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Maximising Economic Democracy and Justice in a Real-World Economy

There are different views on the meaning of the terms economic democracy and economic justice, which aspects of the concepts that should be emphasised, and how they can and should be achieved in a real-world economy.

According to one broad definition, economic democracy is about “… the citizens’ ability to influence economic developments in general or the economic decisions of their own workplace”. Some believe that this can and should be achieved within the framework and institutions of capitalism i.e. private ownership and markets, by making employees and sometimes also citizens in general, shareholders of corporations, for example via Employee Stock Ownership Plans (ESOPs) and other similar tools. The term “inclusive capitalism” is sometimes used in this context. Such a version of economic democracy can often be embraced also by politicians on the right of the political spectrum.

Others want to go further and advocate different forms of market socialism, where capital and productive resources are owned and planned collectively within companies or by public bodies, but where goods and services are still priced and allocated through markets. In this case, the companies are normally controlled by the workers, even if other community stakeholders may be represented on a company’s board.

Others still, especially supporters of an economic model called participatory economics, believe that economic democracy cannot be reconciled with either private ownership of productive resources or markets. They believe that economic democracy should be defined as a situation where a person’s or group’s influence over a decision reflects the degree to which that person or group is affected by the outcome of the decision. This is also often referred to as self-management. To achieve this version of economic democracy, the main actors in a participatory economy are the workers and consumers in their self-managed worker councils and consumer councils. The market is replaced by a democratic decentralised planning procedure in which both consumers and producers through their councils and federations participate in the creation of production and consumption plans via a number of proposal rounds. Information is generated in a way that more accurately reflect the impacts of choices on other actors in society, rather than only the direct impact to individual buyers and sellers, as is the case in market economies.

Democratic decision making

In a self-managed workplace in a participatory economy, all workers belong to a worker council in which each member has one vote. The worker council is the highest decision-making body of the workplace and is the equivalent to the General Meeting in a limited liability company, where all shareholders are represented. The worker councils may form federations at different industry levels to deal with issues affecting multiple workplaces and wider issues affecting the industry; they can also delegate decision-making downwards to smaller teams of workers inside their workplaces, and implement various majority rules for different types of decisions, in order to promote self-management.

However, a formal democratic influence in a workplace where each member has one vote does not necessarily mean that all members have the same prerequisites for participation in the decision-making process of the worker council. Workers whose daily tasks mostly involve planning, analysing, negotiating, etc. necessarily develop a greater ability, knowledge and greater self-confidence to present, evaluate and argue for or against proposals in meetings compared to members whose daily tasks mainly consist of performing monotonous and menial tasks that others have designed and supervise. Therefore, in a participatory economy, the workplaces are expected, to the extent possible, to bundle together the necessary work tasks into so called balanced jobs, which each on average contain a similar set of both empowering and more menial and tedious tasks. To the extent that each job is balanced in this way, members get reasonably similar opportunities to participate in the workplace’s decision making.

Economic justice

Economic justice is about income distribution, i.e. how access to society’s produced goods and services should be shared among citizens. Today many, even on the left, accept or even aim for an income distribution, which in theory is based on one’s contribution to production, with some complementary need-based consumption. The more productive one’s work and/or capital is, the greater the income one is entitled to according to this principle, though some on the left question that ownership of capital should be eligible for income. Wages that are set and determined in labour markets are expected, at least in theory, to comply with this “productivity principle”. In reality, however, the distribution of income primarily depends on the bargaining power of workers and not solely on their productivity, though the latter may certainly affect bargaining power.

Advocates of the participatory economics model, on the other hand, believe that income, to be fair, should be based only on factors that one can affect: in principle, effort and sacrifice in the form of longer working hours, higher work intensity or more dangerous tasks in performing socially useful tasks. The worker councils in a participatory economy are therefore expected to design and establish procedures to assess members’ efforts and sacrifices at work. These assessments then form the basis for the distribution of the members’ income among themselves.

Practical issues with job balancing and effort rating

The high ambitions of participatory economics regarding economic democracy and economic justice have sometimes been met with scepticism. The objections have often not been primarily about the logic but rather the feasibility, for example the possibility to implement balanced jobs and effort grading in a fair and efficient manner in a real-world economy. As just one example, in the book Alternatives to Capitalism. Proposals for a Democratic Economy, Erik Olin Wright, while agreeing in principle with the ideals of balanced jobs and remuneration based on effort and sacrifice, expresses concerns regarding “the practical implementation of the ideals”.

