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Thursday, February 24, 2011

Participatory Economics: An Alternative to Capitalism

New Formulation

Participatory Economics:
A Theoretical Alternative to Capitalism

We seek] a condition of society in which there should be neither rich nor poor, neither master nor master’s man, neither idle nor overworked, neither brain-sick workers, nor heartsick hand workers, in a world, in which all would be living in equality of condition and would manage their affairs unwastefully, and with the full consciousness that harm to one would mean harm to all—the realization at last of the meaning of the word commonwealth. — William Morris(1)

Anarchism is a definite intellectual current of social thought, whose adherents advocate the abolition of economic monopolies and of all political and social coercive institutions within society. In place of the capitalist economic order, Anarchists would have a free association of all productive forces based upon co-operative labor, which would have for its sole purpose the satisfying of the necessary requirements of every member of society. — Rudolf Rocker(2)

Anarchist thought and practice has always criticized capitalism as a social and economic system. What has been less developed is an idea of that with which we would replace capitalism: an anarchist vision. Michael Albert and Robin Hahnel have created a well-developed theoretical system—participatory economics—that is both an alternative to capitalism and consistent with the anarchist and left communist tradition.

The anti-globalization movement, for example, articulated many strong critiques of the World Trade Organization and of global capitalism generally, but not much thought was given to how things could be structured differently. What will life be like after capitalism? How can we run a factory collectively? How do we collectively decide who gets what? Some activists would point to cooperatives—for example, local food cooperatives such as the Mondragon Industrial Cooperative(3) in the Basque region or the Seikatsu Club(4) in Japan—as examples of the new world in the shell of the old. Others use science fiction novels—such as The Dispossessed(5)—as possible models of a new world. Mostly anarchists and other agitators argue that a vision is not important at all, that no one can predict what the new world will look like and that having a vision is authoritarian. Instead, they argue that the new world will spring out of the struggle against the old world.(6)

Peter Kropotkin thought differently. In the preface to Emile Pataud and Emile Pouget’s famous book, How We Shall Bring About The Revolution, he addressed the importance of vision. First, he summarized his critics: “It is often said that plans ought not to be drawn up for a future society. All such plans we are told, are of the nature of romances, and they have the disadvantage, that some day they may hamper the creative force of a people in Revolution.” Kropotkin counters, “On the other hand, it is necessary to have a clear idea of the actual concrete results that our Communist, Collectivist, or other aspirations, might have on society. For this purpose we must picture to ourselves these various institutions at work.” This is exactly what Michael Albert and Robin Hahnel have done in their work on participatory economics. Michael Albert notes that participatory economics should not be taken as a blueprint, but as a “broad understanding of new institutions to inform our dissent.”(7) Kropotkin similarly wrote that a “book is not a gospel to be taken in its entirety or to be left alone. It is a suggestion, a proposal—nothing more. It is for us to reflect, to see what it contains that is good, and to reject whatever we find erroneous in it.” May this multi-book review, then, contribute to the evaluation of Michael Albert and Robin Hahnel’s proposal on participatory economic vision.(8)

Both Michael Albert and Robin Hahnel see their work within the context of the libertarian communist tradition. In an earlier work, Albert and Hahnel wrote that communist anarchism and council communism share an affinity with their views.(9) More recently, the journal Science and Society ran a special issue on theoretical alternatives to capitalism in which Albert and Hahnel describe the roots of their work as within the left-wing libertarian tradition.(10)

Each of the books reviewed here discuss the participatory economic vision. Before examining each book, let’s first take a look at the basics of participatory economics.

Valuative Criteria
Participatory economics is an economic system developed to foster six broad values: equity, or fair and just outcomes; solidarity, or caring and mutual respect among all people; diversity of outcomes which would benefit everyone; participatory self-management, or having a say in decisions to the extent that one is affected by their outcomes; efficiency, or not wasting resources; and environmental sustainability, which requires leaving behind stocks of each kind of natural capital as large as those we enjoy today.(11) These values, argue Albert and Hahnel, are critical to the evaluation of economic systems, which either fetter these values or promote them. Albert and Hahnel critique different economic systems, including capitalism, state socialism, market socialism, and green bioregionalism, all of which, they argue, do not promote these basic six values. Participatory economics, they assert, is the theoretical alternative that fosters these values.

