Sunday, June 18, 2006

Parecon Reading #1




     This weekend I got busy with my goal that I mentioned in my last post of learning more about Parecon. I ordered Parecon: Life After Capitalism by Michael Albert and read my first non-Wiki article on the subject. This was an introductory paper by Michael Albert and Robin Hahnel entitled Socialism As It Was Always Meant to Be. It's not too long, but it gives I think a good introduction to the basic concepts of participatory economics.

     I'm not going to write a book report type of summary here, because that's incredibly inefficient when you could just read it yourself. Rather, in the spirit of learning together and discussing, I'll mention a few aspects of the article that I found interesting.

     Firstly, the notion of rewarding people based on their effort, i.e. "to each according to his or her labor". This was a feature that I knew existed in Parecon before reading this article and I had some definite skepticism about this. Shouldn't those who are naturally gifted and intelligent benefit the same from less effort if they can produce more efficiently? I'm not criticizing Parecon in that there wouldn't be incentives for innovation, because I think they made a decent case in such a short paper that there would indeed be. However, this idea is relatively new to me. They argue that giving people more just because of their gifts that they are born with is no different than giving people more because they are born with more money and property. And I can see this point of view. However I don't think that analogy works completely because intellectual differences contribute to real differences in productivity, whereas property ownership simply means that you're benefiting from someone else's productivity. However, even this sort of compensation might result in an increase of living standards for educated people over what they get in the current capitalistic system. In the current economy, when you think of the big money, who do you think of? CEOs and property owners get the lion's share of the economic output, yet produce little to nothing of value. Jobs that take a lot of education, like science for example, get paid next to nothing in comparison.

     I also thought the idea of Workers' and Consumers' Councils and the iterative planning process that they are involved in was interesting. They didn't discuss this too much in this paper, and I look forward to hearing more about the details of it in upcoming readings.

     What were your thoughts? Does anyone else want to host the next reading or next topic? It doesn't have to necessarily contain a reading.

12 comments:

thinkanythingonce said...

There are several issues that come to mind immediately, but one obvious item is your statement that "CEOs and property owners get the lion's share of the economic output, yet produce little to nothing of value."

Property owners (e.g., landlords) take tremendous risks. They forego present consumption in order to buy property, they maintain it, screen tenants, perform maintenance, etc. I know several landlords and they are not fat cats but ordinary people trying to build a nest egg through hard work and wise investment. They invest a lot of time and personal resources, without any guarantee of payoff.

As for CEOs, the value they add is to organize the factors of production. Again, depending on the company, CEOs have tremendous responsibility, experience great pressure, and put in much hard work. They are highly paid because the value of workers by an intelligent, insightful, imaginative person far exceeds the value of workers who are unorganized or who are organized by majority vote.

Let's face it, if CEOs didn't add value, boards of directors wouldn't hire them and pay those sometimes huge salaries. It would be stupid.

As a scientist, I can assure you that some scientists make a lot of money and some don't. It all depends on whether one chooses a field that is practical (e.g., chemical engineering) or academic (e.g., theoretical physics). If it weren't for such differences in income, we'd be even more awash in super-smart people doing more-or-less useless research. I can also tell you from 20 years of personal experience that, without the right kind of management, many scientists will spend most of their time engaged in research that they find interesting without a single thought for the broader picture. Often it is the smartest one's who do this the most. Once again, the value of the highly-paid manager or CEOs is to organize the workforce so that something actually gets produced.

You also make the mistake of thinking that in a free market, people are rewarded because of superior ability. This is not true. They are rewarded by their customers or employers for providing superior service. Superior service may result from nothing more than a good attitude and hard work.

Those who argue that people shouldn't have differential rewards resulting from differential abilities to provide valued services are trying to erase individual identity. The Rawlsian concept of the original position ignores the fact that we are, as persons, inseparable from our many attributes, including intelligence, creativity, perseverence, etc. If one takes away these things and each individuals mix of them, we are empty shells, more like mannequins than people. Given that, why should an economic concept based on reasoning from such a state be remotely applicable to reality?

IndianCowboy said...

here's what get's me. I'm a big boy. So they put me to digging ditches and I'll be shifting a lot more dirt than the average guy would. Now, they decide to pay me less than the other guy because I wasn't working as hard, even though I shifted more dirt?

What exactly is going to stop me from caving their heads in with a shovel?

Parecon pretty much goes against human psychology, among other things.

