Markets, Corporations, and Parecon
A presentation for the Albany Park, North Park, Mayfair Neighbors for Peace and Justice Economics, April 25, 2009
Section One: What are some of the problems?
The economic problems we face are unarguably systemic. Among the gravest of them are the disproportionate role that limited-liability corporations with rights of personhood pose to humanity and the planet. Government regulations, one entity that might serve as a check and balance to corporate power, are often handmaidens for corporate interests and stepping stones to corporate interests. Pick any broad realm you choose: the environment, war and militarism, labor rights, energy, education, media -- chances are very good that one or more corporations have a stranglehold of control and progress. Thus, a great deal of activism rightly targets corporations.
Another consideration is the economic institution of markets, where buyers and sellers are pitted against one another. Corporate dominance is to a great extent fueled by markets because corporations, as described in the film "The Corporation", are the political-economic equivalent of monsters. Corporations demand increasing profit for their shareholders at the expense of everything else. In a market economy, it is perversely rational to establish these corporate monsters since markets are a competitive realm where you win at another's expense -- to behave like a monster in effect, and the bigger the monster, the better the chance to win. Therefore, it is imperative to address markets as well as corporations.
This is a cruel irony since markets have been touted in various ways even by many liberals and leftists as neutral, beneficient, or unavoidable -- but seldom as a key institution than should be abolished and replaced. The proverbial "invisible hand" of competitive markets is long touted. Far less discussed is what some critical economists have called the "invisible foot", which refer to the problems that are endemic to markets. These problems include markets' competitive ethos fostering monstrous corporations, markets' chronic mispricing focusing prices exclusively on buyers and sellers, and markets' persistently ignoring social, labor, and environmental considerations.
Section Two: What solutions have been proposed?
Some believe markets can be controlled and harnessed, and their worse aspects contained and minimized. But, as I've said elsewhere, provisions can be put in place to mitigate some of the negative effects of markets, just as we see in present-day efforts to oppose corporations, but corporations by their competitive urge and competitive advantage fight back, and thanks to this eat-or-be-eaten logic of markets corporations win nearly every time. Plus, there remains the potential to ignore or belittle the chronic problems with markets -- blatant mispricing, commodity fetishism, ignoring social consumption, and others. Some may try to solve those problems by means outside of the market, but market advocates fight back with the proverbial stick of "free markets".
Many on the left have proposed a command-planning economy instead, even though this has been soundly rebuked, including by mainstream economists. Command-planning economies bear top-down hierarchies, ignore social effects, see technical information monopolized by a select few, and (ironically enough for a supposedly non-competitive model) spawn competition among actors within the command-planning pecking order.
Now we see an intersection of supposedly disparate parts of the economic spectrum. Corporations themselves are command planning economies and possess the structural attributes of command-planning economies. This leads to another cruel irony: those who advocate markets as an alternative wind up spawning the very command-planning institutions that they've opposed, except that they're corporations originating in the economic sphere rather than command-planning states in the political sphere.
So what remains instead of these retentionist systems, such as markets, command-planning, and corporations? Since the economic problems at hand are systemic, the solutions themselves must also be systemic. And one set of alternative economic systems that has been offered is termed "democratic planning".
Section Three: What solution would I advocate?
The best model of democratic planning goes by the name of "parecon" -- participatory economics. Here is a description of what it is, how it works, and how it's better than what's come before.
Parecon is an economic model that strives to achieve solidarity, equity, efficiency, diversity, and self-management (a set of values encapsulated in the acronym "SEEDS"). Parecon has four main institutions: (1) All jobs are balanced for desirability and empowerment. (2) Remuneration is determined by effort and sacrifice in socially-valued labor as gauged by one's workmates. (3) Economic decisions are made by decision-making bodies comprising those who work in a workplace or consume in a residence, where those who are impacted by a decision have decision-making power proportional to the degree they're impacted by that decision. (4) A participatory planning procedure addresses allocation, where consumption or production plans are submitted, with the help of a facilitation mechanism, to those who are impacted by those plans, and revised if necessary by those who made those plans in a series of rounds based on assorted qualitative and quantitative feedback, all done without command planning and without markets.