The Critique of Capitalism and other Alternatives to Capitalism
An economic system has three main tasks: to produce things, to consume things, and to distribute things in some way, which economists call allocation. “Capitalism is an economic system dedicated to production for profit and to the accumulation of value by private business firms.”(12) Capitalism’s main characteristics are the accumulation of value, private ownership of the means of production, production for profit, and hierarchical organization of the workplace, where some do boring and manual labor, while others do skilled work and still others make the decisions. In short, the producers of the surplus do not appropriate and distribute the surplus (surplus being that which exceeds what is necessary to replace the machinery, raw materials, and sustain the workers’ standard of living).

Capitalism’s consumption is characterized by the total neglect of others. Consumers think of only themselves and can ignore the effects of the goods they buy on the environment and on the workers who produced the goods. As Albert and Hahnel explain, “in capitalism it is nonsensical to consider others.”(13) This is also a critique of all markets, not just markets under capitalism.(14) In a capitalist economy, things are allocated by markets, but markets also allocate goods in other economic systems, such as market socialism, of which the Mondragon Cooperatives are a good example. Markets do not promote solidarity or concern for the well-being of others; actually they do the very opposite. Thus, Albert and Hahnel argue, a desirable economic system should not have markets allocate goods since this will promote rugged individualism.

Albert argues that capitalism violates all the basic values; it does not promote equity, solidarity, efficiency, environmental sustainability, self-management, or diversity. In fact, capitalism does the contrary. Capitalism generates atomized, self-interested behavior, not solidarity. Capitalism generates inefficiency since it is based on individual actors. Capitalisms’ environmental record speaks for itself; it destroys biodiversity. Capitalism generates huge income and wealth differentials. Capitalism does not promote self-management but instead generates a situation where a few make decisions for the many. Capitalism does not generate diversity, it pushes people into boring and repetitive jobs, and creates a consumer culture based on a few brand names.

Similarly, Albert and Hahnel argue that market socialism, central planning, and green bioregionalism do not promote the desirable values. Markets generate inequality, destroy diversity, do not promote self-management, promote individualistic behavior that counters the notion of solidarity, and miscalculate the prices of environmental resources. Central planning similarly violates the values. It breeds authoritarianism and this counters solidarity, equity, and self-management. Central planning is alienating and creates a class of bureaucrats and managers, what Albert and Hahnel call a coordinator class. Green bioregionalism is a vague system that is popular with some activists in the United States today. Albert criticizes bioregionalism, arguing that it does not promote an alternative system of allocation, that it is too focused on scale and self-sufficiency, and that this vision will not eliminate classes.

The ABCs of Participatory Economics

What a sad and tragic mistake! To give full scope to socialism entails rebuilding from top to bottom a society dominated by the narrow individualism of the shopkeeper. It is not as has sometimes been said by those indulging in metaphysical woolliness just a question of giving the worker “the total product of his labor”; it is a question of completely reshaping the relationships...in the factory, in the village, in the store, in production, and in distribution of supplies. All relations between individuals and great centers of population have to be made all over again, from the very day, from the very moment one alters the existing commercial organization. — Peter Kropotkin(15)

Participatory economics envisions a very different economy with new institutional arrangements. Instead of private ownership of capital, there is social ownership of the means of production, which means either there are no owners or everyone owns the means of production, so ownership does not generate income or power differences as it does in capitalism. Allocation has a different set of institutional arrangements; instead of markets, there is a system of democratic or participatory planning. Consumer councils create consumption plans, workplace councils create workplace plans, and facilitation boards (administrative institutions) try to refine the different plans and make them correspond. Everybody participates, everyone helps make decisions. Participatory economics has a few new elements that I will briefly introduce. First, it has democratic workers and consumer councils. Second, it is characterized by the concept of balanced-job complexes. Third, remuneration is determined according to one’s effort as judged by one’s work-mates. And, fourth, participatory planning is the allocation mechanism that replaces central planning and markets.

Workers are organized in workers’ councils. This is the first step in establishing non-hierarchical and dignified work. Every work place is governed by these workers’ councils. Albert and Hahnel recognize that democratic councils by themselves do not promote participation sufficiently because while some work is empowering, some work is not. Disempowered workers would come to the council (or not come) lacking information, skill, and energy to participate in a meaningful manner. To solve this problem, Albert and Hahnel propose balanced job complexes, which I think is their most valuable and original theoretical contribution.

