WHAT IS TO BE DONE?

For the First Socialist Economics Forum, Carora Venezuela, September 4, 2008

Robin Hahnel, Professor Emeritus, American University, Washington DC, USA

Where is socialism being reinvented at the dawn of the new millennium? In Latin America where ALBA and the Banco del Sur are replacing the FTAA and the IDB. Where in Latin America is the path from populism and reform to a new kind of participatory socialism being forged? In the Bolivarian Republic of Venezuela. And where in Venezuela is the cutting edge of the Bolivarian Revolution? Here in Carora where every building block of 21st century socialism has first been launched. People of Carora, I salute you.

But no great social experiment is ever built from scratch. We always stand on the shoulders of those who went before us. What can we learn from those who struggled to build socialist economies in the 20th century? I think we should embrace our forebears’ goals – economic justice and economic democracy – and honour the memory of the millions of socialist militants who dedicated their lives to pursuing them, often at great personal cost. But I think we can also learn from their efforts and sacrifices what will NOT achieve their goals, which are our goals as well. Neither planning by an elite, no matter how well intentioned, nor a retreat to market relations when elite planning falters will achieve the historic goals of socialism.

Early in the twentieth century most socialists thought that after capitalism was overthrown workers in different enterprises and consumers in different communities would plan their activities together with little difficulty. But if the history of twentieth century socialism has anything to teach us it is that this is most emphatically not the case. Planning by those Marx called the “associated producers” did not occur for many reasons that are important to study carefully. But one reason is that it is not as easy for groups of workers and consumers to plan together as early socialists naively assumed. Working out procedures so decision making within a worker cooperative, or inside a communal council, is not only formally democratic but also inclusive and truly participatory is difficult enough. But working out procedures that allow different worker cooperatives and communal councils to retain an appropriate degree of autonomy over their own activities, while planning their relations fairly and efficiently is even more difficult.

It is not just that coordinating the activities of millions of different workplaces and neighborhoods democratically is hard to do. Figuring out how to go about doing it in ways that encourage participation on the part of ordinary workers and consumers and lead to plans that are fair and efficient is also not a trivial intellectual task. One of the greatest failures of 20th century socialism was that it left 21st century socialists with precious little in the way of ideas about how to help groups of workers and consumers coordinate their activities themselves – fairly, efficiently, and democratically. In any case, for whatever reasons, instead of planning by the associated producers (and consumers) themselves, what happened in 20th century, post-capitalist economies was that people’s activities were planned for them by a planning elite, or bureaucracy. In some cases the planning bureaucracy was better intentioned and more competent, and in other cases the planning elite was more self-serving and bungling. But in all 20th century post-capitalist economies people’s economic activities were planned for them, not by them.

Ten years ago Venezuela embarked on a new path, and much has been accomplished since 1998. The norms of democracy have been scrupulously observed and major political initiatives have never lacked a popular mandate. A new kind of socialist party is being built.[1] And most importantly for the subject I will focus on, the building blocks of a socialist economy have been created. Educational Misiones, neighbourhood health clinics, people’s food stores, worker cooperatives, participatory budgeting, municipal assemblies, nucleos of endogenous development, and communal councils together comprise a new “social economy” embracing socialist values, and public control over major centres of industry and finance is steadily growing.

The Bolivarian revolution has now arrived at the shores of the Rubicon our forebears never crossed successfully. The time has come to turn the different elements of the “social economy” and the growing public sector into a truly socialist economy: An economy capable of achieving the historic goals of socialism. An economy that distributes the burdens and benefits of economic cooperation fairly. An economy where workers and consumers have control over the economic decisions that affect them. An economy that will finally protect the natural environment that capitalism has been raping for over 300 years. You Bolivarian revolutionaries may be better prepared for a successful crossing than others before you. You have the benefit of hindsight from the failed crossings of others. During the past ten years you have methodically accumulated the necessary equipment for a successful crossing -- – the institutional and ideological building blocks I listed. But make no mistake about it: You are going to attempt what sceptics regard as mission impossible – organize an economy where the interrelated activities of workers and consumers are coordinated and planned equitably and efficiently by the workers and consumers themselves, not by a planning elite, nor by market forces.

