The foundations of alternative economy

Wael Gamal
Publishers: Arab Forum for Alternatives and Rosa Luxemburg Foundation

Introduction:

The Arab region was, like the rest of the world, swept by the global neoliberal model that was continuously promoted as the only option even after its policies were dealt a serious blow with the uprisings that took place in 2011. Those uprisings did, in fact, highlight the failure of such policies and demonstrated the urgent need for alternative ones, yet this was a temporary phase that was followed by an aggressive comeback of neoliberalism in the region.

Supporters of an alternative economy are usually criticized for two main reasons that contradict each other, each of which is cited in a different context. On one hand, alternative economies are seen as general theories that cannot be translated into projects on the ground and are deemed populist. On the other hand, when tangible demands and practical projects are put forward by social movements and labor unions, their initiators are accused of lacking an overall vision that takes into consideration regional and international contexts.

Alternative economic policies proposed across the Arab region before and after the uprisings ranged between cooperatives, self-management, tax reform, and anti-corruption legislations as well as initiatives by officials in several public sectors such as healthcare, education, and transport[1]. But there was never a real effort to formulate a comprehensive vision of alternative economy, one upon which actual projects can materialize.

Prevalent binary approaches:

In August 2015, The Economist published an article called “What’s the alternative”[2] that contained a review of John Plender’s book Capitalism: Money, Morals and Markets[3]. The article argues that capitalism is losing supporters and that its detractors are expanding to include figures like Pope Francis and the inequality and injustice it triggers are giving rise to several movements such as Occupy Wall Street. The article quotes Plender as saying that capitalism might face another crises, yet it will still survive since it, as the title of the article suggests, “better than other systems,” which is equivalent to the main argument upon which neoliberalism is based: that there is no alternative.

The “there is no alternative” discourse is founded on a number of pivotal principles governed by a number of binary approaches: the technocratic versus the political and the ideological, the pragmatic versus the idealistic, and the state versus corporates.

American economist Joseph Stiglitz describes the first approach: “Developing countries are often advised (or instructed) to undertake reforms recommended by ‘experts’ who are called ‘technocrats’ and are often backed by the IMF. Opposition to the reforms is usually dismissed as ‘populist’”[4]. The term “technocrat” was coined in the early 20th century to refer to the rule of experts. This perspective robs economic policies of any social considerations and presents them as purely technical while condemning alternatives as biased and unscientific. “Technocrats can, of course, make an electricity plant work better – to produce electricity at as low a price as possible. This is mostly a matter of engineering, not politics. Economic policies are usually not technocratic in this sense,” Stiglitz adds[5]. According to Stiglitz, each economic policy has its advantages and its disadvantages, hence those who benefit from it and those who are harmed by it: “some may lead to higher inflation but lower unemployment; some help investors, others workers. Economists call policies where no one can be made better off without making someone else worse off ‘Pareto efficient’. If a single policy is better than all others for everyone, it is said to be Pareto dominant. If choices among policies were purely Paretian – ie if no one was made worse off by choosing one policy as against another – the choices involved would indeed be purely ‘technical’”[6].

This approach not only reduces the efficiency of economic policies through sidelining alternatives, but also serves the interests of specific groups at the expense of others. For example, neoliberalism attributes poverty to lack of knowledge and expertise, therefore deals with poverty as a technical issue, which in turn endows the state or the entity in charge of these “technicalities” with more legitimacy, as William Easterly[7] argues. Easterly links this discourse to what he calls “authoritarian development,” which means that “what used to be the divine right of kings has in our time become the development right of dictators. The implicit vision in development today is of well-intentioned autocrats advised by technical experts”[8].

