An Introduction to Participatory Economics

I have never heard of participatory economics before. What is it?

Participatory economics, or parecon for short, is a new way for a society to organize its economic activity. In the United States, our economy is currently organized under a capitalist model. In the old Soviet Union, economic activity was organized using what is commonly referred to as socialism.

Parecon, however, is neither capitalism nor socialism. Both of those economic models are classist. That is, in both capitalism as well as socialism, working-class people have little-to-no say over their workplaces and generally follow orders given to them by others. Unlike capitalism and socialism, parecon is classless. In a parecon, workers manage their own affairs.

How is that possible?

A full answer to this question requires detailing the entire parecon model. However, to help you see the believability of the claim, let me first just highlight one aspect of parecon. It’s not the only aspect worth highlighting, but it is one of the most important. It’s called the “balanced job complex.” You most likely have never heard of a balanced job complex, or BJC, before. But it is one of parecon’s most important facets, and one of the biggest drivers of parecon’s classlessness.

See, every workplace is just a set of tasks. Tasks are bundled to create jobs. In both capitalist as well as socialist workplaces, particular types of tasks are bundled to create particular types of jobs. So, for example, cleaning-type tasks are bundled to create the job of janitor. Filing- and reception-type tasks are bundled to create the job of secretary. And decision-making tasks are bundled to create the job of manager.

As a result, capitalist workplaces and socialist workplaces are virtually indistinguishable. If you were a worker in a U.S. Ford factory in Detroit, and you were suddenly transported to a Soviet Lada plant in Moscow, you would probably not be able to tell the difference based on the nature of the work alone. Yes, there would be obvious language differences, cultural difference, and so on. But just based on the nature of the job itself, you most likely would not know which plant you were in unless somebody told you.

Those tasks that are bundled to create jobs like janitor, secretary, or manager don’t have to be bundled that way. We could just as easily re-apportion the tasks so that everyone has to do their fair share of unpleasant or undesirable work, and so that everyone gets to do some of the more empowering work.

This is the essence of a BJC. There is a bit more that actually needs to be said about BJCs, but for now, I just want to try to convince you that classlessness is possible. Most working-class people are very cynical, and justifiably so. But my claim is that classlessness is possible, and that parecon is in fact a classless model. Balanced job complexes are one of the first things to understand when assessing these claims.

Okay, wait a minute. You’re telling me that jobs in a parecon are fundamentally different than jobs in either capitalism or socialism? You’re telling me there’s a different division of labor?

Yes. Both capitalists as well as socialists organize their workplaces in the same fundamental way. They both take the tasks that are disempowering, unpleasant, rote, onerous, or perhaps even dangerous, and they bundle those tasks to create jobs that typify their workplaces. Then they skim off the creamy tasks and bundle them to create jobs like manager, lawyer, doctor, and engineer.

See, this unequal division of labor gives rise to a class of workers that socialists never tell you about: the coordinator class. In a capitalist economy, workplaces are privately owned by a class of people commonly referred to as capitalists (or sometimes simply owners). And people like janitors, secretaries, assembly-line workers, and the like are referred to as the working class (or sometimes simply workers). It’s true that capitalists and workers comprise two possible classes in an economy.

But there is a third class possible in an economy, the coordinator class. Coordinators are those people who do not own the workplaces, but who run the workplaces. Members of the coordinator class typically have a great deal of say over their own working conditions, as well as the conditions of working-class people below them. As a rough estimate, the working class makes up maybe 80% of a capitalist economy, coordinators 18-20%, and capitalists 1-2%. Examples of the coordinator class include doctors, lawyers, managers, engineers, college professors, accountants, and architects.

Now, in socialist economies like the old Soviet Union, there were no capitalists. Soviet workplaces were owned publicly, not privately. But socialism was not (and still is not) a classless economic model. Why? The answer is because ownership of workplaces is not the only way class divisions economy can arise in an economy. Class divisions can also arise through an unequal and unfair distribution of labor.

The socialists rightly got rid of workplace ownership by private individuals. However, the socialists did not get rid of the unfair division of labor that gives rise to the coordinator class. That’s why the Soviet Union did not have a classless economy. It is this unfair division of labor that parecon corrects through the inclusion of balanced job complexes (as well as some other factors we still have to get to).

