Models of Participatory Planning for Socialism in the 21st Century

Seongjin Jeong (Gyeongsang National University)

1. Introduction

Today, as the social polarization and poverty spread with the neoliberal globalization, anti-capitalist sentiments are growing all over the world. ‘Socialism for the 21st century’ becomes the key word of the contemporary progressives (Lebowitz, 2006). However, the experiences of the crumbling of Soviet and Eastern bloc, combined with the lack of confidence on whether we can get a better society than capitalism after we get rid of it, despite its all the problems, are deterring people from anti-capitalist socialist politics and stopping them at left-Keynesian reformist or at most market socialist one. [1]

Therefore, establishing the case for socialism, in terms of its superiority compared to capitalism as well as its feasibility in the changing condition of 21st century, not just in terms of its necessity, considering the disastrous reality of today’s capitalism, is becoming a urgent task for the radical left, far from a futile utopian socialist mongering. [2] Before proceeding this project, it is necessary to confirm that the crumbling of Soviet and Eastern bloc shows just a failure of special kind of planning, that is, “administrative command economy” (Gregory, 2004). It cannot be taken as a proof of the infeasibility of Marxian socialism or planning in the original meaning of Marx. Of course, we need to make it clear what is meant by Marxian socialism or planning, and establish the feasibility of Marxian socialism or planning, considering the changing conditions of 21st century, especially, globalization and information technology (IT) revolution. Repeating the slogan of ‘imminent breakdown of capitalism’ or limiting ourselves to ‘movementism’ (“struggle is everything, final goal is nothing”), would be far insufficient to attract the intelligent mass of the 21st century towards anticapitalist socialist politics.

In this paper, I will explain Marxian concept of socialism, especially focusing on Critique of the Gotha Programme, and discuss the recent works on participatory planning which are proposed to realize Marxian socialism in the 21st century. This paper will compare three recent models of participatory planning and discuss their merits and demerits: ‘parecon’ [3] model of Michael Albert and Robin Hahnel, ‘negotiated coordination’ model of Pat Devine and Fikret Adaman, and ‘labor-time calculation’ model of W. Paul Cockshott and Allin Cottrell. [4]

2. Marxian Concept of Socialism

2.1. Marxian Concept of Planning

Marx meant planning as democratic participatory economy where the economic life of human being, including production, distribution, and consumption, etc., is controlled by human being’s own autonomous will, not by any kind of external forces, such as market or state. In Capital, Marx specified the meaning of planning in contrast to capitalist market economy as follows. [5] While, in the capitalist market economy, “the interconnection of production as a whole… forces itself on the agents of production as a blind law” (Marx, 1981b: 365), and “the process of production has mastery over man, instead of the opposite” (Marx, 1981a, 175), in the planned socialism, it is “grasped and therefore mastered by their combined reason”, and “brings the productive process under their common control” (Marx, 1981b: 365). [6] In Marxian planning, direct producers themselves become the planners of the economy.

In other words, Marxian socialism may be thought of as “the social transformations that are needed if people are to gain control over their lives, to be able to make informed and effective decisions about how they want to live” (Devine, 2002: 73). Or, as Ticktin said, Marxian socialism can be defined by “the degree to which the society is planned. Planning here is understood as the conscious regulation of society by the associated producers themselves” (1998: 58).

In short, Marxian socialism is ‘socialism from below’ and ‘the self-emancipation of working class,’ the essential economic component of which is the participatory planning by ‘freely associated producers.’ The so-called ‘actually existing planned economy,’ including former Soviet and Eastern bloc or current North Korea or Cuba, has nothing common with Marxian socialism or Marxian planning. [7]

Moreover, even in the former Soviet Union, the most advanced ‘actually existing planned economy,’ the input-output tables, the essential basic technical requirement for central planning, had never been compiled. Therefore, calculation of necessary level of ‘gross output’ from the target level of ‘final output’ by using input-output analysis, including inversion of input coefficient matrix, could not be done in the former Soviet Union. Of course, the Soviet Union did compile the material balance, the elementary primitive equivalent of input-output tables. But they could do it only for about 2,000 products as late as in 1980s (Cottrell & Cockshott, 1993b: 4). Moreover, the level of computing and telecommunication facilities, essential infrastructure for any economic planning, was very poor in the former Soviet Union, compared to that of Western market economies. For example, only 23 percent of urban families had phones as of 1985 (Cockshott & Cottrell, 2005: 243). Then, so-called the most developed ‘actually existing planned economy,’ had never been planned, even in its technical sense of the term.

2.2. Rereading of Critique of the Gotha Programme

I think that Marx’s Critique of the Gotha Programme should be the starting point for the project of designing ‘socialism for the 21st century.’ Dunayevskaya(1991: 153) regarded it as the “New Ground for Organization,” and urged all the Marxist organizations to adopt it as the basis of their actual politics. However, most socialist organizations tend to regard Marx’s Critique of the Gotha Programme as the description of “kingdom of freedom” of far distant future, (“from each according to his ability, to each according to his needs”), and assume that it has no direct relevance to day-to-day strategies and tactics for the struggle for socialism. However, I think that the picture of communist society delineated in Marx’s Critique of the Gotha Programme – especially, the transparent society where all the categories of commodities and money and all the products are basically distributed according to labor-time, etc. – is worth careful rereading for the current project of ‘socialism for the 21st century.’

