WHAT IS TO BE DONE?

PARTICIPATORY PLANNING

For the First Socialist Economics Forum, Carora Venezuela, September 4, 2008
Robin Hahnel, Professor Emeritus, American University, Washington DC, USA

Where is socialism being reinvented at the dawn of the new millennium? In Latin
America where ALBA and the Banco del Sur are replacing the FTAA and the IDB.
Where in Latin America is the path from populism and reform to a new kind of
participatory socialism being forged? In the Bolivarian Republic of Venezuela. And
where in Venezuela is the cutting edge of the Bolivarian Revolution? Here in Carora
where every building block of 21st century socialism has first been launched. People of
Carora, I salute you.

But no great social experiment is ever built from scratch. We always stand on the
shoulders of those who went before us. What can we learn from those who struggled to
build socialist economies in the 20th century? I think we should embrace our forebears’
goals – economic justice and economic democracy – and honour the memory of the
millions of socialist militants who dedicated their lives to pursuing them, often at great
personal cost. But I think we can also learn from their efforts and sacrifices what will
NOT achieve their goals, which are our goals as well. Neither planning by an elite, no
matter how well intentioned, nor a retreat to market relations when elite planning falters
will achieve the historic goals of socialism.

Early in the twentieth century most socialists thought that after capitalism was
overthrown workers in different enterprises and consumers in different communities
would plan their activities together with little difficulty. But if the history of twentieth
century socialism has anything to teach us it is that this is most emphatically not the case.
Planning by those Marx called the “associated producers” did not occur for many reasons
that are important to study carefully. But one reason is that it is not as easy for groups of
workers and consumers to plan together as early socialists naively assumed. Working out
procedures so decision making within a worker cooperative, or inside a communal
council, is not only formally democratic but also inclusive and truly participatory is
difficult enough. But working out procedures that allow different worker cooperatives
and communal councils to retain an appropriate degree of autonomy over their own
activities, while planning their relations fairly and efficiently is even more difficult.

It is not just that coordinating the activities of millions of different workplaces and
neighborhoods democratically is hard to do. Figuring out how to go about doing it in
ways that encourage participation on the part of ordinary workers and consumers and
lead to plans that are fair and efficient is also not a trivial intellectual task. One of the
greatest failures of 20th century socialism was that it left 21st century socialists with
precious little in the way of ideas about how to help groups of workers and consumers
coordinate their activities themselves – fairly, efficiently, and democratically. In any
case, for whatever reasons, instead of planning by the associated producers (and
consumers) themselves, what happened in 20th century, post-capitalist economies was that
people’s activities were planned for them by a planning elite, or bureaucracy. In some

1
cases the planning bureaucracy was better intentioned and more competent, and in other
cases the planning elite was more self-serving and bungling. But in all 20th century post-
capitalist economies people’s economic activities were planned for them, not by them.

Ten years ago Venezuela embarked on a new path, and much has been accomplished
since 1998. The norms of democracy have been scrupulously observed and major
political initiatives have never lacked a popular mandate. A new kind of socialist party is
being built.1 And most importantly for the subject I will focus on, the building blocks of a
socialist economy have been created. Educational Misiones, neighbourhood health
clinics, people’s food stores, worker cooperatives, participatory budgeting, municipal
assemblies, nucleos of endogenous development, and communal councils together
comprise a new “social economy” embracing socialist values, and public control over
major centres of industry and finance is steadily growing.

The Bolivarian revolution has now arrived at the shores of the Rubicon our forebears
never crossed successfully. The time has come to turn the different elements of the
“social economy” and the growing public sector into a truly socialist economy: An
economy capable of achieving the historic goals of socialism. An economy that
distributes the burdens and benefits of economic cooperation fairly. An economy where
workers and consumers have control over the economic decisions that affect them. An
economy that will finally protect the natural environment that capitalism has been raping
for over 300 years. You Bolivarian revolutionaries may be better prepared for a
successful crossing than others before you. You have the benefit of hindsight from the
failed crossings of others. During the past ten years you have methodically accumulated
the necessary equipment for a successful crossing -- – the institutional and ideological
building blocks I listed. But make no mistake about it: You are going to attempt what
sceptics regard as mission impossible – organize an economy where the interrelated
activities of workers and consumers are coordinated and planned equitably and efficiently
by the workers and consumers themselves, not by a planning elite, nor by market forces.

