Life after capitalism

Issue: 100

James Meadway

A review of Hilary Wainwright, Reclaim the State (Verso, 2003), £15; George Monbiot, The Age of Consent (Flamingo, 2003), £13.99; Michael Albert, Parecon (Verso, 2003), £16; and Alex Callinicos, An Anti-Capitalist Manifesto (Polity, 2003), £12.50

‘Overthrow capitalism and replace it with something nicer’: the notorious banner, unfurled as a joke in the pouring rain on May Day 2001, sums up the anti-capitalists’ predicament rather well. We all know what we’re against, more or less. But we might not be too clear about what we’re for. The books reviewed here, in quite different ways, make attempts at indicating an answer.

Hilary Wainwright’s Reclaim the State starts by examining what she calls the ‘underlying issue: the politics of knowledge’.1 This encompasses an attack on some of the foundations of neo-liberalism, criticising it for relying upon a theory of knowledge drawn exclusively from economics. But it also runs to a condemnation of reformist social democracy for its equally—if differently—flawed account of how human beings learn things. Drawing on the work of the Austrian economist Friedrich von Hayek, she suggests that neo-liberalism shares something in common with the social movements (if ‘from a completely different stance’2 ) in seeing knowledge not as codifiable or predictable but as ‘unavoidably tacit, and hence uncodifiable, and also fallible, ephemeral and incomplete’.3 This is quite different to the ‘dominant positivistic view’ endorsed by reformism, where ‘experts’ at the top know best, and can rely on formal, generalised knowledge to run things in our own best interests. She quotes Beatrice Webb—an ever reliable source of unabashed ‘social democratic’ elitism—to the effect that ‘we have little faith in the “average sensual man”. We do not think he can do much more than describe his grievances, we do not think he can prescribe his remedies’.4 Webb’s medical metaphor is apposite: social ‘illnesses’ appear, and well trained doctors diagnose the problems and administer the appropriate pills.

As Wainwright notes, much of the anger of the old ‘new social movements’—those that grew out of the 1960s—was directed precisely at this authoritarian view implicit in large parts of the welfare state consensus, and the unconscious reliance of social democratic governments on the ‘practical knowledge of those who manage the status quo’.5 Wainwright highlights how the:

…women’s movement posed a fundamental challenge to the way the welfare state was organised.Women depended on state institutions in so many different ways, especially as mothers. They needed public resources, but in their experience the way that these resources were managed was not responsive to their needs.6

But she also notes, in her account of the rise and decline of the 1960s movements, how the neo-liberal right carefully warped the language of such demands in its claims to take on the ‘nanny state’ and provide liberation through the ‘free’ market. In examining a further growth of that mutation, she sees in New Labour the peculiar combination of explicit references to 1960s radicalism—’Tony Blair’s speeches used to be peppered with references to “empowerment” and “the new politics”’7 —and fawning support for big business and the free market as the result of ‘tired’ social democracy abandoning ‘social engineering’ but also giving up on ‘social transformation’, while retaining some vestigial pretence of social justice.8 The ‘Third Way’ may now be drowning in blood, but it is as well—as the left increasingly does—to take this new-style neo-liberalism seriously, and Wainwright’s attempts to do so are to be welcomed, especially as they reflect on some of her later claims about new participatory politics.

That neo-liberalism, if apparently radical in theory, ends up grossly authoritarian in practice will be a truism for most readers of this journal. Wainwright attributes this authoritarianism to its mistaken belief in knowledge as private, something held by individuals. In this account social structure arrives accidentally, principally in what Hayek called the ‘spontaneous market order’, refined through an evolutionary process of trial and error. The market, by presenting prices, informs individuals about the world who, through their interactions in the market—buying and selling goods—alter those prices and so alter the state of social knowledge. The role of government is not to meddle in this haphazard and fragile state of affairs, but to protect it from untoward human interference, whether from politicians or trade unions. Hayek’s most famous book, The Road to Serfdom, went so far as to claim that any attempt by the state to interfere in this spontaneous order would lead inevitably to dictatorship, as inherently underinformed governments find they cannot adequately manage society according to some prescribed plan and so resort to increasingly authoritarian methods.

In a neat reversal of this position, Wainwright argues that the neo-liberals’ desire to avoid untoward interference in what they see as a privatised knowledge-gathering process leads them to restrict attempts to create social knowledges—like shop stewards’ committees, or the squatters’ movement. Indeed, Wainwright holds that although knowledge is tacit, accidental, and shaped by trial and error, it is also inherently social. This is held to be the secret of the social movements’ successes: their understanding of knowledge as something shared, and their attempts to work in that shared framework of understanding. The remainder of her book is an examination of how different communities have attempted to build alternatives to neo-liberalism.