“Within the cooperative society based on common ownership of the means of production the producers do not exchange their products; similarly, the labor spent on the products no longer appears as the value of these products, possessed by them as a material characteristic, for now, in contrast to capitalist society, individual pieces of labor are no longer merely indirectly, but directly, a component part of the total labor. The phrase ‘proceeds of labor’ (Arbietsertrag), which even today is too ambiguous to be of any value, thus loses any meaning whatsoever.

We are dealing here with a communist society, not as it has developed on its own foundations, but on the contrary, just as it emerges from capitalist society. In every respect, economically, morally, intellectually, it is thus still stamped with the birthmarks of the old society from whose womb it has emerged. Accordingly, the individual producer gets back from society – after the deductions – exactly what he has given it. What he has given it is his individual quantum of labor. For instance, the social working day consists of the sum of the individual hours of work. The individual labor-time of the individual producer thus constitutes his contribution to the social working day, his share of it. Society gives him a certificate stating that he has done such and such an amount of work (after the labor done for the communal fund has been deducted), and with this certificate he can withdraw from the social supply of means of consumption as much as costs an equivalent amount of labor. The same amount of labor he has given to society in one form, he receives back in another” (Marx, 1992: 345-6. Emphasis by Marx).

In above paragraphs of Critique of the Gotha Programme, Marx clearly states that labor appears directly, categories of commodity, money and value disappears, and labor products are distributed according to labor-time, even in the first phase of communism. But, in State and Revolution, Lenin equated socialism with ‘first phase of communism,’ or with the transition period from capitalism to communism, sometimes even with the state ownership of means of production. Problem is that Lenin’s formulation provides the room for separating socialism from communism, thereby leading to Stalinist theory of socialist mode of production, which asserts that the categories of commodity, money, market and value can exist in the socialism as the transition period from capitalism to communism. All the more problematic is that Stalinist theory of socialist mode of production makes the specific feature of Marx’s first phase of communism – coordination of economy in terms of labor-time – invisible, and postpones any programmatic concept of achieving the first phase of communism to a distant task (Cockshott & Cottrell, 2005: 248), on the one hand, and justifies the long-term coexistence of the market with socialism, which is the heart of the theory of market socialism. [8] However, in Critique of Gotha Programme, Marx clearly states that the planning in terms of labor-time in the first phase of communism should be the urgent programmatic task of German Social Democratic rather than a goal of distant future. What differentiates the first phase of communism from its developed phase is that the former still needs the coordination of the economy by labor-time due to still existing scarcity, rather than that it can only be achieved in the latter.

Therefore, it lacks textual evidence for Nishibe (2006) or Karatani (2003) to interpret Marx’s thesis of labor certificate in Critique of the Gotha Programme as the renunciation of his early critique of Proudhon’s or Gray’s theory of labor money, or try to discover in it the origin of ‘local exchange trading system’ (LETS) or ‘new association movement’ (NAM). [9] It is also incorrect for Kwack (2006) to read Marx’s thesis of labor certificate in Critique of the Gotha Programme as the thesis of distribution according to the performance of labor, rather than the thesis of distribution in terms of labor-time. [10]

Indeed, the idea that labor-time replaces value as the economic coordinator even in the first phase of communism, which is fully developed in Critique of the Gotha Programme, is constantly and consistently recurring theme of Marx, as can be evidenced in various pages of Grundrisse, Theories of Surplus Value, and Capital. For example, following paragraph of Grundrisse is lucid enough. “If we presuppose communal production, the time factor naturally remains essential. …Ultimately, all economy is a matter of economy of time. … Economy of time, as well as the planned distribution of labor-time over the various branches of production, therefore, remains the first economic law if communal production is taken as the basis” (Marx, 1986: 109).

3. Models of Participatory Planning

3.1. Common Features

During the recent revival of the debate on the models of post-capitalist society, following three models for participatory planning stand out: Albert and Hahnel’s parecon, Devine and Adaman’s ‘negotiated coordination,’ and Cockshott and Cottrell’s ‘labor-time calculation’ model. Despite the differences and disputes among themselves, [11] they are in concert to reject all forms of market economy, including the market socialism, and in pursuing the participatory planned society based on direct democracy.

Theorists of participatory planning are very critical of theory of market socialism. For example, Adaman and Devine (1996; 1997) classifies Oscar Lange (1936), who is usually regarded as the father of theory of market socialism and believed to prove the possibility of economic calculation in socialism against the critique of Hayek, as just ‘neoclassical socialism’, in that he embraces neoclassical economic theory of general equilibrium and fails to recognize the importance of ‘tacit’ knowledge, role of uncertainty and democratic participation. [12] Devine also argues that “market socialism, interpreted as a system in which efficiency is sought through decentralization of economic decision-making to more or less fully independent enterprises, is a blind alley. It ignores the characteristic feature of the modern world – interdependence” (1992: 76). The weakest point of market socialism is its internal contradiction of its constituent parts. For example, the workers self-management and market mechanism, the two principles of market socialism, cannot co-exist in the long term. [13] As Albert and Hahnel argue, if market mechanism is allowed to operate even within the framework of workers’ self-management, it is only a matter of time for workers to give up self-management and elect or hire professional managers for the survival of their firms in the competitive struggle necessitated by the market mechanism (1992: 43). As Elson mentions, “Market socialism by itself reinforces and extends the power of enterprise management, at the expense of ordinary workers” (1988: 44). Indeed, the experiences of Yugoslavia evidence that the market socialist project of workers’ self-management within the environment of market is unworkable in reality, and inescapably leads to full-fledged market capitalism. As Konings indicates, the regulation of social interaction by markets will set market socialism “on a slippery slope of marketization. …If it is assumed that human interactions needs to be regulated by markets as the exclusive alternative to hierarchic planning, an exorable logic of marketization is encountered” (Konings, 2001: 117, 125). Indeed, Nove (1983), the representative market socialist, goes so far as to deny the importance of self-organization of grass roots producers, such as workers’ self-management, and regards the labor unions just as the hindrance to the economic reform. Considering this, it is not surprising that Albert(2003) argues that all the actually existing market socialist societies were new class society ruled by so-called ‘coordinator class.’