When your mission proves difficult and problems arise there are many Fidel Castro once
referred to as “brainy economists” who will seize the opportunity to insist that you
abandon your quest as Quixotic, and accept markets as the only way to coordinate the
activities of autonomous decision makers. Others will tell you that ordinary people
neither can nor want to formulate their own comprehensive economic plan, and these
cynics will advise you to accept planning by a dedicated elite, as many 20th century
socialists did before you. I urge you instead to remember that neither of these paths will
lead where you want to go. Embracing markets leads back towards the economics of
competition and greed. You cannot expect some people to behave in socially responsible
ways when you allow others to benefit personally by behaving in socially irresponsible
ways – which is what appropriating productive resources that should belong to and

1
Hopefully the PSUV will be built from the bottom up and its internal governance structures and
culture will provide an example of participatory democracy at its best. And hopefully the PSUV
will fulfil its mission which should not be to govern unilaterally, but to successfully challenge
capitalist ideological hegemony and lead a national debate about what economic justice and
economic democracy mean and require.

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benefit all, and taking advantage of others in market exchanges amounts to. On the other
hand, accepting planning by an elite reinforces worker and consumer apathy at best and
degenerates into a new class system with accompanying privileges at worst. I urge you to
stand fast in your pursuit of what is nothing more, nor less, than the historic mission of
socialism. I assure you that participatory planning by workers and consumers themselves
is possible. But you should be under no illusions: You go where none have gone before.

The Challenge

The challenge is how to empower worker councils and consumer councils while
protecting the interests of others in the economy who are affected by what these councils
do. The challenge is how to give groups of workers user rights over parts of society’s
productive resources without allowing them to benefit disproportionately from productive
resources that belong to and should benefit everyone. What socialists have long
understood is that what any one group in an economy does will inevitably affect many
others. The conclusion many socialists have drawn from this fact is that democratic
planning must allow all to have a voice and say regarding all economic decisions. But
different decisions do not usually affect everyone to the same extent. One might call this
the fundamental dilemma faced by those of us who want to organize a system of
economic decision making that gives people decision making power to the degree they
are affected by different economic decisions: Most economic decisions do affect many
people, but to differing degrees. Market systems treat all economic decisions as if they
affected only the buyer and seller since those are the only people involved in the market
decision making process – thereby effectively disenfranchising all others who may also
be affected.2 On the other hand, a democratic version of central planning, where the
values of different final goods and services are determined by some kind of democratic
voting procedure, treats all economic decisions as if they affected everyone equally –
failing to permit workers who are more affected by a decision greater say than those who
are less affected . Unfortunately, most economic decisions do not affect only a buyer and
seller, nor do they affect all of us equally. Instead, most economic decisions fall into what
we might call the “murky middle” -- affecting some more than others. Unless we
organize economic decision making so that people have greater say over decisions that
affect them more, and some, but less say over decisions that affect them less, we will
continue to fail to achieve meaningful economic democracy. The challenge is how to give
workers and consumers in their own councils a degree of autonomy over what they do
that is appropriate.

But there is another way to see the challenge that highlights both its magnitude and
importance. Encouraging popular participation in economic decision making is hard.
After all, those who actually do the work have been discouraged from participating in
economic decision making ever since humans “ascended” from hunting and gathering
societies to class systems with ruling elites. And for the past 300 years workers have been

2
Mainstream economics has even coined a name for those who markets disenfranchise. They are
called “external parties,” and the effects on them when buyers and sellers make decisions without
consulting their interests are called “externalities.” But of course mainstream economics insists
that these effects are generally insignificant.

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taught they are incompetent to make important economic decisions and to thank their
lucky stars they have capitalist employers and managers to do their thinking for them.
Developing a participatory culture that encourages those who have always been a
silenced majority in their workplaces to actively participate in deciding what they will
produce and how they will produce it is difficult enough, even though these decisions
have immediate and palpable impacts on people’s daily lives. Encouraging popular
participation in coordinating the interrelated activities of millions of different workplaces
and neighborhoods, and to participate in investment and long-run strategic planning,
where the relevance to one’s personal life is more attenuated and less obvious, is even
more difficult. Yet this is the historical legacy of capitalist alienation that socialism must
overcome. Moreover, the price of failure is monstrous. Biologists teach us that nature
abhors an ecological vacuum, by which they mean that in complex ecological systems
any empty niche will quickly be filled by some organism or another. If there is a single
lesson we should learn from human history it is that society abhors a power vacuum. If
people do not control their own lives then someone else will. If there is a single lesson we
should learn from the history of twentieth century socialism it is that if workers and
consumers do not run the economy themselves, then some economic elite will do it for
them.

