Participatory Economy

Capitalism

Ownership of Capital

Social Ownership
Private Ownership

Capital is collectively owned by every individual in society having an equal share.

Workplaces participate in a democratic planning procedure to obtain access to use productive resources.

Implications

Social ownership enables workers to freely make decisions and democratically run their workplaces themselves, without outside interference from private shareholders or the state.

Workers are able to distribute all the income between themselves for work performed, without any income being extracted by private stockholders.

Through democratic planning, every citizen is able to have an appropriate influence in decisions over what we should use our shared scarce productive resources to produce and longer-term investment priorities.

Capital is owned by private individuals through ownership of company stocks.

Stockholders decide the goals of the business, appoint a management board, and receive income via dividends.

Implications

Income is redistributed from workers to a minority class of private owners resulting in an ever increasing level of inequality of income, wealth and concentration of power in society. The richest 1% of adults own 40% of global assets (Source UNU-WIDER, 2000.)

Private ownership divides society into two classes: 1) a capitalist class, who have greater decision-making power and income, and 2) a working class, who must sell their labour power to owners in return for a wage.

Income

Effort, Sacrifice and Need
Property, Power and Output

Workers distribute income between themselves based on differences in effort or sacrifice. This can be in the form of working longer hours, or performing more onerous or dangerous work. Income is also distributed for allowances based on needs, the levels of which are decided democratically.

Implications

There are no super rich and no poor. The differences in the levels of income in society are small because there is only so much longer or harder one can work than someone else.

Studies such as the spirit level show that fairer societies have significantly better outcomes with regards to health, crime, well-being, levels of trust between people, etc.

Income is distributed via:

a) Ownership of private productive property. Those that buy or inherit stocks or land, receive a dividend income by taking a share of the profits of a business, charging rent on land, or by selling their assets at a higher price than they were bought for.

b) A wage for performing work. Wages are set by supply and demand in labour markets which means that those with more human capital receive income above and beyond what their efforts and sacrifices entitle them to.

Implications

The distribution of income in society is very unequal. Typically, 1% of owners receive 40% of income. Much of wealth is passed on within families via inheritance.

Higher income from wages are derived from having advantageous genetics, educational opportunities, tools, connections, fortunate economic changes, as well as having greater bargaining power. Bargaining power unfairly penalises those that have less of it and can’t hold out for a better deal.

Social science studies show that societies with greater inequality have greater levels of crime, physical and mental health problems.

Classes

No Classes
Three Classes

There are no classes. Productive property is collectively owned by everyone in society and therefore there is no property owning class.

Each workplace is organised democratically and empowering tasks are distributed more evenly in order to prevent any group dominating decision- making.

Implications

Because there are no classes, there are no groups competing for power and income.

Each actor in society has comparable working conditions, incomes and decision-making say. Differences in incomes are small and based on personal choices over work efforts.

In a classless society, people are freer to act as individuals and not constrained by group behaviour bias. A classless society enables people to act with one another with more mutual understanding and respect.

There are three classes:

a) Capitalists who own and control society’s productive resources but need not do work (approx 5%).

b) A Professional Managerial class who do the empowering work and have greater income and decision-making power in the workplace (approx 30%).

c) The Working class who do the rest of the work, are given instructions by managers above, and have less income and decision-making power in the workplace (approx 65%).

Implications

Class hierarchies create huge disparities of income, wealth and power. Each class seeks to advance its own interests at the expense of the others.

Each class has its own agendas, and develops their own cultures, attitudes and behaviours. The capitalist class have an interest in maintaining their power and privilege and do so through lobbying the government on policies and shaping the news agenda through ownership of the media.

Decision-Making

Self-Management
Authority and Bargaining Power

A participatory economy is organised to provide each individual a say in decisions to the degree that they are affected by them.

To achieve this each worker belongs to the main decision-making body of their workplace, the workers’ council. Every citizen belongs to a neighbourhood council where they participate in decisions on collective consumption.

Implications

Membership of democratic councils at work and in neighbourhoods, enables every citizen in society to have meaningful control over their lives. Having a say over the things in life that affect you is an important psychological human need for optimal well-being.

While there may be more meetings overall, the few who do lots of meetings today will do less, and those that are not involved in any meetings today, will take part in more.

Better long-lasting decisions will also result because those affected will have an input.

This has an important implication for education. Learning how to be a participatory citizen will be an important subject that is learnt in education and the socialisation process from an early age. This includes critical thinking skills and how to be efficient in democratic meetings.