Another feature shared by recent formulations of participatory planning is their common emphasis on the importance of mass participation and the role of direct democracy. Some theorists, for example Cockshott and Cottrell(1993) even advocate lottery, that is, far beyond the experiences of radical form of representative democracy in Paris Commune of 1871 or soviets of 1917, where officials are elected and recalled by the people with their remuneration limited by the levels of workers’ wages.

I think, the critique of market socialism and the emphasis on the direct democracy are the two most important contributions to the development of Marxian concept of socialism by the recent theorists of participatory planning.

Hereafter, I will summarize and compare main characteristics of three models of participatory planning: parecon, ‘negotiated coordination,’ and ‘labor-time calculation.’

3.2. Parecon

In parecon, all workplaces are owned by workers’ council. Parecon economy is coordinated from below by the participation of workers’ council and consumers’ council.

Parecon introduces the principle of balanced job complex (BJC) which balances the empowering jobs and disempowering jobs for every workers within and across the workplaces in order to abolish the social division of labor. Contrary to common criticisms, parecon does not mean that everybody does everything. In parecon, “Each person will still perform a very small number of tasks in his/her BJC. Some will still specialize in brain surgery, others in electronical engineering, others in high voltage welding, and so on. But those who perform these specialized tasks if they are more empowering than average tasks will also perform some less empowering tasks as well, and if they are more desirable than average, will also perform some less desirable tasks – unless they wish to work more hours or accept a lower effort rating” (Hahnel, 2000:327-328). Contrary to the conventional wisdom, the introduction of BJC would not hurt the specialization and efficiency. Because, “while efficiency requires an important role for experts in determining complicated consequences, efficiency also requires that those who will be affected determine which consequences they prefer” (Hahnel, 2000: 328).

Albert and Hahnel think that the mass participation and equity can only be guaranteed by the abolition of social division of labor through the introduction of BJC. If only a few monopolize empowering jobs, and the rest of the members of society do only tedious and repetitive jobs, the former group eventually dominate and dictate the latter group, even if the society has perfect formal democratic decision making procedures. In this respect, the introduction of BJC is essential for avoiding the emergence of so-called coordinator class which monopolize the empowering jobs (Albert, 2006b).

As to the income distribution, while capitalism rewards both the property and the contribution to production, market socialism rewards only the contribution to production, because it is assumed to abolish the private ownership of means of production. On the contrary, parecon rewards neither the property nor the contribution to production, on the ground that workers have no or little control of them. Parecon rewards only the effort for which workers are responsible. As Albert (2003) explains, we cannot be born as children of chaebol, or with some rare talent, even if we try very hard to be so. They are beyond the control of our own efforts. If we are rewarded or punished for which we have no control of, it is against the principle of justice. But, in market socialism, peoples are remunerated according to their contribution to production, in other words, their ‘performance of labor,’ which are in large part independent of peoples’ own efforts, because it is closely related with differential talent or production facilities of which people have no control. Therefore, if the distribution according to property in capitalism violates the principle of justice, distribution according to the performance of labor in market socialism does no less so. Rewarding only the efforts, as in parecon, fits with the principle of justice.

Moreover, only if workers are rewarded according to the efforts of which they have control, they would be motivated to work hard and the performance would be enhanced too (Albert and Hahnel, 1992: 54-55). In parecon, effort levels of each worker, which provide the basis of his or her income, are rated by ‘effort rating committee’ composed of peer workers. Therefore, the common criticism that, without performance based payment, parecon will soon face the lack of motivation to work or deterioration of performance is groundless.

The macroeconomic coordination of parecon is accomplished through the specific participatory planning mechanism. First, Iteration Facilitation Board (IFB), a sort of central planning board, announces the estimated opportunity costs, or indicative prices, of all the goods, resources, labor, and capital stock, etc. Based on the announced indicative prices, consumer councils submit their consumption plans, and workers councils submit their production plans and required inputs. The consumption plans submitted by the consumers councils should, of course, be substantiated by their respective effort ratings. In other words, any member of consumers councils with more than average effort rating can submit more than average consumption plan. On the other hand, workers councils are required to show that the social benefits of their production plans are above their social costs, when they submit their production plans to the IFB (Hahnel, 2000: 337). Of course, social costs and benefits are also compared in capitalist market economy, but they are seldom done correctly, due to market failure, like public goods, external effects etc. [14] Contrary to capitalism, social costs and benefits can be correctly calculated and compared in parecon, thanks to the participation of all the workers and consumers affected by them. [15] After comparing the production plans and consumption plans submitted by workers and consumers councils, IFS determines the degrees of excess demand or excess supply by every product, and re-announce their new indicative prices: increase the indicative prices of the products with excess demands, and reduces those with excess supplies. Now, based on the revised indicative prices, consumers and workers councils adjust their consumption and production plans and submit them again to IFS. These processes are repeated several times until the production and consumption plans matches with each other, and excess demands and supplies diminishes reasonably, and at that point, after referendum, if necessary, production and consumption are executed actually. Of course, most procedures of the participatory planning in parecon are electronically done through Internet and computer.