A Solution: Participatory Planning

How can we give workers in their cooperatives and consumers in their communal
councils and municipal assemblies the autonomy necessary to stimulate them to become
and remain active participants in economic decision making while ensuring that worker
and consumer councils do not make choices that are socially irresponsible? How is it
possible to grant small groups of workers and consumers enough autonomy to encourage
them to put time and effort into participating without disenfranchising others who are
affected by the decisions they make, even though it be to a lesser extent? How can we
grant groups of workers the right to use some of society’s productive resources as they
would like without allowing them to benefit unfairly from doing so? How can we
convince ordinary workers and consumers who have been discouraged in every
conceivable way from trying to participate in economic decision making that things will
now be different, and participation will finally be worthwhile? The participatory
planning procedure that is part of the model known as a "participatory economy" was
designed to solve these problems.3
3
See Michael Albert and Robin Hahnel, The Political Economy of a Participatory Economy
(Princeton University Press, 1991) chapters 4 and 5, Looking Forward: Participatory Economics
for the Twenty-first Century, (South End Press, 1991), “Socialist Planning as it was Always
Meant to Be,” Review of Radical Political Economics (24, 3&4), Fall and Winter 1992,
“Participatory Economics,” Science & Society (56, 1), Spring 1992, “In Defense of Participatory
Economics,” Science & Society (66, 1), Spring 2002, and Robin Hahnel, Economic Justice and
Democracy: From Competition to Cooperation (Routledge, 2005) chapters 8 and 9, and
"Socialismo Libertaria: Economia Participativa," in Derecho a Decidir: Propuestas para el
socialismo del siglo XXI," Joaquin Arriola, editor. (El Viejo Topo, Barcelona Spain, 2006),
republished by Centro Internacional Miranda, Caracas Venezuela, 2006.

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The participants in the participatory planning procedure are worker councils and federations,
consumer councils and federations, and an Iteration Facilitation Board (IFB). Conceptually,
the planning procedure is quite simple: (1) The IFB announces current estimates of the
social opportunity costs for all goods, resources, categories of labor, and capital stocks.
(2) Consumer councils and federations respond with consumption proposals. Worker
councils and federations respond with production proposals listing the outputs they propose
to make and the inputs they need to make them. (3) The IFB calculates the excess demand
or supply for each final good and service, capital good, natural resource, and category of
labor, and adjusts the estimate of the opportunity cost for the good up or down in proportion
to the degree of the excess demand or supply. (4) Using the new estimates of opportunity
costs, consumer and worker councils and federations revise and resubmit their proposals.
Individual worker and consumer councils must continue to revise their proposals until they
submit one that other councils vote to accept. The planning process continues until there are
no longer excess demands for any goods, any categories of labor, any primary inputs, or any
capital stocks -- in other words, until a feasible plan is reached.

Households submit requests for private consumption goods along with effort ratings their
members received from their workmates to their neighborhood consumption councils.4
Consumption “allowances” for any children, students, and disabled or retired members of
households are combined with the effort ratings of working adults, and if the effort ratings
and allowances are sufficient to warrant the cost to society of producing the household
consumption request it is automatically approved. The neighborhood council can also
approve requests in excess of what the effort ratings and allowances of a household justify if
the council finds reason to do so. The consumption proposal of a neighborhood council
consists of the sum total of approved requests for private consumption goods from its
member households, plus any neighborhood public goods like sidewalks, playground
equipment for a neighborhood park, etc. It is this neighborhood council consumption
proposal that is submitted during each round of the planning process, along with the average
effort ratings and allowances of all members of the neighborhood council. Federations of
consumer councils also submit requests for public goods in each round used by all who live
in larger geographical areas.

Members of worker councils will have to meet to discuss and decide what they want to
propose to produce and what inputs they want to request. Members of neighborhood
consumption councils will have to meet to discuss what neighborhood public goods they
want to ask for. And representatives from councils that comprise a federation of consumer
councils will have to meet to discuss what public goods larger groups of consumers want to
request. However, these are all meetings within worker and consumer councils and within
federations, not meetings between councils and federations. The IFB merely performs a
mechanical calculation to adjust estimates of opportunity costs between each round in the

4
All workers receive an “effort rating” from co-workers in their worker council which is an
estimate of how hard they have worked and sacrificed compared to others. An above average
effort rating entitles a worker to consume more than the average, while a below average rating
only entitles a worker to consume less than the average.

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planning procedure. It does not “set” prices, much less dictate what workers or consumers
can do. The IFB bears no resemblance to Central Planning Ministries which do have power
over who will produce what, and how they will produce it. In participatory planning workers
and consumers propose and revise their own activities in a process that reveals the social
costs and benefits of their proposals. Not only do worker and consumer councils make their
own initial proposals, they are responsible for revising their own proposals as well.

When worker councils make proposals they are asking permission to use particular parts of
the productive resources that belong to everyone. In effect their proposals say: “If the rest of
you -- with whom we are engaged in a cooperative division of labor with productive
resources belonging to all of us -- agree to allow us to use these productive resources as
inputs, then we promise to deliver the following goods and services as outputs for others to
use.” When consumer councils make proposals they are asking permission to consume
goods and services whose production entails social costs. In effect their proposals say: “We
believe the effort ratings we received from our co-workers together with allowances
members of households may have indicate that we deserve the right to consume goods and
services whose production entails an equivalent level of social costs.”

