Democratizing the economic System – theoretical introduction with Etienne Schneider

Aug 8, 2017 by

by Erika Gutierrez and Rachel Jessup

On Day 4 we were introduced to the topic of democratizing the economic system. Though more of a theoretical approach to the topic, it was still interesting and relevant to face current challenges of today’s system.

Democratizing the economy essentially implies challenging the private ownership of the means of production. Examples of ways we can democratize the economy are cooperatives – which we learned about in the afternoon –, council democracies or trade unions. All of these types of organisation incorporate co-determination between workers of firms and management.

What we found most interesting was the part of the lecture where Mr. Schneider – from the University of Vienna, Political Science Department – talked about the key challenges of economic democracy.

The first of these challenges is the danger of having precarious niche alternatives instead of social transformation. Niches are often clique-like and have little diversity. Because it is only accessible to certain socio-economic groups instead of the population as a whole, this leads to a lack of inclusivity.

A second, yet related, challenge of economic democracy is that of inclusion and exclusion. What particularly intrigued us, was the exploration of the role of inclusionary/exclusionary processes regarding producers and consumers. Where should democracy take place? At what level? How do you organize access to participation in the economy? This is especially important when you consider that not everyone is part of the workforce and therefore may not be equally represented (for example, children, the elderly, stay-at-home parents) – though in a more democratic economy this would hopefully not matter.

A third challenge to note is how to organize the labour force. During his lecture, Mr. Schneider presented us with two different theories: social division and functional/spatial division of labour. Social division is a way to divide labour in a more socially conscientious manner, taking into account quality of work and the practice of task rotation to fight social hierarchies. Functional and spatial divisions of labour is more of a quantitative approach to divisions of labour. For example, the more localized an economy is, the higher degree of participation and democracy there will be but the lower the specialisation according to productivity will be.

The fourth challenge to implementing an economic democracy concerns coordination and allocation of resources. We looked at two different ways of allocation which are present in our system today. With market allocation, prices set the allocation of resources. In a democratic economy, this could raise problems through self-exploitation with people taking advantage of the system to their own ends, growth imperatives, and the focus on profit over social goals in society. This mode of production is also ecologically unsustainable. The other allocation mechanism is planned allocation. Though perhaps more complex to implement, it is also a more democratic mechanism that gives a voice to more people through increased participation, feedback procedures and increased access to information.

An alternative model of democratic economics that we analysed was Participatory Economics, also known as Parecon. We explored this notion through group work that had us critically evaluating the four basic institutions of Parecon: democratic councils, balanced jobs, compensation for effort and participatory planning. Though interesting to theorize, we found that this was a very extreme model that would not function in modern society, namely because of its dependency on altruism and the fact that it is in its essence a planned economy. To conclude, even though we didn’t see the plausibility of this model, it was interesting to discuss it with our classmates and this also opened discussion on alternatives economic models that could work in society.