There is greater diversity because more people will be able to express their varying preferences rather than only a minority.

Decisions over investment and use of productive resources are made by a capitalist class of owners.

Owners of capital decide the goals of the business and appoint a senior management to administer the running of the business on their behalf.

Workplaces are organised in a top-down hierarchical decision-making structure. The senior management has the biggest say in workplace decisions and hire workers who are lower down in the hierarchy who have little to no say.

Implications

The investment decisions that are made are ones that provide the biggest personal gains to the minority of owners. Because the majority are excluded, this results in often socially harmful decisions such as investing in coal plants rather than wind turbines for example, or in technologies that improve working conditions.

At work, most of the population are disenfranchised at work because they have little to no say over how the workplace is run, how many hours they wish to work, levels of remuneration, and so on.

Goods and services are exchanged via buyers and sellers competing in markets. Third parties who can be affected by a transaction are excluded from having a say. For example, air pollution from the sale of cars.

Markets facilitate individual consumption, but there are no institutions that enable us to make joint decisions in our community on collective goods and services. This results in overall less collective consumption than is desired. The lack of democracy in the economy violates a psychological need that humans need in order to be fulfilled, a contributing factor to poor mental health.

Allocation

Democratic Planning
Market Competition

The distribution of resources and prices are determined via an annual decentralised democratic planning procedure, called participatory planning, which each workplace and household takes part in.

Implications

The democratic planning procedure generates prices, which more accurately reflect full social opportunity benefits and costs. Therefore prices of goods that are harmful for society, such as petrol cars will be relatively higher than today, and prices for goods which have positive effects on society, such as broccoli, will be relatively lower than today.

Because with democratic planning, there is no bias towards greater production over greater leisure, people have more freedom over choosing how long they wish to work. Less of an imperative for increasing gdp and more emphasis on growing human well-being has a less harmful effect on the ecology and strain on resources.

Because people are better able to choose between individual consumption and collective consumption, it’s likely there will be a greater amount of collective goods.

Scarce resources are distributed via markets whereby individual buyers and sellers compete with each other for profits. Individual sellers set prices for final goods or services they sell.

Implications

Prices are not accurate because they do not capture the full social benefits and costs which are externalised to third parties, such as pollution. This means prices for some items are lower than they should be and other items are higher than they should be, resulting in an inefficient allocation of resources and ecological damage.

Market competition promotes an anti-social rat-race culture, resulting in higher levels of stress and reduction in well-being. Markets have a bias towards greater growth and consumption over leisure. Greater demand is artificially created through advertising.

Because there are multiple problems with markets such as public goods, asymmetries of information, demerit and merit goods, externalities etc. this requires governments to regulate markets and intervene in order to mitigate the adverse effects and rescue the economy when there are inevitable crashes.

Division of Labour

Jobs Balanced for Empowerment
Hierarchical Division of Labour

Each worker council combines tasks in ways that allow for specialisation while also making jobs more balanced with regard to desirability and empowerment.

Implications

Because empowering and desirable work is more fairly shared, nobody is left to do only mind-numbing unpleasant work. This improves the levels of well-being and work satisfaction for those who would have been left with doing only disempowering work.

Everyone has the opportunity for training, education and to develop the confidence and knowledge needed to effectively participate as an equal in workplace decision-making.

Senior management combine tasks into jobs for specialisation without taking into account any implications on empowerment and well-being.

Implications

This results in a minority of the population monopolising all of the empowering conceptual fulfilling work, and others left with only having to do unhealthy, unfulfilling work resulting in large disparities in levels of life-satisfaction and well-being.

A second problem is that the division creates a hierarchy in the workplace, which leaves some with much greater levels of confidence, skills and knowledge, leading them to dominate meetings, even in situations where there is one member one vote.

Workplace

Self-managed Workplaces
Top-Down Corporations

Workplaces are socially owned and are self-managed by their workers.

Every worker belongs to their worker council, the decision-making body for the entire workplace. Workers also belong to smaller democratic councils for teams and departments that make decisions that only affect them. Jobs are balanced for empowerment and workers distribute income between themselves based on differences in effort or sacrifice.

Every workplace participates in an annual decentralised participatory planning procedure to gain access to use society’s productive resources.

Implications

All workers have a much greater say and meaningful control over their working lives. Studies show that people who have control over the decisions that affect them are more productive and happy.

The dominant type of business is a corporation.

Corporations are owned by private individuals, who take income from the profits. The goal of the firm is to maximise financial returns to the owners who appoint a board of directors to run the day-to-day business.

