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Introduction to the Special Issue on Economic Democracy

Review of Radical Political Economics 44(1) 57 2012 Union for Radical Political Economics Reprints and permission: http://www. sagepub.com/journalsPermissions.nav DOI: 10.1177/0486613411418047 http://rrp.sagepub.com

Economic democracy is a term that stands for expanding democratic participation in the public sphere, and in the private realm as well. It refers to social and political arrangements that empower people to participate in decisions that affect their livelihoods and opportunities. Today in many Western societies it is the nominally democratic public sector that is under attack, rather than the private sector. Based on thought diametrically opposed to concepts of economic democracy, markets and privatization are put forward as solutions to almost every social ill. Voting with ones income in the market is the epitome of the individualist notion of a just economy, and paying taxes to fund collective consumption is thought to be unjust, or just plain foolish. The concept of economic democracy seeks to extend democracy of the political arena to the domain of production. This, of course, directly contradicts the logic of capitalism, while drawing on the generally accepted concept of democracy to do so. Advocates of economic democracy press for expanded direct and representative democracy at the national level, at work, and at home. When RRPEs editorial collective for this special issue on economic democracy wrote its call for papers, it knew it was casting a wide net. Our aim was to attract the best of current thinking on issues of workplace democracy, changing dynamics in households, democratic planning, and innovation in cooperatives. We have selected the following five articles from among the submissions we received. As stated in the call for papers, economic democracy is a term that has been used by the left for decades, and it has served several purposes. It was used during the Cold War era to sidestep entrenched opposition in the West to the word socialism. It highlighted democracy, a missing component in the Soviet-style socialism that served as most peoples exemplar for what socialism was. Economic democracy has also focused attention on a critical limitation of capitalism: democracy is noticeably absent in this economic system as well. Within capitalist business enterprise, the primary means of producing goods and services, capital and its management rule. Employees in these firms surrender most of the rights they have as citizens when they enter the workplace. For organized labor within capitalist economies, different forms of works councils, co-determination, and rights within collective bargaining helped attenuate this limitation on the ability to participate in decisions that affect peoples lives. At the level of households, economic democracy has been used to address past and present gender imbalances in the power to make economic decisions. In many societies this imbalance has diminished because of related social changes such as dual-income households, but it remains strong in many parts of the world. More broadly at the social and political levels, the term economic democracy represents an attempt to change the mix of the political and economic. At the level of macroeconomic activity, economic democracy assumes some degree of citizen involvement in forms of economic planning. Since planning has been in eclipse for decades, this aspect of the term has received scant attention. The idea of democratic planning invokes the need to address how citizens can be more involved in decisions about collectively provided goods and services, as well as how

