A Guide to Participatory Economics (Parecon)

Imagine this: an economic system that is designed to make democracy and self-determination the cornerstone of its function. Decisions are made on a local face-to-face basis in your own neighborhood and is coordinated to the town and region, so power always flows from the bottom up. When you go to work it is not to do the bidding of someone else but instead can be done eagerly knowing you directly own and manage part of that workplace, just like everybody else there. Jobs are designed to be equally empowering to everyone in a firm, meaning everyone is equally skilled and equipped to help manage their work. Your community directly controls natural resource health and stability, no longer to leave industries to pollute the environment and the people in it.

            This image of an economy is an idealized system but one that is also feasible. The ideal system of participatory economics (Parecon for short). This system emphasizes worker run workplaces and council organizations to manage the economic institutions in society. They combine the democratic organization of workplaces with the local councils that handle consumer demand needs, creating a highly developed network of democratic bodies. All institutions are owned socially, not by any state power but cooperatively by all members in that society.

This method will be explored more in detail but right off the back there are some considerations we have to make. The fact that a society doesn’t currently exist with a participatory economy leaves it open to certain criticisms that may not exist if it were realized. In this essay I hope to summarize the workings of this type of economy then go through the advantages and disadvantages of the system, as well as the major criticisms up for consideration. With that we can more accurately describe this economic system.

            In explaining Parecon I prefer to start with the democratic workplaces, which is perhaps the most agreeable part of the doctrine. In Parecon every worker in the workplace has an equal stake in the running of the company and therefore all workers act in a democratic fashion to manage it. In a democratic workplace all workers form a general council and have an equal vote toward the management of the firm. Smaller workplaces may have more flexible voting policies compared to a larger workplace that needs more structure. In large firms additional councils may need to be constructed to focus on particular points of management and production – for instance councils that focus solely on research and development or staff training – but how these smaller councils operate and coordinate with other bodies is up the discretion of the greater councils of that firm. There is much to be said about this, like what voting methods are most optimal and what the democratic process would look like – and although this issue is central most authors engaged in this debate have stressed the flexibility of these councils’ decisions, emphasizing that a holistic theory cannot apply perfectly to all situations. So whether councils vote using consensus or majority rules, or some other method, it is important that the workers familiar with the environment are the ones to decide.

            Each workplace is required to give a rating to each job employed. This rating isn’t meant to score the effort of each worker but instead to rate the difficulty and effort required in the job itself. The purpose of this rating is to have a balanced effort score between workers, creating an equilibrium of sacrifice in the firm. This way some workers don’t have the advantage by doing all low effort tasks while the other workers are at a disadvantage doing all high effort tasks. Furthermore, the jobs that are more strenuous on a person are also less empowering, leaving less of a sense of accomplishment and less energy leftover to engage in the democratic running of the firm. This could lead to a minority of people with more say than the others, that is, the people with more empowering jobs being more able and willing to engage in workplace democracy. This is where the purpose of balanced jobs comes in. Although each worker has the same democratic rights within the workplace the idea of these “balanced job complexes” is to make the work done within that workplace as equitable as possible. This means an assortment of tasks will be given to workers to balance out jobs – this is just one way that our normal idea of work would be altered in a Parecon society.

            In this matter it is useful to quote economist Robin Hahnel at length on the matter. He writes:

Balanced jobs are designed to avoid disparate empowerment and thereby protect the freedom of those who otherwise would not have equal opportunity to participate in economic decision making. Balanced jobs are designed to prevent class divisions. But balanced jobs do not eliminate specialization. The proposal is not that everyone perform every task, which is impossible and ridiculous. Each person will still perform a very small number of tasks in her particular balanced job. Some will still specialize in brain surgery, others in electrical engineering, others in high voltage welding, etc. But if the specialized tasks in a job are more empowering than tasks are on average, those who perform them will also perform some less empowering tasks as well. And if the specialized tasks in a job are more desirable than tasks are on average, those who perform them will also perform some less desirable tasks – unless they wish to work for more hours or consume less because they have made fewer sacrifices.[1]

            Here we see many considerations and forward thinking for how workplaces would manage themselves. Balanced job complexes are designed to avoid a “coordinator class” from emerging in the workplace that would take the reigns for the majority of the decision making. By creating as horizontal and fully accountable systems as possible people are encouraged to share responsibilities of planning and managing the firm equally.

            Workers are compensated with “consumption points” based on the amount of effort and time at work they engaged in. Like money, these points are a credit rewarded and used to purchase items for consumption – but unlike traditional currency these points actually reflect the sacrifice that people make to acquire them. That is because “consumption points” do not depend on owning property or employing other workers, but because the person made a sacrifice with their labor and are rewarded as such. The amount of these points are tested against the average sacrifice of other workers and are often dependent on the specific workplace to judge what kind of a sacrifice warrants what kind of compensation. The points can be accumulated and saved, as well as pooled together and loaned to others, just like money. This process goes more in depth than is worth for our purposes, but there is a debate around what this loan and accumulation process would look like. For instance, would interest on these loaned points be accumulated or would they be loaned without interest? Additionally, what method would be in place to assure the repayment of these loans to whatever person/body loaned them out?

