Hahnel ABCs of Political Economy Modern Primer
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consumer federations take responsibility for providing information about available products, and R&D in new products, consumer sovereignty is better served than when producers control advertising and product innovation.
Critics worry that some people might not want their neighbors to know what they are consuming, and want to know if people could borrow or save. Advocates point out that people can submit anonymous consumption requests, or submit to a council made up of people who are not their neighbors if they wish. People can save simply by not asking to consume as much as their current effort rating warrants. People can borrow – consume more than their effort rating currently warrants – by promising to consume less than their effort warrants in the future. As in any economy ultimately someone must judge the credibility of borrowers’ promises to repay. Instead of loan officers at privately owned banks, neighborhood consumption councils and federations would be the arbiters on consumer loan requests in a participatory economy – much as fellow members are in credit unions today.
Some critics worry that the Iteration Facilitation Board could hijack the planning process, and best intentions notwithstanding, we would end up with Soviet-style central planning again. To those critics advocates of participatory planning point out that the Facilitation Board is only a convenience and not actually necessary. Excess demands and price adjustments could all be done by formula – the only drawback being that more rounds of proposing and revising would probably be necessary. Other critics worry that democratic planning would take too much time. To them advocates point out that (1) planning time is not zero in market economies – it’s just done inside corporations by elites rather than by those who must carry out the plans – and (2) in participatory planning, councils and federations do not meet or debate proposals with one another at all. Instead, looking at estimates of social costs, each council or federation decides what to propose to do itself, and whether to vote thumbs up or down on others’ proposals about what they want to do. But no doubt democratic deliberation is more time consuming than autocratic fiat. Advocates believe the gains in economic democracy and in the superior quality of the decisions are well worth it.10 Other critics,
10.Pat Devine put it this way: “In modern societies a large and possibly increasing proportion of overall social time is already spent on administration, on negotiation, on organizing and running systems and people.
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citing the work of Austrian economists Friedrich Hayek and Ludwig von Mises, argue that without markets and private ownership of productive resources there can be no accurate or objective determination of the human costs and benefits associated with producing and consuming different goods and services. Advocates point out that this criticism does not apply to participatory planning because the estimates of social costs and benefits that emerge from the planning process are precisely the result of a real social process in which individuals and groups express their desires about using productive assets knowing they will live with the consequences of their proposals.
Critics worry there would be insufficient innovation. This is an important question since even after people come to recognize that environmentally and socially destructive growth is no longer in our interest, raising living standards for the poor, reducing work time, improving the quality of the working environment, and restoring the natural environment will require a great deal of innovation. However, an economy based on the principle that only above average effort in work merits above average consumption privileges cannot reward those who succeed in discovering productive innovations with vastly greater consumption rights than others who make equivalent personal sacrifices. Moreover, successful innovation is often the outcome of cumulative human creativity for which a single individual is rarely responsible, and an individual’s contribution is often the product of genius and luck as much as effort. Finally, it would be inefficient not to make innovations immediately
This is partly due to the growing complexity of economic and social life and the tendency for people to seek more conscious control over their lives as material, educational and cultural standards rise. However, in existing societies much of this activity is also concerned with commercial rivalry and the management of the social conflict and consequences of alienation that stem from exploitation, oppression, inequality and subalternity. One recent estimate has suggested that as much as half the GDP of advanced western countries may now be accounted for by transaction costs arising from increasing division of labor and the growth of alienation associated with it (D. North, “Transaction Costs, Institutions, and Economic History,” in the Journal of Institutional and Theoretical Economics, 1984). Thus, there is no a priori reason to suppose that the aggregate time devoted to running a self-governing society would be greater than the time devoted to the administration of people and things in existing societies. However, aggregate time would be differently composed, differently focused and, of course, differently distributed among people” (Democracy and Economic Planning: 265–6).
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available to all enterprises once they are discovered. Critics wonder if all this implies there would be too little innovation in an equitable economy that shared innovations immediately.
First, advocates argue that recognition of “social serviceability” should be a more powerful incentive to innovation in a participatory economy where acquisition of personal wealth is unnecessary and elicits no social esteem. Second, proponents argue that a participatory economy is better suited to allocating sufficient resources to research and development because R&D is largely a public good which is predictably under-supplied in market economies, but promoted by participatory planning procedures. Workers’ federations would run research operations whose purpose is to develop more efficient and pleasant methods of work. Consumers’ federations would manage equally extensive research facilities to develop new and better products. The performance of these R&D operations in promoting innovation would be judged by those whose interest they serve and who control their resources. Third, advocates observe that while the only effective mechanism for providing material incentives for innovating enterprises in capitalism is to slow their spread through patents at the expense of static efficiency, temporary extra consumption allowances could easily be granted to workers in innovative enterprises while their innovation is made available to all in the participatory economy who could make good use of it. In other words, while social incentives for innovation are more equitable and should be emphasized, advocates point out that material reward for innovation would be easy to provide with no loss of static efficiency if people in a participatory economy decided their economy was not sufficiently dynamic.
Finally, some critics worry that democratic planning would violate people’s freedom, i.e. not be sufficiently libertarian. But what is a libertarian economy? If people are not free, for example, to buy another human being is the economy not libertarian? There are circumstances that would lead people knowingly and willingly to sell themselves into slavery, yet few would refuse to call an economy libertarian because slavery was outlawed. If people are not free to hire the services of another human being in return for a wage, is the economy not libertarian? There are familiar circumstances that lead people knowingly and willingly to accept “wage slavery.” Does this mean public enterprise market economies are not libertarian because the employer/employee relation is outlawed? Critics of capitalism argue that to equate libertarianism with the freedom of individuals
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to do whatever they please is a misinterpretation that robs libertarianism of the merit it richly deserves.