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desired outcomes will be funded. The term also implies the potential for a one-person, one-vote form of participation, in contrast to private market activity ruled by the income or wealth with which one votes. The articles that follow address many of these concerns. Gemma Millers Gender Trouble: Investigating Gender and Economic Democracy in Workers Cooperatives in the United States compares the ways in which women and men participate in a small sample of U.S. cooperatives, and finds improvement in the status of women in relation to conventional forms, but less than egalitarian gender status in the co-ops. One of Millers contributions is development of a framework for analysis that could be used for extending this research. Market ideology itself is the target of Manual Couret Brancos contribution to this collection. He argues that it is imbedded in the mainstream economics of today, often accepted as if it was natural law, and that the use of mainstream economics erodes our ability to imagine a more substantive democracy than we have experienced to date. His concern is to deepen the meaning and practice of democracy, constraining the impact of market-based economics, and renegotiating the sociallyconstructed boundary between economics and politics. In an argument that is complementary with Couret Brancos, in their Challenging the Presumption in Favor of Markets, Colin Donnaruma and Nicholas Partyka contend that there is a ubiquitous presumption in favor of markets in the world today, and that it inhibits our ability to think of other ways to allocate goods and services. They summarize the shortcomings of market approaches to distribution, and offer a philosophical, social, and economic defense of participatory planning, contending it is more consistent with democratic values than are markets. Convincing the world of the benefits of planning as opposed to markets will require not only good arguments, but practical examples of how democratic planning could work. The article by Adelmir Marquetti, Carlos E. Schonerwald da Silva, and Al Campbell delivers one such example. It is an empirical study of participatory budgeting in Porto Alegre, Brazil, including institutional aspects of the planning and evidence of who has been involved in it. The study highlights the strengths and limitations of this innovative approach to planning, and its significance as an example of participatory economic democracy. For some time the term economic democracy has grappled with how to socialize capital. Should it occur through traditional ownership rights, through new structural forms of participation, or through independent cooperative firms? Philippe Morins contribution to this issue provides insight into Quebecs Fonds de Solidarit, why it was created, and how a labor-sponsored venture capital fund brings forth another manifestation of economic democracy. Morin offers these insights as part of a process of envisioning, and creating, a post-capitalist future. In sum, the five articles in this special issue add insight and new dimensions to the term economic democracy. The term continues to have multiple meanings, even though those meanings share the common feature of challenging the boundary of the political relative to the economic in favor of more democracy, in multiple forms. A future issue of the Review will contain the article Delicious Peace Coffee: Marketing Community in Uganda, by Nancy Neiman Auerbach. We think our readers with an interest in connections between economic democracy and cooperatives, community development, and economic rationality will find it of interest. The editorial collective for this special issue of the RRPE includes two former members of the Editorial Board, John McDermott and Gil Skillman, who deserve our thanks for continuing with the project after their terms on the board had expired. When the project began we reached out to two experts in the field who were not on the Editorial Board. Ulla Grapard of Colgate University

Gunn

and Mark Klinedinst of the University of Southern Mississippi served as excellent reviewers of submissions for this issue, and we offer them our appreciation and thanks. Christopher Gunn, for the Editorial Collective Geneva, New York Members of the Collective: Ron Baiman Richard Cornwall Ulla Grapard Christopher Gunn Mark Klinedinst John F. M. McDermott Paddy Quick Gil Skillman

Gender Trouble: Investigating Gender and Economic Democracy in Worker Cooperatives in the United States
Genna R. Miller1

Review of Radical Political Economics 44(1) 822 2012 Union for Radical Political Economics Reprints and permission: http://www. sagepub.com/journalsPermissions.nav DOI: 10.1177/0486613411418049 http://rrpe.sagepub.com

Abstract This paper explores the relationship between gender equality and economic democracy in worker cooperatives in the United States. A specific method for analyzing womens status in worker cooperatives is proposed. Preliminary findings from a small-scale survey of U.S. worker cooperatives in 2001 are presented, showing that despite the egalitarian nature of cooperatives several gender inequalities persist. JEL classification: J54, B54, P13 Keywords gender, economic democracy, worker cooperatives, labor-managed firms, democratic firms

1. Introduction1
Few studies analyze womens status in the democratic, non-capitalist firms known as worker cooperatives. Worker cooperatives, also known as labor-managed firms, participatory firms, self-managed firms, or democratic firms, are those firms that are both owned and managed by the workers of the firm themselves. On their website, the U.S. Federation of Worker Cooperatives defines worker cooperatives as: . . . business entities that are owned and controlled by their members, the people who work in them. The two central characteristics of worker coop[e]ratives are: (1) workers invest in and own the business and (2) decision-making is democratic, generally adhering to the principle of one worker-one vote.