            With the considerations of balanced job complexes and style and amount of compensation, people are able to freely choose what workplaces they’d like to dedicate their time to. Parecon would have a perfectly free labor market with open mobility so people can choose work that is most agreeable to them and satisfies their needs.

            Planning consumption of goods and services, like production, is democratically managed. Local areas have consumption councils that handle consumption planning. People are free to consume any goods or services that they like; to do this the consumers record what goods they’d like for a given period time and then send that record to the local consumption council. The councils receive the records and aggregate them into reports to advise industries what and how much of each thing needs to be produced for that period (with consumption periods generally thought to be a year depending on circumstance). The survey that consumers are given of items to consume has prices listed so that they can budget their labor credits to how much they spend. However, if they do not plan to change their consumption habits they can always not fill out their record and just “roll over” the consumption schedule they had in the previous period.

            The benefit of this plan is to minimize overproduction and waste within the economy. Whereas under free-market capitalism production planning is often chaos at the whim of market indicators, under Parecon production will be structured to meet society’s needs and then preserve what is left over.  

            Social planning also takes place within the consumption councils. If there is demand and for means for a social good – be it a park, a conservation effort, or infrastructure improvements – the consumption council allocates the labor points necessary to produce that social good. There is also debate about how those points should be allocated, whether all people within access to that good should pay equally to it (if it takes 1000 credits to build a park then all 100 people in that area give 10 points) or whether those that are more likely to use the good should pay more. This is another debate outside the spans of our purpose here.

            Each institution in a Parecon society has both a local and a federal component. For instance, consumption councils would likely operate on a neighborhood by neighborhood basis to engage with people as locally as possible. Representatives from that local sect would then be sent up to the city-wide council, and from there a regional council on the same matter. This federal structure also works with workplace councils and general assembly councils for maximal amount of coordination across a given area. The “federal” component does not mean it has absolute say over the lower bodies, such as when we discuss “federal governments”. Instead this federal structure ensures that power flows from the bottom up, with rules and decision-making being maximized locally and the greater councils then instituting the decisions of the lower ones. The higher councils are not for legislating decisions upon the lower ones, but instead coordinating and communicating legislation from lower councils across the network of other bodies. Representatives to higher councils would be well-versed in the opinions and concerns of the body they represent and would also be recallable at any time given controversy in their decision making. For more contentious issues the decision-making power would often have to be referred back to the lower councils for more deliberation.

            This is a general outline of a participatory economic society. I have tried to give a brief but succinct overview to protect against strawmen. I would stress this is not an intensive view of Parecon, there are several things which I did not mention. For instance, the Iteration Facilitation Board which announces prices for consumers and producers, or the environmental planning that takes place under Parecon. It is a general overview necessary to give some problems and criticisms with this form of economics before we make our conclusion. 

            Most criticisms levied against Parecon deal with its consumption process, as this is more alien than the concept of workplace democracy. One such criticism is the viability of these consumption reports: for instance, how in depth and detailed do they need to be so that they are useful to producers? If you report that you plan on purchasing a set of shirts in the coming period, how much should you qualify it? Need you specify the size of every shirt, the color, the fabric, the design and all other details? I assume these reports will only be as detailed as need be useful to the producer, and that subsequently there will be some degree of randomness to the actual product. This leads me to believe that there may be more waste than was intended. For instance, if a producer is given a consumption report with a limited amount of details they will have to fill in the rest of the details not specified. This may mean, although they produced as many shirts as needed with the specifications of size, fabric, and color, the actual product may not be what the consumer wanted.  It could meet all those specifications but have a hideous design on it that negates how much that producer was expected to sell. After all, consumers have complete freedom in what they purchase, so although they request a certain amount of items doesn’t mean they have to purchase that amount.

            This line of argument can be raised for most final and consumable goods in a Parecon system. Anders Sandstrom responds to this by creating a complex categorization system for goods as well as a process for consumers to dispute with the supplier if the good doesn’t match what was ordered on the consumption survey. This would seem to resolve the issue, but one has to wonder how streamlined this process could be made for people and, correspondingly, how efficient it is.

            This is to show that there are some imperfections in the consumption process, although there is still some responsibility left to the producer to make sure that their product is meant to fulfill society’s needs, after all, workers that collectively own a workplace want that workplace to strive as much as possible. Having a broad and consumable product is one way to do that, as well as offering variety. I am satisfied enough to say that, although there is still some “guessing” in a Parecon society, it is much less than currently runs amok in market capitalist and state capitalist societies – and therefore, more effective at minimizing waste. 

             In addition to this, some in the libertarian-left tradition may hear this description of society and be deeply suspicious of the concept of “points” or “credits” awarded to workers for their labor. It’s easy to compare this concept to traditional currency and see the risks associated with that monetary style. Writers like Kropotkin have criticized this sort of concept as holdover from capitalist economics, advocating instead for a complex form of a gift society. Whether or not the labor credits in Parecon are perfectly analogous to the labor notes or vouchers that Kropotkin criticized, there is still much to be wary of. The fact that credits in Parecon can be spent, accumulated, and loaned out means there will be a certain amount of inequality inherent to Parecon. The question then becomes is that level of inequality sustainable and still allow for the flourishing of all human life, or does the system need to be reevaluated to fulfill those needs.