She chooses to focus on specific ways in which local communities are attempting to create alternatives to neo-liberalism, beginning her journey in Porto Alegre. Porto Alegre in Brazil is familiar to many as the site for the first three World Social Forums, but also as a city run for over a decade by Lula’s Partido dos Trabalhadores (PT, the Workers Party), allowing a certain amount of space to experiment with what Wainwright calls ‘participatory politics’. Chief among these are the well known participatory budgets (PB), and Wainwright provides a description of how these are run. Though often discussed, there has been some uncertainty about what PB entails, so Wainwright’s clear guide is most useful. The aim of PB, in the words of a PT mayor, Celso Daniel, was to ‘share political power, the management of the community, with the city’.9 The process depends on a series of negotiations between parties affected by the municipal budget. Delegates are elected at local meetings in which issues relevant to particular communities are discussed, and the local government’s performance over the last year is assessed. This process continues throughout the year, with delegates from local groups within a region then forming a ‘delegates’ forum’, where they attempt to organise budget priorities for their region based on the local groups’ requests and a ‘budget matrix’ that weights different areas of investment according to city-wide priorities. A region may particularly favour a new road, for example, but this may conflict with a city-wide desire to reduce car usage, so giving roads expenditure a low weight. The final investment request will be an attempt to balance these two demands. As Wainwright puts it, the budget matrix ‘plays a crucial role in creating awareness of both the different regions and of the city as a whole’.10 City-wide co-ordination is provided at the budget council, elected annually. This keeps in touch with regional delegates over the year before drawing up a city budget that it presents to the mayor and municipal council for final agreement.

What becomes clear from this account, though, are the restrictions placed on PB’s capacity to deliver its participants’ aspirations. Some of these are brutally explicit. Celso Daniel was murdered, ‘one of several PT mayors killed probably by members of drugs mafias threatened by the new open method of government’.11 Some are less dramatically violent, but are there nonetheless. Wainwright notes, quoting a PT activist, that ‘the budgetary process is not enough… You cannot plan a city on the basis of individual investments. We have to complement it by democratising and strengthening democratic planning’.12 Planning, unlike ad hoc investment decisions, is one of the key areas in which local governments interact with capital—local and global—through zoning decisions, infrastructural improvements, and so on. Although Wainwright does not make the link explicit, it is not surprising that opening up and democratising this process has proved rather more difficult. On a national level, the problem of challenging these entrenched interests through democratising existing state structures has immediately confronted Lula’s PT administration—the IMF told the new government that it had to run a primary fiscal surplus on its budget of 3.75 percent, or it would be denied funds to pay its foreign creditors. Complying with this demand imposes a gross fiscal pressure on the government, drastically restricting its ability to implement its programme. The dilemmas faced by the national government replicate those of local PTs. Worryingly, Lula seems too much inclined to radical phrases and too little to radical gestures.

We ran into this problem earlier, in Wainwright’s discussion of New Labour. While Tony Blair is barely fit to tie Lula’s bootlaces, the problem of confronting a sophisticated rhetoric of ‘participation’ and ‘community involvement’ used to mask a neo-liberal programme is one familiar to activists in Britain. Wainwright’s further examples of local participatory experiments are all drawn from Britain, covering east Manchester, Luton and Newcastle. Unfortunately her journalistic account here sometimes manages to lose the thread of her argument in a mass of specifics. What does become clear, as these three localities attempt (more by accident than design) to find participatory solutions to the problems they face, is that relying on nice words from a New Labour government is not enough. Nor, for that matter, is leaning on local government structures, no matter how open or transparent, working as they necessarily do within the rigid requirements of central government’s own neo-liberal programme. (In practice, local councils are often only too happy to apply the Third Way formula, privatising council housing in the name of social justice, for example.) Her most inspiring example, and the one that concludes the book, is the successful campaign in Newcastle to prevent the privatisation of local services. This was built by a combination of local residents and, crucially, trade unions representing council workers. The council and its smart new chief executive were challenged, and defeated, by a well organised and popular campaign, backed by the threat of strike action.