This binary approach is always accompanied by that of the pragmatic/realistic versus the idealistic/unrealistic. Neoliberalism poses itself as the only viable option that can actually be implemented on the ground because it is purely technical and devoid of any ideological reference. “Over the past thirty years, capitalist realism has successfully installed a ‘business ontology’ in which it is simply obvious that everything in society, including healthcare and education, should be run as a business,” says Mark Fisher[9]. Capitalist realism in its dominant neoliberal form has expanded in an unprecedented manner that made attempts at finding alternatives an unrealistic effort. In fact, the kind of atmosphere neoliberalism managed to create makes finding alternatives quite hard: “It is more like a pervasive atmosphere, conditioning not only the production of culture but also the regulation of work and education, and acting as a kind of invisible barrier constraining thought and action”[10]. It is noteworthy that neoliberal realism itself seemed impossible decades ago. It was impossible, for example, in the 1960s to anticipate that global wave of privatization that has been taking place in the few past decades.

French philosopher Alain Badiou explains how the atmosphere created by neoliberalism keeps obstructing the emergence of any alternatives and eliminating any that get the chance of seeing the light and how neoliberalism offers its own explanation of different social problems.

In truth, our leaders and propagandists know very well that liberal capitalism is an inegalitarian regime, unjust, and unacceptable for the vast majority of humanity. And they know too that our “democracy” is an illusion: Where is the power of the people? Where is the political power for third world peasants, the European working class, the poor everywhere? We live in a contradiction: a brutal state of affairs, profoundly inegalitarian—where all existence is evaluated in terms of money alone–is presented to us as ideal. To justify their conservatism, the partisans of the established order cannot really call it ideal or wonderful. So instead, they have decided to say that all the rest is horrible[11].

American economist and Nobel Laureate Elinor Ostrom tackles the case of commons as an example of an economic alternative that would be rejected by neoliberalism. According to Ostrom, the fact that commons had in many cases survived for thousands of years refutes claims by supporters of neoliberalism that it is a failing economic system. Ostrom also analyzes the reasons for the failure of the system of commons in some cases and developed a set of micro-level theories that explain how commons can be efficient[12].

The third binary approach limits the choice between corporates and an authoritarian state that controls the economy through a bureaucratic public sector. This approach, therefore, assumes the absence of a third option such as cooperatives, self-administration, commons, communal ownership, and others. Such approach makes it much harder to come up with an alternative since it creates a market that cannot take a third option, which was shown in the 2008 global financial crisis and the way the market is structured in general as well as the prevalence of state capitalism.

Crisis and reactions: Plan C

The 2007-2008 global financial crisis shook the three afore-mentioned binary approaches. According to professor of political economy at the University of East London Massimo De Angelis, reactions to the crises were divided into three categories, each of which offering a plan that can be implemented to deal with the crisis. Plan A consolidates the neoliberal system and overlooks all attempts at a fair redistribution of wealth. This plan will, naturally, be in the best interest of the rich[13]. De Angelis warns that if this plan is not met with enough resistance, all remaining rights will be eliminated and more measures will be taken towards an even stronger dominance of neoliberalism. The global financial crisis, however, led several governments to think of Plan B, in which the state works on a fairer distribution of resources in an attempt to eliminate inequalities and subjects banks and the finance sector to relative regulations that would strike a better balance as well as adopt better policies in dealing with environmental issues. This plan will not succeed if it is not preceded by a major economic crisis that results from a catastrophic damage equal to that of World War Two if not more powerful so that a drastic change can take place in capitalist policies[14]. Because of how far-fetched Plan B is, De Angelis highlights the necessity of searching for a third alternative—a Plan C.

The crisis led to the emergence of several economic theories that aimed at looking for alternatives to the current system. Among those theories were three main trends categorized under what Jane Hardy of the University of Hertfordshire calls “radical economics”[15]. According to Hardy, “Radical economics is a loose collective term for those who are critical of the method and prescriptions of mainstream neoclassical economics. This school of economics dominates teaching in universities, provides the “theory” and justification for neoliberalism and underpins the policies of global financial institutions such as the World Bank and International Monetary Fund”[16].

The first trend is represented by radical economists in the United States such as Paul Krugman and Joseph Stiglitz who criticize “deficit hawks and debts hysterics” and call for more government spending. They have been labelled the “modern avatars of Keynes” by James Galbraith. The second trend is represented by economists who are eclectic in their criticism of the crisis and economic stagnation such as Nobel Laureate Robert Shiller who takes into consideration the role of cultural and psychological factors in determining how the market works. The third trend is comprised of post-Keynesian economists such as Philip Arestis and Jan Toporowski who expanded Keynes’s theories to include inequality and finance based on a theoretical framework that sees capitalism as an unstable system by definition, yet one that can still be rescued[17].