            Another criticism is to what I see as “holes” in the Parecon system. These are issues that Parecon does not describe or resolve, and thus is open to criticism or confusion on how it would be implemented in this sort of society. For instance, Parecon makes no attempt at a description of other institutions in society or how they relate to the wider society, such as healthcare or defense institutions. I would argue that these institutions need wider oversight than traditional workplaces, and thus need some sort of regulatory body. However, this could be assigned to generalized councils that deal with the laws/regulations in that society, but this is not stated.

            This leads to another issue, how Parecon relates to governments, that is to say, it leaves the question open. It could be argued that Parecon could function with any general governmental system, or it could also be argued that Parecon – with its emphasis on communal planning, presupposes a form of governmental system. This is up to some speculation, of course. Both Robin Hahnel and Michael Albert have engaged with libertarian socialist literature to some degree and their writing reflects this. Their ideas also resemble plans proposed by other socialist traditions such as the syndicalists and the council communists.

I should mention there is also a proposed system of government to accompany Parecon, this being Participatory politics (Parpolity for short). Proposed largely by Stephen Shalom and other writers, it seeks to establish the equitable conditions of Parecon into the wider society. This system would have a rehabilitative justice system along with a restructured jury chosen at random to protect the status of minority rights. I’m not well-informed enough to give a comprehensive view of Parpolity but at a glance it seems to hold true to the participatory principles established by other authors. Although again, one likely does not need an established governmental system for Parecon to be valid.

Also not discussed is how a participatory society would interact with market economies. The debate is open whether Parecon itself is a market system, I myself would argue the labor market most reflects a market system, but its categorization is not important to how it functions. What is important is how one Parecon society would interact with non-Parecon societies. Would international trade be fundamentally altered, or would it continue as is, allowing for the exploitation of resources and workers in the non-Parecon society as a result of that trade deal? This seems entirely up to the specific society but still represents a fundamental issue.

            The more grave issue is that all the above criticisms could be invalid. One cannot create a fully function society in their head that also works in practice just as imagined. Although authors of Parecon may have created a holistic and internally logical system that means nothing to how applicable it would be, and what changes would need to be made to the system in practice.

            Here I’ll refer to Noam Chomsky, who both Hahnel and Albert quote in their works, as he describes his skepticism for sketches of future societies.

I’m personally skeptical about detailed descriptions of the future society; I just don’t think we know enough… The kinds of questions you’re asking here are very serious, but the answers to them will be learned by experiment; you try, you see how it works, and then you try other things. Nobody is smart enough to plan a society. You can talk about some of the principles upon which a society should work, and you can set up guidelines as to how to implement them, and how to experiment with them, and there are probably many different ways of doing them. There’s no reason to believe that there’s only one right answer; there are lots of different answers, with advantages and disadvantages, and people have to choose between them on the basis of experience, what has happened to others, and soon. This is true in every area.[2]

            In this quote Chomsky is addressing Diego Abad de Santillan’s 1937 work “After the Revolution” which gives a finely detailed plan for Spain given the success of the anarcho-syndicalist program, although Chomsky has been critical of Parecon on the same grounds as above.

            This is a critique that has been named numerous times and perhaps the most legitimate one. Once we admit that – no matter how rational the system – its application would vary from society to society at any given point in time. This point makes the debates around the finer points of Parecon to seem less significant than they might otherwise be. Instead of viewing Parecon as an immutable and literal system, we should instead view its ideals and methods as a goal post to work towards. As an “ideal” system we should measure our current system against it and work to enact that system. 

            Authors of Parecon give little in the way of method or strategies in enacting a Parecon society, nor do they need to. If my suspicion is correct that the authors fall into the anarchist tradition then their methods are clear, generally preferring to revolutionary means to deconstruct and abolish coercive institutions and replace them with democratic ones; however if we prefer a gradualist approach – making minor changes in the existing institutions when achievable with the end goal in mind – then it would need its own form of praxis particular to it. 

            Having evaluated the system I want to emphasize what I see as its strengths. A participatory society allows for a great amount of freedom in people’s daily lives; from the workplaces to community at large, it puts decision-making powers in the democratic hands of everybody it concerns. The coordinated production and consumption process allows for society to make long-term plans to invest in its future without the short-term boom and bust cycle of the capitalist economy. It is a system without the domination of a small number of corporations and government bodies upon the mass of people. One that, in principle, seeks to meet the needs of everybody in society in a sustainable way.


[1] Hahnel, Robin. Of the People, by the People the Case for a Participatory Economy. Soap Box, 2012.

[2] Pannekoek, Anton, and Noam Chomsky. “Robert F. Barsky Interview with Noam Chomsky.” Workers’ Councils, AK Press, 2003, pp. VIII-XVII.

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