Wainwright’s analysis of New Labour is sharp and to the point, but she does not apply it quite fully to her own examples, in which local activists rapidly become involved in government-backed regeneration schemes. Wainwright is perhaps a little too uncritical here—not of sincere local residents, but of precisely the insidious New Labour rhetoric she earlier condemns. The problems faced in east Manchester, for instance, in simply regulating private landlords, blocking regeneration attempts, show how words and reality can diverge. (Such pressure as there has been for change here seems to have come largely from local residents, not local government.13 ) The danger of co-option is not to tarnish some pristine activist purity, but that convenient ‘participatory’ glosses are provided for the same old programme of privatisation and the running down of public services. The government’s enthusiasm for ‘local representation’ on the boards of privatised council housing management companies is a case in point. Representation for the community turns rapidly into regulation for the financial markets, as activists in east Manchester seem to have found to their cost.14 Hilary Wainwright presents, almost incidentally, an argument for maintaining the independence and autonomy of grassroots campaigns. Her book is a valuable contribution in showing how the global participatory demands of the anti-capitalist movement translate into concrete, local attempts to change the world. However, in stressing the potential for small-scale activities to make material differences, she somewhat neglects the broader picture. She looks to changes in local government to transform localities, attempting to skirt around the global presence of neo-liberal politics, backed by the state and operating exclusively in support of capital. All her local movements end up confronting just this issue, whether in Luton or Latin America, whether the IMF or Manchester council, and formulating our response to it is a key question for the anti-capitalist movement.

George Monbiot attempts to do so. He writes from quite the opposite perspective to Wainwright, calling for nothing less than a ‘global democratic revolution’. This would consist of three interrelated institutions—a world parliament, an ‘international clearing union’, and a ‘fair trade organisation’. We will—for the time being—move swiftly past his utterly bizarre reading of Marx. In a rant that occupies a good chunk of the first substantial chapter, he alleges that The Communist Manifesto contains ‘in theoretical form, all the oppressions that were later visited on the people of the Communist nations’.15 Presumably Stalin, midway through the great purges of the 1930s, would flick open his copy of the Manifesto and interpret ‘Workers of all lands, unite!’ as ‘Cut the bastards’ rations and throw dissenters in a gulag’. Monbiot seems to have read it this way, confusing description with prescription and, in one spectacularly inventive paragraph, accusing Marx of wishing to establish himself as a ‘guardian-philosopher of Plato’s dictatorship’.16 Still, we are not here to quibble over interpretations of texts, no matter how imaginative, but Monbiot’s wholehearted denunciation of Marxism clearly influences his vision of a global democratic revolution.

While both a world parliament, consisting of democratically elected representatives from equal constituencies the world over (with constituencies straddling national boundaries), and a fair trade organisation to allow underdeveloped countries to pursue their own paths to development are easily and quickly understood, Monbiot’s most original suggestion is perhaps the most complex. The other two stem from long debates within the movement, over the role of international law and the United Nations, and in the arguments over those wishing to restrict global trade, the so called localisers. The presentation of both proposals allows Monbiot to make some telling points. His denunciation of the current UN constitution is clear and well argued, but it is his attack on the free traders and on the localisation thesis that is particularly effective.17 The proposed ‘fair trade organisation’ would force developed countries to remove their unfair barriers to trade against the underdeveloped world (and, despite the rhetoric, there are a great many), while allowing underdeveloped countries to restrict trade through tariffs, export controls and so on as necessary to develop their own economies. Restrictions would be placed on companies seeking to trade between countries to ensure that they met ethical and environmental standards. Likewise, ‘fair’ prices could be set for resource use, to reflect environmental and social damage the products cause, and unfair monopolies broken up.18 The world parliament would act as a global sounding board, and the means to apply pressure for reforms to other international institutions, especially for the reform of the UN Security Council. As I said, the arguments around trade and international legality are familiar, so while Monbiot does an excellent job in going through them (though we may not agree with his conclusions), I want to focus on his ‘international currency union’.

The idea stems from a proposal put by the English economist John Maynard Keynes to the Bretton Woods conference at the end of the Second World War. Bretton Woods led to the establishment of a now familiar set of global financial institutions, the International Monetary Fund and the World Bank group, and Keynes was present as a representative of the British government. The problem faced by Britain at the time was very similar to that faced by much of the global South today—the British economy was suffering from a huge surplus of imports over exports, and carrying an enormous government deficit. The problem here is that to attempt to close the gap between imports and exports (the trade deficit) requires investment in exporting industries, but funds available for investment are used up in paying debts, while reducing the value of the debtor country’s currency was liable to increase the volume of exports but at the same time reduce their value. International speculators further compound problems by shifting money out of debtor countries and into creditors, reducing the money available for investment still further. Countries with trade and government deficits can then find themselves in a vicious circle, with capital outflows worsening existing trade imbalances, each side reinforcing the other. The flipside of this is that one country’s deficit is another’s surplus, and so as one country slides, another is pushed further up.

