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Participatory economics, often abbreviated parecon, is a economic system proposed by activist and political theorist Michael Albert and radical economist Robin Hahnel. It uses participatory decision making as an economic mechanism to guide the production, consumption and allocation of resources in a given society. Proposed as an alternative to contemporary capitalist market economies and also an alternative to centrally planned socialism or coordinatorism, it is described as "an anarchistic economic vision", and it could be considered a form of socialism as under parecon, the means of production are owned by the workers.
The underlying values that parecon seeks to implement are equity, solidarity, diversity, workers' self-management and efficiency. (Efficiency here means accomplishing goals without wasting valued assets.) It proposes to attain these ends mainly through the following principles and institutions:
- workers' and consumers' councils utilizing self-managerial methods for decision making,
- balanced job complexes,
- remuneration according to effort and sacrifice, and
- participatory planning.
Albert and Hahnel stress that parecon is only meant to address an alternative economic theory and must be accompanied by equally important alternative visions in the fields of politics, culture and kinship. The authors have also discussed elements of anarchism in the field of politics, polyculturalism in the field of culture, and feminism in the field of family and gender relations as being possible foundations for future alternative visions in these other spheres of society. Stephen R. Shalom has begun work on a participatory political vision he calls "parpolity".
Institutional framework of participatory economics
One of the primary propositions of parecon is that all persons should have a say in each decision proportionate to the degree to which they are affected by it. This decision-making principle is often referred to as self-management. In parecon, it constitutes a replacement for the mainstream economic conception of economic freedom, which Albert and Hahnel argue that by its very vagueness has allowed it to be abused by capitalist ideologues.
Consumers' and producers' councils
Albert and Hahnel proposed the creation and organization of consumer's and producers' councils to implement the decision making principle. Many individuals would participate in both types of councils. These would be the similar to workers' councils.
Geographically, these councils would probably be nested with neighborhood councils, ward councils, city or regional councils and a country council. Decisions would be achieved either through consensus decision-making, majority votes or through other means compatible with the principle. The most appropriate method would be decided on by each council.
Local decisions like the construction of a playground might be made in the ward or city consumers' council, probably interacting with both city and countrywide producers' councils. Countrywide decisions, like the construction of a high-speed mass transportation system, would be discussed by the country consumers' council, possibly interacting with a city producers' council in the city where the materials are produced, or countrywide or international producers' councils.
The producers' councils would probably correspond to workplace councils in each workplace and similar workplaces would group into nested councils on successively larger geographical and linguistic scales.
Compensation for effort and sacrifice
Albert and Hahnel argue that it is inequitable and ineffective to compensate people on the basis of their birth or heredity, their property, or their innate intelligence. Therefore, the primary principle of participatory economics is to reward for effort and sacrifice. For example, mining work — which is dangerous and uncomfortable — would be more highly paid than office work for the same amount of time, thus allowing the miner to work fewer hours for the same pay, and the burden of highly dangerous and strenuous jobs to be shared among the populace.
Additionally, participatory economics could provide a certain leeway for exemptions from the compensation for effort principle. It was suggested that people with disabilities who are unable to work, children, the elderly, the infirm and workers who are legitimately in transitional circumstances, can be remunerated according to need. However, every able adult has the obligation to perform some socially useful work as a requirement for receiving reward, albeit in the context of a society providing free health care, education, skills training, and the freedom to choose between various democratically structured workplaces with jobs balanced for desirability and empowerment.
The starting point for the income of all workers in participatory economics is an equal share of the social product. From this point, incomes for private expenditures and consumption rights for public goods can be expected to diverge by small degrees reflecting the choices that individual workers make in striking a balance between work and leisure time, and reflecting the level of dangerous and strenuous of a job as assigned by their immediate peers.
Money in a Participatory Economy
It was proposed that instead the money would be used differently in a Participatory Economics system. Electronic "credits" would be awarded to workers for their work, as a means of saying that this worker benefited society with their work. The more effort and sacrifice, the more credits are awarded. Credits would then be used to buy goods and services. Once used to purchase something, a credit would be deducted from the consumer's total. Workers would have to work more to get more credits. Albert and Hahnel have proposed that neither banks nor retail stores should receive their compensation by taking a portion of a sale or charging a fee. In that way, there would be no flow of money.
Credits could not be given to someone else in exchange for anything. They would only be redeemable at a parecon store or other sort of vendor. This makes it impossible to bribe or even beg for money. People would still be free to barter their individual goods with each other, e.g. exchange a couch for a stereo, but any attempt to create an exchangeable currency would be discouraged, as this might lead to attempts to reinstate capitalism. Credits might be shareable amongst family members, depending on how the parecon is set up. A lost or stolen card that identified how many credits a worker might have would not be usable by another person, presumably there would be means to verify the identity of a citizen at shopping centers.
Albert and Hahnel did not clarify how a currency of this form would be used in international trading with non-parecon countries.
Economic planning — feedbacks and successive iterations
Albert and Hahnel suggested the creation of Iteration Facilitation Board (IFB), which would set indicative prices based on previous year's economic results. These prices would represent the estimated marginal social opportunity cost for all final goods and services, capital goods, natural resources, and categories of labor. Using these prices as a guide, citizens would respond with their private consumption proposals, and participate in the formulation of collective consumption proposals at the neighborhood, ward, municipal, and federation levels. At the same time, worker's councils, industry councils and production federations would respond with production proposals outlining the outputs they propose to produce and the inputs they believe are required to produce them.
Facilitation boards would then calculate excess supply and demand based on the proposals, adjusting the indicative price for each final good or service, capital good, natural resource, or category of labour accordingly. Using the new indicative prices, consumer and workers' councils and federations would revise and resubmit their proposals. Individual worker and consumer councils would continue to revise proposals until they submit one that is accepted by the other councils.
Iterations would continue according to some predefined method which is likely to converge within an acceptable time delay. A feasible plan for the economy is attained when there is no longer excess demand for any goods, any categories of labor, any primary inputs, or any capital stocks.
The facilitation boards should function according to a maximum level of radical transparency and only have very limited powers of mediation, subject to the discretion of the participating councils. The real decisions regarding the formulation and implementation of the plan are to be made in the consumers' and producers' councils.
Some tasks and jobs are more comfortable than others, and some tasks are more empowering than others. So, to achieve an equitable division of labour, it is proposed that every worker must do different tasks, which, taken together, bring an average comfort and an average empowerment.
For example, someone who works in a facilitation board for one year might then have to work in a steel plant, or in another uncomfortable workplace of his or her choice, for a year, or else would not get a higher salary than the standard for everyone. This assures that no class of coordinators can develop.
Advocates of parecon say the intention is that the four main ingredients of parecon be implemented with a minimum of hierarchy and a maximum of transparency in all discussions and decision making. This model is designed to eliminate secrecy in economic decision making, and instead encourage friendly cooperation and mutual support.
Although parecon falls under left-wing political tradition, it is designed to avoid the creation of powerful intellectual elites or coordinatorism, which is perceived as the major problem of the economies of the communist states of the 20th century.