3.3. Negotiated Coordination

In ‘negotiated coordination’ model of Devine and Adaman, companies are socially owned by those affected by their activities. “Social ownership is neither private ownership nor state ownership, but rather ownership by those who are affected by the use of the assets involved” (Adaman and Devine, 1996: 533). The owners would include the companies’ workers, other companies in the same industry, major suppliers and users, the local communities where the company is based, and interested NGOs, like environmentalists and equal opportunity groups, etc. (Devine, 2002: 77). The social owners are represented on the Board of Directors of the company.

The abolition of the social division of labor is as much crucial to ‘Negotiated coordination’ model as to parecon model. In ‘negotiated coordination’ model, all social activities are classified as following five categories: 1) planning and running, 2) creative, 3) nurturing, 4) skilled, 5) unskilled and repetitive (Devine, 1988: 171). According to Devine, “Abolition of the social division of labor means ending the social stratification that arises when people spend their lives performing primarily just one category of activity”(2002: 73). [16] The reason why the abolition of the social division of labor is essential is that people who spend all their time being told what to do, rather than learning how to decide what to do for themselves, develop subaltern consciousness, and “people with partial subaltern consciousness cannot take an overall view and share the responsibility of running things” (Devine, 1997: 52). In this respect, socialism is “the social transformation that is needed if people are to gain control over their lives.” In other words, “Socialism should be reconceptualized as a society in which the social division of labor has been abolished”(Devine, 1997: 60, 58).

Devine distinguishes ‘market exchange’ from ‘market forces.’ According to Devine, “Market exchange involves transactions between buyers and sellers, where what is being exchanged consists of either stocks (inventories) or goods and services produced by enterprises using their existing capacity. Market forces refer to the process whereby changes are brought about in the underlying allocation of resources, the relative size of different industries, the geographical distribution of economic activity, through the interaction of decisions on investment and disinvestment that are taken independently of one another, with coordination occurring ex post”(1992: 79-80). In other words, market exchanges become uncontrollable and unpredictable market forces once market coordination is extended to investment decision. Devine argues that, in his model, ‘market forces,’ which is intrinsic to capitalism with its permanent drive for accumulation dictated by cut-throat competitive struggles, is extinct and replaced by ‘negotiated coordination.’ According to Devine, not only market exchange but also market forces operate in market socialism model. However, in negotiated coordination model, while market forces are disabled, market exchange still exists and operates in the realm of production using existing capacities. But the changes in capacities, that is, new investment or disinvestment, are executed through negotiated coordination not by market exchange. In other words, all the new (or dis)investments are adjusted by ex ante negotiation by all the groups affected.

However, ‘negotiated coordination’ covers only some part of the whole economic activities, especially new (or dis) investment. Rest of the economic activities, including consumption, are delegated to the hidden hand of market exchanges. So, the common criticism of ‘negotiated coordination’ model that it would degenerate into a “monstrous apparatus of unlimited interferences and endless deliberation” (Hodgson, 2005: 151) is groundless.

‘Negotiated coordination’ model emphasizes the importance of negotiation through the participation of all the groups affected by the activities of the companies. Devine argues that the reason why the economic activity must be based on the active participation of the direct producers in decision on what and how to produce is that “knowledge can only be drawn upon, made use of, by those who have acquired and possess it” (Devine, 2002: 66). In other words, “local” and “tacit” nature of knowledge necessitates the ‘negotiated coordination’ based on the participation of all the social owners. According to Adaman and Devine, “participatory negotiated coordination” is “a process through which tacit knowledge is socially mobilized” (2006: 145).

‘Negotiated coordination’ model emphasizes very much the qualitative aspect of the information, or the ‘local’ and ‘tacit’ nature of the knowledge, unlike parecon or ‘labor-time calculation’ model. For example, when the decision on new (or dis)investment should be made, the qualitative information such as how the workers or local community would be affected by it is brought on the table of ‘negotiated coordination.’ According to Adaman and Devine (2001), ‘negotiated coordination’ process is “deliberative democratic process” in which all the participants discuss with each other, rather than the automatic aggregation process of existing preferences by parecon’s IFB or Cockshott and Cottrell’s supercomputer. [17] Devine emphasizes that ‘negotiated coordination’ is the transformative process by which the cognitions and preferences of the participants could be changed.

In ‘negotiated coordination’ model, prices are set by the company at the social average cost of production, which includes the cost of primary inputs, such as labor, capital, and natural resources, and various intermediate inputs. The price should include the capital costs or expected average returns to capital, calculated at the level of whole economy, besides primary and intermediate input costs. [18] Therefore, it can be said that in ‘negotiated coordination’ model, companies are ‘price makers,’ On the contrary, in parecon or ‘labor-time calculation’ model of Cockshott and Cottrell, companies are ‘price takers’ who should accept the prices determined by the iterative adjustment process (parecon) or by the central calculation agency (‘labor-time calculation’ model).