Despite what socialists claim, socialism has never been about the working class. Here’s one way you can think about it: Capitalism is the economic theory of the capitalist class; that is, capitalism is really all about the economic interests of the owning class. Socialism is the economic theory of the coordinator class; that is, socialism is really all about the economic interests of the coordinator class.

And participatory economics, which is a fairly new economic model, having been introduced in only 1991, is the economic theory of the working class.

Okay, having balanced job complexes is necessary to have a classless economy. Does that mean all we need to do is switch our workplaces over to BJCs to make the economy classless?

No. BJCs are necessary, but not sufficient, to guarantee a classless economy. If we really want to have an economy that is classless, we must also address the way resources are allocated. Let me explain what I mean.

Every economy has producers, and every economy has consumers. In addition, every economy has a mechanism for distributing resources among those producers and consumers. In the United States, the mechanism we currently use for resource allocation is called the market.

When I say market, I don’t mean the grocery store. I mean a mechanism where producers and consumers come together over and over again in roles as buyers and sellers of goods and services. So the way the market allocates resources is determined by the ways in which buyers buy and sellers sell.

For purposes of contrast, consider how resources were allocated in the Soviet Union. There, a group of bureaucrats called planners got together and simply decided how resources were going to be disbursed throughout the economy. The mechanism of allocation used in the U.S.S.R. was called central planning.

So markets and central planning are two ways that an economy has for resource allocation. It turns, though, that both markets as well as central planning impose class divisions on economies in which they are used. That is, even if we in the U.S. were to switch over our workplaces from the current division of labor to a division of labor utilizing BJCs, ultimately the market would re-impose class divisions back on us.

The reason for this is because firms in any market economy must compete in order to survive. For example, if GM moves its plants from Detroit to Mexico in order to take advantage of cheaper Mexican labor, then Ford must follow suit. If Ford does not follow suit, then GM will out-compete Ford, and then there will no longer be a Ford.

Similarly, suppose one firm switches to BJCs but another firm does not. Presumably, the firm utilizing BJCs will want its members to earn a living wage, have good benefits, and so on. (Some things really should be said about wages, prices, money, and so on. Unfortunately, I won’t get to that in this essay.) The non-BJC firm will likely not feel the same way.

We can already see in our market economy what happens as companies continually cut wages, slash benefits, outsource jobs, and eliminate permanent positions in favor of hiring temporary workers. Companies do this because the logic of a market economy demands that they do, otherwise they’ll be out-competed and then they’ll go out of business.

Even if a few firms switch to BJCs, if the mechanism of resource allocation used in the economy is still markets, these pressures on firms to compete or die will still exist. Indeed, even if literally every firm switches to BJCs, if market allocation is still the rule, then again, competition among firms will eventually force companies to abandon those BJCs in order to survive.

Simply put, markets are utterly incompatible with a classless economy. You can have a classless economy, or you can have a market-based economy. You can’t have both.

Centrally planned economies are also not classless, but for different reasons. Centrally planned economies are, by nature, highly authoritarian. Since planners make decisions about what happens in the economy, the only way those planners can ensure that their dictates are carried out is if the whole economy takes on a highly authoritarian cast.

That is, the planners aren’t interested in what workers or consumers think about their decisions. The planners only want obedience. Central planning demands obedience. If you’re a worker, and you have ideas about your firm could be run more efficiently, the planners aren’t interested. They’ve already decided. As a worker, your only job is to do as you’re told.

The upshot here is that, while BJCs are absolutely crucial in order that we may have a classless economy, so too is a new method of allocation also required.

Okay, so to have a classless economy, we need balanced job complexes. We also need a way to allocate resources that is neither markets nor central planning. So if we’ve eliminated markets and central planning from consideration, how then are we going to allocate resources?

We’re going to use a new method of allocation called participatory (or horizontal) planning. For the most part, we are all workers and consumers at the same time. That is, we have a role within the economy as a producer, and at the same time we also have a role within the economy as a consumer.

In our role as a producer, or worker, we make a proposal as to how much we wish to produce for the upcoming year. In our role as a consumer, we make a proposal as to how much we wish to consume for the upcoming year. In effect, we each make two lists: a “to-do” list, and a “wish” list.