To break this loop, Keynes proposed establishing an international currency that he called the ‘bancor’. This could be exchanged at a fixed rate with existing national currencies, and would act as a unit of account between economies. Each country would hold a bancor account at an international clearing bank, and this bank would hold a monopoly on foreign exchange rate operations—in other words, to conduct international trade, countries would have to operate through the bancor. The national bancor account would then be in deficit or surplus, depending on whether the country’s balance of trade was in deficit or surplus. Some leeway would be given, but Keynes (like Monbiot) envisaged creating a series of incentives for countries to clear their bancor accounts, holding neither debt nor surplus—interest would be charged on debtor nations’ accounts, but also creditors’ (a kind of ‘negative interest’), and both would be obliged to alter the value of their currencies.

The net result was that no individual nations would be in a position to run persistent trade imbalances. In particular, countries running trade surpluses would be compelled to adjust their terms of trade (the relative prices of their imports and exports) so as to ensure their own trade balanced. Countries just beginning to develop (and so borrowing heavily, and exporting little) would not be permanently crippled by long-run trade deficits and debt burdens, as the burden of readjustment within the world system would be shared between all economies, through the international clearing bank.

In practice, the more conventional views of the US Federal Reserve held sway at Bretton Woods. Dissenting nations were threatened with the withholding of vital war loans, and were eventually kicked into line. By the end of the war the US was the world’s largest creditor nation, owed billions by the rest of the world, and was running a huge trade surplus. It was completely unwilling to countenance any system that would necessitate altering its terms of trade. The system it proposed allowed countries (like the US) to run permanent trade surpluses, with the flipside of permanent deficits for others. The system of dollar-pegged fixed exchange rates, maintained by the IMF through loans as necessary, was criticised at the time as being inherently unstable, and, as the permanent arms economy faltered and the US became increasingly subject to foreign competition, it did eventually collapse. The IMF and the World Bank found new roles for themselves in a world of floating exchange rates as chief bailiffs for the strict monetary policies demanded by increasingly mobile financial capital. The IMF’s notorious ‘structural adjustment programmes’ have impoverished millions worldwide in cutting government expenditures and ruthlessly enforcing debt payments.

Monbiot’s proposal, then, represents a dramatic reversal of the last 60 years of international trade and investment policy, against both free-floating exchange rates and mobile capital, and against myopic national economic priorities. This is an ambitious programme. Whether it would work, of course, is another question. The critical issue weighing against its successful adoption is exactly the same as it was 60 years ago. Earlier in the book, Monbiot is quite right to stress that what he calls the ‘hopeless realism’ of a George Soros, or the reluctant Labour activist, is no solution. ‘If we are to confine our proposals to what “the authorities are prepared to consider”,’ he writes, quoting Soros, ‘then we may as well give up and leave the authorities to run the world unmolested’.19 When even the most limited of reforms—like Soros’s suggestion of tweaking the IMF and World Bank constitutions—are blocked by entrenched interests (and Monbiot is quite specific about who these are), there is little point in striving to be ‘realistic’:

Let us assume…we can muster sufficient political pressure to persuade the [US] to suspend its veto and permit the constitution of the World Bank and IMF to be changed. We would then have forced the world’s only superpower to have volunteered to suspend its hegemonic status. If that is possible, anything is.20

Instead, we must (as they used to say in Paris) be realistic, and demand the impossible—or, as Monbiot puts it, ‘What is realistic is what happens. The moment we make it happen, it becomes realistic’.21

The problem here is that this criticism of the hopeless realists applies precisely to Monbiot. Not that he is without hope, or that his schemes can be accused of lacking vision. Each of them, in its own way, has much to recommend it. But we cannot see even the complete bundle as wholly adequate to address the many pressing problems facing the world. Take the credit union. In a world of competitive national economies, some developed, some not, Keynes’s plan seems to provide a convenient means to remove some of the more pressing imbalances that today cripple the underdeveloped world. That does not mean, however, that development will be forthcoming. At present, around 75 percent of the world’s investment capital flows entirely within the developed North—Western Europe, Japan and North America. Some 15 to 20 percent moves into the newly industrialising countries (NICs) of south east Asia. The rest of the entire world exists on the remainder. ‘Globalisation’ of world financial markets has led to both the overwhelming concentration of capital within developed regions, and the overwhelming pressure to conform to their diktat in the underdeveloped world. The more desperate the underdeveloped world becomes, the more meagre the few crumbs on offer from the North, the easier it is to bend them to the IMF’s will. Even with a relatively fair international trading environment, and even if the ‘fair trade organisation’ and ‘international clearing bank’ replaced the IMF/World Bank/WTO triumvirate, it is not clear that this pattern of investment would alter much. Capital flows to where it expects a profit—this is not (as we have seen in the pattern of investment described above) usually to where labour is cheapest, despite the IMF’s urgings in this direction. Rather, it is to where previous investments—particularly in infrastructure, such as transport and education systems—have created the possibility of squeezing vast amounts of production from a relatively well paid, well educated workforce—who, because they are well paid, can then provide a convenient market for that output. The incentives for capital to step outside of this merry cycle are minimal. Profits are generated in the North.