Jobs are a certain combination of tasks, and in our current system, certain jobs are intended to be rote jobs, while others are more rewarding. Jobs are organized in a very hierarchical manner. So if one would create a workplace council in such a place there would be power differences. Take for example a person, who has only been sweeping the floor all day, and another who has been meeting all day, thinking, and making decisions. The latter has much more information than the former. When these two people sit on the council, one will be in a position to participate on a different level, which will create a monopoly of knowledge. Thus, it is necessary to break up jobs so that they are more egalitarian. This is what a balanced job complex is—a restructuring of tasks that need to be performed so that instead of having one person run the place while the other sweeps it, tasks are combined and balanced in such a way that each job is equally rote and rewarding, and each person has a fair share of each sort of task. This concept of the balanced job complex is key to creating a more egalitarian world where people are empowered and have control over their own lives—a society that has neither masters nor slaves.

After people are provided with their basic needs, workers will be paid according to their effort, as judged by their work-mates. This system of remuneration is how participatory economics addresses problems of incentives. With this “payment” or “effort rating,” a worker will be allocated a certain amount of consumer goods beyond his or her needs. Similar to workers, consumers are organized in councils at different levels, from the neighborhood, the town or city, county, region, etc. Individual consumers can go to outlets to shop for different kinds of goods. These goods are allocated to these outlets through a participatory planning process.

In participatory planning, both workers’ and consumers’ councils participate directly in the formulation of a plan. The workers’ and consumers’ councils propose and revise their own activity prior to initiating those activities. “Indicative prices,” as determined in the planning process, are used as a communicative tool to estimate the full social costs and benefits of inputs and outputs. Indicative prices are only quantitative measures of social costs to supplement qualitative measures of the social costs of a product. This is an iterative and continuous process where every actor and every level proposes its own plans.

The process starts with the workers’ and consumers’ councils. The workers’ councils formulate a production plan and submit it to a federation of councils and finally to an iteration board. The council request certain inputs and submits a plan for outputs. Regional and industry-wide federations aggregate proposals and keep track of excess supply and demand.

Similarly, individuals and households submit consumption proposals for private goods to the neighborhood councils. Then the neighborhood councils submit the plans for collective and private goods to a federation of councils before it finally goes to the iteration board.

The iteration board compiles all of the plans and makes suggestions on revising the plans by changing the prices. The plans go back to the councils for revision, and this bargaining goes through successive iterations. This is done yearly, but at the same time this process is flexible enough to update the plans when things change.

This is a very short description of participatory economics and it is impossible to justice to the detailed and complex descriptions in the books by Albert and Hahnel.16 Now let’s look at three books by Michael Albert.

Thinking Forward: Learning to Conceptualize Economic Vision (1997)

The decadent international but individualistic capitalism ... is not a success. It is not intelligent, it is not beautiful, it is not just, it is not virtuous—and it doesn’t deliver the goods. In short, we dislike it and we are beginning to despise it. But when we wonder what to put in its place, we are extremely perplexed. — John Maynard Keynes(17)

Like Albert and Hahnel’s Looking Forward (1991) and The Political Economy of Participatory Economics (1991), Albert’s Thinking Forward describes participatory economics in detail, but it is set up very differently. It is divided into ten chapters. The book starts off by discussing the necessity of vision, then describes what an economy is and the six basic values that the economy should foster. In Chapter 2, Albert evaluates the existing visionary options. The ensuing chapters discuss values associated with production, consumption, and allocation. Then, based on these values, Albert argues for the basic institutions that make up a participatory economics. The last part of the book evaluates participatory economics and responds to its critics.

What is unique about this book is not only its accessibility, but also the way each chapter is structured. This book does not read as most books do. In the first part of each chapter, Albert challenges the reader to think by first describing certain concepts and then posing some rather difficult questions. At the end of each chapter, there is discussion of his answers to the questions. This makes the reader think and question throughout the book. When a question is posed, it makes the reader step back, think, grapple with the concepts, then try to answer it in her or his own way. In last part of the chapter, the reader can then read Albert’s answers. This set up is very instructive and helps readers understand this economic vision on a new level. The unique way this book is structured is conducive to really understanding the basic institutions of our economy, how participatory economics differs from the current model, and how it works. It is also conducive to learning how this method could be applied in other areas to create other visions or to modify this vision.

For those unfamiliar with participatory economics, Thinking Forward is an excellent introduction. For the reader interested in the debate that Albert and Hahnel’s vision has generated, the last forty-five pages of the book are dedicated to summaries of critiques of participatory economics, clarifications, and responses. These debates are very interesting and span a wide spectrum of perspectives, including those of activists and academics.(18) Some of these debates are engaged with proponents of other democratically planned economic visions, such Pat Devine, or with proponents of a market socialist vision, such as Thomas Weisskopf. Although Comparative Economic Systems scholars used to study the Soviet Union during the Cold War, today leftist economists who write about alternative economic systems have shifted their focus to debates between market socialism and participatory planning. The last chapter in Thinking Forward fits very nicely into this comradely but important brawl.