The planning procedure is designed to make it clear when production proposals are
inefficient and when consumption proposals are unfair, and other worker and consumer
councils can disapprove of proposals when they are deemed inefficient or unfair. But initial
proposals and all revisions of proposals are entirely up to each worker and consumer
council itself. In other words, if a production or consumption proposal is disapproved the
council that made the proposal revises its own proposal for submission in the next round of
the planning procedure. This aspect of the participatory planning procedure distinguishes it
from all other planning models and is crucial if workers and consumers are going to enjoy
self-management. Participatory planning gives individual worker and consumer council’s
power over their own activities. They are only constrained by the legitimate interests of
others whom they affect. As long as a worker council’s proposal does not misuse scarce
productive resources belonging to all it will be approved by other councils because it will
benefit them more than it costs them. And as long as the social cost of producing what a
consumer council asks to consume is justified by the sacrifices and allowances of its
members, they are being fair to other consumers.

Those interested in a more rigorous analysis should consult chapter 5 of The Political
Economy of Participatory Economics for a formal analysis of the necessary and sufficient
conditions guaranteeing that the planning procedure will converge to a feasible plan, and for
the feasible plan to be a Pareto optimum.5 Essentially the planning procedure whittles overly
optimistic, unfeasible proposals down to a feasible plan in two ways: By multiplying the
amount of different consumption goods requested by the current estimates of their social
costs of production it is possible to calculate the social cost of consumption proposals. As
long as average effort ratings of those making a request are as high as the social cost per

5
It is worth noting that the assumptions are significantly less restrictive than the assumptions
necessary to prove that there will be a general equilibrium of a market economy which will be a
Pareto optimum.

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member of a consumption request the members of the consumption council are not being
too greedy or unfair to others. Otherwise, consumers requesting more than their effort
ratings warrant are forced to either reduce their requests, or shift their requests to less
socially costly items if they expect to win the approval of other consumer councils who have
no reason to approve consumption requests whose social costs are not warranted by the
sacrifices of those making the requests. Similarly, worker councils are forced to increase
their efforts, shift toward producing a more desirable mix of outputs, or shift toward using a
less costly mix of inputs to win approval for their proposals. By multiplying outputs by
current estimates of their social benefits, and dividing by inputs multiplied by current
estimates of their social costs, it is possible to calculate the ratio of social benefits to social
costs of any worker council proposal. Worker councils whose proposals have lower than
average ratios will be forced to increase either their efforts or their efficiency to win
approval from other worker councils. Efficiency is promoted as consumers and workers
attempt to shift their proposals and avoid reductions in consumption or increases in work
effort. Equity is promoted when further shifting is no longer effective and approval of fellow
consumers and workers can only be achieved through consumption reduction or greater
work effort. Each new round of revised proposals moves the overall plan closer to
feasibility, and moves the estimates of opportunity costs closer to the true social opportunity
costs. The procedure generates equity and efficiency simultaneously while leaving worker
and consumer councils and federations in charge of making and revising what they propose
to do.

The participatory planning procedure protects the environment in the following way.
Federations of all those affected by a particular kind of pollutant are empowered in the
participatory planning process to limit emissions to levels they deem desirable. A major
liability of market economies is that because pollution adversely affects those who are
"external" to the market transaction, market economies permit much more pollution than
is efficient. The participatory planning procedure, on the other hand, guarantees that
pollution will never be permitted unless those adversely affected feel that the positive
effects of permitting an activity that generates pollution as a byproduct outweigh the
negative effects of the pollution on themselves and the environment. Moreover, the
participatory planning procedure generates reliable quantitative estimates of the costs of
pollution and the benefits of environmental protection through the same procedures that it
generates reliable estimates of the productivities of scarce resources and the social costs
of producing different goods and services.6

While verifying that a planning procedure will promotes efficient use of productive
resources is of great concern to economists, socialists should be more concerned with
whether or not a planning procedure promotes popular participation in economic decision
making. It is my conviction that this is where participatory annual planning most
outshines other versions of democratic planning. Of course a participatory economy
6
Generating credible estimates of the costs and benefits of different levels of pollution is a major
advantage of the participatory planning procedure compared both to market systems and central
planning. See Economic Justice and Democracy, pages 198-207, for a full discussion of how the
annual planning procedure, the long-run planning procedure, and other features of a participatory
economy combine to protect the environment without loss of economic efficiency.