Because companies are ‘price makers’ in ‘negotiated coordination’ model, price of the product will vary between different companies in the same industry, according to the difference of productivities of the companies. As a result, realized actual returns to capital will be different from expected average returns to capital. Based on the differential actual returns to capital, companies will adjust their production level through the change of existing capacity utilization in the short run, that is, market exchange, or through new (or dis) investment determined by ‘negotiated coordination’ in the medium or long run.

3.4. Labor-time calculation

In ‘labor-time calculation’ model of Cockshott and Cottrell, “the means of production are in unitary public ownership” (Cockshott and Cottrell, 2002: 57).

Cockshott and Cottrell argue that thanks to the development of IT and computing technology, it is perfectly possible to compute the balanced central plan in terms of the labor-time embodied in the products, despite the enormous size and complexities of the modern economy. [19] Cockshott and Cottrell(2006) show that it takes only a few minutes to compute the labor-time embodied in each product, which is the sum of directly expended present labor to produce the product and indirectly expended past labor to produce the intermediate inputs for the product, for a whole economy composed of about as many as 20,000,000 products, by calculating the inverse matrix of input coefficients, using supercomputer.

Based on the data of the labor-time embodied in the product calculated by super computer, Cockshott and Cottrell suggest exactly the same kind of distribution principle, described in Marx’s Critique of the Gotha Programme: remuneration of workers by the labor certificate which shows how long and how hard they work, and the exchange of the labor certificate with the products, tagged by the labor-time embodied in them. Cockshott and Cottrell think that only through the application of Marxian labor certificate distribution principle can the egalitarianism in its true sense of the word be realized. [20] Marxian labor certificate is in no sense the money, because it is thrown out once it is used to exchange with the products, like movie thicket. In this sense, the exchange of labor certificate with labor products cannot be conceived as market exchange.

In ‘labor-time calculation’ model, the level of production of each product is adjusted based on the ratio of the amount of labor certificate offered to purchase the products to the amount of labor-time embodied in the product. For example, “production is expanded for those products showing an above-average ratio of market-clearing price (expressed in labor tokens) to labor values (sic), and reduced for those products showing a below average ratio” (Cockshott & Cottrell, 2005: 243). To emphasize this aspect, Cottrell and Cockshott call their model as “Marx plus Lange plus Strumilin” model (1993a: 105). [21]

As for the decision making procedure, Cockshott and Cottrell reject the representative democracy, and advocate for direct democracy and loterry. According to Cockshott & Cottrell(2002: 61), “Elections are aristocratic, not democratic: they introduce the element of deliberate choice, of selection of the ‘best’ people, the aristoi, in place of government by all the people. A system of election always favors the upper strata of society, those who are best educated, have the greatest access to money and means of communication.” Cockshott and Cottrell do not think that Leninist ‘council-state’ would be the answer, because “grass-roots representative bodies will either be dominated by the Communist Party or by representatives of reaction”(2005: 246). Instead, they suggest lottery as the ideal democratic procedure. “If soviet states are to survive in the long term, they will have to rediscover lot, the ur-principle of democracy” (Cockshott & Cottrell, 2002: 62).

Considering the great emphasis given on the role of the participation and direct democracy by the theorists of participatory planning, common objections to socialism in that it inevitably represses individual freedom and democracy, or the related argument that only the introduction of market mechanism is the cure for it, like, Hayek, Nove(1983) or Roemer(1996), is simply groundless.

However, Cockshott and Cottrell do not mention about the abolition of the social division of labor or BJC, which is central to Devine’s or Albert’s model. For this reason, their plea for radical direct democracy sometime sound like empty slogan. In this regard, following critique by Devine is relevant: “Cockshott and Cottrell’s institutional proposals contain no transformatory dynamic towards classless, or strataless, society based on participatory self-government. …In their model, politics is strangely absent. …There is no room for different views of the good life. …As with their model of central planning, Cockshott and Cottrell’s model of the ‘political’ level is in fact technocratic and managerial rather than political” (2002: 66-67). In their model, there is “no provision for face-to-face social interaction and negotiation” (Adaman & Devine, 1997: 74. Emphasis by S.J.) [22]

Table 1

summarizes and compares main characteristics of three models of participatory planning.

Table 1: Comparison of Participatory Planning Models

  Parecon Negotiated Coordination Labor-time calculation
Theoreticians and Main Works Albert & Hahnel(1991) Devine(1988) Cockshott &Cottrell(1993)
Ownership of Means of Production Workers’ council ownership Social ownership State ownership
Abolition of Division of Labor BJC Rotation of jobs over the life time --
Distribution Principle Efforts Negotiated coordination Labor-time and labor certificate
Determination of Prices of Consumption Goods Indicative prices announced by IFB and iteratively adjusted by comparing consumption and production plans submitted by consumers and workers councils Prices set by companies at the social average costs of production, and adjusted by comparing the actual and expected rate of return Central planning agency calculates the labor-time embodied, and production level adjusted by comparing it with the amount of labor certificate to purchase them
Determination of Investment Investment plans are submitted by workers council and approved by consumers council Negotiated coordination Central planning agency
Market No market No market forces, but market exchange exists No market
Decision Making Direct and representative democracy Direct and representative democracy Direct  democracy and lottery
On USSR Coordinator class rule Statism Socialism

4. Some Issues of Participatory Planning

In recent debates on participatory planning models, some important issues are prompted, which need to be addressed more seriously. In this chapter, I will first focus on the issues of feasibility, information and innovation, and argue that they are far short of raising any serious doubt on the project of participatory planning. Then, I turn on the existing models of participatory planning, especially their attitudes to Marxian labor theory of value and the former Soviet Union, and suggest some venues for developing the project of participatory planning on the foundation of Marxian concept of socialism.