It is, of course, a good thing for people to be free to do what they please – as long as what they choose to do does not infringe on more important freedoms or rights of others. I should not be free to kill you because that would be robbing you of a more fundamental freedom to live. I should not be free to own you because that robs you of a more fundamental freedom to live your own life. I should not be free to employ you because my freedom of enterprise robs you of a more fundamental freedom to manage your own laboring capacities. I should not be free to bequeath substantial inheritance to my children because that robs the children of less wealthy parents of their more fundamental right to an equal opportunity in life. Although advocates of capitalism would not agree, there is little disagreement about any of this among those who believe we must go beyond capitalism if we are to achieve the economics of equitable cooperation. But are there additional freedoms and rights that others should not be free to violate in choosing to do what they please?
Advocates of participatory economics think everyone should have an equal opportunity to participate in making economic decisions in proportion to the degree they are affected. We think selfmanagement is the only way to interpret what “economic freedom” means without having one person’s freedom conflict with freedoms of others. We think self-management, in this sense, is a fundamental right, so when people are free to do what they want this should not mean they are free to infringe on others’ right to selfmanagement. In other words, we do not think some should be “free” to appropriate disproportionate power, or “free” to oppress others with their greater economic power. But we do not think ourselves any less libertarian for wanting to outlaw oppression, any more than abolitionists thought themselves less libertarian for fighting to outlaw slavery.
Advocates of participatory economics also think when people enter into economic cooperation with one another they have a right to a fair distribution of the burdens and benefits of their joint activities, i.e., people should enjoy economic benefits in proportion to the effort or personal sacrifice they incur when fulfilling their economic responsibilities. So we believe economic justice requires that nobody be “free” to appropriate more goods and services than warranted by their personal sacrifice, i.e. nobody should be “free” to exploit others. But we do not think ourselves any less libertarian for
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wanting to outlaw exploitation, any more than reformers thought themselves less libertarian for fighting for progressive income taxation in the early twentieth century.
Does this take all the fun out of freedom? If freedom does not include the freedom to oppress and exploit others does it lose its appeal? Is a “politically correct” economy a drab and regimented world – as some critics would have us believe? Proponents of participatory economics see little reason to think so. Consumers in a participatory economy are free to develop and pursue desires for any goods and services they wish. They are free to consume whatever they want – paying prices that are more accurate reflections of true social costs than market prices are. People are free to choose more consumption and less leisure, or vice versa. They are free to distribute their effort and consumption over their lives as they please. They are free to apply to work wherever they want, free to bid on any job complex at their work place they want, and free to organize a new enterprise to produce whatever they want, by any means they want, with whomever they want. People are free to educate themselves in any career they want, and train for any tasks they want. People are just not free to do any of these things in ways that oppress or exploit others.
But there is another way to look at participatory economics – from the bottom up. The first priority is to guarantee economic justice and self-management for those who have never enjoyed it by making sure people’s consumption is commensurate with their sacrifices, and by making sure people’s work experience equips them to be able to participate in economic decision making should they want to. And there is another way to look at talent and education. A participatory economy encourages people to use their talents. Outstanding abilities used to benefit others will be highly regarded in a participatory economy. People will be encouraged to pursue education and put it to good use in a participatory economy by the esteem and recognition this earns them. Nobody is told what kind of education or work they must do. But there is no material reward for anything other than effort and sacrifice – since this would be inequitable. And while those with greater talent and education will be asked to play the role of expert, and may have their opinion more highly regarded because historically their opinions have proven more insightful, they are not given greater decision making authority in a participatory economy because this would infringe on others’ right of self-management.
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CONCLUSION
The question boils down to this: Do we want to try and measure the value of each person’s contribution to social production and allow individuals to withdraw from social production accordingly? Or do we want to base differences in consumption rights on differences in sacrifices made in producing goods and services as judged by one’s work mates? In other words, do we want an economy that obeys the maxim “to each according to the value of his or her contribution,” or the maxim “to each according to his or her effort and sacrifice?”
Do we want a few to conceive and coordinate the work of the many? Or do we want everyone to have the opportunity to participate in economic decision making to the degree they are affected by the outcome? In other words, do we want to continue to organize work hierarchically, or do we want job complexes balanced for empowerment?
Do we want a structure for expressing preferences that is biased in favor of individual consumption over social consumption? Or do we want it to be as easy to register preferences for social as individual consumption? In other words, do we want markets or nested federations of consumer councils?
Do we want economic decisions to be determined by competition between groups pitted against one another for their well being and survival? Or do we want to plan our joint endeavors democratically, equitably, and efficiently? In other words, do we want to abdicate economic decision making to the marketplace or do we want to embrace the possibility of some kind of participatory, democratic planning?
Those willing to work for the economics of equitable cooperation need not agree now on how far we will have to go to secure it. There is an overwhelming consensus among opponents of the economics of competition and greed on reforms needed to make capitalism more efficient and equitable. That does not mean all agree on what reforms should be accorded greater priority in light of limited financial and organizational resources. But few who favor the economics of equitable cooperation would disagree that most of the reforms and programs described briefly above move us in the right direction, and most of us would agree on other reforms that could be added to the list as well. Since the road leading beyond capitalism
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must travel through capitalism for the foreseeable future in any case, there will be time, and a great deal of new experience to evaluate, while we continue to discuss and debate (1) whether it is necessary to move beyond capitalism, (2) how far beyond capitalism we must go, and (3) what a sustainable economics of equitable cooperation will eventually look like.