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cannot give every person decision making authority exactly to the degree they are
affected in every decision that is made. The idea is to devise procedures that approximate
this goal. How does participatory planning do this? (1) Every worker has one vote in his
or her worker council. (2) In larger worker councils sub-units govern their own internal
affairs via one worker one vote. (3) Every consumer has one vote in his or her consumer
council. (4) Federations responsible for different levels of collective consumption and
limiting pollution levels are also governed by democratic decision making procedures
where each council in the federation sends representatives to the federation in proportion
to the size of its membership. (5) But most importantly, worker and consumer councils
and federations not only propose what they will do in the initial round of the participatory
planning procedure, they alone make all revisions regarding their own activity during
subsequent iterations of the planning procedure.

Who decides if proposals from worker and consumer councils and federations are
acceptable? In central planning this decision ultimately resides with the central planning
authority. The reason given for this is that it is presumed that only the central planning
authority has the information and computational means necessary to determine if
proposals would use scarce productive resources efficiently, and if proposals would
distribute economic burdens and benefits fairly. In other words, it is presumed that only
the central planning authority can protect the social interest. But both parts of this
presumption are false. Because a great deal of information about what different worker
councils can and cannot do resides with those who work in those councils, and because
there are perverse incentives that lead them to mislead central planners about their “tacit
knowledge,” it is false to assume that a central planning authority will have the accurate
information needed to make informed judgments. On the other hand, worker councils
would only harm themselves by failing to make proposals that accurately reveal their true
capabilities during the participatory planning process since underestimating capabilities
lowers the likelihood of being allocated the productive resources they want. Moreover,
the procedure not only yields an efficient plan, it also generates accurate estimates of the
social costs of all scarce productive resources and all harmful emissions. This means that
everyone has the information necessary to calculate the social benefit to social cost ratios
of every worker council’s proposal, and everyone has the information necessary to
compare the social cost of every consumer council to the average effort rating of its
members.

Allowing councils to vote “yeah” or “nay” on the proposals of other councils does not
mean they must engage in a time consuming evaluation of those proposals. All they have
to do is look at the social benefit to cost ratio for proposals from worker councils. When
the ratio of social benefits to social costs of a worker council proposal is below average
they are probably using resources inefficiently or not working as hard as others. When
the social cost per member of a consumer council proposal is higher than the average
effort rating of its members they are probably being too greedy and unfair to others. But
otherwise, everyone else is better off approving a proposal from a worker council, and
otherwise a proposal from a consumer council is perfectly fair. In other words, the
participatory planning procedure not only makes it possible for each council to judge
whether or not the proposals of other councils are socially responsible, it makes it easy

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for them to do so without wasting their time. So it is false to assume that only a central
authority could have the information and means to protect the social interest. In the
participatory planning process each and every council has the information it needs to
make these judgments about the proposals of others, which is why it is possible for
worker and consumer councils to decide on a plan of economic cooperation themselves,
and why they need not delegate this power to a central authority, i.e. an economic elite.

Of course there may be special circumstances that warrant special consideration.

Federations would play an important role in cases where a more careful and time
consuming review of a proposal was in order. There will be cases where more qualitative
information is necessary to form a responsible judgment, and cases where councils appeal
a “nay” vote. Moreover, a unanimous “yeah” or “nay” vote of all other councils is
unlikely, but also unnecessary. Rules for how large a super majority is necessary for
approval would have to be ironed out, and federations might decide to draw the line in
different places in this regard. But the important point is there are clear guidelines and
mechanisms that give each council and federation autonomy while allowing all councils
and federations to protect them from socially irresponsible behavior on the part of others
without delegating decision making power over proposals to a central authority. Does all
this guarantee that if a decision affects me 1.24 times as much as it affects someone else,
I will have exactly 1.24 more say than they do? Of course not. But I will get to decide
what private goods I want to consume, my neighbors and I will get to decide what local
public goods we want to consume, and all who use larger level public goods will get to
decide what those will be, as long as our work efforts and sacrifices warrant the social
expense of providing us with what we want. And my co-workers and I will get to decide
what we produce and how we produce it -- as long as we propose to use society’s scarce
productive resources efficiently.

Dangers to Avoid in Democratic Planning

Authoritarian planning discourages worker and consumer participation because it

disenfranchises them. While those who advocate democratic planning do so to give
people more control over economic decisions that affect them, badly designed systems of
democratic planning might continue to discourage worker and consumer participation in
a different way. If worker and consumer councils have no autonomous area of action
regarding their own work and consumption activities, but must submit to seemingly
endless discussion, debate, and negotiations about what they want to do together with
many others,  in many different planning bodies, ordinary workers and consumers may
well lapse back into apathy even after an authoritarian planning procedure is
abandoned. There is a danger that some forms of democratic planning can discourage
participation on the part of ordinary workers and consumers by requiring them to engage
in too much negotiation with others, especially if most of these negotiations are
conducted by representatives. In this case, ordinary workers and consumers would no
longer be disenfranchised as they are under authoritarian planning, but if procedures for
involving all who are affected are cumbersome and rely primarily on representatives they
may become a practical barrier to participation that only the most dedicated and
determined workers and consumers will be willing to fight through. In other words, when

9
poorly organized, democracy can become just another bureaucratic maze from the
perspective of ordinary workers and consumers leading to what one socialist feminist
economist warned could become a “dictatorship of the sociable.”

