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Painted Brain | Small Is Beautiful: The Case For Participatory Economics
a case for participatory economics
participatoryeconomics,KevinNaruse,PaintedBrainNews
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  • Kevin Naruse
  • February 17, 2017

Small is Beautiful: The Case for Participatory Economics

What happens when you mix libertarianism and socialism? Probably a blank stare. The mixture of libertarian thought and socialism seems like an oxymoron, an impossible combination of polar opposites. Not to get overly political,  but they are irreconcilably different. There is a commonly-accepted notion in the prevailing economic school of thought that holds that you can have high productivity (GDP) or a high human index (quality of life), but not both. But enough politics, let’s move on to the original intent of this article: economics.

I’m not here to pit one economic theory against another. It does well to point out, however, that the leading economic doctrine of our twenty-first century world economy and the institutions based upon it is one that places greater emphasis on GDP and makes HDI secondary – profits over people to be overly-simplistic.

This theory, known as the classical school of economics, is the standard history textbook version. Its actual roots are in the University of Chicago. The Chicago School of Economics, as it is called, an economic doctrine first taught in schools in the 1950s, quickly gained acceptance in the academic community, spreading in popularity until eventually becoming the leading economic model in both the private and public sectors.

One its chief proponents was Milton Friedman, who taught at University of Chicago.

There is an alternative model that seeks to do the “impossible.”

This is what I’d like to focus on now. What is equity, literally speaking, and how do communities maximize productivity without sacrificing quality of life?

Bear with me a moment and I will explain.

If you look into it carefully, you’ll find that there’s a term for it – Participatory Economics, or Parecon for short. It is an economic theory in itself, highly-detailed, and though hundreds of books have been written about it, it is not overly complex. While many standard economic textbooks are filled with jargon and arcane terminology, in its purest form, the precepts of any economic theory should be simple enough to understand (but not simplistic). Parecon should be comprehensible to the lay person, that is, the average lay reader can understand it, as I have found by my own experience.

Here is a starting principle.

There are several assumptions, or biases that underpin this model.

“Participatory decision-making involves the participation of all persons in deciding issues in proportion to the impact such decisions have on their lives.”

– Wikipedia

Sound simple enough? Too simple? Good, let’s move on.

The central premise of Parecon goes like this:

“Participatory economics is a form of decentralized economic planning involving the common ownership of the means of production. It is a proposed alternative to contemporary capitalism and central planning.”

  Wikipedia

Parecon’s philosophical precepts are not too different from Deming’s Total Quality Management business model.

In other ways, they are different. Deming’s model is more practical, less theory. Parecon is more theoretical and less practicum.

The primary principle of participatory economics is to reward workers for their effort and sacrifice. Let’s break this down further and dwell on what exactly “equity” is. 

What is equity? Let’s begin with what it is not.

Critical theorists say that:

“It is inequitable and ineffective to compensate people on the basis of luck, such as their birth or heredity or current social status, or solely based on seniority of employment.”

– Michael Albert, Participatory Economics.

“The underlying values of Parecon are equity, solidarity, diversity, workers’ self-management and efficiency (defined as accomplishing goals without wasting valued assets)”.

– Wikipedia

The catch here is that in order to be truly effective, Parecon must be institutionalized. To say that it’s easier said than done would be a gross understatement. If the structure of an organization or doesn’t grow around it, when leadership disappears, the movement, community, organization, or even an entire nation, may break down quickly. This has been demonstrated again and again – institutions that survive, history has shown us, have been able to maintain, even prosper, because a durable structure was in place before leadership changed hands.

However, to play devil’s advocate, if workers are rewarded not on the basis of hard work, performance, and sacrifice, but on seniority or status within the organization, the net effect of such an inverted structure is that it becomes decentralized in terms of decision while making economic incentives work backwards. Special status or seniority over actual merit results in worker apathy, absenteeism, and turnover.