Robin Hahnel, one of the co-creators of the participatory economics model, responds to these concerns in the same book. He summarises the potential problems: ”As I see it there are two practical problems: (1) there will be people in a participatory economy who disagree with the principles. What does one do when workers in an enterprise want to reward contribution rather than effort? What does one do when workers in an enterprise don’t want to balance jobs (2) Even if everyone did agree on balancing jobs and rewarding effort, sometimes it will be difficult to accomplish because effort, empowerment, and/or desirability can be difficult to measure”.

He then goes on to clarify the participatory economics stand: “Regarding the first problem, supporters of Participatory Economics recommend that workers councils try to balance jobs and reward effort as best they can, taking practical obstacles into account (…) we would oppose any proposals authorizing anyone outside a workplace to impose these policies on a workplace where a majority of members did not wish to implement them (…) as long as every worker in a worker council has one vote, I believe each worker council should be permitted to decide how to organize work and how to reward one another as they see fit.”

Note, first of all, that in a real-world participatory economy, it is the worker councils, in which every member has one vote that will be ultimately responsible for 1) delegating decision making and deciding on different majority rules, 2) creating procedures for balancing jobs and 3) creating effort rating procedures. Different worker councils will approach these tasks in different ways and with different levels of ambition, which is fine, but what happens if a majority of the members of a worker council wants to reward productivity instead of effort, or do not want to balance jobs?

Hahnel argues that the implementation of job balancing and effort rating procedures ​​in reluctant workplaces will require two necessary activities. First, workers supporting these institutions must, in their workplaces, discuss with their co-workers convincing them of the benefits for everybody of balanced jobs and compensation based on efforts and sacrifices compared to hierarchical job divisions and income based on productivity or bargaining power. Secondly, the political groups in society as a whole supporting economic democracy and justice must continuously pursue hard and determined campaigns for these issues. These campaigns should form a constant background to efforts and discussions in the workplaces. Beyond these efforts, though, any attempts to introduce balanced jobs and effort rating procedures in workplaces with a majority of opposing workers will be counterproductive.

As to the second question, it is obvious that sometimes in some circumstances and to varying degrees it will be difficult to measure and assess efforts and sacrifices of co-workers, and the empowerment and desirability of work tasks, although these difficulties are often exaggerated. However, as long as one accepts the fact that estimates of this kind will always be approximations and not expressions of absolute truths, this does not pose a problem or a threat to the validity of the model. It is always possible to make and improve estimations, although it may be impossible to achieve perfection.

Participatory planning

As mentioned, the allocation of society’s common resources in a participatory economy happens through a democratic planning procedure. The self-management of worker councils does not, of course, include a freedom to evade the participatory planning procedure and go on to produce for a market with the sole aim of maximizing profits. The planning procedure is “hardwired” into a participatory economy, and workplaces have no choice but to participate in it if they want to continue their production since there is no other way to get access to productive resources than through the planning procedure.

The participatory planning model has been criticized primarily for the demands it imposes on consumers to plan and announce their consumption preferences for the upcoming year, which many consider to be unrealistic. Consumers and producers no doubt have different needs and requirements as to how detailed the planning should be. Consumers want as few as possible coarse categories of goods and services to consider when planning their consumption, while producers need a more detailed categorisation to plan their production. Furthermore, it must be possible for consumers to prepare their consumption proposals in a way that is not too detailed, cumbersome and time consuming, and the planning process must also be able to handle the consumption of consumers who refuse to prepare and submit consumption plans.

The requirements and demands on an allocation mechanism that is to replace the market will be extensive but by no means insurmountable. There exist already today detailed suggestions for a number of tools and routines that manage and provide solutions to the needs identified above and many others, for example in the previously mentioned book Alternatives to Capitalism and in the book Anarchist accounting – Accounting principles for a participatory economy. A detailed presentation of the complete participatory economics model, including a FAQ section that addresses many concerns, can be found at www.participatoryeconomics.info.

If our desires for true economic democracy and justice are sincere we should always be willing to discuss in a non-dogmatic and open way, potential problems, and their solutions, when considering possible implementations of the necessary institutions in a real-world setting. Our aim should be the best possible approximations of our ideals while acknowledging that the implementation of ideals and institutions in a real-world economy will never look exactly the same as the presentation of the same ideals and institutions in theoretical economic models. We believe this discussion is essential for the sake of the credibility of our goals: the implementation of true economic democracy and justice and an economy based on cooperation and solidarity instead of today’s capitalism that is based on competition and greed.

Anders Sandström lives in Stockholm, Sweden, and is a trained accountant with a degree from Uppsala University. He is the cofounder of Parecon Sverige, an advocacy group for the economic model of participatory economics in Sweden and the author of “Anarchist Accounting: Accounting Principles for a Participatory Economy.”

Jason Chrysostomou lives and works in London. He is a member and co-founder of Participatory Economics UK, an advocacy group based in the UK.

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