Parecon or socialism?

The review of Parecon: Life After Capitalism, appearing in February Socialist Standard, was troubling. The review says the economic system proposed in the book called participatory economics, or parecon for short, permits profits, just not excessive profits. But in parecon there are no owners. In fact there are no classes. More, no one earns income based on ownership of any kind. There are, therefore, no profits - none.

Yes, society produces a social product. Yes, some plants produce a total value of output greater, and in some cases even much greater, than the total value of their inputs, including their labor. But, no, this does not enrich anyone associated with those plants relative to the incomes, say, of people working at plants that are far less productive. Remuneration is uncorrelated to value of output save that people must do socially valuable labor to be remunerated for labor at all. What the reviewer says about profit affecting wages, etc., in parecon, is simply about some other system...unless the reviewer is saying, if total output for a parecon is lower, average income is lower, which is, of course, a truism, having zero to do with profits, which don't exist in a parecon.

The reviewer says, incredibly, that getting rid of private ownership of production, markets, top down decision making, the corporate division of labor, and remuneration for property and power, the core economic institutions of capitalism, and replacing them with self managing workers and consumers councils, balanced job complexes, remuneration for duration, intensity, and onerousness of labor, and participatory planning, the core economic institutions of parecon - is correcting political dimensions, but not economics. I doubt the reviewer read the book. It is confined to addressing economic dimensions, not the polity.

I suspect that this reviewer thinks that because in parecon there are income, wages, and valuations - prices - it must be capitalism. This marks a major confusion. A letter I received from the host periodical signed off, "Yours for a moneyless, wageless world of common ownership." This too, is troubling.

In this world you desire to attain there is, I presume, production. Likewise, I assume you agree that people will consume. More, beyond production and consumption, is there some regulation of what is produced and in what quantity? The alternative would be that anyone can produce anything, with no concern other than that they wish to. This is nonsense, but if there is regulation of how resources, energies, and labor are allocated to generate outputs, does that regulation reflect the preferences that both producers and consumers have and especially a full valuation of the relative contribution to well being and development of different choices? If it does, then to that extent it includes "money." The valuations are prices, albeit not necessarily as we have known them in market and centrally planned systems.

In turn, do people receive a share of the product? Obviously they must if they are to survive, much less attain their capacities. So, that being true, is there any correlation between the share one gets and what one does as one's work? If not, anyone can take anything, in any amount, and do no work - which, of course, is absurd, since demand would exceed supply. If there is a correlation, however, then there are to that extent "wages" according to some norm, even if the correlation is due to people collectively and responsibly establishing their own incomes. In parecon, these are the reasons why there are "money" and "wages." The task becomes having this limited money and wages, which is to say valuations and shares of income, inevitably present in any economy, in accord with our full aspirations and values.

Money - more importantly, relative valuations of products and processes - exists in a parecon, therefore, so that people might make choices in light of full and true social costs and benefits. Participatory planning facilitates the determination of true and full values as decided by the self managing population.

Wages - more importantly, shares of social product allotted to citizens - exists in a parecon so that, of course, we can all equitably benefit from the social product, and specifically so that choices regarding such things as how long people work, how hard we work, producing what items, and what we justly consume, can be determined by the population, again, in accord with true social costs and benefits and, as well, with attaining equitable outcomes and self management.

I would claim, and the book does claim, that parecon is not only a serious economy able to meet needs, develop potentials, incorporate true self management, and be not just profitless but, beyond that, classless - but is also as close to having no money and no wages as is possible without incurring immense damage. That is, it has valuations and it has income shares, like any economy, but not the pejorative aspects of either - distinguishing it from all capitalist, market, or centrally planned economies.
Michael Albert, ZNet / Z Magazine

Reply:

The gist of your complaint is that, contrary to the claim made in the review of your book Parecon in the February Socialist Standard, you maintain that there are no profits in parecon because "no one earns income based on ownership of any kind. There are, therefore, no profits - none". But this is only because you have defined profit as a property income. It's still there, however, as you admit in your second paragraph above: "... some plants produce a total value of output greater, and in some cases much greater, than the total value of their inputs, including their labour". For profit to exist - or more generally “surplus value” (rent, interest and profit) - it is not necessary that these accrue to individuals through their ownership of property. Profit is simply the difference between expenditure and income and derives from the unpaid labour of the workers. Profits therefore existed in the former state-capitalist USSR and exist in the present-day Vatican - even though there is no individual ownership.

On page 132 of your book the rate of profit appears under the guise of "benefit cost ratio":

"Each round of planning, or iteration, yields a new set of proposed activities. Taken together, these proposals yield new data regarding the status of each good, the average consumption per person, and the average production 'benefit cost ratio' per firm. All this allows for calculation of new price projections and new predictions for average income and work, which in turn lead to modifications in proposals ..." http://www.zmag.org/books/pareconv/parefinal.htm (Chapter 8, subsection: Proceeding From One Proposal To Another)

You say the "benefit cost ratio" has nothing to do with profit because the "benefit cost ratio" will only benefit parecon society as a whole and not any individual. But as we have seen, this is based on a misunderstanding of what profit means. Moreover, you also claim on the same page in your book that:

"...workers’ councils whose ratios of social benefits of their outputs to social costs of their inputs were lower than average would come under pressure to increase either efficiency or effort..."

