A Critique of “Participatory Economics & the Next System”

Participatory economics, also known as “parecon” is a newer one of the many “third way” political systems that attempt to distinguish themselves from the traditional left/right, socialist/capitalist dichotomy.  “Participatory  Economics & The Next System” by Robin Hahnel gives us a short (20 page) overview of parecon.  Its ideals are based on the goals of sustainability and equity.  Its strategy is informed by the perceived failures of both capitalism and socialism to achieve the aforementioned ideals (which socialism is for and which capitalism propagandistically claims to be for).  It turns out to be a good synthesis of ordinarily sectarian ideas of the left.  However, despite trying to eschew the traditional, its outlook remains dated.  The parecon system ends up embracing one of the most traditional forms of statecraft, bureaucracy.

Hahnel begins by raising questions about the social division of labor: “Why should some people’s work lives be less desirable and less empowering than others (p. 4)?”  This is a very important question to ask, and one that was long ago answered by liberal political economists—because, in their view, some people are just superior to others.  An ecology of rationalizations has grown around that idea, from “executives have a really stressful and important job”, to “entrepreneurs take risks”, to “rich people work hard and poor people are lazy” (that one was actually well-developed by the 18th century).  However, even if we consider these excuses to be true, so what?  If one person is better or worse than another, it doesn’t mean we need to give one privileges over the other.

I think Hahnel likely understands that the rationalizations for the highly unequal distribution of wealth & power are false, that poor people are clearly not lazy, that lots of people have stressful and important jobs, and that lots of people take risks.  However, based on the structure of parecon: “As long as work requires people to make sacrifices, it is only fair that those who make greater sacrifices receive extra ‘consumption rights’ to compensate them for their extra sacrifice (p. 5)”, it doesn’t seem as though the next question has been considered.  Creating a system of privileges based on what’s actually stressful, risky, or difficult makes no more sense than the reverse.

We should be eliminating unempowering and undesirable work, not trying to make it up to the person or exalt those who toil.  The parecon system seeks to determine which jobs are worse than others, but rather than doing so out of the shared experience of different types of jobs, it creates a job rating bureaucracy: “we require worker councils to provide their members with what we called an ‘effort rating’ (p.5)” to determine which jobs should receive more privileges.  Hahnel notes that in order to prevent abuse, “councils must be capped in the average effort rating they award to their members.”  However, there is no objectively sufficient disparity in effort rating, and it’s not much of a stretch to imagine this being manipulated into yet another system of rule.

Though I am being critical of the idea thus far, I actually agree with most of what Hahnel has written so far.  That is, the social division of labor is a major problem, workplaces should be internally democratized, we should not impose balance on workers by an external bureaucracy (though I think this proposal fails in accomplishing that), and that balanced jobs do not eliminate specialization.  I agree with the main point of his next section, which is that consumption (which I prefer to call provision to leave behind the idea that we must consume to be fulfilled) should be organized to balance the conflict between the interests of producers and the interests of users, which are often diametrically opposed.

However, while Hahnel earlier noted the impracticality of having people rotate through every job, he does not see the impracticality his proposal for measuring consumption, where every household creates an itemized request for everything they want ahead of time. People are not very capable of knowing how they’ll feel in the future; people get buyer’s remorse often, they overestimate how much they want, and so on.  There is also nothing specific on how often this is done.  I’m going to give Hahnel the benefit of the doubt and assume that the year-long period that he mentions in the next section does not apply to this case.  But even when we buy groceries for just the week, we end up taking much more than we can consume (much of this, I think is also because of portion sizing).  Basing the system of provision on people doing this, I think, is a poor idea.

In my view, there is nothing fundamentally wrong with the retail store, other than problems caused by its use as an instrument of capitalism.  The store is a fine place to track consumption, because it both allows people to access goods on demand, simplifies distribution to a neighborhood, and centralizes the point of data collection so that all is required is to verify each delivery’s bill of items, to add it to the store’s inventory and to take periodic inventory of the store to track provision to users.  As long as the data from stores, or the warehouses that distribute to them, or both, is open access, then workers councils will be able to query that data to find out how much of their particular specialty they need to produce.  On the other hand, we should avoid centralizing important resources and making it easier for someone to take control of the stores in order to dominate.