Those higher up in the hierarchy do the empowering tasks and pay themselves a higher salary.

Implications

The top-down hierarchical centralised corporate organisational structure means the majority of people spend their working lives with little meaningful control, performing tasks that have been set from above.

Corporations have grown very big, bigger than some countries, and hold massive wealth, power and influence, yet have little to no public accountability.

The profit-centered motive means decisions are made which often have harmful environmental and social impacts.

Consumption

Individual and Collective
Individual

Consumption is organised through decentralised democratic planning.

Individuals and households can express desires for what goods and services they want from producers via their neighbourhood consumer council during the annual democratic planning. This includes desires for collective consumption.

Information on goods is provided by consumer review organisations, not by firms.

Implications

We can expect more collective consumption compared to levels of individual consumption in capitalist economies.

Replacing advertising with consumer led information results in more objective information about products.

We can expect that democratic planning, along with a fairer distribution of income, will lead to people choosing more leisure over consumption, which has positive outcomes in reducing waste, pollution, and the impact on our natural environment.

Consumption is organised through market competition, where individuals can purchase goods that are on offer for individual use.

Firms predict what consumers want based on market research. Firms spend on advertising to influence consumption desires. There is no inherent institution for expressing requests for collective consumption i.e goods that are shared and paid for by a group of people.

Implications
There is an inherent bias in markets towards continually increasing consumption, because competition creates a grow or die scenario for firms.

An absence of an institution for expressing desires for collective consumption results in inefficiency and less collective goods being produced than would otherwise be the case.

The above two points have a negative impact on our environment and sustainability.

Advertising causes psychological pressures, increasing conspicuous consumption and harm to mental health.

Product Information

Consumer Bodies
Corporate Advertising

There is no advertising.

Consumers receive information on products from consumer bodies, who are responsible for promoting informed consumer choice by testing and reviewing products, and offering independent advice and providing impartial information.

Implications

Information on goods generated is more objective because it is from consumer groups who do not have an incentive to sell any particular good. There are no advertising commercials.

The news media does not depend on advertising for its revenues. We can expect a reduction in total consumption and better informed consumers.

Advertising consists of messages paid for by firms to persuade consumers into purchasing their products or services on billboards, posters, television, radio, internet, etc.

Corporations invest substantial resources in advertising to promote their brands and products. Adverts are often designed to elicit emotions and invoke desirable lifestyles.

Implications

Advertising is a huge industry that is used to create desires for consumption that increase profits but do not necessarily increase human well-being. In 2018, firms spent over $600 billion in advertising worldwide.

This results in an inefficient use of scarce resources, increasing consumption and putting pressure on our natural resources. Advertising is proven to be harmful to our mental health. A person is subjected to thousands of advertisements on an average day.

The Environment

Democratic Planning and Social Cost Pricing
Inherent Market Growth and Externalities

Each worker can choose between their desire for more work versus more leisure during annual participatory planning.

Prices for external social costs, such as pollutants, are part of the planning procedure and affect the final price of goods.

Investment and innovation decisions that affect our impact on the environment, such as energy and transport, involve all citizens in society and are done via the worker and consumer federations.

Those impacted by pollution are members of CAPs (Communities of Affected Parties), and have the right to forbid the pollution or choose to receive compensation.

Implications

There is no inherent drive to grow in the participatory planning procedure because desires for greater leisure can be expressed on an equal footing. An increase in leisure over consumption reduces pressure on using our natural resources.

Because external costs such as pollution are factored into prices during participatory planning, there will be a reduction in harmful activities because those items will be costlier or prohibited by communities of affected parties.

Because all citizens are able to influence society’s longer term investment decisions rather than them being made by profit-maximising firms, we can expect the environment to be given a greater priority.

Prices are set by competitive bidding between profit-seeking firms and individuals in markets which do not capture costs external to the transaction, such as pollution.

Investment decisions are made by firms who are guided by short-term financial returns.

Implications

Because of market externalities, the price of goods which have harmful environmental effects are lower than they should be, resulting in greater consumption of activities which harm the environment.

The bias towards growth over leisure results in greater pressure on earth’s natural resources and ecological limits.

Because investment decisions are made by profit-maximising firms, choices are made which maximise personal returns over environmentally sustainable options.

Diversity

Expanded
Homogenised

Decisions on what goods to produce and how include all workers in the enterprise.

Consumers express their desires for goods and services by sending their consumption proposals in the annual planning procedure, submitting ideas and voting on collective goods.