Those trends can be categorized under Plan B according to De Angelis’s classification since they aim at dealing with the problems of inequality while improving growth rates and restoring the role of the state in the economy after it was sidelined by neoliberal policies. At times, those trends propose alternative policies that seem too far-fetched in the current political context. These include a universal basic income, imposing a wealth tax, or regulating tax havens. For De Angelis, the ability of these trends to effect a real change will remain limited since the policies they propose require a direct confrontation with the hegemonic social and political class and this requires the establishment of a totally new alternative framework.

 

Alternative economy between the macro and the micro:

The process of looking for alternative economic policies is not confined to economists. In fact, many alternative economic policies proposed in the past years were inspired by movements initiated on the ground by producers and consumers. For example, the privatization of several public services such as energy, healthcare, and water led to the emergence of several movements that called for restoring the role of the state. The book called Making Public in a Privatized World, edited by David McDonald, examines this global movement and its manifestation in different part of the world[18].

The book tackles different experiences such as reinventing public water in Colombia, garbage collection in Brazil and India, public health for indigenous people in Guatemala, remaking public banks in Turkey, and local services in the United States. These experiences inspire the criteria based on which alternatives can be sought such as equal access to public services, solidarity, efficiency, accountability, participatory activities, and environmental consideration. These criteria stand in stark contrast to the priorities of neoliberal policies such as reducing budget deficits and accumulation of profit, which lead to more poverty, soaring prices, deteriorating services, and inequality.

Such movements also led to the emergence of cooperatives, self-management initiatives, and proposals for alternative policies, many of which materialized after the 2011 uprisings in several Arab countries such as Egypt, Tunisia, Algeria, and others. Several North African countries also witnessed a number of protest movements that focused on environmental justice and the distribution of public resources[19]. Experience on the ground in the Arab world demonstrate the link between grassroots movements that aim at combating neoliberalism on one hand and the general rules that can be inspired by those movements and which can constitute the core of alternative economic policies. That is why attempts at formulating a Plan C, according to De Angelis, came into being as a result of actual initiatives that proved viable on the ground. Such initiatives can inspire strategies that address particular issues in which alternative policies can be utilized—on the micro level—as well as strategies that can offer an overall alternative to the capitalist system—on the macro level.

The anti-capitalism, also called anti-globalism, movement that started in 1999 was a major inspiration for many alternative economy initiatives. This movement was founded on criticism of the major international financial institutions, on top of which are the World Bank, the International Monetary Fund, and the World Trade Organization, called for cancelling Third World debts, and promoted the restructuring of global economic system as well as slammed the hegemony of corporates on economic policies and warned of the consequences of neoliberal policies especially privatization.

However, neoliberalism kept consolidating its power, which in turn led to the emergence of more movements or the restructuring of already existing ones especially those related to Marxist economics or the reformation of capitalism as well as environmental justice, feminist economics, and participatory economics (Parecon)[20].

Principles and objectives of alternative economy:

According to Michael Albert, Participatory economics (Parecon) “provides a new logic including new institutions with new guiding norms and implications. But parecon is also a direct and natural outgrowth of hundreds of years of struggle for economic justice as well as contemporary efforts with their accumulated wisdom and lessons. What parecon can contribute to this heritage and to today’s activism will be revealed, one way or the other, in coming years”[21].

Participatory economics is an economic system the is based on shared ownership of production tools as well as the participation in the decision making process of all members of a given community in a way that guarantees a balanced allocation of both production and consumption as an alternative model to that provided by the state or the central authority. Utopian socialism, on the other hand, is a system that does not stop at reforming existing drawbacks, but rather offers an alternative vision that replaces the current system and creates a totally new world in which welfare extends to all the community and not to a minority. American Marxist sociologist Erik Olin Wright calls this system “real utopia.”