When your mission proves difficult and problems arise there are many Fidel Castro once referred to as “brainy economists” who will seize the opportunity to insist that you abandon your quest as Quixotic, and accept markets as the only way to coordinate the activities of autonomous decision makers. Others will tell you that ordinary people neither can nor want to formulate their own comprehensive economic plan, and these cynics will advise you to accept planning by a dedicated elite, as many 20th century socialists did before you. I urge you instead to remember that neither of these paths will lead where you want to go. Embracing markets leads back towards the economics of competition and greed. You cannot expect some people to behave in socially responsible ways when you allow others to benefit personally by behaving in socially irresponsible ways – which is what appropriating productive resources that should belong to and benefit all, and taking advantage of others in market exchanges amounts to. On the other hand, accepting planning by an elite reinforces worker and consumer apathy at best and degenerates into a new class system with accompanying privileges at worst. I urge you to stand fast in your pursuit of what is nothing more, nor less, than the historic mission of socialism. I assure you that participatory planning by workers and consumers themselves is possible. But you should be under no illusions: You go where none have gone before.

The Challenge

The challenge is how to empower worker councils and consumer councils while protecting the interests of others in the economy who are affected by what these councils do. The challenge is how to give groups of workers user rights over parts of society’s productive resources without allowing them to benefit disproportionately from productive resources that belong to and should benefit everyone. What socialists have long understood is that what any one group in an economy does will inevitably affect many others. The conclusion many socialists have drawn from this fact is that democratic planning must allow all to have a voice and say regarding all economic decisions. But different decisions do not usually affect everyone to the same extent. One might call this the fundamental dilemma faced by those of us who want to organize a system of economic decision making that gives people decision making power to the degree they are affected by different economic decisions: Most economic decisions do affect many people, but to differing degrees. Market systems treat all economic decisions as if they affected only the buyer and seller since those are the only people involved in the market decision making process – thereby effectively disenfranchising all others who may also be affected. [2]

On the other hand, a democratic version of central planning, where the values of different final goods and services are determined by some kind of democratic voting procedure, treats all economic decisions as if they affected everyone equally – failing to permit workers who are more affected by a decision greater say than those who are less affected . Unfortunately, most economic decisions do not affect only a buyer and seller, nor do they affect all of us equally. Instead, most economic decisions fall into what we might call the “murky middle” -- affecting some more than others. Unless we organize economic decision making so that people have greater say over decisions that affect them more, and some, but less say over decisions that affect them less, we will continue to fail to achieve meaningful economic democracy. The challenge is how to give workers and consumers in their own councils a degree of autonomy over what they do that is appropriate.

But there is another way to see the challenge that highlights both its magnitude and importance. Encouraging popular participation in economic decision making is hard. After all, those who actually do the work have been discouraged from participating in economic decision making ever since humans “ascended” from hunting and gathering societies to class systems with ruling elites. And for the past 300 years workers have been taught they are incompetent to make important economic decisions and to thank their lucky stars they have capitalist employers and managers to do their thinking for them. Developing a participatory culture that encourages those who have always been a silenced majority in their workplaces to actively participate in deciding what they will produce and how they will produce it is difficult enough, even though these decisions have immediate and palpable impacts on people’s daily lives. Encouraging popular participation in coordinating the interrelated activities of millions of different workplaces and neighborhoods, and to participate in investment and long-run strategic planning, where the relevance to one’s personal life is more attenuated and less obvious, is even more difficult. Yet this is the historical legacy of capitalist alienation that socialism must overcome. Moreover, the price of failure is monstrous. Biologists teach us that nature abhors an ecological vacuum, by which they mean that in complex ecological systems any empty niche will quickly be filled by some organism or another. If there is a single lesson we should learn from human history it is that society abhors a power vacuum. If people do not control their own lives then someone else will. If there is a single lesson we should learn from the history of twentieth century socialism it is that if workers and consumers do not run the economy themselves, then some economic elite will do it for them.

A Solution: Participatory Planning

How can we give workers in their cooperatives and consumers in their communal councils and municipal assemblies the autonomy necessary to stimulate them to become and remain active participants in economic decision making while ensuring that worker and consumer councils do not make choices that are socially irresponsible? How is it possible to grant small groups of workers and consumers enough autonomy to encourage them to put time and effort into participating without disenfranchising others who are affected by the decisions they make, even though it be to a lesser extent? How can we grant groups of workers the right to use some of society’s productive resources as they would like without allowing them to benefit unfairly from doing so? How can we convince ordinary workers and consumers who have been discouraged in every conceivable way from trying to participate in economic decision making that things will now be different, and participation will finally be worthwhile? The participatory planning procedure that is part of the model known as a "participatory economy" was designed to solve these problems.[3]