Parecon is better than retentionist systems like command planning, markets, and corporations because parecon spells out a new and markedly different set of rules to achieve a positive set of goals. Retentionist systems bear job hierarchies where a relative few bear highly empowering and desirable jobs, whereas participatory economics requires jobs balanced for desirability and empowerment. Retentionist systems pay poorly and require decisions that (overwhelmingly negatively) affect those who have little say in those decisions; parecon pays more fairly and strives to provide more fair decision-making power to its participants. In allocation, parecon uses participatory planning for the shared goal of eliminating excess demand, in contrast to competitive markets which spawn command-planning corporations and to the command-planning economies which spawn competition.
Section Four: What can we do?
In sum, we should abolish corporations by abolishing the markets where they spawn and thrive, and replace those markets with a participatory economy. Easier said than done. How do we do that?
First, we must widen awareness of the idea and build support for it. There are many things we can do, like this panel, and expressing the ideas in various creative media -- radio, video and film, in print, on the internet, and elsewhere -- and in various forms, fictional and actual alike. We also have to draw connections between this admittedly abstract and far-reaching proposal and the immediate impacts it has on so-called "everyday people". We can use these ideas to help people in their immediate needs and concerns, and connect previously disparate activist efforts on the immediate anti-corporate initiatives and those who work on the theoretical economics front.
The next steps and the harder steps include calling out the hypocrisy and double-standards among retentionists, regardless where they fall on the political spectrum. It's easy to mock acolytes of Milton Friedman as unwitting and hypocritical command-planning advocates. It's far more difficult to critique liberal or left groups that implement organizational structures that often structurally mimic the very corporations we oppose.
It's also hard, but necessary, to build new institutions that implement parecon rules. There are already some existing examples, and we should continue to build more. One idea along these lines would be to make a website or other entity that has established a useful function directly using the structures of participatory economics to its advantage.
At some point, with continued agitation and with expanded imagination, we can ultimately implement the institutional changes we need, but we must seriously take on the question "What do we want?". Oddly enough, both libertarians and Marxists, though they can't agree on what color the sky is, curiously offer the very same response to the question of "What do you want?" They both answer: "Let's figure that out after we win." Fat chance: We won't win if we don't seriously address this question, and I hope that this presentation offers some food for thought in this regard. I thank you for your time and attention, and I look forward to your questions and comments.
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Markets in the real world
By Davidson, Carl at Apr 29, 2009 20:02 PM
Markets are going to be aroud for a long time, as long as scarcity persists.
I prefer to be paid for my work, then take my money to stores and spend it as I please. The store can record my choices with bar codes if they like, but I don't want anyone's permission, or to go to any meetings, on what I want to buy.
I prefer getting share of the profit of a firm I jointly own with other worker-owners, where we decide ourselves how best to divide it up, rather than a wage. I don't care about 'balanced job complexes, so long as I have access to an educational system where I can add to my skills and go as far as I want , and in what direction I want.
If I do get a wage, I want it to be based on how productive I am, and to bargain for it collectively with my fellow workers, without fear of being fired, and with open information all around.
Markets process information in parallel, rather than in series, as plans do. That's why they are vastly more effiecient in pricing and distributing scare goods and services. Markets also fail, which is why we need to plan. Why worker-ownership, wage-labor can approach zero, limiting or abolishing the labor market. Public ownership of capital, leasing it to workers, severly restricts capital markets.
But if I have a good idea, I like a setup where I can recruit a like-minded team, go to a public bank or credit union, get approval for a grant and/or loan, and sell it to customers that I can find. If I get "too rich," well, that's what a decent progressive tax system is for.
It's important to recognize there is no such thing as 'The Market.' There are markets. They tend to be for dynamic, creative and destructive. That means they have to be regulated. Cartain markets, as in wage-labor or capital, can be restricted to the point of near-abolition, but abolishing all markets causes more problems than it solves. The withering away of markets is for the distance future.
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Re: Markets in the real world
By Szczepanczyk, Mitchell at Apr 30, 2009 11:34 AM
Carl writes: "Markets are going to be aroud for a long time, as long as scarcity persists."
Scarcity isn't an excluisve province of any kind of economic allocation. You can have scarcity in markets where corporations hoard resources, you can have scarcity in command planning where the command planning authority hoards resources, and you can even have scarcity in parecon if there isn't enough of a given resource.
And saying that markets will be around a long time is like Republicans in the mid-1980s saying that the Berlin Wall and Apartheid will be "entrenched forever". Put away the magic 8-ball and break open the clipboard. It's not a matter of prediction, it's a matter of action.