There was a study in monkeys where they 'payed' them for doing certain things. and, IIRC the only system the monkeys were happy with was when pay correlated to achievement

Delta said...

thinkanythingonce,

I know several landlords and they are not fat cats but ordinary people trying to build a nest egg through hard work and wise investment

I guess a popular tactic with defenders of capitalism is to focus on the guy down the street who is struggling to make it work, and implying that he is a good representation of the economic system. My grandfather was a landlord who took care of his tenants and worked hard every day of his life. He did take risks. He maintained it, he screened tenants, and performed the maintenance himself with the knowledge of repair that he learned in Korea. But the truly wealthy (my grandfather was never that wealthy), don't have to take risks. They're born rich, and have to forego no consumption to buy property. They don't maintain it, peform maintenance, screen tenants (if their land holds tenants), etc. And it's legitimate to focus on these people when characterizing capitalism because these people are the types who are accelerating their ownership at the greatest rate. Buying land if you have excess money is not a risk. It's a sure investment.

As for CEOs, the value they add is to organize the factors of production. Again, depending on the company, CEOs have tremendous responsibility, experience great pressure, and put in much hard work. They are highly paid because the value of workers by an intelligent, insightful, imaginative person far exceeds the value of workers who are unorganized or who are organized by majority vote

Let's face it, if CEOs didn't add value, boards of directors wouldn't hire them and pay those sometimes huge salaries. It would be stupid


Sure they would. You think that CEOs get paid based on value they add? Many get upwards of $30 million/year. I don't think that's the going rate for a CEO. Hell, I bet they're are tons of people just as qualified who would jump at the chance to do the same job for $100,000. Workers who organize themselves are going to more motivated. But besides, even if you wanted an authority figure, you can find someone that would do that for $300,000 or less. Cases like the recent Exxon CEO who received a $400M retirement package display how compensation cannot possible be tied to value adding.


As a scientist, I can assure you that some scientists make a lot of money and some don't. It all depends on whether one chooses a field that is practical (e.g., chemical engineering) or academic (e.g., theoretical physics). If it weren't for such differences in income, we'd be even more awash in super-smart people doing more-or-less useless research. I can also tell you from 20 years of personal experience that, without the right kind of management, many scientists will spend most of their time engaged in research that they find interesting without a single thought for the broader picture. Often it is the smartest one's who do this the most. Once again, the value of the highly-paid manager or CEOs is to organize the workforce so that something actually gets produced

No, it is true that science sometimes focuses on matters that are impractical for current application. But these issues later can become very important, and capitalism doesn't support important research for the future at all, and needs a powerful state to do it for them.

Those who argue that people shouldn't have differential rewards resulting from differential abilities to provide valued services are trying to erase individual identity. The Rawlsian concept of the original position ignores the fact that we are, as persons, inseparable from our many attributes, including intelligence, creativity, perseverence, etc. If one takes away these things and each individuals mix of them, we are empty shells, more like mannequins than people. Given that, why should an economic concept based on reasoning from such a state be remotely applicable to reality?

No one is trying to erase individual identity, and no one is attempting to take away people's intelligence or creativity, it's just an issue of how people should be compensated for their work.

indiancowboy,
here's what get's me. I'm a big boy. So they put me to digging ditches and I'll be shifting a lot more dirt than the average guy would. Now, they decide to pay me less than the other guy because I wasn't working as hard, even though I shifted more dirt?

What exactly is going to stop me from caving their heads in with a shovel


You wouldn't be forced to join a Parecon community. If you preferred you could go down the road to another community where half of your output went to the guy who owned the shovel.

The hope is that people have a little more compassion for their fellow man than wanting to pound them with a shovel. Capitalism does a good job of isolating people from each other and destroying feelings of community and solidarity, but people are social creatures.

There was a study in monkeys where they 'payed' them for doing certain things. and, IIRC the only system the monkeys were happy with was when pay correlated to achievement

Well firstly, humans have a slightly higher degree of conciousness than a monkey, and so monkeys don't give a really good indication of human potential. But besides, monkeys in the wild are pretty organized and community-oriented. They don't wander around by themselves. Monkeys in a cage having to sit on their own feces? Yeah, that might hurt their sense of community and attachment to each other.

Thanks for the comments!

thinkanythingonce said...

I guess a popular tactic with defenders of capitalism is to focus on the guy down the street who is struggling to make it work, and implying that he is a good representation of the economic system. My grandfather was a landlord who took care of his tenants and worked hard every day of his life. He did take risks. He maintained it, he screened tenants, and performed the maintenance himself with the knowledge of repair that he learned in Korea.

That is a good representation of a vital feature of the capitalist system. I know several immigrants, for example, who came here ten years ago, put themselves through school, and now are investors or landlords. This does happen and it is not to be trivialized.