The participants in the participatory planning procedure are worker councils and federations, consumer councils and federations, and an Iteration Facilitation Board (IFB). Conceptually, the planning procedure is quite simple: (1) The IFB announces current estimates of the social opportunity costs for all goods, resources, categories of labor, and capital stocks. (2) Consumer councils and federations respond with consumption proposals. Worker councils and federations respond with production proposals listing the outputs they propose to make and the inputs they need to make them. (3) The IFB calculates the excess demand or supply for each final good and service, capital good, natural resource, and category of labor, and adjusts the estimate of the opportunity cost for the good up or down in proportion to the degree of the excess demand or supply. (4) Using the new estimates of opportunity costs, consumer and worker councils and federations revise and resubmit their proposals. Individual worker and consumer councils must continue to revise their proposals until they submit one that other councils vote to accept. The planning process continues until there are no longer excess demands for any goods, any categories of labor, any primary inputs, or any capital stocks -- in other words, until a feasible plan is reached.

Households submit requests for private consumption goods along with effort ratings their members received from their workmates to their neighborhood consumption councils.[4] Consumption “allowances” for any children, students, and disabled or retired members of households are combined with the effort ratings of working adults, and if the effort ratings and allowances are sufficient to warrant the cost to society of producing the household consumption request it is automatically approved. The neighborhood council can also approve requests in excess of what the effort ratings and allowances of a household justify if the council finds reason to do so. The consumption proposal of a neighborhood council consists of the sum total of approved requests for private consumption goods from its member households, plus any neighborhood public goods like sidewalks, playground equipment for a neighborhood park, etc. It is this neighborhood council consumption proposal that is submitted during each round of the planning process, along with the average effort ratings and allowances of all members of the neighborhood council. Federations of consumer councils also submit requests for public goods in each round used by all who live in larger geographical areas.

Members of worker councils will have to meet to discuss and decide what they want to propose to produce and what inputs they want to request. Members of neighborhood consumption councils will have to meet to discuss what neighborhood public goods they want to ask for. And representatives from councils that comprise a federation of consumer councils will have to meet to discuss what public goods larger groups of consumers want to request. However, these are all meetings within worker and consumer councils and within federations, not meetings between councils and federations. The IFB merely performs a mechanical calculation to adjust estimates of opportunity costs between each round in the planning procedure. It does not “set” prices, much less dictate what workers or consumers can do. The IFB bears no resemblance to Central Planning Ministries which do have power over who will produce what, and how they will produce it. In participatory planning workers and consumers propose and revise their own activities in a process that reveals the social costs and benefits of their proposals. Not only do worker and consumer councils make their own initial proposals, they are responsible for revising their own proposals as well.

When worker councils make proposals they are asking permission to use particular parts of the productive resources that belong to everyone. In effect their proposals say: “If the rest of you -- with whom we are engaged in a cooperative division of labor with productive resources belonging to all of us -- agree to allow us to use these productive resources as inputs, then we promise to deliver the following goods and services as outputs for others to use.” When consumer councils make proposals they are asking permission to consume goods and services whose production entails social costs. In effect their proposals say: “We believe the effort ratings we received from our co-workers together with allowances members of households may have indicate that we deserve the right to consume goods and services whose production entails an equivalent level of social costs.”

The planning procedure is designed to make it clear when production proposals are inefficient and when consumption proposals are unfair, and other worker and consumer councils can disapprove of proposals when they are deemed inefficient or unfair. But initial proposals and all revisions of proposals are entirely up to each worker and consumer council itself. In other words, if a production or consumption proposal is disapproved the council that made the proposal revises its own proposal for submission in the next round of the planning procedure. This aspect of the participatory planning procedure distinguishes it from all other planning models and is crucial if workers and consumers are going to enjoy self-management. Participatory planning gives individual worker and consumer council’s power over their own activities. They are only constrained by the legitimate interests of others whom they affect. As long as a worker council’s proposal does not misuse scarce productive resources belonging to all it will be approved by other councils because it will benefit them more than it costs them. And as long as the social cost of producing what a consumer council asks to consume is justified by the sacrifices and allowances of its members, they are being fair to other consumers.