The details in the “Participatory Planning” section are where Hahnel really starts to lose me.  First, an annual planning procedure to decide which worker councils get which resources for which ends seems to me like an ineffective way to decide how to provision resources.  For one, plans can change substantially inside of a year; two, depending on how large each administrative region is, it could take months just to resolve all the conflicts between different worker’s councils, and those resolutions could too easily involve compromises and concessions that undermine the ability of those councils to succeed (in other words, rather than two councils’ conflict being resolved by one deferring to the other, each could claim less than the full amount and then both fail).  I think this latter possibility becomes much more probable on a longer timescale.

Then we start getting into measurements.  Hahnel writes:

There is an ‘iteration facilitation board’ (IFB) that performs one, very simple function: at the beginning of each round, or iteration, the IFB announces current estimates of the opportunity cost of using each kind of capital  (natural, produced, and human), the social cost of producing every good and service, the damage caused by every pollutant, and the social benefits of each consumption good and service.

For something that was introduced as a “very simple function”, that is a very tall order.  One board (made up of whom?) has to know the following:

  1. The opportunity cost of each kind of capital—First, how are we measuring opportunity cost?  Opportunity cost is a rather abstract concept in economics, defined basically as the benefit foregone by choosing one use of resources over the other possible uses.  How are we measuring “benefit”?  Liberal economists generally conceive of it as “utility”, but again, that is not something we can measure; it’s an abstract, subjective quality.
    Second, this may seem nit-picky, but there is only one kind of capital, and it’s financial.  It is not means of production, and means of production are not capital.  “Natural capital” is, in other words, living systems, and that is not something that we should treat as mere capital in aggregate for human exploitation.  “Produced capital” is better referred to as industry or technomass.  “Human capital”should instead be conceived of as fulfilled humans, because again, it is not something we should treat as mere capital for exploitation.  None of these things are capital—they are capitalized, if and only if they are involved in capitalist business.
  2. The social cost of producing every good and service—While it is important to have a strong understanding of the costs of production, this is not a figure that should be estimated by a board.  This is something that will have to be measured by a coalition of industry and research science.  Workers will know what materials they are using, what processes they are using, and generally what the outputs of those processes are, and for the unknowns there, we need researchers to continuously test these figures and improve upon them.  While the outcome will not exactly capture every output, it will be far more akin to measurement than estimation.
  3. The damage caused by every pollutant—This seems to be just a repetition of the previous item, and I will just reiterate my previous point for this one.
  4. The social benefits of each consumption good and service—So, again, this is really not much different from measuring the opportunity cost of each kind of capital since (according to the framework being used by Hahnel) capital has value depending on what it produces in the end.  The first criticism on point one applies here, too—how exactly are we supposed to measure “benefit”?

I am no proponent of “the knowledge problem,” the idea that central planning is impossible, and have long, unpublished rants on the economic calculation problem.  In this case, though, I have to admit that they have an economic calculation problem.  Not, of course, because logistical planning is impossible without money, but because parecon seemingly embraces the abstractions of capitalist logic, such as capital, opportunity cost, a nonexistent utilitarian unit (the “util” as Nitzan puts it in Capital as Power), and a homogeneous “unit of account”.  These things, which would difficult for a central body to estimate in a capitalist system are impossible to estimate outside of it, because they cannot exist outside of it.

Opportunity cost, for example, can exist within capitalism, as a probabilistic measure, calculated in terms of money cost and money revenue—if this risky investment pans out but I chose the safe one, how much would that cost me?  Once you put down the tools of capital, however, what is there to measure this in?  There are a scarce few instances where this sort of competitive, utilitarian calculation can actually take place thanks to shared input/output units—such as energy and time.  More importantly, does this concept even make sense?  It seems to me an argument against reallocation or evolution—that imperfect choices “cost” something.  What’s more important is that we continue taking steps and making improvements, and not that we only make optimal choices.