Utopian socialism is similar to participatory economics in supporting communal ownership of production tools, but the former uses the market in the allocation of resources for production and liaising between producers and consumers as well as combines different types of ownership—state, market, cooperative. Communalism, on the other hand, is an economic system in which members of a community share and control all resources and manage all production processes through a horizontal work structure.

Despite the difference between various trends of alternative economies, there are certain common traits they share as a general framework upon which any alternative economy should be founded. Parecon theorist Robin Hahnel identifies four main objectives of an alternative economy:

  • People’s role in the decision-making process should be proportionate to the impact decisions have on them.
  • The outcome should be both fair and efficient.
  • Procedures should enhance solidarity.
  • Plans should be environmentally sustainable[22].

Hahnel describes those objectives in the title of his book Of the People, By the People: The Case for a Participatory Economy[23].

First: Economic democracy:

Alternative economy refutes the foundations of conservative economic freedom, a type of freedom that is confined to contracts and private ownership, and replaces it with a different vision that surpasses that traditional definition of democracy as the ruling of the majority to become the participation in the decision-making process of all those affected by different decisions. This can be done through self-management as a means of achieving economic democracy[24]. Supporters of communalism favor a vertical, de-centralized system that operates from the bottom-top as far as decision-making is concerned and is based on self-management and the redistribution of resources. This system aims at countering the effects of the top-bottom structure upon which the capitalist system is based and at substituting the ruling of the majority with participation[25].

Second: Economic justice:

This concept deals with the distribution of the burdens and benefits of economic activity among members of a given community. There are four criteria according to which this distribution can be determined: first, the financial and human capital each individual contributes; second, human capital; third, human effort; and fourth, to each according to his need. The first represents the way conservatives view economic justice, the second represents liberals, the third represents the majority of supporters of economic justice, and the fourth represents a vision of a better world in which solidarity becomes a priority[26]. Parecon combines the third and the fourth so that members of the community are compensated based on their effort and/or need.

Third: Sustainability:

Alternative economies are based on full awareness of the dangers of climate change and the issue of sustainability and adopts the “precautionary principle” that was initiated by environmental movements. According to this principle, it is better to resort to precautionary measures when taking a given action might, but is not certain to, cause harm. Here, two types of sustainability are identified: the first is “weak” sustainability in which future generations are left with a total of natural and human (produced) capital that equals what we have at the moment; the second is “strong” sustainability in which the total capital is equal to what we have at the moment while maintaining the value of the natural capital[27]. The second means making sure that natural resources do not decline.

Fourth: Efficiency:

The concept of efficiency is always used in the neoliberal discourse to justify economic injustice and promote capitalism as the best system. However, efficiency in alternative economy assumes that if a certain procedure would make the total benefits some or all people get more than the cost of these benefits then this procedure should be implemented. This replaces the main consideration in capitalism, which is whether this procedure is profitable or not. That is why the criterion of efficiency here compares between the different levels of satisfaction among different echelons of society and takes this satisfaction into consideration when deciding upon procedures to be taken[28].

Fifth: Solidarity:

Solidarity revolves around focusing on the welfare of all members of the community. While in prevalent economies, welfare is seen as an external matter that needs to be explained and justified, while in alternative economy it is part and parcel of the system.

Sixth: Economic diversity:

Diversifying tools of production is both an aim and a means. Because alternative economy acknowledges the diversity of communities, hence human needs, it focuses on the necessity on diversifying production activities[29]. Alternative economy is against stereotyping human needs.

Institutions and mechanisms:

In alternative economy, the community gives councils and labor unions the right to take part in a participatory process which guarantees that benefits are fairly distributed among all members of the community.

  • Councils:

Michael Albert describes councils as follows:

Economics is conducted by and for workers and consumers. Workers create the social product. Consumers enjoy the social product. In these two roles, mediated by allocation, people conduct economic life. To do their jobs responsibly, workers ought to consider what they would like to contribute to the social product, both by their own efforts and in association with those they work with. They ought to address how to combine their efforts and the resources and tools they access to generate worthy outputs that other people will benefit from. They ought to be directly in touch with the dynamics of production and with its implications for themselves and others. And they ought to weigh their direct understanding of their production situation and preference about it against their choices’ implication for those who consume their product[30].

