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An introduction to Participatory Economics

Growing numbers of people are coming to the realisation that many of the problems and injustices that we face in our world today, such as climate change, increasing inequality, alienation, war, and more, are predictable outcomes of an economic system that is based on exploitation and greed. But what might a more desirable alternative economic system look like, beyond vague ideals and flowery language?

Participatory Economics is a model for a new economy that describes how workers and consumers in a modern society could go about organising production, consumption and distribution in a way that is consistent with economic justice, democracy and ecological sustainability. The model has been informed by the last century of thought and experimentation around the idea that workers and consumers should co-operatively manage the economy rather than be forced to compete against one another or be ruled by an economic elite.

Goals

The key goals of a participatory economy are to further:

  • economic democracy, or self-management – for workers and consumers to have a proportional say in decisions based on how much they are affected by them.
  • economic justice – for the burdens and benefits of economic activity to be distributed fairly, and,
  • ecological sustainability – to increase human well-being whilst also protecting our vital natural environment and eco-systems, safe-guarding them for future generations.

Any desirable economy should also seek to ensure efficiency – so that we do not waste our precious scarce resources, time and effort; solidarity – to advance together instead of at the expense of each other; and diversity, to increase opportunities for a variety of tastes and lifestyles.

Institutions

The key institutions to achieve these goals are:

  • Self-managed worker and consumer councils and their federations
  • Jobs balanced for empowerment and desirability
  • Income based on effort or sacrifice, and special needs
  • A de-centralised participatory planning procedure for allocating our resources fairly and efficiently.

Work

In a participatory economy nobody owns what is called ‘the means of production’ – the factories, land, equipment and tools that are used by workers to produce goods and services. These resources, technologies and the body of knowledge that we inherit are seen as a product of thousands of years of human endeavour that everyone born into society should benefit from, rather than a small minority of the population. Instead workplaces are granted ‘user rights’ under procedures designed to determine whether workers make an efficient use of scarce resources, during the democratic planning procedure, called participatory planning described further below.

Inside workplaces, instead of top-down hierarchical management, there are worker councils, (or assemblies) where each worker has a vote in the running of the workplace. To further the goal of self-management (for each worker to have appropriate decision making say), a worker council may decide to setup different decision making procedures, such as voting by majority, super majority, or by consensus, etc. Larger workplaces may also decide to create various sub-units that have autonomous say over decisions that only affect them. This is similar to the way many worker cooperatives that operate in the world today.

Jobs would be organised differently in a participatory economy than in hierarchical economies. Since tasks vary in their level of empowerment and desirability, a goal would be to avoid a minority monopolising all the empowering and desirable tasks whilst the majority being left with only repetitive and mundane tasks. In a participatory economy tasks are combined into jobs so that all participate in some empowering and desirable tasks. This is for two important reasons:

  1. to avoid the emergence of class divisions, so that a formal right to participate in economic decision-making equates to an effective right to participate equally. Since influence over economic decision-making is affected by the knowledge obtained at the workplace, it is likely that those workers who obtain more confidence and knowledge will dominate meetings and discussions even when each worker has one vote.
  2. to fairly share the burdens and benefits of labour, so everyone has the opportunity to do fulfilling and desirable work.

The idea of balancing jobs for empowerment is not that everyone perform every task, or that all jobs are rotated. There will still be workers who specialise in surgery, or architecture or piloting. The idea is that if the specialised tasks are more empowering than tasks are on average, those who perform them will also perform some less empowering tasks as well. It is up to each individual workplace to decide how they go about balancing jobs for empowerment.

What about the distribution of income? The primary means by which consumption rights are allocated in private enterprise market economies are via ownership of productive property (which is largely passed on through inheritance), bargaining power, luck, and unfair advantage. These are rejected as having no moral basis. Instead, a participatory economy aims to base any differences in consumption rights according to the differences in the effort or personal sacrifice people choose to make, since this is the only factor under our control. The goal is to equalise net benefits (benefits minus burdens), so those, for example, who choose to incur greater burdens at work by foregoing more leisure time would thus receive greater income as a balancing mechanism.

Effort can take different forms: longer working hours, at a higher intensity, or by performing more dangerous, unhealthy, or unpleasant work. Worker councils have autonomy over how they go about measuring effort of their members, including the procedures and level of accuracy they might choose. For example, workers at many worker co-ops today use hours worked as a method for dividing consumption rights amongst themselves.

In addition to effort based consumption, a participatory economy also facilitates requests for consumption based on special needs within consumer councils, as well as providing for those who are unable to work, too young or old to work, or who have been affected by events beyond their control, the levels at which are all determined by democratic processes.