The confines of economic thinking are further reflected in the next passage:

Consumption council proposals are evaluated by multiplying the quantity of every good or service requested by the estimated social cost of producing a unit of the good or service and summing.  This result is compared to the average effort rating plus allowances of the members of the consumption council or federation requesting the goods and services.  A neighborhood council whose members have higher than average effort ratings–indicating that they made greater than average sacrifices as workers–is entitled to a consumption bundle which costs society more than the average.

Aggregating individual requests will not get anything but the most approximate cost.  It makes seemingly no attempt to look at ways that requests to many goods or services could be reduced to fewer goods or services by sharing or servicizing them, and with “effort rating” helping to dictate a system of consumption privileges, there is an implicit punishment in doing so.  There is an attempt to avoid this by using an average effort rating.  However, it seems to me that either way, the bureaucratic metric of effort rating is exploitable, and the system of privileges that it controls provides a good reason to go through with exploiting it.  This very outcome is prevalent today; most of our immediate needs are fulfilled by commodities that we individually own, and not by services or shared resources.

As I said at the beginning, there is a lot of this article that I agree with.  The next section explores some of the social theory behind the parecon planning procedure:

When worker councils make proposals they are asking permission to use particular parts of productive resources that belong to everyone. […] When consumer councils make proposals they are asking permission to consume goods and services whose production entails social costs.

Parecon is clearly against private property and incorporates the basic thrust of Marxism.  It is not against free associations using means of production/industry/technomass—”initial self-activity proposals, and all revisions of proposals, are entirely up to each worker and consumer council”—as long as it’s clear that use is not the same as ownership.  Earth’s resources, human knowledge, and the social wealth—the infrastructure and technomass built collaboratively over generations and by countless and mostly anonymous people—cannot be justifiably owned by individuals.  It is clearly evident that this results in exploitation and the wielding of power over others.  We have known this for more than a century thanks to Marx and other early socialist and anarchist thinkers.  History, in fact, is full of examples of tyranny whose basis is control over our necessities, our food, water, shelter, cropfields, and so on.

Parecon is clearly against considering social costs as mere “externalities” as liberal economists do.  People should not be completely free to to anything, even things that have a socially harmful effect.  Social costs tend to remain unnoticed.  Even though people today know that common activities such as driving, shopping, and eating meat have incredible social costs like climate change, massive waste and resource exploitation, wars, slavery, disease, and unconscionable treatment of other living things, a price tag makes you think of none of those things.  We should be limiting both producers and consumers on engaging in any of those unequivocally harmful practices.  A society where we are free to harm others quickly turns into a society where the strong dominate the weak.  In any type of social interaction, we always need to ensure that all parties maintain their own existence and liberty.

In addition to the limitations placed on people living in parecon society, there are obligations as well:

“In effect [the worker councils’] proposals say: “If the rest of you, with whom we are engaged in a cooperative division of labor, agree to allow us to use productive resources belonging to all of us as inputs then we promise to deliver the following goods and services as outputs for others to use.”

The vast majority of people in modern societies believe that each person should have an obligation to help care for the rest.  In liberal society, most of us believe that paying taxes is one of those duties, because taxes fund social programs that are necessary to have a fair and just society.  In the past, we have had duties to others in our society that do not relate to paying taxes, such as the obligations in feudal societies stemming from one’s place in the feudal order.  In Murray Bookchin’s anthropology of rule (from The Ecology of Freedom), he notes that one of the earliest forms of rule, gerontocracy, may have come about as a result of the (usually very justifiable) fear of abandonment by their kin in times of scarcity.  Non-hierarchical duties to the old, frail, and so forth, can prevent systems of rule from arising, and the abolition of scarcity is necessary to secure that lack of rule.

Hahnel understands the exploitative nature of contractual employment.  While parecon still has a form of payment, it does try as hard as possible to eliminate exploitation.  Contractual employment is inherently exploitative for various reasons, but primarily because employers are in a far superior bargaining position than employees.  As a result, the conditions of employment will nearly always be in the employer’s favor.  Hahnel notes that in parecon, “nobody’s pay can be determined in advance at the time of hiring.  Pay is determined only after work has been done by the effort rating workers receive from their co-workers.”  I still think any system of privileges will result in exploitation, but this method would certainly seem to be less exploitative thanks to its democratic and empirical basis.

