Anarchist Accounting

Accounting Principles for a Democratic Economy

Anders Sandström

• Publisher: Routledge
• Year: 2020
• ISBN:
  9781000244724
• Edition: 1
• Topic: Business
• Subtopic: Contabilità
• Index: Business

This book is about accounting in an alternative libertarian socialist economic system. It explores what information and transactions we need to enable democratic and effective financial decisions by those affected by the decisions. Based on the economic model, participatory economics, the author proposes a set of accounting principles for an economy comprised of common ownership of productive resources, worker and consumer councils, and democratic planning, promoting the model's core values.

The author tackles questions such as how accounting could be organised in an economy with no private equity owners or private lenders and creditors that is not based on greed and competition but instead on cooperation and solidarity. A large part of the book is focused on issues regarding investments; thus, he asks how and on what basis decisions are made about the allocation of an economy's production between consumption today and investments that enable more consumption in the future, and how investments are accounted for. He also considers how investments in capital assets and production facilities would be decided, financed, and valued if they are not owned by private capital owners and if allocation does not take place through markets but through a form of democratic planning. In answering these questions and more, the author demonstrates that alternative economic systems are indeed possible, and not merely lofty utopias that cannot be put into practice, and inspires further discussion about economic vision.

By applying accounting to a new economic setting and offering both technical information and the author's bold vision, this book is a comprehensive and valuable supplementary text for courses touching on critical accounting theory. It will also appeal to readers interested in alternative kinds of economies.

1
A PARTICIPATORY ECONOMY

Below we provide an overview of the participatory economy model, its fundamental values, and defining institutions. For a more comprehensive and technical description of the model and especially the planning procedures, see Hahnel (2021 forthcoming). A shorter and more accessible presentation is offered in Hahnel (2012). We furthermore recommend a visit to the website www.participatoryeconomics.info, which includes links to further articles, videos, books, and other resources.

Goals

Any economy has three tasks to accomplish: the organisation of (1) production and (2) consumption, and because humans abandoned individual economic self-sufficiency long ago in order to take advantage of the efficiency gains from a division of labour, (3) the allocation of goods, services, and resources among different producers, users, and consumers. A participatory economy, while performing these three tasks, explicitly aims to advance six specific goals: economic democracy, economic justice, solidarity, diversity, efficiency, and ecological sustainability.

Supporters of the participatory economy vision define economic democracy as a condition where a person’s influence over decisions is determined by how much the person is affected by the decision in question. If you are affected more than others by a decision, you should have more influence over that decision; if you are less affected than others by a decision, you should have less influence. This is also called self-management, which is the only way to promote economic freedom without the freedoms of some disenfranchising the freedoms of others.

Economic justice is about the distribution of the benefits and burdens that result from economic activity. In a participatory economy the goal is for any differences in income, i.e. a person’s share of what is produced in the economy, to be based on differences in sacrifices or personal effort in performing socially valuable work. Income distribution should not be affected by how productive one’s labour is, due to having access to better tools and capital, being born with a higher intelligence, or other factors that are beyond a person’s control. Effort and personal sacrifice are the only factors that a person can influence and thus form the main basis on which any differences in compensation should be based. Of course, there are also many circumstances when income should be distributed based on need – for example, when people are not able to work because of severe disability; when they are too young or old to work, i.e. children and senior citizens; when in need of health and social care during times of illness; if they become victims of natural disasters; and in many other situations, as decided democratically by society. The complete rule for distribution of income, or consumption possibilities, in a participatory economy is therefore “to each according to effort or personal sacrifice, and needs”.

Solidarity is defined here as concern for others’ well-being and the attitude that circumstances for our fellow human beings should be valued and assessed as if they were our own. In private enterprise economies the interests of employers and employees are opposed to one another. And in market economies buyers and sellers are pitted against each other such that success for one person is achieved at the expense of someone else. A participatory economy seeks to create an environment where mutual aid, cooperation, and solidarity are encouraged, and where our interests are intertwined in a way that the individual success means that others benefit as well.

