- Professor Devine can you explain the main points of your model called Participatory Planning through Negotiated Coordination?
The model of participatory planning draws on the theoretical and historical experience of attempts to construct a socialist economic system and offers an alternative to both Soviet style top-down command planning and market socialism. In the former people are coerced by the state, in the latter they are coerced by the operation of market forces; in neither do those affected by the outcome of economic decisions participate in making those decisions. The model of participatory planning is a model of participatory self-government.
The model is based on the concept of social, rather than private or state, ownership. Social ownership is ownership by those who are affected by the use of the assets involved. Assets whose use affects only a local community are socially owned by the different groups within that community, according to the extent to which they are affected. Assets whose use affects a region, or a national economy, or an international entity such as the European Community, or the entire globe, are socially owned by the relevant groups at each level, again in proportion to the extent to which they are affected.
The basic democratic units of a self-governing society are the voluntary associations within civil society, made up of people sharing a common interest, together with representative assemblies at each level of political decision making. People participate directly through the associations in civil society and through sharing the responsibilities of acting as representatives, and indirectly by electing representatives and holding them to account. This layered structure of decision making and self-governance may be thought of as having similarities with the concept of subsidiarity – decisions should be made at the most local level consistent with all affected by the decision being able to participate in making it.
- Professor Devine, is your model a market economy, or something else?
The model of participatory planning is not a market economy in the sense of an economy in which economic resources are allocated across different uses primarily through the operation of market forces. In such an economy the private owners of resources (means of production) decide on the use of their resources in pursuit of maximum profit. Each private owner acts atomistically, in ignorance of the decisions being made simultaneously by all the other owners, even though it is the combined effect of all these atomistic decisions that will determine whether the profit expectations that gave rise to the decisions will be realised. In general, because the decisions are not co-ordinated in advance, realised profitability will be greater or less than expected profitability, and the private owners will then move their resources out of less profitable and into more profitable lines of production. The process is continuous, with at each stage the outcome being what no one willed. Co-ordination does take place, but only after the resources have been committed. This is how market forces operate. Marx called this process “the anarchy of production”.
Both capitalism and market socialism are based on market forces, even though the private owners in market socialism are worker co-operatives or autonomous state-owned enterprises. In the model of participatory planning, a distinction is drawn between market forces, which are replaced by negotiated co-ordination, and market exchange, which continues to exist. Market exchange involves the output of an enterprise, produced with its current capacity, being sold to another enterprise, in the case of intermediate goods and services, or to consumers, in the case of consumer goods and services. Changes in the structure of productive capacity, involving major investment and disinvestment, are brought about by the operation of market forces in capitalism and market socialism, but by negotiated co-ordination in the model of participatory planning.
The social owners at the level of the enterprise include the workers in the enterprise, the users of its output, the suppliers of its major inputs, the communities in which it is located, and associations in civil society with an interest in its activities, e.g., environmental groups or equal opportunities groups – all who are affected by its current activities. However, when it comes to changes in the capacity of the enterprise, involving major investment or disinvestment, a wider group of interests is involved, so the social owners at the level of investment are different from those at the level of the enterprise using its current capacity. The pattern of investment, bringing about changes in the structure of capacity, is decided by this wider set of social owners, represented on a negotiated co-ordination body for the industry or sector involved.
The principal characteristic of a planned economy is that major interdependent decisions, such as major investment projects, are co-ordinated before the resources are committed, unlike the co-ordination after the event that occurs through the operation of market forces. The model of participatory planning through negotiated co-ordination does not attempt to plan everything in advance, unlike the Soviet model of command planning or current models of electronic socialism, but is does allow for the planning in advance of major investment. It retains market exchange but replaces market forces by negotiated co-ordination.
- One of the main objections raised against the planned economy has been formulated by the Austrian economist Friedrich von Hayek, who argues that it is impossible for the centre to have access to all the information needed to make rational economic decisions. How does your model respond to this criticism?
The Austrian school’s criticism of central planning dates back to the socialist calculation debate which was initiated in 1920 by Ludwig von Mises, and then continued by Hayek and the modern Austrian school, now largely based in the United States . The criticism is in two parts. First, there is the argument that much, if not most, information relevant to economic decision making is local information, specific to time and place. The argument is that such information cannot be formulated, transmitted to the centre, and then processed, because of the sheer magnitude of the task. This has been countered by models of electronic socialism making use of modern information technology and computer processing. However, the second part of the criticism is that such knowledge is not just decentralised, but is also largely “tacit”, i.e., it is knowledge based on knowing how to do something, rather than on knowing that something is the case. Tacit knowledge, it is argued, is acquired through practical experience and can only be drawn on by those who have had that experience. It cannot be detached from those whose tacit knowledge it is, and so cannot by its very nature be centralised.