Moving Forward: Program For A Participatory Economy (2001)

The calloused hands of the fields and of the factories must clasp in fraternal salute because, truly, we workers are invincible; we are the force and we are the right. We are tomorrow. —Emiliano Zapata

In the wake of the anti-globalization protests in Seattle and in Washington D.C., Albert penned this program to speak to a new and emerging movement and address how it should move forward. “Great social movements need long-run goals for inspiration and guidance and need short-run programs for immediate orientation and agenda,” writes Albert.(19) This book provides suggestions for how participatory economics is the long-run economic vision and alternative to capitalism and provides a program for how to get there.

The book, divided in seventeen chapters, has six main parts: on just rewards, self-management, dignified work, participatory allocation, economics and society, and the participatory economics program. Each part has a discussion of the long-run goals, a discussion of a short-run program, and a hypothetical discussion between an advocate of participatory economics and a critic.

In the first part, for example, Albert argues that a good economy should reward only effort and sacrifice instead of profit, power, or output. A program that would support some of the basic six values of participatory economics would include supporting the fight for higher wages, enhancing affirmative action, and increasing taxes on profit, property, wealth, and income.Albert believes we should struggle for these reforms in a non-reformist way.(20) Throughout the book, he argues that activists should strive and fight for incremental change and that a sequence of incremental changes will ultimately bring about radical change as long as we have a vision for a better world in mind. While I fundamentally differ on the role of revolutionaries in bringing about social transformation,(21) I believe Albert’s ideas can help us understand and work within mass movements, or potential mass movements. While most of my activism certainly fights for small reforms, I see Albert’s strategy as sort of a non-strategy, a strategy that says “All Hands On Deck.” Much of Albert’s program is not much of a program at all and there exists no strategic focus on how to transform this world into a free society. Just keep on plugging away at all the things you are doing, we just need more people to be doing it, he argues. For Albert, the movement(s) need to grow and intensify. What is the task for revolutionaries? It is the same as that of the liberal, except that the revolutionary wants to use this reform to raise consciousness with the goal of fundamentally altering the basics of this society. Much of the program for participatory economics that Albert suggests falls within this framework.

Parecon: Life After Capitalism (2003)

It is necessary with bold spirit and in good conscience, to save civilization. We must halt the dissolution which corrodes and corrupts the roots of human society. The bare and barren tree can be made green again. Are we not ready? — Antonio Gramsci

Parecon is Albert’s latest book and is much longer and more comprehensive than his previous publications. This book is divided into four parts and 26 chapters and spans more than 300 pages. Much of the book covers material that is presented in its basic form in previous work by Albert and Hahnel. Part I discusses values and institutions. Part II describes the institutions and workings of the economic vision. Part III is an example of how a person would live their daily life under participatory economics to add richness to their abstract vision. Part IV addresses the critics of participatory economics. While Parecon does not add much new material or perspective to the previously developed vision—though it addresses some new criticisms—it is certainly nice to have a cleaned up version of the book that will reach a new audience.

Parecon does a very nice job of responding the critics. While most critics wonder whether participatory economics will be able to accomplish this or that practical task, few really critique its basic six values. Albert and Hahnel’s vision comes very much from the study of microeconomics, the study of individual behavior. I don’t think much of their efficiency criteria and I don’t think it should be of any concern to leftists, for it is not a value a good society should have. This concept comes out of the utilitarian tradition, a tradition I expect few readers of this review would hold dear. Efficiency basically refers to the idea that an analysis can or should determine the net balance between all the positive and negative effects of an economic action. For example, a cost-benefit analysis is done and all the benefits are added up, and all the costs are subtracted. If the positives outweigh the negatives the economic outcome is efficient and should be done. This of course, as you can imagine, creates huge problems. Can you identify and measure all effects? Who does it benefit? Can you just add up all the benefits and costs? Those familiar with utilitarianism can see the obvious relationship. Anarchists certainly don’t come out of this liberal philosophical tradition, so why should we bother with their conceptions of the world?(22)

While Michael Albert is very prolific, clear and accessible, his writing at times is not the best. For those who have seen him speak, his books read just as if he is speaking to you. Parecon does this the least of all the reviewed books and it is the most stylistically pleasing among them.