Those interested in a more rigorous analysis should consult chapter 5 of The Political Economy of Participatory Economics for a formal analysis of the necessary and sufficient conditions guaranteeing that the planning procedure will converge to a feasible plan, and for the feasible plan to be a Pareto optimum.[5]

Essentially the planning procedure whittles overly optimistic, unfeasible proposals down to a feasible plan in two ways: By multiplying the amount of different consumption goods requested by the current estimates of their social costs of production it is possible to calculate the social cost of consumption proposals. As long as average effort ratings of those making a request are as high as the social cost per member of a consumption request the members of the consumption council are not being too greedy or unfair to others. Otherwise, consumers requesting more than their effort ratings warrant are forced to either reduce their requests, or shift their requests to less socially costly items if they expect to win the approval of other consumer councils who have no reason to approve consumption requests whose social costs are not warranted by the sacrifices of those making the requests. Similarly, worker councils are forced to increase their efforts, shift toward producing a more desirable mix of outputs, or shift toward using a less costly mix of inputs to win approval for their proposals. By multiplying outputs by current estimates of their social benefits, and dividing by inputs multiplied by current estimates of their social costs, it is possible to calculate the ratio of social benefits to social costs of any worker council proposal. Worker councils whose proposals have lower than average ratios will be forced to increase either their efforts or their efficiency to win approval from other worker councils. Efficiency is promoted as consumers and workers attempt to shift their proposals and avoid reductions in consumption or increases in work effort. Equity is promoted when further shifting is no longer effective and approval of fellow consumers and workers can only be achieved through consumption reduction or greater work effort. Each new round of revised proposals moves the overall plan closer to feasibility, and moves the estimates of opportunity costs closer to the true social opportunity costs. The procedure generates equity and efficiency simultaneously while leaving worker and consumer councils and federations in charge of making and revising what they propose to do.

The participatory planning procedure protects the environment in the following way. Federations of all those affected by a particular kind of pollutant are empowered in the participatory planning process to limit emissions to levels they deem desirable. A major liability of market economies is that because pollution adversely affects those who are "external" to the market transaction, market economies permit much more pollution than is efficient. The participatory planning procedure, on the other hand, guarantees that pollution will never be permitted unless those adversely affected feel that the positive effects of permitting an activity that generates pollution as a byproduct outweigh the negative effects of the pollution on themselves and the environment. Moreover, the participatory planning procedure generates reliable quantitative estimates of the costs of pollution and the benefits of environmental protection through the same procedures that it generates reliable estimates of the productivities of scarce resources and the social costs of producing different goods and services.[6]

While verifying that a planning procedure will promotes efficient use of productive resources is of great concern to economists, socialists should be more concerned with whether or not a planning procedure promotes popular participation in economic decision making. It is my conviction that this is where participatory annual planning most outshines other versions of democratic planning. Of course a participatory economy cannot give every person decision making authority exactly to the degree they are affected in every decision that is made. The idea is to devise procedures that approximate this goal. How does participatory planning do this? (1) Every worker has one vote in his or her worker council. (2) In larger worker councils sub-units govern their own internal affairs via one worker one vote. (3) Every consumer has one vote in his or her consumer council. (4) Federations responsible for different levels of collective consumption and limiting pollution levels are also governed by democratic decision making procedures where each council in the federation sends representatives to the federation in proportion to the size of its membership. (5) But most importantly, worker and consumer councils and federations not only propose what they will do in the initial round of the participatory planning procedure, they alone make all revisions regarding their own activity during subsequent iterations of the planning procedure.

Who decides if proposals from worker and consumer councils and federations are acceptable? In central planning this decision ultimately resides with the central planning authority. The reason given for this is that it is presumed that only the central planning authority has the information and computational means necessary to determine if proposals would use scarce productive resources efficiently, and if proposals would distribute economic burdens and benefits fairly. In other words, it is presumed that only the central planning authority can protect the social interest. But both parts of this presumption are false. Because a great deal of information about what different worker councils can and cannot do resides with those who work in those councils, and because there are perverse incentives that lead them to mislead central planners about their “tacit knowledge,” it is false to assume that a central planning authority will have the accurate information needed to make informed judgments. On the other hand, worker councils would only harm themselves by failing to make proposals that accurately reveal their true capabilities during the participatory planning process since underestimating capabilities lowers the likelihood of being allocated the productive resources they want. Moreover, the procedure not only yields an efficient plan, it also generates accurate estimates of the social costs of all scarce productive resources and all harmful emissions. This means that everyone has the information necessary to calculate the social benefit to social cost ratios of every worker council’s proposal, and everyone has the information necessary to compare the social cost of every consumer council to the average effort rating of its members.