Carl writes: "I prefer to be paid for my work, then take my money to stores and spend it as I please. The store can record my choices with bar codes if they like, but I don't want anyone's permission, or to go to any meetings, on what I want to buy."
In parecon, you do get paid for your work -- more fairly than in any other economy, in fact. Likewise, in parecon, your credit can be used at any outlet, and you can spend it as you please -- according to indicative prices that reflect social, environmental, and labor costs, rather than in markets that ignore such costs and reflect bargaining power between antagonists. The allocation system of participatory planning in parecon doesn't use meetings; proposals are made, submitted to whoever is impacted, judged on their feasibility, returned to whoever made them, and responded. But that's for handling the overall details regarding consumption patterns over some larger timeframe (a year, say), while you say most people shop "day to day" (we are ALL "day to day" -- *grin*). You're not trapped in a parecon to make changes; you can take the initial plan you made, and adjust it if need be during the course of the year, while the final accounting at the end of the larger timeframe can compare the plan versus its final encapsulation, changes and all. Molehills aren't mountains.
Carl writes: "I prefer getting share of the profit of a firm I jointly own with other worker-owners, where we decide ourselves how best to divide it up, rather than a wage."
Suit yourself, but I think this is open to abuse. The profit might not be shared along fair principles, and there might not be an institutional framework in place by which it stays fair.
"I don't care about 'balanced job complexes, so long as I have access to an educational system where I can add to my skills and go as far as I want , and in what direction I want."
So you're advocating unbalanced job complexes -- and this is different from retentionist systems how? And what makes you think that an educational system catering to unbalanced job complexes would be any different to what we have now which is fine-tuned to cater to unbalanced job complexes?
Carl writes: "If I do get a wage, I want it to be based on how productive I am, and to bargain for it collectively with my fellow workers, without fear of being fired, and with open information all around."
Fighting for one's rights and for having open information are all to the good, but productivity isn't necessarily connected to hard work and thus isn't equitable (which is why parecon doesn't use that as the payment norm).
Carl writes: "Markets process information in parallel, rather than in series, as plans do. That's why they are vastly more effiecient in pricing and distributing scare goods and services. Markets also fail, which is why we need to plan. Why worker-ownership, wage-labor can approach zero, limiting or abolishing the labor market. Public ownership of capital, leasing it to workers, severly restricts capital markets."
FYI: You're bad-mouthing ("markets also fail") and praising ("vastly more efficient") markets in the same breath. Planning can be set up in parallel as well; indeed, that's what the participatory planning procedure encapsulates. Plus, markets still have the invisible foot, which you don't address. Finally, markets might be more efficient than command planning, but it's not less than participatory planning. A more detailed comparison between parecon and the "econdem" model is here:
http://www.zmag.org/znet/viewArticle/6345
Carl writes: "But if I have a good idea, I like a setup where I can recruit a like-minded team, go to a public bank or credit union, get approval for a grant and/or loan, and sell it to customers that I can find. If I get "too rich," well, that's what a decent progressive tax system is for."
...until you bribe the politicians off, or promise politicians and regulators lucrative positions after they leave the public sector. I see this a TON in the media politics work I do, but you could see parallels if you look closely at any industry. Also, the kind of "entrepreneurship" you describe can also happen in a participatory economy: assemble a workers' council, submit a proposal for the products you can make to consumers' councils who submit proposals for the products themselves.
Carl writes: "It's important to recognize there is no such thing as 'The Market.' There are markets. They tend to be for dynamic, creative and destructive. That means they have to be regulated. Cartain markets, as in wage-labor or capital, can be restricted to the point of near-abolition, but abolishing all markets causes more problems than it solves. The withering away of markets is for the distance [sic] future."
It's important to not confuse the "platonic ideal" of something versus actual instantiations of that ideal. But abstractions are used all the time, especially in science, and can help find things in the real world we wouldn't have otherwise. That's how biologists knew to look (and find) for the gene, same for astronomers and black holes, or physicists and neutrinos, or linguists and Bach-Peters sentences. Why can't we do the same thing in the economic realm regarding markets, corporations, command-planning, and participatory economics?
It would seem that eliminating markets and replacing them with a participatory economy would go a long way to solving a whole bunch of social problems, economic and non-economic as well.