Participatory planning is designed so worker and consumer councils can decide what they
want to do as long as it does not misuse productive resources that belong to all or take
unfair advantage of others. It is designed to help worker and consumer councils
demonstrate to one another that their proposals are socially responsible by generating the
information to form such judgments. And it is designed to avoid unproductive and
contentious meetings where representatives from different councils make proposals not
only about what those they represent will do, but about what workers in other councils
will do as well. In participatory planning as long as the social cost of what consumers
want is justified by the sacrifices they made in work their proposal will be approved. And
as long as the social benefit of the outputs a group of workers propose to make outweighs
the social cost of the inputs they ask to use, they will be permitted to do what they
propose. The planning procedure may take a number of rounds before proposals are
confirmed as fair and not wasteful of social resources, but rounds in the planning
procedure are not rounds of increasingly contentious meetings between representatives
from different councils to debate the merits of different overall plans.

In each round a council whose proposal was not approved receives objective evidence
why it was not acceptable to others.7 In each new round councils also receive more
accurate estimates of the social costs and benefits of different goods and services – i.e.
updated information about how any proposal they make would affected others. There
must be a new meeting to decide how to revise a proposal that was rejected. But this is a
meeting within the council or federation, not a meeting between representatives from the
council or federation with representatives of councils who voted not to approve the
previous proposal. Members of each council and federation discuss among themselves
how to revise their proposal with clear guidelines about what will win approval from
others. If they submit a proposal that meets the guidelines they never have to plead their
case. They can also submit materials they wish others to consider, explaining any human
or social costs and benefits that cannot be captured in quantitative estimates of
opportunity costs, or any special circumstances they feel should be taken into
consideration before passing judgment on their proposal. And finally, if they wish to
explain in person why they believe a proposal that fails to meet the guidelines should,
nonetheless, be accepted by others they can ask for a meeting with representatives of
councils who found their previous proposal unacceptable. But an important difference
between participatory planning and other models of democratic planning is that councils
never have to debate someone else’s ideas about what they should do, and councils have
easy ways to win approval for what they want to do without having to plead their case in
contentious meetings with others.
7
In the case of consumption councils the reason will be that the estimated social cost of their
consumption proposal was higher than warranted by the effort ratings its members received from
their workmates. In the case of worker councils the reason will be that the estimated social
benefits of the outputs they proposed to make was less than the social costs of the inputs they
asked for and the estimated damages of any pollution they proposed to emit.

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Participatory planning is different from other conceptions of “democratic planning.” It is
carefully designed so as not to overburden the main planning process with meetings of
representatives from different councils, and particularly meetings without clear criteria
for settling disagreements for lack of reasonably accurate estimates of the social costs and
benefits of different goods and services. Instead, the participatory planning procedure
provides for meaningful deliberation through a carefully structured, social, iterative
process where workers and consumers: (1) discover how their choices affect one another
as ever more accurate estimates of social opportunity costs are generated in successive
rounds, (2) have a great deal of control over what their own economic activities will be
since each council and federation makes and revises its own proposals, and (3) are
protected from socially irresponsible behavior since they can vote not to approve wasteful
and unfair proposals submitted by others.

In other versions of democratic planning it is common to give “stake holders” seats on

enterprise councils when there is reason to believe that people who do not work at an
enterprise are affected by enterprise decisions.8 But there are two disadvantages of this
way of addressing the problem that people other than workers in an enterprise are
affected by what an enterprise does: (1) How does one decide which other constituencies
are affected and how many seats to give them? It seems naïve to assume there would be
no differences of opinion on these matters, and in absence of any objective criteria
decisions would be arbitrary even if not contentious. (2) If outsiders have seats, workers
in an enterprise have no place where they can discuss what they want to do free from
outside interference. It requires workers to hear from and convince outsiders before they
can even formulate a proposal about what they want to do. If the only way to enfranchise
outsiders were to give them seats on enterprise councils it might be necessary. But the
participatory planning procedure provides others who are affected an appropriate degree
of influence over enterprise decisions without infringing on the autonomy of workers in
the enterprise. The planning procedure empowers others to reject any proposal a group of
workers makes that fails to benefit those outside the worker council at least as much as it
costs them, and does so without arbitrarily deciding which outsiders are affected and to
what degree. Limiting membership in worker councils only to workers in an enterprise
does not mean they get to do whatever they want. If they vote to use productive resources
belonging to everyone inefficiently, their proposal will not be approved in the
participatory planning procedure. In other words, the legitimate interests of others can be
better protected through the participatory planning procedure rather than by denying
workers the right to function in a council where only they have voice and vote.

