we doubt—various policies could be tweaked. For example, the recalibration of the work complexes for innovating workplaces could be delayed (to allow those workplaces to capture more of the benefit of the innovation, or extra consumption allowances could be granted to innovators for a limited period of time. Such measures would be (in our view) a last resort, but would in any event depart from equity and efficiency far less than in other economic systems, and in no systematic recurring fashion.

      In general, much of what parades itself as scientific opinion about incentives is plagued by implicit and unwarranted assumptions predictable in an era of capitalist triumphalism. One should be neither as pessimistic about the motivational power of nonmaterial incentives in an appropriate environment as many people otherwise critical of injustice have become, nor should one see any obstacles to the deployment of limited material incentives specifically for innovation in a parecon should its members decide they are needed. In the end there is no reason to doubt the efficacy of a mixture of material and social incentives during the process of creating an equitable and humane economy, with the balance and mix chosen to further equity, diversity, solidarity, and self-management for all— rather than simply generating advantage for a few.


    • avatar
      James Wilson March 16, 2014 8:08 am 

      I also wanted to say that ” innovation” comes from creativity.A natural urge. It has nothing whatsoever to do with “monetary incentive” as is the general idea within the current system.

      People create and innovate all the time. The pursuit of creative possibilities is the life blood of being human.The current system denies the opportunity to indulge in such pursuits for most people on the planet. And what it does allow is extremely restricted and homogenized.

      A participatory planned economy, a Parecon, is designed to allow a greater number of people, or in fact ALL, to be able to, to have the right to, the chance to pursue creative possibilities, therefore increasing the diversity of “whatever is produced”, not the opposite.

      If not, it must be tweaked to do so.

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