In effect, the proposed solution, despite all good intentions, ends up recycling the same problems that inspired the effort in the first place, with the intended goal being to ensure overall equity as effectively as circumstances will allow. The problem gets a temporary solution, only for the same problem to re-enter through the back door. One step forward, one step back.

Back to square one.

“Democracy ceases to work when you take away from those who work and give to those who would not.”

– Thomas Jefferson

The entire point of a democratic workplace is this:

A self-governing organization (or a peer-run social movement or community) in purest form presents a monumental challenge. Many of the woes of the twentieth century may be seen to arise from the sheer number of nations practicing self-government in ways that are harmonious. Most nation are far too unwieldy for their own good, their infrastructure maxed out, and the current refugee crisis only exacerbates the problem, a butterfly effect, in fact. Our institutions are not properly equipped to handle the current and all-too common problems facing the globe.

Decentralization over centralization of authority is desirable, as is autonomy for the individual. Every person needs more than simply being accepted and loved, there is also the need for achievement. There must be a sense of freedom that goes along with having free will and personal options. Otherwise, the necessary ingredients for a wealthy existence are missing. In other words, the assurance of social mobility is the stuff that makes a high human development index score possible, and motivates greater civic participation (active involvement in the political process). Economically speaking, according to Parecon, without achievement, vitality suffers.

However, Parecon asserts that a common pitfall is to assume that decentralization of authority and individual autonomy are ends in themselves. It is not the desired end, but a means to an end, the goal being the attainment of the so-called “impossible ideal.”

This important distinction is often overlooked in building intentional communities and other campaigns.

The desired (or ideal) end would be to establish that delicate balance, a juggling act between productivity (GDP) and a high standard of living (HDI). Challenging, improbable perhaps, but worthy of our efforts, don’t you think?

Decentralization and autonomy without the requisite structure is ineffectual. This is perhaps the greatest challenge in terms of organizational endeavors. I would say that this is what makes the establishment of any form of self-governing community a challenge. It has never been tried on a scale larger than a major city.

I must admit that I am biased, and say that my belief is that Parecon, though somewhat idealistic and full of peculiar difficulties, is also based on a solid dose of realism. I believe that it should be included in our history and college textbooks. Today’s university curriculums on Economics are biased towards Milton Erickson’s model. Diversity is ideal, is it not? There is always more than one narrative.

There is a rich and vast array of literature written on this concept of participatory economics, and it does not adhere to any one ideology. It can be applied from a conservative viewpoint as well as a liberal one, and has been practiced with varying degrees of success in many small-scale communities around the world.

Many economic theorists still embrace variants of Parecon’s school of thought.

“Small is Beautiful” is one such example.

History itself has been a testament to the unique challenges of implementing direct democracy. There is nothing quite like it. The ancient Greeks conceived it, imperfect though it was, and ultimately they could not resist Roman subjugation a few centuries after Pericles’ Golden Age. They didn’t stand the test of self-sufficiency (in this case – national or homeland security), and thus lost out to the superior military might of Rome.

Polar opposites libertarianism and socialism may appear, no doubt, but upon closer inspection there are ways to balance them, by employing an economic system that employs many of the features of non-centralized socialism, libertarianism (high personal autonomy), and yes – capitalism. This delicate sleight of hand requires a robust civil society.

There is no one single theory that explains everything. Our history textbooks are far too one-dimensional in this regard.

It is possible to have a free market, private business, and a free marketplace of ideas. There is nothing contradictory about it. The course of history since the invention of the printing press has proven that, for more than six hundred years, such a free marketplace of ideas is truly an engine of innovation and scientific progress.

If this doesn’t convince you, here’s a parting thought.

In the words of Adam Smith, native of the Scottish Enlightenment and godfather of modern economic theory put it, “The invisible hand of the free market” is a seemingly (although not quite) adaptive, robust, self-regulating mechanism when it is free flowing.”

Kevin Naruse is Painted Brain’s social media director and a valued contributor to Painted Brain News.

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