Deliberative democracy can take place where the proposals are different comprehensive
plans, and deliberation takes place at meetings attended only by a few representatives
from each council. Or, deliberative democracy can take place by having councils propose
what they want to do, i.e. submit “self-activity proposals,” and deliberation takes place
within worker and consumer councils among all members to formulate and revise
proposals in response to feedback from others and more accurate estimates of opportunity
and social costs. While the first conception of deliberative democracy is more common, it
8
See Pat Devine, Democracy and Economic Planning (Westview Press, 1988).

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has three disadvantages: (1) Only a few people from each council benefit from the
deliberations – those sent as representatives – who then bear the burden of trying to
convey their deliberative experience to those they represented. (2) Members of a worker
council never formulate proposals for what they want to do. Instead their representatives
together with representatives from other councils formulate proposals about what
everyone, including them, will do. And (3) meetings of representatives proposing
different comprehensive economic plans do not generate quantitative estimates of social
costs and benefits of different goods and resources without which rational discussion of
the merits of different plans is severely hampered, if not impossible. The participatory
planning procedure, on the other hand, empowers worker and consumer councils to
formulate their own proposals and generates estimates of social opportunity costs that are
as accurate as can be hoped for.

Conclusion

Unfortunately our socialist forebears failed to recognize that designing democratic

planning procedures that do not deteriorate into planning by an elite or market
coordination based on greed and competition is not easy. It's not just that doing it is not
easy. Figuring out how to do it is also not easy. In some ways 20th century socialists
provided their 21st century descendents with a rich inheritance. But unfortunately
procedures to ensure that ordinary workers and consumers determine economic decisions
and encourage one another to behave in socially responsible ways, and procedures that
avoid the predictable withdrawal of ordinary people from economic decision making
leaving a vacuum for an elite to fill were nowhere to be found when the Will was read.

All versions of socialist democratic planning can be thought of as ways for people to
discuss and decide on a division of labor among them -- having agreed to treat productive
resources as the common property of all. One would hope the procedures used (1) permit
people to influence decisions in proportion to the degree they are affected, (2) distribute
the burdens and benefits of economic activity equitably, and (3) use scarce productive
resources efficiently. One notion of how to go about this is for representatives from
different councils to meet together where they propose, discuss, and eventually vote on
different comprehensive plans for the entire economy. Another vision of how to organize
the democratic dialogue is for different groups of producers and consumers to propose
what they, themselves, want to do, and then refine those proposals in light of ever more
accurate information about how their proposals affect one another, and what is therefore
an efficient and fair use of the productive resources belonging to all.

As you Bolivarian revolutionaries explore the advantages and disadvantages of different

approaches to democratic planning I urge you to give serious consideration to the latter
approach because I believe organizing comprehensive planning as an iterative, social
process of “self-proposals” combined with information sharing, followed by democratic
approval based on clear criteria of social responsibility maximizes the potential for
popular participation in annual planning. (1) Unlike other approaches to democratic
planning, the participatory planning procedure provides unprecedented autonomy for
worker and consumer councils over their own activities. Since what they, themselves will

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do is what concerns people most, this is an important virtue when we try to convince
those who have long been disenfranchised that it is finally worth their time to participate
in economic decision making. (2) The procedure generates the information people need
to make informed decisions about what is efficient and fair – reasonably accurate
estimates of the social costs of producing different goods and services – including
environmental costs -- and the opportunity costs of using different scarce productive
resources – including different kinds of labor. Without some idea of how valuable a
productive resource is when used elsewhere, and how much it costs society to produce a
good or service how can anyone know whether a work or consumption proposal is
efficient or fair? Unfortunately, many versions of democratic planning fail to generate
this necessary information for making informed choices even if they do arrange for
decisions to be made democratically. The participatory planning procedure generates this
information and makes it readily available to all councils, which allows them to vote on
others’ proposals with little loss of time so the power to approve or disapprove worker
and consumer councils’ proposals no longer need reside in the hands of a planning elite.
(3) The iterative, social, planning procedure teaches participants how what they choose to
do affects others, and how what others choose to do affects them. In other words, it
teaches participants how our economic fates are linked. (4) Since discussions about
proposals take place within worker and neighborhood councils rather than at meetings of
representatives, everyone, rather than only a few, can participate in what is a social
education process as well as a social decision making procedure. In other words, the
procedure maximizes direct participation and minimizes participation through
representatives. (5) The participatory planning procedure provides clear criteria for
resolving disagreements about proposals and thereby avoids the possibility of getting
bogged down in endless debates between representatives that end only when one side
exhausts the other.