Participatory Economics is a very rich vision of what a better world can look like. Certain people argue that capitalism might not be great, but it the best we have, so all we can do is improve it and make it more tolerable. Albert’s books pull the rug from under this argument. Activists, organizers, and agitators often struggle to describe what kind of world we want; what would a world without cops or prisons look like? What would a world without private property look like? What would a world without patriarchy look like? Of course, many of these kinds of questions are impossible to really answer, but Albert and Hahnel have made an important contribution to envisioning what an alternative to capitalism might look like and how it might work. Whatever their flaws are, I hope that these books will be widely read and will foster much more pondering, talk, debate, and vision.


1. Cited in Michael Albert and Robin Hahnel, The Political Economy of Participatory Economics (Princeton: Princeton University Press, 1991).

2. Rudolf Rocker, Anarchism and Anarcho-Syndicalism (London: Freedom Press, 1988).

3. See the official website: http://www.mondragon.mcc.cs/. Roy Morrison’s We Build the Road as We Travel argues that Mondragon is the Third Way and a viable alternative to both capitalism and state socialism. For an anarcho-syndicalist critique, see Libertarian Labor Review, 19. For a book-length anthropological study and critique, see Sharon Kasmir, The Myth of Mondragon (Albany: State University of New York Press, 1996).

4. See Richard Evanoff, Social Anarchism 26, 1998, http://library.nothingness.org/articles/SA/en/display/248

5. Ursula LeGuin, The Dispossessed (New York: Harper & Row, 1974). Also see Marge Piercy, Woman on the Edge of Time (New York : Knopf, 1976).

6. For example, see “The Sad Conceit of Participatory Economics,” Northeastern Anarchist 8.

7. Michael Albert, Moving Forward: Program for a Participatory Economy, (Oakland: AK Press, 2001), 10.

8. All Kropotkin quotes from Emile Pataud and Emile Pouget, How We shall Bring About the Revolution: Syndicalism and the Cooperative Commonwealth (London: Pluto Press, 1990), xxxi-xxxvii.

9. Michael Albert and Robin Hahnel, Unorthodox Marxism: An Essay on Capitalism, Socialism and Revolution (Boston: South End Press, 1978), 314.

10. Science and Society 66, Spring 2002, 27.

11. These values are very nicely explained in many of their books. They are explained in most detail in Chapter 2 of Robin Hahnel, The ABCs of Political Economy: A Modern Approach (London: Pluto Press, 2002). For more on ecological economics and natural capital, see for example work by Herman Daly, especially Steady-State Economics.

12. Carol Heim, “Capitalism,” Political Economy Research Institute Working Paper 41, 2002, http://www.umass.edu/peri/pdfs/WP41.pdf This is a great article that briefly explains capitalism and its historical evolution.

13. Michael Albert and Robin Hahnel, Looking Forward: Participatory Economics for the Twenty First Century, (Cambridge: South End Press, 1991), 46.

14. For an excellent critique of markets, see Sam Bowles, “What Markets Can—and Cannot—do,” Challenge, July-August 1991.

15. Quoted in Albert and Hahnel, Looking Forward, 46.

16. For an abstract and more academic presentation of their model, see Michael Albert and Robin Hahnel, The Political Economy of Participatory Economics, (Princeton: Princeton University Press, 1991). For a less academic and more institutionally rich description of Parecon, see Albert and Hahnel, Looking Forward: Participatory Economics for the Twenty First Century (Cambridge: South End Press, 1991). This last book is available on-line: http://www.parecon.org

17. Cited in Albert, Thinking Forward, 11. Keynes was by no means a revolutionary and critiqued capitalism in his day to modify it in order to prevent revolution.

18. For those interested in some of these debates, see Michael Albert, Parecon: Life After Capitalism (New York: Verso, 2003), Science and Society, Spring 2002, and Review of Radical Political Economics, Fall and Winter 1992.

19. Albert, Moving Forward, 1.

20. Albert also writes about his strategy in The Trajectory of Change: Activist Strategies for Social Transformation, (Cambridge: South End Press, 2002). The basic strategy in the two books is the same. The Trajectory of Change is reviewed by Uri Gordon in “Chasing the Tornado,” The New Formulation, 2, no. 1, February 2003. While I would certainly disagree with much of Gordon’s critique, I also think he hits the point when he critiques the substance of Albert’s non-reformist reform strategy.

21. See my book review of Noel Ignatiev’s books in this issue of The New Formulation.

22. For a critique of efficiency, see Rick Wolff’s “Efficiency: Whose Efficiency?” in Post-Autistic Economics Review, no. 16, October 2002, http://www.paecon.net

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