We then tally both lists across society, generating economy-wide “to-do” and “wish” lists. Chances are exceedingly good that the overall wish list is longer than the overall to-do list. Before we’d be able to proceed, we’d need to bring the lists in line with one another.

So, based on the available information, producer and consumers make new proposals. Consumers reduce the levels of their requests, and workplaces increase what they propose to produce. Consumers and producers repeat these processes until “to-do” and “wish” lists are brought in line.

Please understand, I am leaving out some important details here. Allocation isn’t rocket science. But at the same time, it’s a little more complicated than I’m making it sound. I’m not trying to pull a fast one on you. I’m trying to give you just the bare essentials necessary for even believing a classless economy is possible. If you find yourself skeptical that what I’ve described is sufficient to properly explain allocation, that’s a good thing. You should be skeptical, because what I’ve described is not sufficient. I’m just trying to help you be a little less cynical than you probably (understandably) are when you hear me claim a classless economy is really possible.

Certainly, more can and should be said about allocation. But for now, the important point is that people, in their dual roles and workers and consumers, make proposals about what they wish to produce and consume. It might be worth noting that, at the same time people make these proposals, they are also proposing the length of their work week. I know that’s not obvious yet, but for right now I hope you are willing to accept that it might be true. Hey, when’s the last time anyone gave you any real control over how many hours you worked?

Okay, we have balanced job complexes, and we have a new way to allocate resources. I realize more needs to be said here, especially about allocation, later on. So I’m willing to reserve judgment for the time being until I hear more. But what about how much money I make? I mean, I get that I’m a consumer. But how do I know how much I can consume? Do some people get to consume more than me? What determines any of this?

The questions you are raising are important ones. I’d like to first introduce a new term here, one that I think will make it a little easier for us to talk about these issues. The term is “remuneration.” It’s a term that economists use. I hate to start tossing around $50 words, but I think in the long run it will make understanding this topic a little easier.

Your remuneration is the level of consumption you are entitled to. In today’s economy, what I’m calling remuneration is really just the size of your paycheck. If you make a lot of money, you’re someone who is highly remunerated. If you don’t, then you’re not.

But what is it in any economy that determines the extent to which a person is remunerated? That is, whether we’re talking about capitalism, socialism, or parecon, what determines how much anybody is entitled to consume?

Historically, what people have is what they can take. Bargaining power. Brute force. Whatever. If you’re a professional athlete, few people can do what you can do, so you’re able to command a lot of money. After all, if the organization doesn’t hire you, who else are they going to get who can throw a 95 mph fastball, or throw a football 60 yards downfield on a frozen rope?

Or suppose you’re a big corporation selling products made by Chinese prison labor. You’ve got smaller competitors trying to compete with you. So you just lower your prices to levels your competitors can’t match, wait for them to go under, and then you’ve got a monopoly and you can do whatever you want.

Vlad the Impaler would probably have appreciated a capitalist economy. The Harvard Business School certainly does.

But socialism, even though it is not the same as capitalism, isn’t hugely different either. Not if you’re looking up from the bottom, anyway. The planners sit in nice offices, make big and important decisions, then go home at the end of the day to nicer homes than what you live in (if you’re a Communist peon.) Maybe Soviet planners didn’t have the wealth that big U.S. capitalists have, but they weren’t fishing their meals out of trash cans, either.

Do any of these important people, in either the U.S. or the former Soviet Union, deserve to live so high on the hog? To ask is to answer. Okay, so how should people be remunerated?

Rather than people getting what they can take, parecon proposes something more fair: People should be remunerated based only on their own effort and sacrifice. So, for example, if someone is going underground and mining coal all day (an extremely dangerous job), while someone else is sitting behind a desk playing computer solitaire and occasionally reading important documents, who’s really expending more effort and sacrificing more?

Put another way, solely on the basis of effort and sacrifice, who deserves to be more highly remunerated: a doctor or a garbage collector? A lawyer or a janitor? An investment banker or a nurse aide? In an economy with jobs like we currently have in the U.S., if remuneration were for effort and sacrifice only, the wage scales we have would be completely reversed. Actors would not be commanding 25 million per picture, while others were working temporary jobs on assembly lines.

But a participatory economy would not have jobs like the U.S. does currently. In a parecon, everyone would work a balanced job complex. What this is means that, in terms of effort and sacrifice, everyone’s job complex would be comparable to everyone else’s job complex, across the entire economy.