Allowing councils to vote “yeah” or “nay” on the proposals of other councils does not mean they must engage in a time consuming evaluation of those proposals. All they have to do is look at the social benefit to cost ratio for proposals from worker councils. When the ratio of social benefits to social costs of a worker council proposal is below average they are probably using resources inefficiently or not working as hard as others. When the social cost per member of a consumer council proposal is higher than the average effort rating of its members they are probably being too greedy and unfair to others. But otherwise, everyone else is better off approving a proposal from a worker council, and otherwise a proposal from a consumer council is perfectly fair. In other words, the participatory planning procedure not only makes it possible for each council to judge whether or not the proposals of other councils are socially responsible, it makes it easy for them to do so without wasting their time. So it is false to assume that only a central authority could have the information and means to protect the social interest. In the participatory planning process each and every council has the information it needs to make these judgments about the proposals of others, which is why it is possible for worker and consumer councils to decide on a plan of economic cooperation themselves, and why they need not delegate this power to a central authority, i.e. an economic elite.

Of course there may be special circumstances that warrant special consideration. Federations would play an important role in cases where a more careful and time consuming review of a proposal was in order. There will be cases where more qualitative information is necessary to form a responsible judgment, and cases where councils appeal a “nay” vote. Moreover, a unanimous “yeah” or “nay” vote of all other councils is unlikely, but also unnecessary. Rules for how large a super majority is necessary for approval would have to be ironed out, and federations might decide to draw the line in different places in this regard. But the important point is there are clear guidelines and mechanisms that give each council and federation autonomy while allowing all councils and federations to protect them from socially irresponsible behavior on the part of others without delegating decision making power over proposals to a central authority. Does all this guarantee that if a decision affects me 1.24 times as much as it affects someone else, I will have exactly 1.24 more say than they do? Of course not. But I will get to decide what private goods I want to consume, my neighbors and I will get to decide what local public goods we want to consume, and all who use larger level public goods will get to decide what those will be, as long as our work efforts and sacrifices warrant the social expense of providing us with what we want. And my co-workers and I will get to decide what we produce and how we produce it -- as long as we propose to use society’s scarce productive resources efficiently.

Dangers to Avoid in Democratic Planning

Authoritarian planning discourages worker and consumer participation because it disenfranchises them. While those who advocate democratic planning do so to give people more control over economic decisions that affect them, badly designed systems of democratic planning might continue to discourage worker and consumer participation in a different way. If worker and consumer councils have no autonomous area of action regarding their own work and consumption activities, but must submit to seemingly endless discussion, debate, and negotiations about what they want to do together with many others, in many different planning bodies, ordinary workers and consumers may well lapse back into apathy even after an authoritarian planning procedure is abandoned.

There is a danger that some forms of democratic planning can discourage participation on the part of ordinary workers and consumers by requiring them to engage in too much negotiation with others, especially if most of these negotiations are conducted by representatives. In this case, ordinary workers and consumers would no longer be disenfranchised as they are under authoritarian planning, but if procedures for involving all who are affected are cumbersome and rely primarily on representatives they may become a practical barrier to participation that only the most dedicated and determined workers and consumers will be willing to fight through. In other words, when poorly organized, democracy can become just another bureaucratic maze from the perspective of ordinary workers and consumers leading to what one socialist feminist economist warned could become a “dictatorship of the sociable.”

Participatory planning is designed so worker and consumer councils can decide what they want to do as long as it does not misuse productive resources that belong to all or take unfair advantage of others. It is designed to help worker and consumer councils demonstrate to one another that their proposals are socially responsible by generating the information to form such judgments. And it is designed to avoid unproductive and contentious meetings where representatives from different councils make proposals not only about what those they represent will do, but about what workers in other councils will do as well. In participatory planning as long as the social cost of what consumers want is justified by the sacrifices they made in work their proposal will be approved. And as long as the social benefit of the outputs a group of workers propose to make outweighs the social cost of the inputs they ask to use, they will be permitted to do what they propose. The planning procedure may take a number of rounds before proposals are confirmed as fair and not wasteful of social resources, but rounds in the planning procedure are not rounds of increasingly contentious meetings between representatives from different councils to debate the merits of different overall plans.

In each round a council whose proposal was not approved receives objective evidence why it was not acceptable to others.[7]

In each new round councils also receive more accurate estimates of the social costs and benefits of different goods and services – i.e. updated information about how any proposal they make would affected others. There must be a new meeting to decide how to revise a proposal that was rejected. But this is a meeting within the council or federation, not a meeting between representatives from the council or federation with representatives of councils who voted not to approve the previous proposal. Members of each council and federation discuss among themselves how to revise their proposal with clear guidelines about what will win approval from others. If they submit a proposal that meets the guidelines they never have to plead their case. They can also submit materials they wish others to consider, explaining any human or social costs and benefits that cannot be captured in quantitative estimates of opportunity costs, or any special circumstances they feel should be taken into consideration before passing judgment on their proposal. And finally, if they wish to explain in person why they believe a proposal that fails to meet the guidelines should, nonetheless, be accepted by others they can ask for a meeting with representatives of councils who found their previous proposal unacceptable. But an important difference between participatory planning and other models of democratic planning is that councils never have to debate someone else’s ideas about what they should do, and councils have easy ways to win approval for what they want to do without having to plead their case in contentious meetings with others.

