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Participatory Economics: An Alternative to Capitalism

(The following article was first published in Metro India, an English daily newspaper from Hyderabad, on April 21, 2014, and is being reproduced here with their kind permission)

Participatory economics, often abbreviated parecon, is a system for organizing the economic activity and is proposed as an alternative to capitalism. At the same time it is also quite different from any centrally planned socialism. It was proposed principally by activist and political theorist Michael Albert and radical economist Robin Hahnel. The decision-making principle on which it is based, referred to as self-management, is that all persons should have a say in decisions proportionate to the degree to which they are affected by them.
 
To accomplish self-management we need to adopt different decision criteria depending on the situation – dictatorial in one case, majority vote in some, and consensus in others. For instance, the decision about whether or not to put up one’s family photo on one’s desk should be left to that individual, whereas the decision to play or not loud music at work cannot be so decided.
 
In addition to self-management, the other values on which parecon is based are equity, solidarity and diversity. Equity refers to the remuneration we get paid for our work. The norm is that we should get compensated fairly in comparison to others. Solidarity refers to the fellow-feeling and the benefit we receive in concert with one another in contradistinction to mutual opposition and trampling upon one another. Diversity is about the heterogeneity and range of options we have at our disposal.
 
Any economic system has to make decisions on production, consumption and allocation of resources. Parecon tries to achieve these goals without sacrificing the aforesaid four values. The economic institutions/principles in it are workers’ and consumers’ councils, balanced job complexes, remuneration for effort and sacrifice, and participatory planning.
 
Workers and consumers councils, using self-managerial methods for decision-making, make decisions on production and consumption and what resources to use in the best interests of their community. There will be nested councils all the way to the top for each level of community, for example, local, district-level, state-level and national.
 
Balanced job complexes tries to do away with the conventional division of labour and job parceling that empowers only those at the top. Those lower down in the hierarchy tend to do rote and tedious work without any say in the decision-making about matters that affect them in the workplace. Thus we have two classes of workers – the professional and managerial class (“coordinator class”) and working class. Balanced job complexes leads to an egalitarian and classless workplace by rotating people through different jobs and tasks at the workplace, with workers being suitably educated and trained for those roles. Thus, everyone is empowered not only with regard to work they do but also with regard to decision-making.
 
Remuneration is based on effort and sacrifice. We get paid for how long we work, for how hard we work, and also for how burdensome, tedious and risky the work is that we do. In the current capitalist system, the remuneration is based on the property or capital we own, the power we hold in the hierarchy, or the output we generate at work, which in turn is determined to a great extent by birth and heredity or genetic lottery.
 
Allocation decisions are achieved in parecon via “participatory planning” and not through markets as in capitalism or through central planning as in traditional socialism or communism. Workers and consumers propose their production and consumption plans through workers and consumers councils and federations, which get relayed to an Iteration Facilitation Board (IFB), which revises its “indicative prices” and it goes through a further relay of information back and forth and iteration till equilibrium is reached.  
 
While there are some criticisms of parecon, this novel model needs to be discussed in depth to see how we can adopt its broad principles. Though broached in the 1970s and 80s, parecon has assumed greater relevance now in the backdrop of the recent 2008 financial meltdown, which has exposed the chinks in the armour of the capitalist system and its unjust ways.