The shift in the priorities of the Bretton Woods institutions, firmly allied to the growing importance of global financial flows, is not covered by Monbiot. Yet it is of critical importance. Monbiot appears to be implicitly tied to an old fashioned view of development as something that could be executed in isolation by national economies. For a brief period, in the exceptional conditions provided by the post-war boom and its immediate aftermath, this was just about possible—at enormous human cost, countries like South Korea and other NICs were able to mobilise sufficient capital from their own resources to transform themselves into significant national economies. Many other countries adopted a similar pattern of national capital mobilisation and import substitution, often with Stalinist Russia as a model. They were, for many reasons, not always successful. But the possibility of development was there, and many countries were able to achieve significant economic gains.

Now, given the immense scale of capital’s operations—on an increasingly international level—the prospects of balanced economic development for the underdeveloped countries look bleak. The lag between the infrastructural requirements of capital, and the actually existing infrastructure of the South, is so great that there is little hope of attracting international capital in anything like the quantities sustainable development would need. At best, there is a wildly unbalanced concentration of capital in extractive industries, and in the most dismal, low paid, low skill manufacturing. But Monbiot expects, given fair trade, the clearing union, and so on, that the South will pull itself up by its own bootlaces. A certain amount of aid can be provided through a Tobin tax on international financial transactions, the operations of the credit union could provide another source of funds, and Monbiot is, of course, in favour of the cancellation of Third World debt. All of this would help but, with the best will in the world, such assistance would only ameliorate highly unfavourable conditions. The South would have to rely on its own resources, while billions of ‘bancors’ continued to flow between the countries of the North.

The path of national economic development within a competitive international economy—such as it ever existed, and ignoring its terrible costs—appears to have been closed. This is not just a question of international institutions, but of system-wide priorities. Why should the South sweat blood to gain, ever so slightly, on the countries of the North? Vast wealth is available for global development, if only it is mobilised not for profit, but for human need. To achieve that requires challenging not just the framework within which international capital operates, but the fact that it operates as profit-driven capital at all. Monbiot seems unwilling to contemplate this. He has placed a bar over challenging the fundamental economic relationship of capitalism, that between worker and boss. Some of this is glimpsed in his attack on Marx—he sees the abolition of private property as providing the ‘perfect preconditions for totalitarian dictatorship’. More importantly, his strategies for implementing his grand schemes rest on appeals to any agency other than the working class—the international clearing union, for instance, could be brought into existence by the simultaneous refusal of Southern governments to pay their debts. This could conceivably happen if those governments—as debilitated and as venal as our own—were given sufficient political incentive. A suitably international political force is the global justice movement—a suitably heavy weight within that is the organised working class.

But to prioritise the working class is to offer an alternative not just to international trade agreements, but to glimpse the possibility of a new way of working. International capital can be completely disabled by its own workers—the recent Heathrow airport strike is a case in point. If we are to build on Monbiot’s condemnation of neo-liberalism, and provide some more substance to some of his proposals, we need to push our alternatives to neo-liberalism a little further. The final two books considered here aim to do that.

Parecon, by Michael Albert, is an attempt to provide a thorough account of a feasible economic alternative to both the market and central planning. It is offered as something like a blueprint for socialism, a complete rewriting of the rules that presently govern economic activity. Part imaginative exercise, part critique of capitalist economics, Parecon is in many ways very different to the other three books looked at here. It shares, however, a common concern with creating alternative social structures that work in line with the core values of the anti-capitalist movement. Albert lists his ‘guiding values’ for assessing economic structures as ‘solidarity, diversity, equity, self management, and efficiently meeting needs and developing capacities’.22 The initial chapters of the book are a very thorough dissection of capitalism and some possible alternatives in light of those core values. It is unlikely that we would find much to quibble with here— Albert has the knack of expressing often abstract economic discussion in clear and simple language, and this section of the book is probably the most successful. It is followed by a description of the workings of a ‘participatory economy’, or parecon.