Participatory planning is different from other conceptions of “democratic planning.” It is carefully designed so as not to overburden the main planning process with meetings of representatives from different councils, and particularly meetings without clear criteria for settling disagreements for lack of reasonably accurate estimates of the social costs and benefits of different goods and services. Instead, the participatory planning procedure provides for meaningful deliberation through a carefully structured, social, iterative process where workers and consumers: (1) discover how their choices affect one another as ever more accurate estimates of social opportunity costs are generated in successive rounds, (2) have a great deal of control over what their own economic activities will be since each council and federation makes and revises its own proposals, and (3) are protected from socially irresponsible behavior since they can vote not to approve wasteful and unfair proposals submitted by others.

In other versions of democratic planning it is common to give “stake holders” seats on enterprise councils when there is reason to believe that people who do not work at an enterprise are affected by enterprise decisions.[8]

But there are two disadvantages of this way of addressing the problem that people other than workers in an enterprise are affected by what an enterprise does: (1) How does one decide which other constituencies are affected and how many seats to give them? It seems naïve to assume there would be no differences of opinion on these matters, and in absence of any objective criteria decisions would be arbitrary even if not contentious. (2) If outsiders have seats, workers in an enterprise have no place where they can discuss what they want to do free from outside interference. It requires workers to hear from and convince outsiders before they can even formulate a proposal about what they want to do. If the only way to enfranchise outsiders were to give them seats on enterprise councils it might be necessary. But the participatory planning procedure provides others who are affected an appropriate degree of influence over enterprise decisions without infringing on the autonomy of workers in the enterprise. The planning procedure empowers others to reject any proposal a group of workers makes that fails to benefit those outside the worker council at least as much as it costs them, and does so without arbitrarily deciding which outsiders are affected and to what degree. Limiting membership in worker councils only to workers in an enterprise does not mean they get to do whatever they want. If they vote to use productive resources belonging to everyone inefficiently, their proposal will not be approved in the participatory planning procedure. In other words, the legitimate interests of others can be better protected through the participatory planning procedure rather than by denying workers the right to function in a council where only they have voice and vote.

Deliberative democracy can take place where the proposals are different comprehensive plans, and deliberation takes place at meetings attended only by a few representatives from each council. Or, deliberative democracy can take place by having councils propose what they want to do, i.e. submit “self-activity proposals,” and deliberation takes place within worker and consumer councils among all members to formulate and revise proposals in response to feedback from others and more accurate estimates of opportunity and social costs. While the first conception of deliberative democracy is more common, it has three disadvantages: (1) Only a few people from each council benefit from the deliberations – those sent as representatives – who then bear the burden of trying to convey their deliberative experience to those they represented. (2) Members of a worker council never formulate proposals for what they want to do. Instead their representatives together with representatives from other councils formulate proposals about what everyone, including them, will do. And (3) meetings of representatives proposing different comprehensive economic plans do not generate quantitative estimates of social costs and benefits of different goods and resources without which rational discussion of the merits of different plans is severely hampered, if not impossible. The participatory planning procedure, on the other hand, empowers worker and consumer councils to formulate their own proposals and generates estimates of social opportunity costs that are as accurate as can be hoped for.

Conclusion

Unfortunately our socialist forebears failed to recognize that designing democratic planning procedures that do not deteriorate into planning by an elite or market coordination based on greed and competition is not easy. It's not just that doing it is not easy. Figuring out how to do it is alsonot easy. In some ways 20th century socialists provided their 21st century descendents with a rich inheritance. But unfortunately procedures to ensure that ordinary workers and consumers determine economic decisions and encourage one another to behave in socially responsible ways, and procedures that avoid the predictable withdrawal of ordinary people from economic decision making leaving a vacuum for an elite to fill were nowhere to be found when the Will was read.

All versions of socialist democratic planning can be thought of as ways for people to discuss and decide on a division of labor among them -- having agreed to treat productive resources as the common property of all. One would hope the procedures used (1) permit people to influence decisions in proportion to the degree they are affected, (2) distribute the burdens and benefits of economic activity equitably, and (3) use scarce productive resources efficiently. One notion of how to go about this is for representatives from different councils to meet together where they propose, discuss, and eventually vote on different comprehensive plans for the entire economy. Another vision of how to organize the democratic dialogue is for different groups of producers and consumers to propose what they, themselves, want to do, and then refine those proposals in light of ever more accurate information about how their proposals affect one another, and what is therefore an efficient and fair use of the productive resources belonging to all.