Implications

More people participating in decision-making processes results in a wider-reaching exploration of solutions to problems. People’s preferences are not shaped by advertising. Greater income equality results in a wider range of preferences being able to be expressed compared to production geared towards fulfilling the needs of a wealthy minority.

Firms conduct market research to predict what goods people want. Senior management decides which goods to produce based on which ones will most likely maximise their profits and use advertising to influence consumers to buy their goods.

Consumers express their desires for goods and services by purchasing items that are available for sale in the market.

Implications

Where there is competition in markets, it results in many different types of goods produced. However the trend is towards homogenisation and a narrowing of preferences.

Advertising shapes people’s tastes and preferences into conformist patterns. Marketing and commercial environments produce commercial attitudes and habits.

The trend is towards greater concentration and fewer firms who dominate markets, resulting in monopoly and oligopoly, reducing the variety of options.

Well-being

Psychological, Social and Material
Material

Places at its core the need for self-management, justice, diversity, ecological sustainability, efficiency, and solidarity as necessary conditions for optimal human well-being.

Implications

Self-managed workplaces and neighbourhood councils enable the satisfying of the human need for control over one’s own life and meaningful work.

Humans are social beings and participating and connecting with others through social cooperative institutions helps us to fulfil this need.

Income morality, democracy and sharing out empowering work more fairly means that everyone is valued and treated with the human need for respect.

Because citizens have a meaningful choice between work and leisure, they are able to pursue interests that they value. A greener economy creates a greater connection with our natural world which is well understood to improve human well-being.

Places an importance to acquiring and consuming material goods as the means to achieve well-being.

Implications

Produces material wealth but in a very unequal way.

Many psychological needs are not met, including the need to control one’s working life, to have meaning and purpose from work.
The majority of workers have little say over their working lives in corporations.

A series of studies have observed a correlation between materialism and unhappiness. Studies in the United States have found that an increase in material wealth and goods in the country has had little to no effect on the well-being and happiness of its citizens. Materialism positively correlates with more serious psychological issues like depression, narcissism and paranoia.

Education

Democratic Education
Hierarchical Private Education

Schools are organised as self-managed workplaces. Schools prepare students with the skills needed to work in a democratic economy and effectively participate in meetings.

Implications

Schooling will have a big emphasis on teaching critical thinking skills, creativity and participatory meeting skills. In democratic schools, students have a say on what they learn, how they learn and the rules of the school.

Parents that can afford it can pay for their children to go to private school. The state provides education for the majority. Schools are organised in a top-down hierarchical structure and the full curriculum is decided by a centralised national body.

Implications

Because citizens are not taught democratic skills and critical thinking in school they are more vulnerable to manipulation by propaganda and misinformation as adults.

The schooling system reflects the wider hierarchical structure of the economy. Schools prepare students to fit into their class roles in the economy, empowering those who take up the key decision-making roles, while disenfranchising the majority to internalise taking orders.

Efficiency

Socially-derived pricing
Individually-derived Pricing

Prices and the allocation of resources are decided through a cooperative negotiation between workers and consumers via an annual decentralised democratic participatory planning procedure.

Implications

Prices are closer to their true social opportunity costs because costs which are external to a buyer or seller, such as pollution are priced and included in the planning procedure, making goods which have a harmful external cost will have a higher price and vice versa.

Collective goods are more accurately priced because desires for them can be more accurately captured via neighbourhood councils.

Tastes, preferences and therefore demand for goods and services are not skewed by commercial advertising. Information on goods and services is provided more objectively through consumer led organisations. The demand for goods is reflected by an equitable distribution of income.

The allocation of resources is determined via firms competing in markets. Prices are generated via transactions between individual buyers and sellers.

Implications

There are a number of known market failures, which result in inefficient resource allocation:

Prices generated through market exchange do not reflect true social opportunity costs because externalities affecting third parties, such as pollution, are not included. Prices of harmful activities are lower than they should be, resulting in more production of them and costs being passed on to others.

Climate change is a result of the greatest market failure the world has seen.”
– Nicholas Stern

There is a trend towards greater concentration of ownership and firms in monopolies and oligopolies have greater power to distort prices.

Tastes and preferences and therefore demand are skewed because of commercial advertising. Information failure/asymmetry failure occurs because one party to an economic transaction possesses greater knowledge than the other party.

The Inequitable distribution of income leads to vast resources being used towards producing for the rich, while many have basic needs unmet resulting in large disparities of well-being. Other failures include merit and demerit goods, the public goods problem and the free rider problem.