Would job complexes ever be able to be perfectly balanced, like some mathematical equation? Of course not. But it is certainly possible to look at work tasks across the economy, assess them on the basis of effort and sacrifice, and re-group them into jobs which are comparable to each other on these bases.

How do we know this? Well, every company already does this, except in reverse. Currently, companies look at the tasks in their workplaces, and bundled the undesirable into unpleasant, low-paying jobs, while bundled the more desirable and pleasant tasks into empowering, high-paying jobs. But what can be made, in this case, can be just as easily unmade. And then re-made. We may not be able to undo gravity, but we can certainly undo (and redo) the way we do our work. Perfectly? No. But over time, there’s no question we can create work roles that come closer and closer to being balanced for effort and sacrifice.

So if everyone is working in a BJC, comparable to everyone else’s BJC, then effort and sacrifice can be measured largely, if not entirely, in terms of hours worked. In this system, if you work 25 hours a week, you’re entitled to a level of consumption which is higher than someone who works only 20 hours a week. If someone works 30, they’re entitled to more consumption than you.

Now, who decides the length of the work week? We all do, as part of the allocation process. When you propose a level of work and consumption for yourself, you are also implicitly proposing a number of hours per week you wish to work.

Think of production and consumption requests as two piles of stuff. You propose to produce a pile of stuff, and you propose to consume a pile of stuff. That pile of stuff you propose to produce is going to require a certain number of weekly work hours in order to produce it all. And that pile you propose to consume will, likewise, require a certain number of hours worked per week in order for it to be produced.

So, as part of the allocation process, if you want a really big pile of stuff, that’s okay. It just means that you are implicitly saying to everyone in the entire economy, “Here’s how many hours I think we should all work this year.” On the other hand, if you want to consume less, you are saying to the entire economy, “Here’s how many hours I think we should work this year. We won’t have as much stuff, but we’ll have more free time.”

As part of the allocation process, eventually society will settle on an overall consumption pile for the entire economy, and an overall production pile for everyone. Society will also be settling on an average work week for everyone — for purposes of example, let’s say 25 hours.

So everyone will work an average of 25 hours. But some people want more stuff, so some of them work 30 (or perhaps even more) hours per week. Other people don’t care about stuff, they’d rather have more time with family and friends. So they work only 20. But since everyone across the entire economy is working a balanced job complex, everyone’s overall effort and sacrifice can be measured largely (if not entirely) in terms of hours worked. So the length of your work week determines your level of remuneration in a parecon.

Okay, let me see if I have this straight: We all work a BJC, so everyone’s work situation is comparable to everyone else’s. The allocation process, which you are calling participatory planning, determines how much stuff the economy produces, and also how much we all work. But individually, some people might choose to work less or more, depending on their own individual preferences. And remuneration in a parecon is strictly for effort and sacrifice. But since the economy is built to take effort and sacrifice into account, the most important thing to measure here is simply hours worked. Surely there’s more though?

Of course there’s more. I’m not trying to give you the full picture of participatory economics. For that, you really do need to read Michael Albert’s Parecon: Life After Capitalism (Verso Press, 2003) — the definitive parecon text. I definitely can’t do justice to the subject in a presentation as short as this.

I only have one goal here: I’m trying to give you a reason to think that a classless economy is possible, and without you having to swim through a tome to believe it. There’s so much more that needs to be said. However, if you think that further investigation is worth your time, I recommend you read Albert’s book, or perhaps you might check out some of the other essays that have been written about parecon, which can be found on the internet at the parecon website.

Eric Patton lives in Cincinnati, Ohio. He can be reached via e-mail at: Read other articles by Eric, or visit Eric's website.

11 comments on this article so far ...

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  1. alan johnstone said on May 12th, 2007 at 12:32pm #

    “I have never heard of participatory economics before”
    Nor does it appear have you heard of “free access” socialism and appear to be confusing what is often described as “state capitalism” , which is public ownership and not common ownership . Socialism or communism ( Marx and many Socialists use the terms interchangeably . ) could be better described as “the free association of producers” .
    Trouble with Parecon is that it continues with prices and wages and money , instead of abolishing them all and Parcons counter arguments are just the acceptance of a variation of Von Mises Calculation Argument , that allocation of resources require prices , rather than the alternative , which would see production -for- use based on Calculation in Kind , physical real determinations based on peoples needs .
    State Capitalism may require central planning and a bureaucracy ( your co-ordinator class who had collective ownership and control just as the Catholic church had collective ownership of church property – no individual private ownership , but yet still based on the private property system . ) but real socialism is a self regulating decentralised inter-linked system to provide for a self sustaining steady state society.