Diversity refers to a situation where people have access to a large number of different choices about how to meet their needs and desires. People vary greatly regarding their preferences, tastes, talents, and lifestyles; the best life for one person is not necessarily the best life for another. A participatory economy, therefore, rejects conformity in favour of a society characterised by a great deal of diversity. An additional benefit of promoting diversity is the spreading of risks; it is advantageous to allow and test many ideas and options in different areas. That way, more doors will be kept open and experience and knowledge will increase.

Efficiency means that our goals are achieved with the least possible waste of resources, time, effort, and energy. A participatory economy wants to maximise human well-being for all, which requires using scarce resources where they are most valuable.

These five goals are already indirectly supporting ecological sustainability, but supporters of participatory economics see long-term sustainability and the concern for the environment as an important and independent value in and of itself. A participatory economy is a green economy that wants to achieve economic goals without diminishing future generations’ access to a stimulating and rewarding natural environment.

Institutions

The participatory economy model defines a minimal set of institutions designed to maximise our potential for achieving the above objectives. These institutions are democratic worker and consumer councils, jobs where tasks are “balanced” with regard to empowerment and, where possible, desirability; compensation based on effort or sacrifice and needs; and finally, a democratic allocation process called participatory planning.

Democratic worker and consumer councils

In a participatory economy the means of production such as land, natural resources, factories, machinery, and technical knowledge are owned collectively by all. All of this is treated as the “productive commons”, belonging no more to any person than anyone else. Influence over decisions is therefore not based on ownership of private property or on different groups’ bargaining power. Instead, people meet in democratic worker and consumer councils and their respective federations, where they discuss and vote on decisions regarding their own affairs. All members have equal rights and all members have one vote.

The worker council is the highest decision-making body in every workplace, in the same manner as the annual shareholder general meeting is, in theory, the highest decision-making body in a corporation in today’s economic system. In addition, decision-making in every workplace should be organised to maximise self-management, i.e. so that workers can influence decisions in proportion to the degree that they are affected by the outcome of the decision. To achieve this, different voting procedures can be agreed on to be used in different situations within workplaces, such as majority vote, consensus, or different types of qualified majority. Larger workplaces may decide to create semi-autonomous subdivisions with decision-making authority over matters that primarily affect only them. All are free to apply for membership in the worker councils of their choice or to apply to start a new worker council.

Each individual also belongs to a local neighbourhood consumer council. The consumer councils, among other things, handle individual household’s requests for consumption, i.e. their suggested list of goods and services they wish to consume during the following year. An individual consumer’s consumption rights are constrained by the member’s income that he or she is allocated in their workplace (based on effort or sacrifice), in addition to any income they may receive through internal redistribution within consumer councils (based on need) or via the national systems for allocation of income to those who are too young to work, retired, or disabled. Every individual consumes both private goods, such as food and clothing, and public goods such as parks, libraries, and playgrounds. Through their neighbourhood consumer councils, and through delegates to higher level federations of consumer councils, consumers propose collective consumption at the same time that they make their requests for private consumption.

Every worker and consumer council elects representatives to the “higher” levels of councils, called council federations. Worker council federations are organised by industry, and consumer council federations are organised geographically in increasingly larger geographic areas, e.g. at neighbourhood, city, region, and national level. This structure is necessary because different kinds of collective consumption, or public goods, affect smaller and larger constituencies. In order to counteract any potential misuse of power, representatives acting within federations can be subject to rules of rotation, recall, and instructions from members of the council at lower levels.

Balanced Jobs

In any economy, there are jobs that define the tasks a worker has to perform. In hierarchically organised economies, such as capitalism or centrally planned state socialism, the majority of jobs are defined in such a way that most of the tasks in a particular job are either relatively empowering or disempowering. This leads to a situation where a minority will monopolise access and use of information and knowledge in the workplace, which in turn leads to a situation whereby this group dominates meetings and discussions in the workplace due to greater confidence and knowledge, even in a situation where every worker formally has one vote. An uneven distribution of empowering tasks promotes class differences and hierarchies.