            In those councils, every member has a vote, therefore takes part in the decision-making process. Each vote should have actual leverage so that it is not obstructed by other entities. That is why it is important that the decision-making process is linked to actual work on the ground. In this regard, two types of committees are established in each of those councils: committees that determine the compensation based on effort and job balancing committees to distribute jobs/tasks. According to Hahnel, each workers’ council will determine its own procedures for assigning tasks and evaluating work, which becomes the basis of consumption in consumers’ councils. Job balancing committees make sure that workers are empowered: “We argue that as long as some workers sweep floors all day, every day, while others attend meetings of various kinds all day, every day, formally equal rights to participate at worker council meetings will not translate into truly equal opportunities to influence firm decisions”[31]. Some market socialists criticize the job balancing concept on the basis that it violates the principle of efficiency as well as people’s economic freedom, yet this concept is agreed upon by supporters of parecon and utopian socialism.

  • Participatory planning:      

Participatory planning is meant to replace markets: “Here the distinction between a long-run goal and a transition strategy is crucial. I have never been under the illusion that we can replace markets with participatory planning immediately[32]”. This planning is part of an investment plan that determines the commodities to be produced for the year and how they will be distributed in a way that will boost the performance of different sectors by the end of the year. Workers’ councils or consumers’ unions are in charge of this process:

Only worker councils and consumer councils and federations participate in the annual planning procedure. Each worker and consumer council, and each federation of consumer councils participates by submitting a proposal for what that council or federation wants to do, i.e. councils and federations make what we call “self-activity proposals.” There is a single “iteration facilitation board” (IFB) that performs one, very simple function. The IFB announces current estimates of the opportunity costs of using each kind of “capital” – natural, produced, and human – the social cost of producing every produced good and service, and the damage caused by every pollutant[33].

Participatory planning was criticized on the basis that if production and consumption plans are to be efficient, people need to know in advance what they will be consuming throughout the year not only in terms of the quantity of the products, but also their different specifications, which is impossible according to the detractors of this approach. Erik Olin Wright argues that if the plan is based on predictions and what happened the year before then the markets can play a role in this system. Other critics believe producers and consumers “cannot together respectfully arrive at ‘instructions’ that they mutually carry out without any central agency and without competition and commodity exchange, except with horrible repercussions[34].” Michael Albert responds to this criticism: “Nove Notes that no links other than horizontal or vertical exist. But this ignores that there may be means other than markets for horizontal relations unless one assumes, by necessity, that markets are the only horizontal allocation system possible. Nove asserts that there can be no third way. Alternatives are logically impossible. But he gives no reason why this must be so other than complexity[35].” Albert examines different ways of working in participatory planning such as evaluation of prices and work through committees and which makes participatory decision making easier.

The problematics of transition: Reform or revolution?

Is it possible to establish alternative economy institutions without political change? Is it necessary to target the state first and foremost? And until this happens, what will be the status of emerging protest movements? Can capitalism coexist with a democratic alternative founded upon the afore-mentioned principles? In an attempt to answer such questions, it is noteworthy that there are three possible strategies for the establishment of an alternative economy: first, severing all ties with the current system through a revolution or a radical political change; second, infiltration through allowing resistance pockets to penetrate the current system until it can impose its own rules; third, lobbying through putting pressure on the state and the current system to change their policies.

Wright argues that it is impossible to replace the market, yet history proves that the market and neoliberalism only work with their own terms. That is why the establishment of cooperatives, for example, in the presence of the market is quite problematic since those cooperatives will start giving in under the pressure of the dominant economy and the class system. An example is Credit Agricole which started as a French farming cooperative then over the years ended up as a commercial bank that is totally dominated by market rules. The same applies to the Mondragon, which almost turned into a multinational. “When a division of labour is coordinated by markets those who take advantage of others are often rewarded while those who behave in socially responsible ways are often punished for having done so. For this reason markets act like a cancer that undermines efforts to build and deepen participatory, equitable cooperation[36].”