    And regard your BJCs was it not Marx who advocated a society-
    “… in communist society, where nobody has one exclusive sphere of activity but each can become accomplished in any branch he wishes, society regulates the general production and thus makes it possible for me to do one thing today and another tomorrow, to hunt in the morning, fish in the afternoon, rear cattle in the evening, criticise after dinner, just as I have a mind, without ever becoming hunter, fisherman, shepherd or critic.”

    I understand some of the roots of the problem , the 2nd International statism , the acquisition of political power by the Bolsheviks when Russia was socially ,economically and materially unable to achieve Socialism and the intellectuals and apparatchiks substituting themselves for the capitalist class and then the need for neo-Trotskyists to re-evaluate this failure of the revolution which Parecon has erroneously accepted and built upon .
    Instead of elaborate constructs, simpler is better . Abolition of the wages system and from each according to their abilities , to each according to their needs – and not according to their work (Thats why labour-time vouchers must be rejected too)

  2. Jim Crittenden said on May 12th, 2007 at 4:53pm #

    If this idea were built like an open source software movement, it could be possible to transform the existing system in relatively short order.

  3. Max Shields said on May 12th, 2007 at 5:04pm #

    Sounds interesting. I’ll read more on this to see how the economics is woven into the larger issue of culture. Culture “feeds” both the body politic and economic system and all three are subservient to the ecosystem that sustains the whole shabang.

    I like the notion of a horizontal rather than hierarchical interdependency which mirrors the ecosystem’s web of networks, and nested feedback loops – yes it’s definitely more complex than your expository piece, but elegant.

    I don’t know if Albert addresses the non-economic – sociologists have a long history of viewing humans as rational and economically driven – that is, creatures looking to optimize (if not maximize) gains over loses. This is not a natural state but it has been designed (marketing/advertising) – as opposed to natural emergence. Understanding human nature is the key. Not to say such a nature is static but it is structurally limited.

    Still, with more insight into Albert’s full thesis some questions may be answered – I am somewhat skeptical of blueprints, but a vision of healthy alternatives is desperately needed.

  4. Eric Patton said on May 12th, 2007 at 6:22pm #

    If you would like to understand more about how parecon fits in with culture (as well as kinship and polity), I would recommend reading either _Realizing Hope_ or _Thought Dreams_ (both also by Albert). If you have to pick one, I’d start with RH.

  5. Eric Patton said on May 13th, 2007 at 8:54am #

    I don’t know much about open-source software, but I do think that, once real changes begin, things will progress rapidly. I can’t prove that, of course. But no changes at all are going to occur — at least no real changes — until left organizations are radically transformed. That’s the way it seems to me.

  6. jsalvati said on May 13th, 2007 at 7:06pm #

    I don’t think I agree with a single thing you’ve said, but you should be aware that ‘capitalism’ and ‘socialism’ are economic systems, not theories. A theory is based on assumptions, and it describes and predicts things. For example, the theory of economics could describe economic interactions in either a capitalist or socialist system (though it would be much less descriptive of state socialism).

    I think you might enjoy reading some of what Noam Chomsky has written on ‘anarchism,’ he’s another person I don’t agree with, but I see a lot of similarities with what he and you propose.

  7. Robert Briggs said on May 14th, 2007 at 8:50am #

    What about specialized tasks requiring more targeted training? I am not trying to perpetuate classism, but a surgeon requires more in-depth training and experience than a janitor. Would that not be an argument for some specialization? So if some specialization is required, and you have surgeon-janitors and computer programmer-garbagemen and teacher-groundskeepers, we already have reintroduced class (as work can never be allocated evenly if the natures of work differ). Also there is a question of efficiency, especially during transition. If you need 2x surgeons in the economy (or rather 2x number of manhours of surgeries performed), and suddenly your surgeons are spending 50% of their time performing other tasks, then you only have x manhours of surgery to go around in the economy, creating a shortage of those services. You could fill in with some multiplier of x manhours of lesser skilled labor, but in so doing, the quality of the services offered is reduced, the quality of life is reduced, and the economy is made less efficient.