Hahnel also has some understanding of social ecology.  While there is not really much in the parecon structure to really address ecological concerns (for example, I favor absolute limits on extraction based on ecological health, but Hahnel does not seem to), he notes that “an egalitarian distribution of wealth and income means nobody will be so poor and desperate that they cannot afford to prioritize environmental preservation over material consumption.”  The connection between poverty, slavery, and environmental destruction is very strong.  The elimination of relative social strata will also have an effect on environmental destruction.

The article supports foreign trade but is critical of the common form of foreign trade which primarily serves to plunder weaker regions.  Hahnel notes the importance of trade, a lack of which is often a limiting factor on the growth of a new society.  However, he also acknowledges the relative differences in development that a parecon society might have from its trading partner.  In the case of the parecon society being less developed, it should be “fighting for the most favorable terms it can secure.”  In the other case, however, it should negotiate terms that distribute more than half of the benefit from the trade to the less-developed trading partner.

As he discusses trade in the context of parecon, Hahnel raises a question that was previously addressed by transferics and VIAAC theory:

Supporters of participatory economics differ from many who preach the virtues of localism in that we are agnostic with regard to how self-sufficient versus how integrated different geographical areas should be.  There is no doubt that often more internal diversification and self-sufficiency would move us in the right direction?  But the question is how much more self-sufficient should economies become?

First, we need to understand why we are asking this question.  This will reveal the underlying values we are aiming for in determining or achieving an “appropriate” amount of self-sufficiency.  In any case, closeability is the concept we should use to answer this question.  To briefly explain the concept of closeability, it is the ability for a community to continue functioning undisturbed when closed off from outside inputs or outputs.

We want to achieve a certain level of closeability, the character of which depends on the underlying values, and those values will certainly differ from one community to another.  Part of this answer will also require other communities making their own values clear.  In order for these appropriate levels of closeability to be achieved, each community needs to understand what to expect of the others.

One of the most likely values that underlie the desire for closeability is the basic sense of independence that individualists want.  Some simply prefer not to have to rely on others for anything.  In this case, we would want complete closeability; complete closeability is the simplest form, which assumes that if inputs/outputs are lost, they are lost completely and suddenly.  A completely closable community would have the ability to provide everything for itself at any time, and only engages with other communities for the gains in industrial efficiency that they could achieve.

Complete closeability can be made slightly less ambitious by restricting which part of its consumption it considers necessary to carry on.  If the loss of all or certain luxuries is considered acceptable in the closed state, then the requirements for achieving the proper level of closeability are substantially reduced.  This would be appropriate for communities that engage with other communities in order to improve their general quality of life by obtaining luxuries that they cannot or will not produce themselves.

There are also those who want to engage with other communities in order to secure their own existence.  In other words, part of the benefit of being part of a larger community is the reduction of social risk.  In this case, we would need to use more probabilistic methods in determining appropriate self-sufficiency.  An appropriate level of risk should be identified; this will determine the level of outside support we expect to give or receive in a disaster event.  Total risk aversion would be complete closeability–the assumption that no level of risk is appropriate and we should treat closure as a complete and sudden occurrence.  If we assume an appropriate level of risk, we will be trying to achieve partial closeability.

Note, that I say “sudden” because there is a time dimension to consider, as well.  If a community has stored food and water, that gives it time to either ramp up production, help the damaged/lost “other” community, or at least wait out the crisis until things return to normal.  If we incorporate a time delay into our goal, we will be trying to achieve pseudo closeability.  If we incorporate both a time delay and probability, we are aiming for incomplete closeability.  Again, none of these are objectively correct or incorrect.  They are entirely based on the values of the community seeking to achieve any of these goals.

Participatory economics is certainly an incomplete idea, much like any other proposed alternate political economy.  However, its core principles represent a good synthesis of a wide range of ideas from Marxism to social ecology.  It has its ideological problems, specifically its embrace of privilege and bureaucracy that reflect its American origins.  It also has its practical problems, a need for quantities that are impossible to measure, owing to the dominance of liberal and utilitarian views in economics.  Despite these issues, a parecon society would be a major step in the right direction in terms of social change.

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