Or go bust, presumably, unless profits were redistributed from workers' councils with above average ratios. This shows the limits of planning in “parecon”, for in their planning considerations they must maintain profit rates. And while planning might be based on past or current profit rates, profits themselves are inherently unpredictable and this may scupper plans for the future. There is also the antagonism between wages and profits. Parecon society would need to maintain a positive rate of profit or lurch into crisis. This means that workers could not push up wages to the level that stopped profits being made, and this again sets definite limits to what can be planned.

Of course production and consumption will be regulated in a socialist society. That’s an essential part of it, but this does not require recourse to money either as a means of exchange or for costing products and production. Calculation - and “costing” - in socialism will take place in kind (in tonnes of steel, kilowatt-hours of electricity, person-hours of work and so on) without having to put a monetary value on anything and everything. Socialist society will decide - through democratic discussion and from what people indicate they want by what they take from the common stores - what it needs to satisfy individual and collective consumption, and to replace and expand (if need be) the productive apparatus and then will bring together the physical and human resources to produce this. This will be done in the most technically efficient way, after taking into account good working conditions and environmental considerations.

In implementing the long-standing socialist principle of “from each according to their ability, to each according to their needs”, socialist society breaks the link between work done and consumption. Rather than being “allotted” what to consume as under “parecon”, people would be able to take from the common store of wealth set aside for individual consumption what they judged they needed to live and enjoy life, irrespective of what they had contributed to production. Every able-bodied person would be expected to contribute something, but we don’t share your bleak view that, in this event, not enough would be produced to satisfy people’s needs (that “demand would exceed supply”, as you put it) - and that therefore, not just profits, but the wages system too would have to be retained as a means of both obliging people to work and of limiting their consumption. Just like under capitalism.

Hence our original description of “parecon” as “post-capitalist capitalism”, i.e. not post-capitalism at all. We would be prepared to refer to it as a “utopian blueprint for an ideal society” if you prefer.- Editors.

Rejoinder:

By any definition I have ever encountered, surpluses are not profits per se, though they may become profits under certain social relations, of course. Definitions aside, Parecon people's income, in any case, is not correlated to output, or to revenues minus expenditures, but to effort expended in socially valued production. No class takes income based on unpaid workers labor. No one does, other than those infirm and unable to work, that is. On the other hand, society and each of its members very much benefits if the total social product per time worked and inputs used up, is more, rather than less, socially valuable.

Saying that if a firm produces things of greater social value than it uses up, that means there are profits and the system is capitalist, is, honestly, absurd. In any economy, from now until the sun burns out and beyond, one will want workplaces of humans to actually generate more worth than they use up, of course. How the social product is then dispersed among the population is a very important issue, to be sure. Doing it according to effort, having also eliminated not only private owners above workers, but a coordinator class above workers, by balancing job complexes and instituting self management, is equitable.

Our real difference is probably best encapsulated in your calling the old Soviet Union state capitalist, and my saying that since it didn't have private owners of means of production, and it didn't have markets, but it did have a ruling economic class composed of those monopolizing empowering tasks in the economy, it is far more sensibly called not capitalist, not socialist, but coordinatorist, after its ruling class.

I share your desire that a future desirable economy involve workers and consumers cooperatively negotiating economic activities and their distribution. That is what parecon accomplishes. Given space limits, I guess for now we just have to agree to disagree about a lot, beyond that desire, however.
Michael Albert

Reply:

It is only under capitalism that the social surplus takes the form of a monetary surplus value and, as you admit, this is what will exist in “parecon”. And this is what will be the imperative guiding and limiting its planning decisions. The institutional changes you advocate (no legal individual ownership of means of production, self-management, etc.) are inadequate reasons for claiming that capitalism has been overthrown.

We agree that the former Soviet Union did have a ruling class, but not that there were
 no markets there. Even the regime’s ideologists admitted that there was “commodity-production”, i.e. production for sale, and that buying and selling relationships existed between state enterprises. While there was no individual legal ownership of the main means of production (though there was of some things: dachas, works of art, state bonds, bank accounts), these means of production were not owned by society as a whole but effectively by a class which monopolised them, via the state, and which lived a privileged life from the surplus value extracted from the wage-labour of the workers. That is why we think the best description of that and similar societies was state capitalist.

Your attitude towards the former Soviet Union is revealing in that it shows that you had nothing against the continued existence there of the key features of capitalism that are production for sale, money, wages, profits, etc but only to the fact that the economic system involving these was controlled by a privileged ruling class and not democratically by the workers. “Parecon” is thus revealed to be the idea of the economic system that existed in Russia “self-managed” by the workers. A sort of “self-managed capitalism” that could only exist on paper.

Socialism will break free from the financial bureaucracy of capitalist calculation. It will treat people as ends in themselves. It will produce directly for human needs. It will break the link between individual effort and individual consumption. That’s what all those who consider themselves to be anti-capitalist should be aiming at. - Editors.