Alex Callinicos, in An Anti-Capitalist Manifesto, shares with Albert a desire to offer value judgements on capitalism and its alternatives, and lays down four requirements that any substitute for capitalism must meet to be considered ‘something nicer’—justice, democracy, sustainability and efficiency.23 He, too, presents a considered discussion of each of these desirable values and, again, this is a clear and articulate attempt to outline the debates the movement has engaged in. Though the two sets of requirements differ, Callinicos is keen to stress that his ‘universal principles’ do not contradict the requirements of diversity in particular:

Properly understood, an egalitarian conception of justice is not about the imposition of uniformity but about giving everyone an equal opportunity they…have reason to value. Plainly not all ways of living are consistent with egalitarian justice: it conflicts with hierarchical, authoritarian and exploitative social relationships. But it is a confusion to think that universally valid principles command universal consent.24

So some invalid ‘ways of living’ are ruled out in the interests of a wider diversity. Albert—and indeed the rest of the movement—would have no quarrel with that. Both his and Callinicos’s requirements for a just society are essentially quite compatible. Callinicos’s more combative statement of these values stems from his attempt to write a manifesto, a politically engaged work with concrete proposals, rather than devise a thought experiment, and this sense of political engagement gives his Manifesto its drive and urgency. Parecon is written at a different pace. Interestingly, it is the one value both authors explicitly agree upon—efficiency—that provides perhaps the most important disagreement between the two.25 To see why, we need first to summarise Albert’s description of how a parecon would work.

First, private ownership of the means of production is abolished. Production is organised by workers’ councils, who democratically manage and operate workplaces. Each individual is free to join whatever workers’ council they wish, or form a new council. Albert does not specify the form of democracy used within the workers’ councils (and, later on, the consumers’ councils), leaving it up to the individual participants, although his book does contain an extended and quite interesting discussion of the relative merits of majoritarian voting against consensus-based decision making. The major binding requirement on individuals in workers’ councils is that they must work in what Albert calls ‘balanced job complexes’. These are bundles of different tasks, weighted according to their relative individual ‘empowerment’ and desirability, that take the place of what we now have in single task jobs. The aim is to overcome the ‘social division of labour’ between jobs, in which very few have empowering and fulfilling work, while the majority suffer in tedious, repetitive and otherwise undesirable tasks. Albert does not intend to abolish skills, or to force everyone to do everything, but to rotate tasks within job complexes sufficiently so that no one need feel disempowered. Workers are remunerated on the sole criteria of effort, this being the only factor over which individuals exercise discretion and so the only fair grounds for reward.26

Consumption is organised by individuals, families or ‘living units’ arranged into consumers’ councils. These are ‘nested’, so that the smallest neighbourhood consumer councils are federated into ward councils; ward councils are federated into borough councils; these fit into city councils, and so on all the way up to national or (though Albert does not discuss the possibility) potentially international councils. The intention here is to cope with what conventional economics labels as ‘externalities’—namely, the fact that my consumption choices have an impact on others, elsewhere. If I drive a car, I pay only for the petrol I use—I do not have to pay for the pollution that is forced on everyone else. I have, in other words, an incentive to overuse my car, given that I do not bear the full cost of its use. By nesting consumption councils in this way, Albert hopes that a better appreciation of consumption impacts will be provided to individual consumers.

We can see how this democratic arrangement of nested councils might begin to solve some of the global problems we encountered earlier. We should be able to ensure that globally-informed production and consumption choices are made. Where consumption or production decisions have large impacts on others, the process of democratic decision making should take these impacts into account. A large new factory, for example, would not simply be able to pollute the river it stands next to, given that it runs through a nearby town. The co-ordinated investment that capitalism cannot provide to the underdeveloped South should now be within reach, given co-operation between different producer and consumer councils.

However, while Albert holds planning to be vital to creating a just society—by allowing all individuals to make informed decisions and for society to assess its priorities—it is probably this aspect of his work that is the most problematic. Bringing the parecon system into operation means aligning desired consumption (as expressed by the consumer councils) with desired output (as expressed by the producers). Any economy, to function at all, must attempt to co-ordinate these two elements. Free market capitalism does so through the price mechanism, shifting prices in response to changes in demand (desired consumption) and supply (desired output). Co-ordination takes place after the event—after the ‘plans’ are presented in the marketplace, with the obvious possibility of misalignment. Albert aims to not only extend the range of factors influencing consumption and production decisions, but to remove the free market’s inherent instability through prior planning. Discussions take place between producers and consumers throughout the planning process before an eventual output is agreed upon.

Albert’s description of the planning process leans heavily upon work originally conducted by the Austrian economist, Oskar Lange, back in the 1930s, on the feasibility of operating a centrally planned economy. Albert obviously aims to broaden the planning process to include democratic workers’ and consumers’ councils, but the underlying logic is the same. The critical question here is—could all this work? The answer has to be a rather tentative ‘possibly’.