4.1. Feasibility

Most common objection to the participatory planning is that it is simply not possible to coordinate the modern complex economy without market mechanism. Indeed, the impossibility of market abolition, or the infeasibility of planned economy in the 21st century conditions is received almost as an axiom in some of Korean progressives today. Left-Keynesians or market socialists, currently the dominant tendencies in the Korean left, argue that the abolition of market is not only impossible, considering the changed conditions in the 21st century, especially globalization and IT revolution etc., but also undesirable, considering the efficiency issues.

But, these assertions are simply groundless. Of course, it is true that globalization tends to render Stalinist ‘socialism in one country’ nothing but a fantasy. However, Stalinist ‘socialism in one country’ has nothing to do with Marxian socialism which can be achieved only through revolution on a world scale. Globalization acts to deepen the interconnection between national capitalisms and mature the objective conditions for the Marxian socialism as world revolution.

However, Schweickart(2006) repeats that the idea of parecon or participatory planning is just utopian pipe-dream in complex modern economy, and asserts that his model of market socialism is the only feasible model for the progressives. But, it is plain truth to know that market socialism as well as participatory planning needs enormous surge of mass anti-capitalist struggles before it can be initiated. Indeed, state ownership of means of production, the essential prerequisite of market socialism, can only be achieved in the revolutionary conjunctures, because it will seriously threaten the private property. Then, we need to approach the issue from strategic point of view, and determine which vision, market socialism or participatory planning, is more effective to build the mass struggle for post-capitalist future. Like Albert(2006b), I think that participatory planning is far more effective than market socialist oxymoron. Paradoxically, market socialism, which is usually advocated and received in the name of realism, is actually more unrealistic and utopian than the radicalism of participatory planning. [23]

Also, rapid development of technology should not be the reason to reject the planning, because new technology, especially IT, enables the application of very detailed planning on a whole economy scale, which was unthinkable in early 20th century. For example, using ‘bar code’ that enables every single product to have a unique identification number, we can construct a planning system that can control whole process of distribution from production to consumption and its feedback for almost all the products on a national and even global scale. Indeed, for most of large companies, the process of production and distribution has already been highly planned at the company level. What is problematic with capitalism is that the planning is limited to the company level, and anarchy of production is the rule in the whole economy. However, if all the companies are required to upload regularly their detailed financial statements, including balance sheet, profit and loss account, and factory cost report, etc, on the standardized web page, then the information could easily be captured by systems analogous to Google and integrated and calculated to construct a production and investment planning on a national or global scale (Cockshott, 2006).

Marx project of building non-market planned economy in terms of labor-time, as is delineated in his Critique of the Gotha Programme, is literally feasible today. Of course, for this, the calculation of labor-time embodied for millions of goods interrelated with each other through input-output relations is needed, which requires again solving the same number of simultaneous equations. Common criticism raised in the socialist calculation debate of the 1930s is that even if it is theoretically possible it is practically irrelevant because it would take more than ten years to compute just one-year planning (Kwack, 2006). However, Cockshott (2006) exemplifies an experiments with a modest computer costing about 5,000 pounds which found that “the equations of an economy roughly the size of the Swedish economy” could be solved “in about a two minutes.” [24]

In addition, thanks to the dazzling development of internet and network technology and internet, Marxian concept of socialism from below, in other words, participatory planning, becomes an actuality nowadays. For example, on-line discussion combined with internet voting can provide effective tools for realizing the principle of direct democracy of Athens in the 21st century economy and politics. [25]

4.2. Information

Advocates for market economy, including market socialists, argue that all kinds of planned economy would inevitably face with the information problem. They also argue that it can only be solved in the market economy. However, as Elson(1988) argues, the problem is more the lack of information disclosure and sharing, rather than the generation of information. In capitalism, information is fragmentized and hard to share, due to the institution of private property. [26] Indeed, “the market mechanism fails to communicate all the relevant information to the relevant individuals because these individuals are in competition and in many cases have an interest in withholding relevant information on their own projects from each other. The markets blocks rather than enables the communication of information” (Konings, 2001: 127). Considering the state-of-art IT and network technology today, information problem is more of sociopolitical rather than of technical. As Elson (1988: 43) argues, problem is that “those with positions of power to preserve will resist information disclosure.” For example, accounting of factory cost, one of basic tools of company management in any capitalist economy, can be utilized in participatory planning. It is not that the problem of information generation newly appears in a participatory planned economy.

Disclosure and sharing of company information is one of the indispensable conditions for the democratic and conscious control of the economy. Because, “conscious control” is nothing other than “open access to all available information concerning the product and its price, so that any decision-maker has access to the same information as any other” (Elson, 1988: 43). In a word, “Social control is a matter of transparency” (Konings, 2001: 132).