The second part of the Austrian argument, based on tacit knowledge, is a powerful argument against the possibility of electronic socialism. However, it has no force in relation to the model of participatory planning through negotiated co-ordination, which is a bottom-up, not top-down, process of planning. Decisions at the level of the enterprise are taken by the social owners at that level, drawing on their tacit knowledge, just as in the case of capitalist enterprises. The difference, however, is that the social owners embrace all those with an interest in the decision, not just the private owners and their representatives, as in capitalism, so that the range of tacit knowledge drawn on is much wider and the decisions made, therefore, are likely to be more efficient. Decisions with respect to investment are made by the negotiated co-ordination bodies, consisting of the social owners at that level, drawing on a much wider set of tacit knowledge than in capitalist decision making.
- Another criticism made against planning is that such a system would lack dynamism. Would a system of participatory planning through negotiated coordination be a dynamic economy?
Capitalism is certainly a dynamic system. Indeed, Marx greatly admired capitalism for its continuous revolutionising of the forces of production, increasing labour productivity and creating the material foundation for a communist society able to produce enough for everyone’s needs to be satisfied. However, he also recognised the human and ecological costs involved in the capitalist mode of production. Today, in the most developed capitalist countries, productivity is high enough for everyone’s needs to be met. The problem is not that not enough is produced, but that what is produced is grotesquely unequally distributed. In such countries what is needed is a change from an emphasis on quantity to a focus on the quality of life. Much of what counts as innovation and dynamism is no more than endless product differentiation and demand stimulation, with continuous growth threatening ecological catastrophe.
Nevertheless, a dynamic rather than static society is surely desirable. The question is what sort of dynamism, what sort of innovation is needed to improve the quality of life? Innovation is inherently uncertain, but what can be decided is the areas to which the resources devoted to research and innovation should be applied. In capitalism, this is decided by governments, with a structural bias towards armaments, and capitalist corporations, with a structural bias towards profits. In a society based on participatory planning, these decisions would be made by the people who would expect to benefit from successful research outcomes and innovations. There remains, however, the question of whether a model of participatory planning based on negotiated co-ordination would stifle creativity, initiative and entrepreneurial activity.
Given the inherently uncertain character of innovative activity, two processes are needed for a dynamic economy to produce a steady flow of successful innovations: the generation of a variety of potential innovations; and a selection process that decides which of these turns out to be successful. In capitalism, the criterion for deciding which possible innovations to develop and launch onto the market, is expected profitability, and success is judged by realised profitability. While this sometimes results in socially useful innovations, more often that not it results in socially useless or harmful ones. In a participatory society there would be a variety of research institutions and research departments which would generate a stream of potential innovations. These would be offered direct to users or sold through market exchange, with the uptake providing information on whether they were found to be socially useful. However, the criterion for deciding which projects should be pursued would not be expected profitability, but expected social usefulness, as judged by the representatives of the potential users participating in the decision–making process.
- In Europe , do you know of any party that proposes your model?
Some years back, the Socialist Workers’ Party in Britain , somewhat to my surprise, may have proposed the model as a possible way of organising a socialist economy. The model also forms the basis of the section on economic organisation in the booklet What On Earth Is To Be Done? published by the UK based Red Green Study Group.
- Professor Devine, what is the difference between the participatory economy of Albert and Hahnel and your model?
Albert and Hahnel’s model of participatory economics has much in common with my model of participatory planning in terms of its values, its emphasis on the importance of participation, and its insistence that everyone should perform their fair share of the different types of work necessary in society. However, as a form of economic organisation the two models are fundamentally different. Participatory economics is a form of electronic socialism. All economic decisions and activities are co-ordinated in advance before resources are committed and production and consumption are undertaken. It is a neo-classical general equilibrium model in which the role of the Walrasian auctioneer is played by a central computer.
The central computer proposes a complete set of shadow prices for enterprise-based workers’ councils and neighbourhood-based consumers’ councils to take into account when making their offers of what they would like to produce and bids for what they would like to consume. The offers and bids are then transmitted to the central computer which aggregates them to see if the total offers and bids for each and every product are equal. If they are not, the central computer issues a new set of shadow prices, revised in a market clearing direction, and the process is repeated. This iterative process continues until aggregate offers and bids for all products are equal, and only then do production and consumption take place, when everything has been co-ordinated in advance.