As you Bolivarian revolutionaries explore the advantages and disadvantages of different approaches to democratic planning I urge you to give serious consideration to the latter approach because I believe organizing comprehensive planning as an iterative, social process of “self-proposals” combined with information sharing, followed by democratic approval based on clear criteria of social responsibility maximizes the potential for popular participation in annual planning. (1) Unlike other approaches to democratic planning, the participatory planning procedure provides unprecedented autonomy for worker and consumer councils over their own activities. Since what they, themselves will do is what concerns people most, this is an important virtue when we try to convince those who have long been disenfranchised that it is finally worth their time to participate in economic decision making. (2) The procedure generates the information people need to make informed decisions about what is efficient and fair – reasonably accurate estimates of the social costs of producing different goods and services – including environmental costs -- and the opportunity costs of using different scarce productive resources – including different kinds of labor. Without some idea of how valuable a productive resource is when used elsewhere, and how much it costs society to produce a good or service how can anyone know whether a work or consumption proposal is efficient or fair? Unfortunately, many versions of democratic planning fail to generate this necessary information for making informed choices even if they do arrange for decisions to be made democratically. The participatory planning procedure generates this information and makes it readily available to all councils, which allows them to vote on others’ proposals with little loss of time so the power to approve or disapprove worker and consumer councils’ proposals no longer need reside in the hands of a planning elite. (3) The iterative, social, planning procedure teaches participants how what they choose to do affects others, and how what others choose to do affects them. In other words, it teaches participants how our economic fates are linked. (4) Since discussions about proposals take place within worker and neighborhood councils rather than at meetings of representatives, everyone, rather than only a few, can participate in what is a social education process as well as a social decision making procedure. In other words, the procedure maximizes direct participation and minimizes participation through representatives. (5) The participatory planning procedure provides clear criteria for resolving disagreements about proposals and thereby avoids the possibility of getting bogged down in endless debates between representatives that end only when one side exhausts the other.

I conclude with a clarification and three related observations. When we talk about comprehensive national planning this really includes three different kinds of planning: annual planning, investment planning, and long-run development planning. Since the only difference between them is the length of time considered, at the highest theoretical level they can all be analyzed in the same way. Since my personal inclination is to think about things at the highest theoretical level that is how I first approached them. And I still believe that we should try to use the procedures of participatory planning whenever possible when making investment plans and development plans because in many ways those procedures maximize participation of ordinary workers and consumers. However, I want to make clear that what I have been discussing today is annual planning. I have argued that democratic annual planning is preferable to both coordination through markets and to annual planning by an elite. And I have argued that the participatory planning procedure has many advantages compared to other approaches to democratic annual planning. Unfortunately, however in the real world investment and development planning differ from annual planning in important ways that must be taken into consideration.

The problem is not only that uncertainty increases the farther in the future we try to calculate, and that people’s preferences change over time -- although these are problems as well. The problem is opportunity costs and the social costs that depend on them will vary depending on what investment and development plans we choose -- which means we may misevaluate investment and development options using today’s opportunity and social costs. To all intents and purposes productive resources and consumer preferences are fixed when we formulate annual plans. That is why opportunity and social costs can be estimated with some degree of accuracy -- provided planning procedures are properly designed to do so. But opportunity costs, and therefore social costs of production in future years as well, will vary to some extent depending on what investments we choose to make this year. And both will vary even more depending on what long-run development trajectory we choose. This means that evaluating different investment and development plans using the estimates of opportunity and social costs derived from this year’s participatory annual planning process can be misleading. [9]

Industry and consumer federations, rather than individual worker and consumer councils, should bear most of the responsibility for formulating, revising, and approving investment and development plans in any case. And “self-proposals” by federations can still play an important role, particularly in the initial stages of investment and development planning. But quantitative comparisons of the social costs and benefits of different investment and development self-proposals will be less accurate than comparisons of annual production self-proposals. This means that discussion and debate among representatives from different federations at national investment and development planning meetings must play a greater role than is necessary during annual planning. It means that formulation of alternative feasible, comprehensive investment and development proposals by teams of experts must play a larger role than is necessary during annual planning. And finally, it means that discussion and debate by representatives followed by referenda on a few alternative investment and development plans must play a greater role than during annual planning where self- revision of self-proposals can be relied on to generate an efficient and equitable annual plan, and where discussion can be concentrated within councils where all can participate.

