The Participatory Economy model, also known as Participatory Economics, or Parecon, was developed by economists Michael Albert and Robin Hahnel and first formally presented in 1991 in Princeton University Press. Drawing on libertarian socialist ideas and real-world examples throughout history, their motivation was to inspire hope, inform strategy and to demonstrate that a viable and better alternative to the two dominant economic systems of the last century, capitalism and a command economy, is possible.

“It always seems impossible, until it’s done”

Nelson Mandela

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Values

Before designing new institutions, first we need to be clear what values a desirable economy should be based on. The key values of a participatory economy are defined as:

Self-Management

= For every individual to have a say in a decision based on the degree that they are affected by it.

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If we reject authoritarianism and top-down control in our political system, shouldn’t we also demand democracy in the economy too?

In workplaces today, workers lower down in the hierarchy have very little meaningful control over their work lives. Many would support the idea of expanding democracy at work, but what exactly do we mean by economic democracy? It shouldn’t mean that everyone has a vote on every decision. A better approach is to call for self-management, defined as having a say in decisions in proportion to the degree you are affected by the outcome of a decision. If you are affected more than others by a decision, then you would have more say than they do; if you are affected less, you would have less say than they do.

Institutions in the workplace and wider economy should be organised in a way to maximise this decision-making norm. Self-management maximises human freedom by giving people control over their lives. The capacity to analyse and evaluate the consequences of our actions, choose among alternatives based on our assessments, and the ability to act on them are important human needs that any desirable economy should seek to fulfil.

Justice

= To fairly share burdens and benefits so that any differences in income from work are based on differences in effort or sacrifice.

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Today’s societies are the most unequal in human history. But what is a fair distribution of the burdens and benefits of economic activity?

Income is each person’s share of the social product. Most will agree that receiving greater income than someone else based on luck or having unfair advantage is not fair. Inheriting wealth, being born with favourable genetics or having access to better opportunities, training or information, are all factors beyond our control. The only factor we have direct control over is the level of effort or sacrifice we wish to make and therefore should form the moral basis for income for work.

Effort or sacrifice can take many forms, such as choosing to work longer hours, or performing less pleasant or dangerous work. It is moral to also provide income based on need to those who are unable to work.

Solidarity

= To foster an awareness of shared interests, togetherness and concern for the well-being of others.

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The logic of market economies is such that interests are pitted against each other, so that for one person to get ahead it is often at the expense of someone else. Instead, solidarity requires creating conditions that reveal how our interests are intertwined, so that for one person to advance we all advance in the spirit of mutual-aid, cooperation and togetherness.

Solidarity is about fostering concern for the well-being of others and granting others the same consideration in their endeavours as we ask for ourselves. The ties in a society that bind people together as one have been a powerful creator of human well-being throughout human history. It is clear that for human beings, cooperation is an important part of human life and we should try to organize economic institutions to encourage instead of discourage people from acting out of solidarity with others.

Environmental Sustainability

= To nurture our natural environment and protect it for future generations through conservation and sustainable practices.

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The climate and ecosystems on our planet Earth sustain all human life. It is therefore vital that while meeting our economic needs, that we protect and steward our natural environment without diminishing the ability of future generations to meet their needs and continue to progress. This means leaving future generations conditions at least as beneficial as those we enjoy today.

Efficiency

= To use our scarce resources and human talents wherever they return the greatest increase in human well-being.

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Many people who are critical of the present economic system are turned off by the word ”efficiency”. This is for two reasons: many seem to think that the word efficiency is the same as profit maximisation – which it is not, and secondly, we are often told that the virtue of free markets are that they are efficient – which they are not. For example, an efficient economy would not result in climate breakdown, financial crises, booms and busts and persistent unemployment.

Efficiency means meeting our economic goals, with as little waste of resources, time, labour and energy as possible. If our goal is to maximise human well-being for all, then we don’t want to squander our scarce resources, or needlessly waste our time and energy performing burdensome labour or doing jobs with no social value.

Diversity

= To recognise that each individual is unique and to create a large variety of options for people to fulfill their lives.

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Diversity refers to people having a large variety of choices to fulfil their needs and desires. Since humans show a large variety in preferences, tastes, potentials and lifestyles, the best life for one is not necessarily the best life for another. Variety adds to the richness of all our lives.

Diversity is about rejecting conformity, homogenisation and regimentation in favour of flourishing variety of options and outcomes in our lives. The other benefit diversity brings is not placing all our eggs into one basket. It is important to experiment with different ideas, explore different options, and encourage minority viewpoints, in case one path followed turns out to be wrong.

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Institutions

What are the institutions to achieve these values?
The defining institutions of a capitalist economy are private ownership of society’s productive resources, corporations, and markets. In contrast, the major institutions that make up a participatory economy are:

  1. Social ownership of the productive “commons”.
  2. Self-managing workers’ councils.
  3. Self-managing neighbourhood consumers’ councils.
  4. Federations of councils covering larger geographical areas.
  5. A decentralised democratic planning procedure, called participatory planning, that these councils and federations use to coordinate and plan themselves how to efficiently, fairly and sustainably allocate society’s productive resources.
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Social Ownership of the Commons

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The things we use at work to produce goods and services, such as materials, machines, buildings and knowledge, often called ‘capital’ or ‘the means of production”, are a product of thousands of years of human endeavour which each generation inherits as a gift

In a participatory economy, these productive resources are owned equally by everyone in society. Everyone has a right to benefit from and decide on how they are used. This is also often called ‘the commons’.

This means there are no private individuals who own the economy and reap vast power and wealth for themselves, nor is the economy controlled by a centralised state beauracracy. Instead, society grants workplaces access to use and manage parts of the productive commons via an annual participatory planning procedure, which everyone participates in.

Workers’ Councils

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Instead of hierarchical top-down corporations, work in a participatory economy is organised by self-managing workplaces. Every worker is a member of a democratic decision-making body for their workplace, called the workers’ council, where every member has one vote.

Members of workers’ councils:

  • Plan and decide together what to produce and how.
  • Divide up tasks into jobs that are balanced for empowerment so that everyone has the confidence and knowledge to participate in decisions.
  • Distribute income fairly between themselves based on any differences in effort or sacrifice.
  • Elect recallable and rotated representatives to federations for decisions affecting their industry.

Neighbourhood Consumers’ Councils

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Every resident or ‘household’ belongs to their local neighbourhood consumers’ council, where every member has one vote. This is a direct decision-making body where residents can make proposals and decide on the consumption of local public goods and services where they live.

Members of consumers’ councils:

  • Discuss and decide together what collective goods they’d like to fund, such as a gym, a library or other community facilities.
  • Make decisions around the distribution of any income based on need.
  • Elect recallable and rotated representatives to higher level federations for collective consumption decisions covering their city, region and nationally.

Federations of Councils

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All neighbourhood consumers’ councils will belong and send delegates to a federation of neighborhood councils in a ward, city, county, state, and the national level. The purpose of these federations is to allow people to express their demands for public goods affecting larger geographical areas, such as transport, healthcare, education, etc.

Participatory Planning

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A participatory economy is a democratically-planned economy. There is no market exchange or central planning. Instead, decisions over the distribution of society’s productive resources and which goods and services to produce are made via an annual decentralised democratic planning procedure, called participatory planning, which all workers’ councils, consumers councils and federations participate in.