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Look closer at market institutions
By Leask, Bernard at Apr 28, 2009 19:16 PM
Hi Mitchell,
Interesting article. Have you ever read Karl Polanyi's "The Great Transformation" or his anthropological-oriented studies of market institutions? I found your following comments quite interesting...
"Another consideration is the economic institution of markets, where buyers and sellers are pitted against one another. Corporate dominance is to a great extent fueled by markets because corporations, as described in the film "The Corporation", are the political-economic equivalent of monsters. Corporations demand increasing profit for their shareholders at the expense of everything else. In a market economy, it is perversely rational to establish these corporate monsters since markets are a competitive realm where you win at another's expense -- to behave like a monster in effect, and the bigger the monster, the better the chance to win. Therefore, it is imperative to address markets as well as corporations."I find this to be a convoluted argument and a non sequitir - it begins by considering "markets" in the abstract and ends by inexplicably conflating this with a "market economy". Is there no difference for you between a "market" and a "market economy"? Is it true that in every "market" buyers and sellers are antagonistically pitted against each other? One problem is that this way of expressing it assumes that all markets are basically the same. Neighborhood markets for shoe repair lump in the same boat as internal (ie:national) markets or long distance trade, by the same token markets for shoe repair, markets for labour power, or natural rsources are all lumped together to mean the same thing. Can you speak of a credible historical literature that suggests this kind of groos abstraction is appropriate? May I suggest that you seek out the work of Karl Polanyi for a possible better understanding of market institutions really are so that you may criticize them and their defects all the better. I don't think we can no longer rely on the unhistorical assertions of Michael Albert. His "effort rating" as regards as serious enquiry into market patterns and their evolution can only be reagrded as very poor.
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Re: Look closer at market institutions
By Leask, Bernard at Apr 28, 2009 20:01 PM
I did not realize that one cannot edit these comments after they had been posted. Sorry for the spelling and grammar mistakes.
I additionally want to emphasize that in the historical literature consideration of markets in relation to the many social institutions interacting with them is considered paramount when assessing their social impacts.
"The step which makes isolated markets into a market economy, regulated markets into a self-regulating market, is indeed crucial. The nineteenth century- whether hailing the fact as the apex of civilization or deploring it as a cancerous growth- naiively imagined that such a development was a natural outcome of the spreading of markets. It was not realized that the gearing of markets into a self-regulating system of tremendous power was not the result of any inherent tendency of markets towards execrescence, but rather the effect of highly artificial stimulants administered to the body social in order to meet a situation which was created by the no less artificial phenomenon of the machine. The limited and unexpanding nature of the market pattern, as such, was not recognized, and yet it is this fact which emerges with convincing clarity from modern research." (Polanyi, Karl. The Great Transformation, 60)
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Re: Look closer at market institutions
By Szczepanczyk, Mitchell at Apr 29, 2009 12:20 PM
Bernard,
Thanks for commenting. I haven't read the Polanyi book you mention, though I'm now interested in reading about it. I should also say that this speech I gave in Albany Park in Chicago was limited to ten minutes, so I couldn't elaborate as much as I would like. And, I didn't mean to conflate "markets" and "market economies" -- obviously a market is one institution in a market economy, though it's a critical institution. I could (and probably should) simply strike the word economy from the phrase "In a market economy," in the third paragraph of my presentation.
In my presentation, I was focusing on the abstract institution of a market. An institution is defined to be a set of roles. And the institution of a market has the roles of buyers and sellers, who use a shared medium of exchange (money, typically) to buy or sell goods or services. Now, we can think of that shared medium of exchange being treated in a zero-sum fashion, where a gain by one participant or side is matched by a loss by another participant. In the institution of a market, the gain of payment received by a seller is matched by the loss of payment made by a buyer.
Now, there are instances of institutions that are called markets which do not behave in a zero-sum fashion -- for example, a stock market where the price of a stock can increase in a non-zero-sum fashion. More, there are instances of institutions also called markets where the participants are not antagonistic to each other.
I think this misses the issue. I'm referring to the defined _institution_ of a market as stated above and how the universally-hated institution of a corporation emerges from that logic. Whether or not other institutions that are referred to as "markets" that don't follow this logic wasn't my intent. But that was hard to express in so little time. Let me know if you have any more questions or comments.
-- Mitchell
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