But the truly wealthy (my grandfather was never that wealthy), don't have to take risks. They're born rich, and have to forego no consumption to buy property. They don't maintain it, peform maintenance, screen tenants (if their land holds tenants), etc. And it's legitimate to focus on these people when characterizing capitalism because these people are the types who are accelerating their ownership at the greatest rate.

As long as that wealth was acquired by free exchange with others, it is legitimate and a just reward for someone's work. Even if it is passed on from generation to generation, it is still legitimate.

Buying land if you have excess money is not a risk. It's a sure investment.

On the contrary, buying land is not a sure investment. You may find that your property values don't appreciate at the rate expected and you lose money. You may find your property taxes go up more than expected. You may find that crime increases in the area where you bought the land. You only think it is a sure thing, I suspect, because you've never actually done any investing and therefore never come face-to-face with the risks.

Sure they would. You think that CEOs get paid based on value they add? Many get upwards of $30 million/year. I don't think that's the going rate for a CEO. Hell, I bet they're are tons of people just as qualified who would jump at the chance to do the same job for $100,000. Workers who organize themselves are going to more motivated. But besides, even if you wanted an authority figure, you can find someone that would do that for $300,000 or less. Cases like the recent Exxon CEO who received a $400M retirement package display how compensation cannot possible be tied to value adding.

Years ago, Ben and Jerry's (the ice cream company) declared that they would not hire a CEO for more than seven times the wages of the average (or lowest paid?) worker. Guess what? The guy they got wasn't up to the job. Neither was his replacement. In the end, they had to offer a higher salary to get the kind of person they needed.

Being in charge is not as easy as it looks. CEOs don't hold a gun to the heads of the board of directors to get the pay they get. They are offered spectacular rewards in expectation of or reward of spectacular results. This is a free transaction and really none of our business unless we are stockholders.

No, it is true that science sometimes focuses on matters that are impractical for current application. But these issues later can become very important, and capitalism doesn't support important research for the future at all, and needs a powerful state to do it for them.

I see, so that's why the Soviet countries and China were so far behind the capitalist countries in technology? Support for scientific research of the type you describe is a luxury good that is more likely to be purchased in a rich (capitalist) country than in a poor (socialist/communist) one.

No one is trying to erase individual identity, and no one is attempting to take away people's intelligence or creativity, it's just an issue of how people should be compensated for their work.

Why can't we let the market decide what each person gets for their reward by allowing each free individual to decide which goods and services to buy? Why does the left still have such a problem with economic freedom?

A pop star or sports star makes far more in a year than I'll make in my lifetime. This isn't immoral, unfair, or wrong: it is people freely choosing how to spend their money.

If worker management is so effective, why are we not overrun by worker-managed companies? The reason is simple: management of a complex enterprise is not something that can be done by majority rule. Most people don't understand the mathematics, technology, financials, etc. necessary to do this.

Parecon sounds like a prescription for a thousand petty tyrannies, ruled over by petty tyrants in charge of local worker's councils. In place of the impersonal marketplace, we'd have the bullying personality politics of the union and guild. It would, quite literally, be medieval.

Delta said...

As long as that wealth was acquired by free exchange with others, it is legitimate and a just reward for someone's work. Even if it is passed on from generation to generation, it is still legitimate

Capitalism serves to concentrate wealth in fewer and fewer people over the course of time. This can be seen recently in many mainstream studies ( here and here, for example). It's trivial to understand why. People who have had prior success are more in a position to have future success, and so the wealth piles up from generation to generation. Some day the entire world could be owned by a few people. Is this a desirable system? It's basically a Shake and Bake Monarchy.

On the contrary, buying land is not a sure investment. You may find that your property values don't appreciate at the rate expected and you lose money. You may find your property taxes go up more than expected. You may find that crime increases in the area where you bought the land. You only think it is a sure thing, I suspect, because you've never actually done any investing and therefore never come face-to-face with the risks

Sure I've done investing, and it is risky. But that's because I don't have much to fall back on. If I could afford for a few things to fail, and had the wealth to invest in different things, then it wouldn't be a risk, because I would surely come out with a profit. Investing is not a zero-sum game. If you have enough money to play and lose a few times, then you're going to make money. There's nothing brilliant or worth compensating with this.

