Participatory economics, or parecon, proposes a new economic model that eliminates the binary of capitalism and socialism. It suggests restructuring workplaces, eliminating senior management, and paying based on effort and sacrifice. Prices would be set by community councils, and trade credits would replace money. Critics cite bureaucracy and inconsistencies, but the theory opens up new possibilities for economic debate.
Participatory economics, also known as parecon, is an economic theory proposed as an alternative to traditional socialism and free-market capitalism. Popularized by the efforts of activist Michael Albert and economist Robin Hahnel, the theory has attracted considerable interest and criticism since its inception. Perhaps the most interesting factor about participatory economics is that it eliminates the idea that capitalism and socialism are the only possible economic principles and introduces some new possibilities and concepts to the world of economics.
Parecon supporters tend to believe that both capitalism and socialism have failed to achieve their set goals. While centrally planned socialist economies have repeatedly been shown to fail through suppression of individual needs and little inhibition of corruption, capitalist economies limit public access to priority technology, allow for the mass gain of wealth, and the political power of accompaniment by companies and some individuals and seem largely incompatible with the principles of equality embedded in democracy. At the deepest level, what participatory economics rebels against is the idea that there are only two options; by creating a third potential model, the authors attempt to open up the discussion of economics to new possibilities.
There are several fundamental principles of participatory economics, some of which revolve around the restructuring of workplaces. According to the model, business decisions would be made by the entire employee workforce rather than just executives. Also, the idea of senior management would be eliminated by expanding each position’s responsibilities to create an average balance of power rather than a hierarchy. Payment would be based on effort and sacrifice, so those in dangerous positions, such as firefighters, could be paid more than those in relatively safe jobs, such as janitors.
The system would be based on community and regionally based councils where all participating members have one vote and decisions are made by majority vote with some exceptions. Those with a vested interest in a given matter may have more say; for example, construction workers might have a weighted vote on whether a city should build a bridge, since they will do the building. Prices would be set periodically or annually by determining the number and type of goods a community is able to produce and what items are expected to be consumed. These supply and demand lists would go through a multi-round adjustment period for refinement based on conflicting needs.
The theory of participatory economics also suggests the elimination of free-flowing money. People would only earn trade credits through work, based on the model of effort and sacrifice for income, which could be exchanged for goods and services. When a person buys an apple, credits adjusted for value are deducted from the individual’s account, but simply disappear, rather than being added to a merchant’s account. Since the money is earned purely on work, profits are not a factor.
The criticisms of participatory economics are vast and come from many directions. Some cite the preponderance of bureaucracy created by the council system, while others question how a worker can be trained to do all the jobs needed to create a balance of power. Critics also cite inconsistencies in the theory, such as that someone at some level will have to determine “effort and sacrifice” and that physical danger and hours worked are the only considerations about the importance of a job. Regardless of the criticisms, participatory economics receives praise from some sectors for simply opening a new level of debate about modern economic theory.
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