It will be clear that Albert and Hahnel’s model of participatory economics involves workers’ and consumers’ councils in formulating hypothetical offers and bids dependent on the particular set of shadow prices they are currently faced with. It is therefore vulnerable to the Austrian school’s criticism that the importance of tacit knowledge, which can only be drawn on through action, means that workers only know whether they are capable of producing what they think they can produce when they start producing, and consumers only know what they want to consume when they are faced with the actual decision of what to consume. It is also significant that their model is called participatory economics, not participatory planning, since planning in the sense of decisions about changes in the future structure of productive capacity brought about by investment does not figure in their model.
Participatory economics is focussed on co-ordinating in advance production and consumption based on existing capacity. In my model of participatory planning, current production and consumption are co-ordinated through market exchange, through buying and selling. If more is produced than users want to buy, enterprises reduce output, if less is produced than users want to buy, enterprises increase output, or if they are already producing at full capacity bid for new investment to expand capacity. Co-ordination takes place after production has occurred, based on information generated by market exchange. The crucial advantage of planning as a co-ordinating mechanism, however, arises in relation to major investment that changes the structure of productive capacity, which is planned and co-ordinated in advance. As has been seen, this takes place in my model through a process of negotiated co-ordination involving the different social owners at the relevant level.
Finally, a crucial difference between the two models is that Albert and Hahnel’s participatory economics is a process of interaction at a distance between workers’ and consumers’ councils. Although there is discussion within each council, there is no discussion between councils. In this sense, it is an atomised model, which is not really surprising given that the economic mechanism of participatory economics is a version of neo-classical general equilibrium. Participatory planning, by contrast, is a political process involving negotiation within and between all levels by the social owners at each level. It takes account of the fact that people are not just workers and consumers, but also have many other interests and concerns, reflected in the voluntary associations in civil society to which they belong, as well as being citizens with a general interest in the common good.
- What is your opinion on the economic policies of Hugo Chavez? In your opinion can your planning model be applied in Venezuela ?
In the autumn of last year (2007) I spent ten days in Venezuela studying the Bolivarian revolutionary process underway there, with its emphasis on the “social economy” and its aspiration to build twenty-first century socialism. What is going on is immensely impressive and inspiring, but it also has some worrying features. The key aim, it seems, is to use Venezuela ’s oil revenues to promote programmes that empower and educate people. These programmes take the form of various “missions” concerned with education, health, social welfare, etc., running parallel to the existing state structures, plus attempts to establish workers’ councils in all enterprises and community councils in all neighbourhoods.
The relationship between the missions and community councils, and the existing state structures, is problematic and remains to be worked through. Similarly, the relationship between workers’ councils and enterprise managements is also not resolved. It must be remembered that some 50% of the economy is made up of the informal sector, around 25% is privately owned, including most consumer goods and services, and around 25% is state owned, including most heavy industry. The social economy is very small. It consists mainly of co-operatives, but the term is also used to cover workers’ councils and various forms of partnership involving the state. What is only just beginning to be recognised is that the relationship between enterprises, and between enterprises and communities, is crucial for the future, and that the way in which their interdependence is taken into account must be a central part of the design of a socialist economic system. It is in this connection that my concept of participatory planning through negotiation between the social owners is becoming relevant.
The result of the December 2007 referendum on constitutional reform, the first time Chavez has lost a vote, is a sign of the very real problems that the Venezuelan revolutionary process faces. Crime, corruption and bureaucracy are widespread, even endemic. The referendum was lost by Chavez not because the opposition gained support (its vote was only marginally higher than in the presidential election at the beginning of the year) but because many of Chavez’s supporters did not vote due to a feeling of disillusionment. The President remains immensely popular, but it is worrying that so much seems to depend on one person. Venezuela is in a difficult transitional stage, in which the creation of an informed, educated and committed popular base, rooted in civil society, is the critical task, but one that will take a long time to accomplish. We must hope that the process will be successful, but there are no guarantees.
- A final “provocative” question. In your opinion, is a new October Revolution possible?
No, at least not in the developed capitalist world. Gramsci long ago recognised that the struggle for socialism must take place primarily within civil society, taking the form of a war of position for hegemony. We now also recognise that a socialist economy in which production is for use not profit requires an institutional architecture based on participation, which embeds the economy in society and its political processes. Political transformation and the creation of a self-governing society is a complex, intertwined process that will take a long time.