I offer three observations in this regard that may be of interest: (1) While the participatory annual planning procedure is quite different from traditional conceptions of democratic planning which revolve around representatives meeting to formulate comprehensive plans, perhaps subjected to referenda, investment and development planning will of necessity have to look more like these traditional conceptions. [10] (2) Unfortunately it will be more difficult to stimulate popular participation on the part of ordinary workers and consumers in investment and development planning than in annual planning. This is not only because workers often see investment and development decisions as less crucial to their daily lives than decisions about what they will produce and consume this year. It is also because (a) representatives with the help of experts will play a greater role in formulating investment and development plans, even if those alternative investment and development plans are subject to popular referenda, and (b) “self-proposals,” which hold greater interest for most people, will play a smaller role in investment and development planning than in annual planning. (3) Therefore, it is all the more important to maximize popular participation of ordinary workers and consumers during the annual planning process by using the participatory planning procedure which (a) is a powerful school teaching people how their fates are linked and how to participate, and (b) is the most effective way to fill the power vacuum that a planning elite more likely to emerge from investment and development planning might otherwise usurp.

Thank you for your patience. I have subjected you to a lengthy and tedious presentation. I can only hope that the importance of the subject for all of us searching for a 21st century socialism capable of achieving the goals shared by all socialists, past and present, may have made the price worth paying.

Hasta la Victoria Siempre

robinhahnel@comcast.net

[1] Hopefully the PSUV will be built from the bottom up and its internal governance structures and culture will provide an example of participatory democracy at its best. And hopefully the PSUV will fulfil its mission which should not be to govern unilaterally, but to successfully challenge capitalist ideological hegemony and lead a national debate about what economic justice and economic democracy mean and require.

[2] Mainstream economics has even coined a name for those who markets disenfranchise. They are called “external parties,” and the effects on them when buyers and sellers make decisions without consulting their interests are called “externalities.” But of course mainstream economics insists that these effects are generally insignificant.

[3] See Michael Albert and Robin Hahnel, The Political Economy of a Participatory Economy (Princeton University Press, 1991) chapters 4 and 5, Looking Forward: Participatory Economics for the Twenty-first Century, (South End Press, 1991), “Socialist Planning as it was Always Meant to Be,” Review of Radical Political Economics (24, 3&4), Fall and Winter 1992, “Participatory Economics,” Science & Society (56, 1), Spring 1992, “In Defense of Participatory Economics,” Science & Society (66, 1), Spring 2002, and Robin Hahnel, Economic Justice and Democracy: From Competition to Cooperation (Routledge, 2005) chapters 8 and 9, and "Socialismo Libertaria: Economia Participativa," in Derecho a Decidir: Propuestas para el socialismo del siglo XXI," Joaquin Arriola, editor. (El Viejo Topo, Barcelona Spain, 2006), republished by Centro Internacional Miranda, Caracas Venezuela, 2006.

[4] All workers receive an “effort rating” from co-workers in their worker council which is an estimate of how hard they have worked and sacrificed compared to others. An above average effort rating entitles a worker to consume more than the average, while a below average rating only entitles a worker to consume less than the average.

[5] It is worth noting that the assumptions are significantly less restrictive than the assumptions necessary to prove that there will be a general equilibrium of a market economy which will be a Pareto optimum.

[6] Generating credible estimates of the costs and benefits of different levels of pollution is a major advantage of the participatory planning procedure compared both to market systems and central planning. See Economic Justice and Democracy, pages 198-207, for a full discussion of how the annual planning procedure, the long-run planning procedure, and other features of a participatory economy combine to protect the environment without loss of economic efficiency.

[7] In the case of consumption councils the reason will be that the estimated social cost of their consumption proposal was higher than warranted by the effort ratings its members received from their workmates. In the case of worker councils the reason will be that the estimated social benefits of the outputs they proposed to make was less than the social costs of the inputs they asked for and the estimated damages of any pollution they proposed to emit.

[8] See Pat Devine, Democracy and Economic Planning (Westview Press, 1988).

[9] This is not a problem unique to democratic planning. Authoritarian planning and market systems face the same dilemma but in effect, simply pretend the problem does not exist.

[10] Ernst Mandel, Pat Devine, and David Laibman are some who have proposed models of democratic planning along these more traditional lines. I believe their proposals provide valuable suggestions for investment and development planning but fail to take advantage of available opportunities to maximize popular participation in annual planning in ways that the participatory planning procedure does.