I conclude with a clarification and three related observations. When we talk about
comprehensive national planning this really includes three different kinds of planning:
annual planning, investment planning, and long-run development planning. Since the
only difference between them is the length of time considered, at the highest theoretical
level they can all be analyzed in the same way. Since my personal inclination is to think
about things at the highest theoretical level that is how I first approached them. And I still
believe that we should try to use the procedures of participatory planning whenever
possible when making investment plans and development plans because in many ways
those procedures maximize participation of ordinary workers and consumers. However, I
want to make clear that what I have been discussing today is annual planning. I have
argued that democratic annual planning is preferable to both coordination through
markets and to annual planning by an elite. And I have argued that the participatory
planning procedure has many advantages compared to other approaches to democratic
annual planning. Unfortunately, however in the real world investment and development
planning differ from annual planning in important ways that must be taken into
consideration.

The problem is not only that uncertainty increases the farther in the future we try to
calculate, and that people’s preferences change over time -- although these are problems

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as well. The problem is opportunity costs and the social costs that depend on them will
vary depending on what investment and development plans we choose -- which means
we may misevaluate investment and development options using today’s opportunity and
social costs. To all intents and purposes productive resources and consumer preferences
are fixed when we formulate annual plans. That is why opportunity and social costs can
be estimated with some degree of accuracy -- provided planning procedures are properly
designed to do so. But opportunity costs, and therefore social costs of production in
future years as well, will vary to some extent depending on what investments we choose
to make this year. And both will vary even more depending on what long-run
development trajectory we choose. This means that evaluating different investment and
development plans using the estimates of opportunity and social costs derived from this
year’s participatory annual planning process can be misleading.9

Industry and consumer federations, rather than individual worker and consumer councils,
should bear most of the responsibility for formulating, revising, and approving
investment and development plans in any case. And “self-proposals” by federations can
still play an important role, particularly in the initial stages of investment and
development planning. But quantitative comparisons of the social costs and benefits of
different investment and development self-proposals will be less accurate than
comparisons of annual production self-proposals. This means that discussion and debate
among representatives from different federations at national investment and development
planning meetings must play a greater role than is necessary during annual planning. It
means that formulation of alternative feasible, comprehensive investment and
development proposals by teams of experts must play a larger role than is necessary
during annual planning. And finally, it means that discussion and debate by
representatives followed by referenda on a few alternative investment and development
plans must play a greater role than during annual planning where self- revision of self-
proposals can be relied on to generate an efficient and equitable annual plan, and where
discussion can be concentrated within councils where all can participate.

I offer three observations in this regard that may be of interest: (1) While the
participatory annual planning procedure is quite different from traditional conceptions of
democratic planning which revolve around representatives meeting to formulate
comprehensive plans, perhaps subjected to referenda, investment and development
planning will of necessity have to look more like these traditional conceptions.10 (2)
Unfortunately it will be more difficult to stimulate popular participation on the part of
ordinary workers and consumers in investment and development planning than in annual
planning. This is not only because workers often see investment and development
decisions as less crucial to their daily lives than decisions about what they will produce
9
This is not a problem unique to democratic planning. Authoritarian planning and market
systems face the same dilemma but in effect, simply pretend the problem does not exist.
10
Ernst Mandel, Pat Devine, and David Laibman are some who have proposed models of
democratic planning along these more traditional lines. I believe their proposals provide valuable
suggestions for investment and development planning but fail to take advantage of available
opportunities to maximize popular participation in annual planning in ways that the participatory
planning procedure does.

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and consume this year. It is also because (a) representatives with the help of experts will
play a greater role in formulating investment and development plans, even if those
alternative investment and development plans are subject to popular referenda, and (b)
“self-proposals,” which hold greater interest for most people, will play a smaller role in
investment and development planning than in annual planning. (3) Therefore, it is all the
more important to maximize popular participation of ordinary workers and consumers
during the annual planning process by using the participatory planning procedure which
(a) is a powerful school teaching people how their fates are linked and how to participate,
and (b) is the most effective way to fill the power vacuum that a planning elite more
likely to emerge from investment and development planning might otherwise usurp.

Thank you for your patience. I have subjected you to a lengthy and tedious presentation. I
can only hope that the importance of the subject for all of us searching for a 21st century
socialism capable of achieving the goals shared by all socialists, past and present, may
have made the price worth paying.

Hasta la Victoria Siempre

robinhahnel@comcast.net

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