Albert’s planning process depends on what he calls an ‘iterative process’, relying on an Iterated Facilitation Board (IFB). The first step is for the IFB to offer ‘indicative prices’ for all the commodities in the economy. Workers’ and consumers’ councils take these indicative prices and draw up production and consumption plans based on them—workers’ councils using input goods prices to assess the social costs of production and plan likely outputs, consumers’ councils using output goods prices to assess the social costs of their consumption. The IFB then calculates the excess demand or supply for each good—the amount requested, above or below what is actually available, and adjusts the price of each good up or down depending on whether it is in excess demand (so the price goes up) or supply (so the price goes down). Consumers’ and workers’ councils then revise their plans using these new prices, altering proposed quantities demanded and supplied, and resubmit them to the IFB. This process continues until all excess demands and supplies are cancelled out.

Those with some background in neo-classical economics will find the scheme reminiscent of the supposed activities of the ‘imaginary auctioneer’—a mythical being who simultaneously decides prices for an entire free market economy to ensure that no excess demands or supplies remain, and that a stable ‘general equilibrium’ exists. The IFB performs a similar task. Indeed, Albert claims—in his more formal presentations of parecon—that a participatory economy exhibits much the same virtues as claimed for a free market.27 In particular, a stable parecon, with all prices decided by an IFB, will exhibit the mysterious property of Pareto efficiency. This holds that no individual within the economy can become any better off without making someone else worse off—it is the neo-classical economist’s principal virtue.

It is, however, a somewhat flawed concept of efficiency, and not necessarily one to which anti-capitalists should attach much weight. (Albert himself, quite rightly, holds that a parecon has much else to commend it beside this formal value.) Pareto efficiency cannot be used to provide judgements in all circumstances. In particular, it is a static concept of efficiency. We can use it to judge one distribution of resources, but not necessarily compare it to another. This becomes highly problematic if the availability of total resources changes over time—if, for example, the economy grows and more goods are available to be distributed. Without further—and highly restrictive—assumptions, we cannot be certain that economic growth would produce efficient allocations of goods.

Should we care about this? After all, ‘efficiency’ is too often held up as capitalism’s shining benefit. An easy response to the claims made for its ‘efficient’ operations is to simply dismiss the idea. But it seems better, as Callinicos quite explicitly does, to see efficiency as inherently related to other, more obvious, anti-capitalist values. It is clear that an inefficient economy has a huge impact on sustainability—the colossal waste of capitalism (highlighted by Mike Kidron in his last article for this journal) has a clear impact on environmental sustainability. It is clear, also, that any reasonable democracy would see the desires of its participants translated rapidly into outcomes—an inefficient economy, unable to do that, would also be undemocratic. Finally, and critically for our discussion, there is the question of efficiency and justice. Neo-classical economics explicitly ties the two together—there exist reams of esoteric mathematical proofs purporting to demonstrate that a free market economy, given a socially decided allocation of commodities, will always produce an outcome both Pareto-efficient and in line with society’s preferences over just distribution of resources.28

However, it should be clear that what we conceive as justice—even if we allow that under exceptional and implausible circumstances, a free market could produce the outcome above—is not just about predetermined allocation decisions (important though these are), and is tied into the other values Callinicos proposes. Together, an economy functioning in accordance with those values should allow individuals to ‘secure equal access to the advantages they need in order to live the life they have reason to value’.29 The relationship also works in reverse—any reasonable concept of efficiency must be one which simultaneously satisfies the demands of democracy, justice and sustainability.

By leaving the standard of efficiency as distinct from the other claims made, Albert risks undermining those other claims. This is especially the case when we attempt to deal with an economy that is growing—not just one, as Albert’s formal model and Parecon appear to suppose, that produces the same goods each year, but one in which innovation and growth take place. The problem of innovation is covered by Albert, and none of us would have much problem with supposing that a post-capitalist society would display far more creativity and original thought than any existing capitalist economy. The critical point, however, is in tying that new technology—and new investment more generally—to his overall planning mechanism. It is here that an underlying weakness in Albert’s work is at its most obvious. He appears to rely on precisely the kind of theory of knowledge that we earlier found Friedrich von Hayek criticising—knowledge as a static, predictable process, easily assimilated by (for example) an IFB and a formal planning process. Albert, naturally, differs from Hayek in assuming that what people know about themselves and others is social—the whole point of democratic planning is to allow that social knowledge to flourish. But that does not mean it is static, and if Hayek’s criticisms of formal planning (and, implicitly, conventional justifications for the free market) carry any weight, Albert’s static planning procedure is flawed.30

It seems far better, in trying to deal with the complexities of a modern economy, to take a piecemeal approach to removing the market— what Callinicos calls a ‘transition programme’—as a means of both challenging the existing social order and attempting to find a way to a new one. Part of that process is taking on the distinct markets that make up a capitalist economy. The labour market can be undermined with a minimum income guarantee, the markets for public services—like transport and utilities—can be undermined by making them free at the point of delivery, and so on.31 It is also clear, as Callinicos shows, that the ideal of democratic planning needs defending. He cites the example of carbon dioxide emissions, responsible for global warming:

Any serious attempt to reduce greenhouse gas emissions…would require global mechanisms capable of negotiating and enforcing decisions designed drastically to alter the prevailing allocation and use of resources over decades. If that isn’t planning, I don’t know what is.32

Democratic planning, then, is necessary, but we might also suspect it to be a creative process of discovery, subject to fits and starts, but achievable once the crushing weight of capitalist property relations have been removed.