Years ago, Ben and Jerry's (the ice cream company) declared that they would not hire a CEO for more than seven times the wages of the average (or lowest paid?) worker. Guess what? The guy they got wasn't up to the job. Neither was his replacement. In the end, they had to offer a higher salary to get the kind of person they needed

No, that's correct. But do you know what 7x the lowest worker would be? If person scooping ice cream for $6/hour works 40 hours/week for 50 weeks year, the CEO would only get paid $84,000. For someone with a good education this is comparable to what other job opportunities they would have, and these opportunities wouldn't have such ceilings on their pay, so perhaps they weren't happy with who they got. Try $200,000, or hell, even 300k. You can't justify salaries in the tens of millions of dollars with this example.


Being in charge is not as easy as it looks. CEOs don't hold a gun to the heads of the board of directors to get the pay they get. They are offered spectacular rewards in expectation of or reward of spectacular results. This is a free transaction and really none of our business unless we are stockholders

It certainly is our business, we are the ones who are getting price gouged by these monopolies. Gas is so expensive yet CEOs are getting ridiculous salaries. There's no competition. And it's too difficult to enter the market.

I see, so that's why the Soviet countries and China were so far behind the capitalist countries in technology? Support for scientific research of the type you describe is a luxury good that is more likely to be purchased in a rich (capitalist) country than in a poor (socialist/communist) one

Neither the USSR nor China is or was a socialist or communist country. Both were dictatorships where the people had no say. This is not how socialist/communist countries function. Most of all modern technology is developed publicly, with public funds, and then it is given to corporations to make a profit with. Check out a video of a Chomsky talk here for examples.

Why does the left still have such a problem with economic freedom?

When the wealth is concentrated to such a horrible extent, you don't have freedom, either political or economic.

If worker management is so effective, why are we not overrun by worker-managed companies? The reason is simple: management of a complex enterprise is not something that can be done by majority rule. Most people don't understand the mathematics, technology, financials, etc. necessary to do this

One of the key aspects of Parecon seems to be empowering workers to fully understand the mechanisms by which their business operates. We're not overrun with worker managed companies today because what owner is going to give up control to the workers?

Parecon sounds like a prescription for a thousand petty tyrannies, ruled over by petty tyrants in charge of local worker's councils. In place of the impersonal marketplace, we'd have the bullying personality politics of the union and guild. It would, quite literally, be medieval.

Well, learn about it first before you make judgements. It's odd that you would critique a Parecon economy for a supposed tyrant who is in control of the economic process when corporations are the ultimate economic tyrannies.

Anonymous said...

This capitalism triumphalism makes people withhold sound judgement. Apparently someone else owning the means of production and acquiring most of the profit from the goods produced by the powerless workers isn't friendly slavery.

http://en.wikipedia.org/wiki/Cooperative

http://www.google.com/search?hl=en&q=wheatsville&btnG=Google+Search

http://www.eurekalert.org/pub_releases/2004-09/aps-wdn092404.php

Capitalist children were probably separated from their parents and siblings, isolated in a bare room in some nasty suburban home. No wonder they hate other humans and have trouble trusting their fellow men.

I have been reading the Parecon stuff, and see some validiity in the idea. Yes, some kinks definitely need to be worked out, but this is a matter of fine-tuning, not of economic upheavals.

-Mookie

John K. Fitzpatrick said...

>>>. Shouldn't those who are naturally gifted and intelligent benefit the same from less effort if they can produce more efficiently? [...] because intellectual differences contribute to real differences in productivity, whereas property ownership simply means that you're benefiting from someone else's productivity. <<<

The 'gifted' (by nature or nurture) do benefit by applying their gifts, but they don't get to monopolize those benefits. If the gift lowers the average job complex, everybody benefits (shorter working hours for same pay). If the gift increases (socially desired) productivity, everybody benefits (more good stuff for the same price).

If intellectual work is *really* so hard, then the balanced job complex will reflect that, and after sweating it out for a few minutes at the media console, that valued
infoworker will still be obligated to spend many happy, cushy days digging ditches. :)

- John

p.s. Capitalism - supposedly fit for monkeys. Excellent point, I'll remember that.

bernarda said...

The 19th century economist JP Proudhon asked the question, "What is Property?" His answer, "Theft".

Which is true for at least any land property. Pieces of land were stolen and restolen over centuries.

Royal or princier families today are just the descendents of clans that successfully stole and held land. You have the colonialist powers who took the best land because they had the power. No particular individual merit was involved.

The thriving civilizations of the Aztecs and the Incas were exterminated simply because the Spaniards were able to do it. No trade or commerce was involved.

Today we have the legal fiction of the corporation. What is a corporation? It is a legal entity that allows its owners to avoid responsibility for its acts. The very idea of a corporation in today's legal terms means theft.

A corporation is an organization that can rob, defraud, or even kill people without involving the personal responsibility of its owners.