4.3. Innovation

Another common objection against the idea of participatory planned economy is that it will be poor in dynamic efficiency compared to capitalism, because it does not have Schumpeterian ‘creative destruction’ through technological innovation, though it may succeed in guaranteeing the static efficiency in resource allocation. However, it is groundless too. Because the alienation and division of labor are abolished in participatory planned economy, work motivation and productivity can be greatly enhanced. Moreover, if the mobilization of ‘local’ and ‘tacit’ knowledge of direct producers is maximized through their democratic participation in the company management, technological innovation will be more dynamic than in capitalism. [27] In contrast, it is very difficult for capitalists to snatch the ‘local’ and ‘tacit’ knowledge of direct producers at the workplace in capitalism, where capitalists monopolize the management rights. [28] Under the hierarchical decision making structure of capitalism, workers and consumers tend to become passive and have no interests in innovative thinking. Since the hierarchical management of capitalism robs people of control of their lives, capitalism cannot mobilize creative economic potentials, and absence of innovation is its corollary (Albert and Hahnel, 2002: 111-112).

Advocates of market economy, including Schumpeter and market socialists, argue that, because the extra profit, or technological rent, which accrues to the innovator, provides the incentive for technological innovation, there will not be any significant innovation without the expected technological rent for the innovator, which can only be secured by capitalist property system. However, extra profits are not the only incentive for innovation. As Elson argues, “more leisure time, less arduous work, social esteem, the sheer pleasure of producing new knowledge and solving problems are all powerful incentives”(1988: 42).

Contrary to capitalism where the public goods, such as investment for R&D, tend to be under-supplied due to market failure, participatory planned economy, free from the problem of market failure, can allocate more resources for R&D and innovation. As Kotz argues, even in capitalism, some phase of technological innovation, like invention and development, are largely carried out by non-profit public institutions, like government or universities (2002: 98). Also, because there is no intellectual property right in participatory planned economy, innovation of one economic unit can be easily and rapidly generalized to all the other units. Unlike capitalism where the lion share of the fruits of innovation accrues to the profit of capital, it will be shared by entire human race for their well-being in participatory planned economy. Hayek’s accusation that planned economy is prone to lack of innovation, though somewhat relevant regarding the Soviet style planned economy, cannot be applied to participatory planned economy.

Contrary to conventional wisdom, there exist serious limits and bias in the technical change in capitalism. As Cockshott and Cottrell (2005: 240) argue, “The real criticism that can be levied at capitalist economies in this regard is that they are too slow to adopt labor-saving devices, because labor is artificially cheap.” [29] In this regard, Marx’s classic discussion about the conditions of introducing machinery is still valid. In Capital, Marx argues that it is more difficult to introduce machinery in capitalism than in communism, because in capitalism it is introduced only for economizing the necessary labor, that is, only for maximizing the surplus value, while in communism it is introduced for economizing labor in general. [30] Last but not least, capitalist innovation, which is motivated by profit-seeking and fear of extinction by ruthless competitive struggles, and proceeded in an anarchic unregulated way, is inevitably wasteful and destructive of environment as well as of human being.

4.4. Relevance of Marxian Labor Theory of Value

Despite the enormous contribution to the revitalization and development of Marxian concept of socialism, existing models of participatory planning still leave something to be desired. Above all, there seems to be some distance between Albert’s parecon model or Devine’s ‘negotiated coordination’ model and Marx’s original concept of socialism, in that they reject Marxian labor theory of value and Marxian labor certificate as is suggested in Critique of the Gotha Programme. [31] Indeed, Albert’s parecon model seems to crucially depend on neoclassical ‘indicative price’ or Walrasian tâtonnements process like Lange (1936). As O'Neill (2002: 25) indicates, parecon model introduces the category of money price to calculate social costs. Parecon model shares neoclassical economics’ assumption that the social choices with different dimensions can be reduced to cost and benefit calculation in terms of price [32] Callinicos (2006) is also critical of parecon model in that it mimics market mechanism too much and tends to overemphasize the decentralization. Devine succinctly calls parecon as “neoclassical electronic socialism” (Devine, 2007: 258).

On the other hand, Callinicos(2006) gives credit to Devine’s ‘negotiated coordination,’ for the democratic politics plays the central role in the model. But, Devine’s ‘negotiated coordination’ model also adopts Neo-Ricardian or Sraffian model of prices of production instead of Marxian labor theory of value. Moreover, Devine’s ‘negotiated coordination’ retains market exchanges, though it rejects market forces which are allowed to operate in market socialism model. [33] However, Devine’s distinction between ‘market socialism’ and ‘market forces’ is just arbitrary. As O'Neill(2002: 90) indicates, “it is not clear just how the distinction between market exchange and market forces operates in practice,” because, “to the extent that independent actors engage in market exchange, forces will exist that will tend to determine outcomes.” [34]

As is evidenced in the failures of market socialist experiments, any project of post-capitalist economy that rejects Marxian economic coordination in terms of labor-time and retains the market mechanism will soon degenerate into the genuine capitalist market economy. [35] The adoption of labor-time calculation as the basic principle of economic coordination is essential to the project of designing Marxian socialism for the 21st century.

Indeed, for the actual operation of participatory planning, calculation of the labor-time embodied in the products is essential. It is because we can distribute the various products of an economy to the members of the economy equitably only after aggregating them using a common denominator. As we abrogate the money price, what is left for the common denominator is labor-time embodied in the product. Consumers can rationally choose the products tagged by the labor-time embodied in them and exchange their labor certificates earned by their labor with the products they choose.

Of course, not every goods are distributed according to the labor-time standard. As for some goods and services, such as health, education and other collective consumption goods, what Marx describes as the distribution principle in the developed phase of communism, that is, needs-base distribution should be introduced in advance. In other words, distribution according to individual labor-time worked is limited to the part of the social product which remains after the deduction of above part, equivalent of “basis income”, as well as the “social accumulation fund for new investment and innovation.”