The major question for socialists remains the same, even if deliberately not addressed by Albert—how to challenge and overthrow the capitalist state, as a precursor to building a just society. Albert offers a thought provoking and illuminating view of some of the institutions we could look to create in that society. Callinicos’s signposts to that society will be invaluable until we get there.


  1. H Wainwright, Reclaim the State (London, 2003), p14.
  2. As above, p16.
  3. As above.
  4. B Webb, Our Partnership (Oxford, 1948), entry for 29 December 1894, quoted in H Wainwright, as above, p19.
  5. H Wainwright, as above, p21.
  6. As above, p5.
  7. As above, p27.
  8. As above, p26.
  9. As above, p47.
  10. As above, pp48-49.
  11. As above, p47.
  12. B Alfonsi, quoted in H Wainwright, as above, p59.
  13. As above, pp108-109.
  14. As above, p96.
  15. G Monbiot, The Age of Consent (London, 2003), p26.
  16. The one quote he provides here—that ‘these guardians will “represent and take care of the future” of that class’ (G Monbiot, as above, p28) is unreferenced. The full quote from Marx is ‘The Communists fight for the attainment of the immediate aims, for the enforcement of the momentary interests of the working class; but in the movement of the present, they also represent and take care of the future of that movement.’ Quite a different claim.
  17. As popularised by Colin Hines, this proposes that restricting international trade and promoting national self sufficiency would be of global benefit.
  18. G Monbiot, as above, pp226-234.
  19. As above, p63.
  20. As above, p64.
  21. As above, p66.
  22. M Albert, Parecon: Participatory Economics (London, 2003), p42.
  23. A Callinicos, An Anti-Capitalist Manifesto (Cambridge, 2003), p107.
  24. As above, p114.
  25. Callinicos himself describes it as ‘probably the most controversial’ of the values he advances. A Callinicos, as above, p107.
  26. Both these issues were raised during the discussion on ‘How could we run the economy?’ at the Marxism 2003 event. Balanced job complexes, in particular, were subject to much debate; unfortunately, space prevents going over these arguments, and the focus is instead on Albert’s description of the planning process (noting, however, that he sees creating balanced job complexes as closely tied to this process).
  27. M Albert and R Hahnel, The Political Economy of Participatory Economics, chs 5 and 6, contain their formal presentation of the case. It can also be found at Notice that this formal presentation abstracts, in the usual fashion, from the real world in assuming preferences and technologies are quasi-concave. Albert and Hahnel’s proof of the efficiency properties of a parecon, like those of Walrasian equilibrium, depend on this assumption. The authors seem correct to assert, however, that deviations from this assumption in a parecon will act to increase its other virtues—in promoting solidarity, equity, and so on—whereas it has plainly negative effects in a free market. In other words, introducing the real world makes a parecon work better, but a free market worse.
  28. A result known as the ‘second fundamental welfare theorem’, this depends on extremely stringent conditions for it to apply. A Pareto-efficient general equilibrium is already tenuously linked to reality; when burdened with further assumptions, that links snaps pretty much entirely.
  29. A Callinicos, as above, p108.
  30. It is telling, too, that his model appears to exhibit a kind of ‘money neutrality’, familiar from standard neo-classical general equilibrium models. This holds that changes in nominal (money) variables have no effect on the underlying economy; in practice, it does not hold for numerous reasons, perhaps most clearly laid out (in this context) by Keynes. Money, he noted, performs three functions under capitalism: it is used in trade, it is saved and it is used ‘speculatively’. It is unlikely that many would wish to return to a barter economy, so money as a unit of exchange should present no problems for us. The inequalities and inefficiencies created by hoarding wealth in the form of saving is easily dealt with by preventing the private ownership of productive property. It is money in its ‘speculative’ aspect that poses problems; while speculation is what passes for planning under capitalism, we would hope for a less irrational and inhumane system but it is at precisely this point that Albert’s model runs into problems.
  31. A Callinicos, as above, pp132-139, contains a suggested transitional programme.
  32. As above, p123.