A participatory economy aims to organise work in a radically different way in order to achieve real influence for everyone in the workplace and in society at large. To the degree that it is possible every workplace is expected to combine tasks into jobs that are roughly comparable in terms of empowering tasks. This means that all workers perform some tasks that are empowering and some that are less so. The idea is not that everyone should perform every task in a workplace. There will still be specialisation. A balanced job will still contain a limited number of tasks, but at least some will be empowering, and tasks that are not empowering will be part of everyone’s job. Balancing jobs for empowerment will help equip all in a workplace to participate meaningfully in democratic decision-making.

Every worker council is responsible for balancing jobs to the extent possible, and the way they approach this will necessarily vary greatly between different workplaces, depending on different practical, technological, and individual considerations.

Income based on effort and need

A worker receives consumption rights (or in other words, income) as compensation for work performed. In our current economy, the size of an individual’s income depends on a variety of factors such as ownership of capital, bargaining power, talent, education, luck, and, to a much lesser extent, effort or sacrifice. Because the only one of these factors a person can influence is their effort, a participatory economy aims to compensate workers based on the effort and personal sacrifice that they put into (socially valuable) work.

Worker councils are required to establish procedures of their choosing for grading members’ efforts. Workers who choose to put in a higher level of effort in their work will receive more income. Effort or sacrifice can take different forms, such as working longer hours, working at a higher intensity, or performing more dangerous or unhealthy tasks. How worker councils evaluate effort is up to them and they are likely to design very different procedures for this purpose. The only restriction is that the worker council’s average effort rating, or “dollars” that it distributes to its members, is capped. Either every workplace is capped with the same average number of dollars it can distribute to its members, or alternatively this cap can be based on the relationship between the social benefit of the “outputs” the workplace produce and the social cost of the “inputs” that the workplace use. This will be explained in detail later in the book. The purpose of putting a cap on the average effort ratings a workplace can assign to its members is to avoid the possibility that workers would deliberately exaggerate one another’s efforts leading to “inflation” in income.

Finally, decisions about awarding consumption rights based on special circumstances and needs on compassionate grounds are handled in the consumer councils, and decisions about consumption allowances due to disability, retirement, and youth – both with regard to rules for eligibility and how large the allowances should be – are handled through a national system within the national consumption federation, not within workplaces.

The case against markets¹

Before describing the final defining institution of a participatory economy – participatory planning – it may be worth thinking about why the market (a system of competitive bidding between individual buyers and sellers) is an undesirable allocation mechanism for a participatory economy. What are the arguments against the market?²

Below we briefly present four arguments against retaining the market system: markets (1) are unjust, (2) undermine solidarity and promote selfish attitudes and behaviours, (3) undermine both economic and political democracy, and finally (4) allocate scarce resources inefficiently.

Markets are unfair

In a private enterprise market economy, capital owners receive compensation in the form of profit without exerting any work effort, meaning that the benefits that employees collectively receive are necessarily less than the market value of what they produced. Most socialists regard this to be unfair. But what about the income differences between categories of workers, and what if capitalist enterprises are replaced by worker-owned companies that take on members from a labour market where supply and demand is allowed to continue to influence relative wages? When labour is hired through a labour market – regardless of ownership – those who make a greater contribution to the companies’ production and corporate income (i.e. those who possess more “human capital...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Table of Contents
• List of exhibits
• About the author
• Acknowledgements
• Introduction
• 1 A Participatory economy
• 2 Accounting in a participatory economy
• 3 Consumers and consumption
• 4 Worker councils and production
• 5 Investment and long-term development
• 6 The Society Account
• Conclusion
• Appendix 1: Accounting primer
• Appendix 2: Investment in a capitalist market economy
• Index