Weisskopf objects to the distribution principle according to labor-time, arguing that it is difficult to control for the variation of intensity and skill, which is needed for the correct calculation of the labor-time as the basis of income distribution. Instead, Weisskopf suggests the contribution to the production, or the performance, as the basis of income distribution, for it is visible and easily computable (1992: 16). However, it is questionable that the contribution to production or performance is easier to calculate or can serve as a more legitimate basis of distribution. Indeed, with increasing socialization of production, it becomes almost impossible to attribute the corresponding part of the output to the contribution of any individual producer. On the contrary, calculation of labor-time is easy and plain enough, though the issue of differential intensity and skill remains.

Homogenization of heterogeneous labor, that is, ‘reduction of skilled labor to simple labor’, is required to calculate the labor-time embodied in the products correctly. For the reduction, resorting to wage differential would not be helpful, for it would be the ‘fallacy of circular reasoning,’ as was argued by Böhm-Bawerk. Instead, the solution suggested by Cockshott and Cottrell (1993), which regard skill as a sort of product and calculates the education and training time required to produce the skill, seems to be more prospective.

But the reduction of skilled labor to simple labor is needed only for the correct calculation of the labor-time embodied in the products. Of course, it should have nothing to do with the distribution principle in participatory planned economy. If the skilled labor is the outcome of education and training expenses, which is financed by public expenses, as is in participatory planned economy, there will be no legitimate reason to pay skilled labor more than simple labor. In other words, one labor hour of brain surgeon should be equally compensated as one labor hour of garbage collector by one labor hour certificate, on condition that both persons get same level of effort rating by their peers (Hahnel, 2005: 26).

Last formulation indicates that Marxian model of socialism for the 21st century could be constructed by the critical synthesis of exiting models of participatory planning from the viewpoint of ‘labor-time calculation’ model. [36] However, it is incorrect for Cockshott and Cottrell to call their model as ‘labor value calculation model’ not as ‘labor-time calculation model’. Two concepts are totally different. While the labor-time is supra-historical concept, it takes the form of value only under the specific historical condition of capitalism, and the value form disappears in Marxian socialism. [37] Allowing the concept of value to enter the theorization of socialism is the shortcut that leads to erroneous market socialism.

4.5. Russian Question

It also needs to be indicated that above discussed three models of participatory planning seem to have certain biased conception of Russian Question. First of all, there is no understanding on the qualitative break between Leninism and Stalinism. For example, Albert and Hahnel (1992: 57) do not admit any positive significance of October Revolution of 1917, and assert that “the simple truth is that socialism as originally conceived has never been tested.” According to Albert, who argues for parecon, the former Soviet Union is a sort of class society ruled by ‘coordinator class,’ centered on the Communist Party and planning agencies. [38] Devine, the theorist of ‘negotiated coordination’ model, also rejects the whole period of the former Soviet Union as ‘statism’, arguing that it has nothing common with Marxian socialism. On the contrary, Cockshott and Cottrell, who designed the ‘labor-time calculation’ model, argue that Stalinist Russia should be recognized as a primitive attempt to build Marxian socialism, despite some unpleasant side-effects, such as lack of democracy etc. [39] However, above theorists all share the so-called continuity thesis of Leninism and Stalinism, and reject the actuality of Leninism, though they call themselves Marxists. However, as Jeong (2006) shows, there did exist a qualitative break between Leninism and Stalinism, as is epitomized by Stalinist state-capitalist counter-revolution in 1928. Without correcting for their anti-Leninist bias, existing models of participatory planning would be of little use for building the real movement for Marxian socialism, and might end up with isolated harmless islands of non-capitalist experiments, such as ‘Mondragon,’ ‘participatory budget,’ ‘solidarity economy,’ ‘community-based economics,’ ‘LETS,’ or ‘associationism’ etc.

5. Concluding Remarks

Three models stand out in the recent debates on the participatory planning. They are Albert’s ‘parecon’ model, Devine’s ‘negotiated coordination’ model, and Cockshott and Cottrell’s ‘labor-time calculation’ model. Despite their important differences with each other, they all contribute to revitalize the discussion and activities for anti- and post-capitalist alternatives. Their common critique of market socialism, theorization of the role of participation from below, emphasis on the role of abolition of division of labor and direct democracy, focusing on the ‘local’ and ‘tacit’ nature of knowledge and information, making workable planning model based on labor-time calculation, etc., are all noble and precious contributions to the development of Marxian concept of socialism. With these new contributions by participatory planning models, a Marxian vision of socialism proves to be feasible in the 21st century of globalization and IT revolution, far from being a bankrupted utopian project. Indeed, only by participatory planning, “self-management (decision making input in proportion to degree affected), equity (to each according to effort), efficiency (maximizing benefits from scarce productive resources), solidarity (concern for others), and ecological restoration” (Hahnel, 2000: 338) can this be assured. Progressives should embrace Marxian participatory planning as the alternative to neoliberal market economy, instead of outdated Keynesian social economy or self-contradictory market socialism. Of course, recent attempts to theorize participatory planning still contain some limitations and biases which need to be addressed from the standpoint of classical Marxism. Developing the theory of participatory planning and allying it with the mass movement for the anti- and post-capitalist alternative must be one of urgent tasks of the progressives.