The question is when and how can markets be replaced and capitalism be surpassed? There are several answers to this question, which has been posed since the crisis took place. Some proposed a gradual change such as Paul Mason[37] while others insist that a social revolution is the only way to fight the current system which will do all what it takes to preserve its network of interests. In fact, an alternative economy such as parecon or communalism cannot achieve its goals as far as economic justice or environmental sustainability are concerned without surpassing capitalism. This does not mean that nothing can be achieved until then because emerging initiatives can still achieve results on the ground until the entire system is replaced. “I believe there is a social revolution in the making that, if recognized and able to attract more energies from people around the world, could give us a chance to embark on a process of transformation towards postcapitalist society,” says Massimo De Angelis. This social revolution is to emerge from and be guided by the different emerging movements that would gradually form an alternative system.

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[1] Mohamed al-Agati, ed. Alternative Economy in the Arab Region: Concept and Issues. (Workshop in Tunisia, September 2016). Cairo, the Arab Forum for Alternatives and Rawafed, 2016.

[2] “What’s the alternative? Capitalism is not perfect. But it’s better than other systems.” The Economist, 15 August 2015: https://goo.gl/BqJLRG

[3] John Plender. Capitalism: Money, Morals and Markets. London: Biteback Publishing, 2015

[4] Joseph Stiglitz. “Don’t trust technocrats.” The Guardian, 16 July 2003: https://www.theguardian.com/politics/2003/jul/16/globalisation.economy

[5] Ibid.

[6] Ibid.

[7] William Easterly. The Tyranny of Experts: Economists, Dictators, and the Forgotten Rights of the Poor. New York: Basic Books, 2015.

[8] Ibid.

[9] Mark Fisher. Capitalist Realism: Is There No Alternative? London: Zero Books, 2009.

[10] Ibid.

[11] “On Evil: An Interview with Alain Badiou”: http://www.cabinetmagazine.org/issues/5/alainbadiou.php

[12] Elinor Ostrom. Governing the Commons: The Evolution of Institutions for Collective Action. Cambridge: Cambridge University Press, 2015.

[13] Massimo De Angelis. Omnia Sunt Communia: On the Commons and the Transformation to Postcapitalism. London: Zed Books, 2017.

[13] Ibid.

[14] Ibid.

[15] Jane Hardy. “Radical economics, Marxist economics and Marx’s economics.” International Socialism, issue 149, January 2016: http://isj.org.uk/radical-economics-marxist-economics-and-marxs-economics/

[16] Ibid.

[17] Ibid.

[18] David McDonald, Making Public in a Privatized World: The Struggle for Essential Services, London, Zed Books, 2016.

[19] Hamza Hamouchene and Mika Minio-Paluello, eds. The Coming Revolution in North Africa: The Struggle for Climate Justice. Platform (London), Rosa Luxemburg Foundation (North Africa), and Environmental Justice North Africa (EJNA), 2015.

[20] Derek Wall. Economics After Capitalism: A Guide to the Ruins and a Road to the Future. London: Pluto Press, 2015.

[21]Michael Albert. Parecon: Life After Capitalism. London: Verso, 2003.

[22] Robin Hahnel and Erik Olin Wright. Alternatives to Capitalism: Proposals for a Democratic Economy. London: Verso, 2016.

[23] Ibid.

[24] Ibid.

[25] David Bollier. Think Like a Commoner. Gabriola Island (Canada): New Society Publishers, 2014

[26] Robin Hahnel. Of the People, By the People: The Case for a Participatory Economy. Oakland: AK Press, 2012.

[27] Ibid.

[28] Ibid.

[29] Ibid.

[30] Michael Albert.

[31] Robin Hahnel and Erik Olin Wright.

[32] Ibid.

[33] Ibid.

[34] Michael Albert analyzes criticism by British economist Alec Nove and responds to this criticism in Life After Capitalism.

[35] Ibid.

[36]  Robin Hahnel and Erik Olin Wright.

[37] Paul Mason. Post Capitalism: A Guide to our Future. London: Allen Lane, 2015.

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