The Economy of the Revolution - After the revolution


If we are to envision this world as an improvement over our current one, it will be absolutely necessary to retain the advances made during the industrial, and even more importantly the recent agricultural revolution. To fail to do so would be no less than mass genocide. The productive capacity of the world in terms of food, goods and services is enormous. In order to feed the hungry and cloth the naked, we will need an efficient system of production allocation and distribution.

The Failure of Capitalism

The intrinsic failure of capitalism and market economics has been written about at great length. These deficiencies include many abuses that are unavoidably woven into the fabric of the capitalist market economy. If we, however, were to attempt to distill the central problems we might come up with the following list:

  1. The accumulation of wealth in the hands of few, while many suffer in poverty.
  2. The inevitability of economic rent (unearned gain) due to manipulations of the political economy by those with accumulated capital.
  3. The lack of any mechanism by which externalities (such as pollution and other social harm) can be accounted.
  4. Reward through competitive advantage for hiding innovation (i.e. trade secrets) whilst punishing players who would make public the increased productive power, for the benefit of society.

This last problem (problem 4) can be seen as a specific case of problem 2 where the accumulated capital is human capital, and the economic rent is differential productive capacity. However this additional abstraction does not aid in our reasoning and so we leave it as a separate point.

The above list is by no means exhaustive, but I think it does circumscribe the most terrible problems. The full list of deficiencies and the systemic mechanisms that cause them will not be undertaken here. Suffice it to say that a careful examination reveals that any attempt to ameliorate these problems is infeasible.

If this situation, however intolerable, were inevitable then there would be little sense in complaining and we could all go back to our place continuing with the status quo. However, there are in fact alternatives.

Alternative Economies

If we are to replace capitalism we would like to ensure that the system with which we replace it does not have the deficiencies of capitalism. As anarchists we will additionally require a society that fosters equality, solidarity and can function without hierarchy or special privilege.

Numerous different alternative economies have functioned throughout history. These include gift economies, centralised communism, collective workplaces, cybernetic socialism. They have ranged from the anarchist to the authoritarian. They have taken place in both agrarian and industrialised communities. From collectivised factories in Catalonia during the Spanish revolution, farms and workplaces in the Free Territory of what is now the Ukraine to the Kibbutzim operating into the present day, there can be no doubt that alternative economies are possible.

Despite these "proofs of existence" it is still very useful to ask what types of institutions would be desirable for increasing the efficiency of the production and distribution of goods and services, reducing the transaction costs of coming to agreements, ensuring equitable distribution and all the while safe-guarding libertarian ideals.

In an agrarian society with relatively small levels of trade it is probably unnecessary to have any sophisticated cybernetic institution for the optimization of mutual aid. In an industrialised society it is truly inevitable. If the institution is not provided, it will come into existence out of necessity. The situation with Kibbutzim in Israel, and many other collectivised workplaces in history is one of individual communities competing in an over-arching capitalist system. Clearly this is undesirable, as while it reduces the problem 1 for those who happen to be in the collectives, it does nothing about problem 2, 3 or 4.

Mechanisms of optimization will necessarily use mathematics and therefore numbers. It is inevitable that any sufficiently advanced industrial society will attempt to solve optimization problems using numbers. That these numbers should be correlated with goods, services and labour is reasonable. Numbers in these institutional schemes of optimization may fairly be called money, but they should not, a priori, be identified with capitalism.


Parecon is an economic system first described by Michael Albert and Robin Hahnel. It is designed to assign "prices" to goods and services by finding convergence between supply and demand and assessing externalities in a direct democratic fashion.

Additionally, a guiding principle of Parecon is the development of balanced work complexes which mix desirable and/or empowering work with undesirable and/or disempowering activities in a workplace so as to maximise satisifaction. This has additional effect of bringing the remuneration necessary to fill posts closer to the average. This helps to ensure a more egalitarian society.