    I am intrigued, but is there a solution for the problem of specialization?

  8. Max Shields said on May 14th, 2007 at 12:44pm #

    Alan Johnstone said,
    “…real socialism is a self regulating decentralised inter-linked system to provide for a self sustaining steady state society.”

    While I won’t argue what “real socialism” is or is not, this point is precisely what I was making regarding a natural state – which is self-organizing. This mirrors the natural order rather than the design we’ve fabricated with industrialization over the last several centuries, and its corollary. The latter places people outside of the natural order which is unsustainable.

    I agree that socialism, as you describe it has not been achieved and really was never meant to be implemented in nation-states like Russia. But while I don’t buy that there is a linear historicality such as feudalism, then capitalism, then socialism, then communism (stateless), I do think that the Soviet Union was never a socialist state as theorized. So it serves more as a strawman to be kicked around as an illustration of how socialism has failed.

    That said, my problem with capitalism and socialism is that they are not natural and congruent with life. Rather than arguing from dogma (which is what political/economic theory becomes) or ideology, the premise ought to start with what people need in a sustainable ecosystem. In this sense, economics is about people as inhabitants of a delicate living planet. The human designed systems (as distinct from the biologically emergent system) would then take the form of networks of communities with both local and global interfaces (horizontal not hierachical). It is natural to have pervious borders, it is necessary (I don’t buy the libertarian notion that the state is a necessary evil, when state means governance)to have governance, and it is most preferable for it to be a democratically based governance. Democracy must be scaled small. Certainly it must be smaller than the US 3 X 2,000 land mass with its 3rd largest population – democracy cannot survive on that scale, nor was it ever intended to.

    So there is the cultural shift to small eco-based sustainability, the democratic polity, and a scaled economic system that is subservient, first, to nature, and secondly to what people need. This is a living, self-organizing society which is neither at war with nature nor itself.

    I suppose Michael Albert has touched on much of this in his Realizing Hope. As Albert states in an interview, he learned after developing parecon that this is only a small part of the total picture of human life and that economics is a subset of the larger picture. There will be variations, but I think it is essential to view this in a interdisiplinary way so as to avoid an economic-centric view to the exclusion of all others.

  9. Max Shields said on May 15th, 2007 at 9:14am #

    Robert Briggs said on May 14th, 2007 at 8:50 am

    Specialization. My thought is we’re talking about roles. Today we have roles which are power-centric and disempowering in many cases.

    I think parecon is attempting to get at those class dynamics. I see no reason why a physician has to take on another role or profession to satisfy the basis of participatory governance. I think we have ample examples of professionals – particularly in the service sectors who are not representative of an elitist class. The US and capitalism has created those dynamics. The question is human nature – what are the dynamics that drive the class system – is it purely economics? Is it some notion of rational “man” optimizing/maximizing outcomes?

    I don’t buy blueprints and utopias because these readily collapse under the scrutiny of implementation. I also think that societies need to be scaled to make any system work for people. A vision is good, perhaps essential, but detailed blueprints or specs on design seem incongruent with the changes needed.

  10. Eric Patton said on May 15th, 2007 at 9:23am #

    “I am intrigued, but is there a solution for the problem of specialization?”

    Yes, this is dealt with in Albert’s book.

  11. The Sanity Inspector said on June 1st, 2007 at 4:44am #

    Reminds me of a couple of Paul Johnson quotes:

    “The study of history is a powerful antidote to contemporary arrogance. It is humbling to discover how many of our glib assumptions, which seem to us novel and plausible, have been tested before, not once but many times and in innumerable guises; and discovered to be, at great human cost, wholly false.”

    “One of the principal lessons of our tragic [20th] century, which has seen so many millions of innocent lives sacrificed in schemes to improve the lot of humanity, is — beware intellectuals. Not merely should they be kept well away from the levers of power, they should also be objects of particular suspicion when they seek to offer collective advice. ”

    There would still be people who insist on following their own star. Wonder what parecon equivalent of gulags set up to receive them would look like…