If you think there is any shred of honesty in the corporate world, just take a look at the history of the Robber Barons in the 19th century. Rockefeller, for instance, made his fortune in oil by pure skulduggery. He hired thugs to intimidate his competitors and hired private militias to murder striking workers.

Freetrade or the free exchange of goods has never existed and will never exist. It is simply an article of faith by so-called libertarians.

thinkanythingonce said...

I'll be brief and state some facts.

First, I did read about Parecon. The article in the original post emphasizes thgat economic decisions will be made by "worker's councils". In passing, please recall that the word "soviet" means "worker's council."

Second, economic prosperty is very strongly correlated to the existence of a capitalist system and free markets. All attempts at soviet-style systems degenerate into brutality. That's what happens when things are controlled politically rather than through free exchange.

Third, why do leftists always disown every example of a soviet/socialist/communist system as not being true to the ideal, while simultaneously criticizing capitalism based on corrupted examples (e.g., the US with its politicized mixed market)? Why not compare ideal to ideal, or realization to realization? Either way, free market based systems win.

Fourth, if worker management is really superior, we should be overrun by worker managed companies now. Where are they? Is there even one in the Fortune 500?

Fifth, if worker management is superior, why didn't China choose it instead of a free market model for its reforms starting in the 1980s? Could it be that they know more about human nature and economics that western leftists?

bernarda, if all property is theft, then please relinquish everything you "own" to me. I am willing to bear the burden of the "crime" of living a good life, producing things that others want, trading for the things they produce, and owning things that I earn. If you choose to call this "theft," you are only speaking gibberish. I suggest you crawl in a hole somewhere and try not to breath, since you don't want to steal someone's oxygen.

SH said...

Thinkanythingonce,

First, in the spirit of factual truth and also in passing, "soviet" means just "council" not a "worker's council".

Second, authors of Parecon don't seem to argue for a soviet-style system. They agree that socialism as it was implemented in Russia is flawed, so while all the talk about failings of "soviet-style" systems seems to be very typical of capitalist apologists, it is also completely irrelevant in a discussion like this one. Nobody seems to be arguing for centrally planned economy here.

As for the correlation of prosperity to capitalist system: whose prosperity? An average American now is better off than a typical American in 1900. But the same is true about pre-capitalist world. A typical slave in 1850 lived better than a typical slave in 1750. Does it mean that slavery was the best system?

Third, why do all the "rightists" always assume that there is only one other idea out there, the one that is the easiest to criticize? There are other theories out there and many of them do not agree with what was implemented in Soviet Union or China or wherever. There never was a realization of Parecon, for example, just like there never was a realization of a "truly free market". So there are no realizations we can look at when comparing these two systems. We can only look at the theoretical systems. You say that your theoretical "free market" wins. What criteria do you use to judge the systems and what makes you think it wins?

Fourth, your argument about worker-managed companies does not work. Here is the example of the same argument: if "truly free markets" are so much better than "mixed markets" why aren't we overrun by them? Is there a single strict "free market" out there?

Fifth, China is opting for a free-market-oriented economy. You ask why not for a worker-managed one. Again we can ask you the same question, why didn't they choose to go to a more libertarian, all out laissez-faire, "give me totally free market of give me death" type of economy? Could it be that they know more about human nature and economics that Western rightists?

To sum this up:

1. Centrally planned economies have huge problems and many examples of them failed, but nobody seems to be arguing otherwise. Parecon is not a centrally planned top-down system, so pointing to China or Soviet Union for evidence of its alleged flaws is meaningless. It is not enough for two economic systems to have similar words ("councils") to be considered equivalent.

2. It is clear that our current system has many problems. So the question is not whether it is better than soviet-style economy. The question is, can we do better than what we have now? And is Parecon this better system? Your answer is no. Now can you present any real arguments in support of your position?

And just to make something clear, I am not a proponent of Parecon but I am not ready to dismiss it just because it uses the word "soviet".

Anonymous said...

They read Ayn Rand and think selfishness is a virtue.

bernarda said...

thinkanythingonce is typical of libertarian nonthink. Instead of arguing against the points I made citing examples, he/she launches a completely irrelevant personal attack,

"bernarda, if all property is theft, then please relinquish everything you "own" to me. I am willing to bear the burden of the "crime" of living a good life, producing things that others want, trading for the things they produce, and owning things that I earn. If you choose to call this "theft," you are only speaking gibberish. I suggest you crawl in a hole somewhere and try not to breath, since you don't want to steal someone's oxygen."

His inanity speaks for itself.