Eventually the price of all goods and services and labour is agreed upon in worker and consumer councils.
Parecon is an explication of an institution for providing a distributed (not centralised) efficient collectivist economy which corresponds somewhat roughly to the notion of mutual aid developed by Proudhon.

In terms of its strengths over Capitalism it is useful to look at the list of problems exhibited by Capitalism and to see how well Parecon fares.

In Parecon there is no advantage to be obtained from hiding innovations. Workers have a vested interest in reducing the amount of undesirable labour in their workplace. This means that innovation pressures exist which lead to increased productivity and, even more importantly, workplace comfort and enjoyment. With no pressure to hide this information all of society can benefit from these advances. Problem 4 is not present in parecon.

Parecon solves the problem of assigning prices to externalities by allowing the community to assess how much the externalities impact them. This assessment is then included in the prices of the given goods and services. The environment, social welfare and quality of life can all be expected to improve in a society that can assess the cost of externalities. Parecon therefore copes well with our problem 3.

In a Parecon society it would not be easy to extract economic rent by manipulating the political economy since remuneration would not differ greatly between members of the society. While this does not give us assurance that problem 2 is not present, it does significantly reduce the likelihood.

Remuneration is unlikely to vary radically in a Parecon, since high levels of remuneration would drive up demand until the price was more acceptable and because remuneration is arrived at through the agreement of ones peers. This however does not place limits on the acquisition of durable goods. It may be possible to stockpile desirable items and use them in trade in a black market economy. If the monetary system includes cash moneys then it may be possible to stockpile cash, yielding to the possibility of inheritance and oligarchy. There are a number of ways this might be avoided. Credit could be the only means of accounting, or cash could have expiry, but the danger should be kept in mind. It isn't completely clear that problem 1 has been avoided.

From Collectivism to Communism

"If we preserve the individual appropriation of the products of labour, we would be forced to preserve money, leaving more or less accumulation of wealth according to more or less merit rather than need of individuals."
 -- Carlo Cafeiro, Anarchy and Communism (1880)

Parecon follows the collectivist model in which the means of production is a communal resource but individuals retain ownership of the products of labour. There are a number of reasons that this situation could be considered undesirable.

The difference between a means of production and a product arecompletely a matter of perspective. All means of production themselves are products. Many items that one might use in daily life, such as scissors or hammers, could be classified as a means of production.

Additionally, exclusive ownership is inefficient. In order to maximise utility of resources it is necessary that they see maximal use. This reduces the productive burden on society while increasing the resources available, effectively raising the standard of living of the entire community.

One way in which we can increase the inherent efficiency of Parecon is by moving from a system allowing private ownership to one in which all goods are communal and can be placed in reserve by individuals for a time period. The reservation of an item would award a temporary exclusive use, so that resources (such as automobiles) which were limited could be effectively utilised.

Durable goods for which productive capacity is in excess, and for which there is no social cost inherent in its dissemination, could be reserved for a lifetime.

These alterations manage to retain the obviation of the problems with capitalism while simultaneously increasing efficiency. Even more importantly, this modification may solve problem 1.

If all goods are community resources and Parecon is viewed merely as an institution for coordinating the use of goods which are in limited supply, then there is no need to worry about stockpiling since it would only be a stockpiling by the entire community. There should be no fear of a black market, since there would be no private property to sell.

Equality for all

"from each according to ability, to each according to need"
-- Karl Marx

Parecon and the modification presented, as institutions, do not address this central tenet of anarchist communism. Parecon can not replace the need for society to provide for the public welfare. Parecon simply attempts to optimise consumer/producer relations in a more egalitarian way. It does not remunerate those who do not have any ability. The disabled, the young and the old all have needs that require assistance in the absence of any provided labour.

I don't think this should be viewed as a barrier to the use of Parecon, since the problem can be accomodated by providing remuneration to classes of people who do not do any socially useful labour. It is important though that we realise the danger of elevating any institution above the welfare of the people. This terrible mistake is the reason that capitalism has exacted such a terrible human and ecological toll.