Innovation

Social Innovation
Corporate and State Innovation

Innovations are made by workers and decided upon in the workers’ councils based on whether the innovation will increase the workplace’s social benefit to cost ratio.

Research and Development (R&D) is a public good.

Implications

Because citizens will have a much greater say in decisions around innovation investment through their consumer and worker councils, it is more likely that they will choose priorities such as reducing the working week, technologies that reduce undesirable work and improving the environment rather than creating lots of different products that do not necessarily contribute much to improved well-being.

People are more likely to put forward ideas for innovations because society funds them.

Innovations spread quickly as there are no private patents.

Innovation decisions are made by a small group of private investors based on which innovations will most maximise profits.

R&D is a private good.

Implications

While markets generate less-risky smaller scale innovations, the state has a more significant role in funding and developing innovations that are bigger, riskier, expensive and more complicated. For example, innovations from public research include the technology inside smartphones, the internet and satellites.

Because innovations are private patented and monopolised they do not spread quickly.

Media

Independent Media
Corporate Media

Media are self-managed workplaces which are socially owned. They are supported by their viewers and there isn’t any advertising.

Implications

The general public can have more influence over news content and priorities.

Because there are no classes in the economy, no private owners and no advertising, this reduces sources of institutional bias in news content.

Media are profit-seeking corporations which are owned by private individuals. They primarily gain their income from selling advertising.

Implications

There is a high concentration of media ownership. Most of the media is owned by a few global conglomerates.

The news content has biases which reflect the owners’ class interests and the need to appease advertisers who fund them.There is an underfunding of investigative journalism.

Investment

Inclusive and Social
Private

Citizens decide the portion of the economy’s production that should be allocated to investment versus consumption during participatory investment planning.

Implications

Because decisions happen through participatory procedures, citizens are able to express their preferences for investment priorities and guide decisions around society’s interests.

Because prices better reflect true social costs, investment decisions are more likely to be made which lead to more socially efficient outcomes for human well-being.

Corporations make investments through their own savings or via borrowing from banks or third party lenders.

The key decisions about what to invest in are made by the board of directors of each firm.

Implications

Decisions are made by a small group of people and exclude most of society.

Because decisions are driven by the private profit-maximisation motive based on market prices, which don’t accurately reflect true social opportunity costs, harmful technologies are often invested in over more socially beneficial technologies, e.g. fossil fuels versus renewables.

Money

Non-Transferrable
Transferrable

Currency can exist in both physical form, as vouchers, and in digital.

The supply of currency, expressed as an accounting unit for measuring income, comes from the planning of the total production in the economy.

Currency is non-transferable i.e purchasing power cannot be transferred from one individual to another, or to an enterprise. Currency cannot be used by individuals to buy productive capital, such as shares, because capital is socially owned.

Implications

There is no inflation. No income can be gained from interest. Fraud or other types of crime would be harder to commit because income cannot be transferred from one individual to another.

Currency can exist in both physical form, as cash, and in digital.

The supply and creation of money is managed by the central bank and private banks.

Currency is transferable i.e purchasing power can be transferred from one individual to another or to a firm. Currency can be used by individuals to purchase productive capital.

Implications

There is inflation. Fraud and other types of crime are easier to commit.

Land & Housing

Community Land Ownership
Private Land Ownership

Land is owned in common by everyone in society. Pricing of land and housing is set via participatory planning and citizens get exclusive access to plots of land for a time period.

Investment in new housing is collectively financed.

Implications

Because land is socially owned, it cannot be a source of unearned income.

Housing is likely to be more affordable compared to market private ownership economies. This is because there is no private ownership of land and prices are not influenced by economic rent and speculation induced demand.

Through consumer councils, citizens will have a greater democratic say in the design of housing resulting in more variety in housing and living spaces, which take into account people’s diverse preferences. For example, from individual to more communal forms of co-living, with more shared spaces.

Land is privately owned by individuals or companies. The price is set via competitive bidding in markets.

Investment in new housing is privately or state financed

Implications

Private land ownership enables the land owner to receive unearned income through capital gains (selling at a higher price than they bought it for), and charging economic rent (renting out the land for higher than their upkeep costs).

Because land is in fixed supply, credit is in unlimited supply, and the incentive to obtain economic rent and capital gains speculation, this has an inflationary effect, pushing land prices up to above optimum levels and leading to market crashes.

There is homogenous housing because citizens have little meaningful democratic say in the design process, which is led by private firms or by the state authorities.