Consumption

Every individual or household in a participatory economy belongs to a neighbourhood consumption council. This is where households put in requests about what goods and services they wish to consume, including both private goods (e.g food, clothes) and public goods (e.g parks, libraries, playgrounds). Decisions about special needs based consumption requests are also made within the neighbourhood consumer councils.

Every worker and consumer council will elect representatives to higher layers of councils (who are subjected to rotation, recall and instruction by lower level council members) – forming federations of councils. Worker councils are federated across industries, and consumer councils are federated geographically by local, city, regional and national levels. The reason for the ‘nesting’ of councils is because different decisions impact differently on various sections of the population.

Allocation

The activity of workers and consumers needs to be co-ordinated in some way: an economy needs an allocation or distribution system. The two dominant allocation systems over the last century: competitive markets and command planning are both rejected for not producing outcomes that are consistent with previously stated goals.

The allocation of resources in a participatory economy is done via a de-centralised democratic planning procedure called participatory planning, involving councils and federations of workers and consumers who make ‘self-activity’ proposals over a series of rounds, based on increasingly accurate generated information. The procedure is designed to create a feasible, efficient and fair plan.

In order for the planning procedure to function, there is a board of facilitation workers, whose task it is to aid the flow of information based on an agreed set of rules designed to reach convergence. It is important to note that facilitation workers do not have any discretionary powers and could in theory be replaced by an algorithm.

The basic idea is as follows:

  1. Prices are announced (these indicative prices reflect the opportunity and social costs of using different resources, producing different goods and services, and the damage caused by different pollutants)
  2. Workers and Consumers submit self-activity proposals. Consumers of what they wish to consume; and producers of what they plan to produce.
  3. Prices are updated. Facilitation workers update prices up or down in proportion to the degree of excess demand or supply.

The above process repeats itself over several iterations until there are no longer any excesses in supply or demand, and until a realistic and mutually agreed upon plan for the year is attained.

Consumers are not expected to know everything they will want in detail. They simply choose from amongst a list of coarse categories based on what they think they will want for the year ahead, using a reference of what they consumed in the previous year as a guide. Flexibility is built into the plan ensuring that changes and adjustments are able to be made during the year.

Protecting the ecology

Both of the two dominant economic systems of the last century, capitalism and centrally planned socialism have had a poor record when it comes to protecting our natural environment. How might a participatory economy fair any better? A participatory economy aims to be a green economy through its logic and system of incentives:

Accurate costs

One of the big failings of market economies is that prices of goods do not reflect the costs to those who are affected by a transaction that are not the immediate buyer or seller, such as pollution. Markets bias activities that pollute over ones that preserve our environment. In a participatory economy, the negative external effects of pollution are internalised into the costs of producing goods and services. During the annual planning procedure, producers are charged the cost of pollutants based on current estimates of damages they propose to emit. The costs of different pollutants will appear as a result from the planning process whereby producers and affected parties express their experienced benefits and and burdens from pollution. What is a pollutant is determined by federations of those affected who are advised by scientists in research and development operations.

No growth imperative

Market economies have an intrinsic bias towards growth and over-production as rival firms compete for market share and profits, using up and wasting resources at ever increasing levels. A big advantage of democratically planned economies, such as a participatory economy, is that the level of work versus leisure is democratically decided through negotiation by workers and consumers. Given that many goods would be provided for at public cost, job security and a society with an egalitarian distribution of wealth and income, it is likely that more people would choose greater leisure time over more production.

Protecting the ecology in longer term plans

The interests of future generations are handled in the long-run planning procedure by means of restraints that the present generation places on itself in democratic deliberations concerning long-run plans. Major changes and investment priorities in the energy, transportation, and housing sectors, as well as conversions from polluting to “green” technologies and products are all determined by long-run democratic planning processes in contrast to investment decisions being dominated by the interests of maximising the profits of competing giant corporations.

Summary

In summary, a participatory economy is organised around self-managed councils of workers and consumers and their federations. To the extent practical and possible, jobs are balanced for empowerment and any differences in consumption are based on differences in personal sacrifices and special needs. Worker and consumer councils, with the help of facilitation workers, use a de-centralised cooperative procedure for planning the allocation of resources.

Whilst this is only a brief introduction to the participatory economics model, readers interested in exploring the model in greater depth are encouraged to visit the newly launched website www.participatoryeconomics.info where they can find more articles, links, books and related organisations.

Developing and debating economic vision, such as a participatory economics and other proposals, in a healthy and non-dogmatic way is an important task for those seeking to win a better world. Developing seriously thought out alternatives, inform current experiments, projects and reform campaigns which are building new institutions within existing market systems. Vision should serve to inspire people joining the movement in gaining a better understanding of what needs to change, identifying the challenges and building confidence that another world is possible.