This articles title references Judith Butlers (1990) book Gender Trouble: Feminism and the Subversion of Identity.
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Duke University, Durham, NC, USA

Date received: May 24, 2009 Date accepted: June 15, 2010 Corresponding Author: Genna R. Miller, Economics Department and Womens Studies Program, Duke University, Campus Box 90097, Durham, NC 27708, USA Email: gm19@duke.edu

Miller

As such, these firms are structured on a principle of economic democracy, where notions of democracy are defined around ownership and participation and around an emphasis on egalitarian relations. In relation to this theme of a democratic ideology, one cooperative member states that, Co[-]ops rockthey are a wonderful place to be a workerhaving control in our workplace is very empowering!!,2 while a retired worker cooperative member explains that, [Being in a worker cooperative] is the most democratic thing Ive ever done.3 However, does this democracy extend to gender relations? Previous studies of worker cooperatives and participatory firms find that women are underrepresented as members, hold lower status, and participate less in making business decisions (ICA 1995; ILO 1995; Cline 1997c; Tang 1993; Theis and Ketilson 1994). However, none of these studies has focused on the relationship between gender and worker cooperatives in the United States. Does the American experience replicate these findings from participatory firms in other areas of the world? This paper develops a framework for analyzing womens status in U.S. worker cooperatives and provides preliminary findings from a small-scale survey conducted in 2001. The findings suggest that, despite the emphasis on democracy in worker cooperatives, gender inequalities exist.

2. Gender and Worker Cooperatives Literature


The egalitarian characteristics of worker cooperatives have led many researchers to suggest that women would fare better in these types of firms. However, as Hacker (1989) points out: We enjoy excellent feminist analyses of the role of women workers in capitalist and socialist systems, but know little of gender stratification within [worker] cooperatives . . . . (Hacker 1989) Thus, worker cooperatives remain an important site for research into womens equality. Agencyoriented theories suggest that if members of worker cooperatives rely less on hierarchical structures, this may benefit women, as hierarchies in traditional firms are often based on gender (Oerton 1994). The non-hierarchical nature of cooperatives gives workers more democratic control over their workplace and their working conditions, providing workers with greater scope for challenging inequities at work (Conn 1990), so that they can become active, self-reflexive agents who engage in moments of resistance (Oerton 1996). As such, workplace democracy may benefit women (Collom 2000). Likewise, feminism is often viewed as being compatible with the cooperative movement as both strive to reduce social inequalities (Gunn 1984). While theories predict improved gender equality within worker cooperatives relative to capitalist firms, findings suggest that these improvements occur, but to a limited degree. Women in many worker cooperatives still face barriers and challenges to their full equality, in terms of membership, status, and participation in decision making. In terms of membership, the International Co-operative Alliance (ICA), which serves cooperatives around the world, established the ICA Gender Equality Committee in 1965 in order to address concerns of womens lower membership and status in cooperatives worldwide. Furthermore, in 2000, the ICA proposed an ICA Strategy for Promoting Gender Equality (2000) in order to reduce barriers to womens membership and participation in co-ops around the world.

Written response from a current worker cooperative member from a 2001 preliminary survey of U.S. worker cooperatives. 3 Personal phone conversation with a retired worker cooperative member, November 23, 2009.

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Studies also indicate that women hold a lower status in cooperatives relative to men. In their training manual with the ILO (1995), the ICA Gender Equality Committee addresses concerns over womens status in terms of control over resources, access to credit, income levels, time constraints, and occupations. Within Canadian worker cooperatives, women hold fewer leadership positions than do men (Cline 1997a; Smith 2003), are crowded into less skilled jobs (Smith 2003), and participate at a lower degree in decision making (Cline 1997a, 1997b; Conn 1990; Theis and Ketilson 1994). As Smith (2003), a researcher at the University of Victorias BC Institute for Co-operative Studies, explains: . . . men [are] the majority in skilled labour, management, and director positions. Women who do sit on boards of directors or hold management positions admit that they feel alone, outnumbered, and are often afraid to speak up or fully realise their leadership roles. . . . The sexual division of labour (women as unskilled labourers and men as skilled labourers) is another challenge worker co-operatives face. This issue has a lot to do with larger societal structures of education, training, and taking time off to raise a family. . . . Ultimately, the gender barriers in worker co-operatives reflect the larger societal contexts in which they exist and, in many cases, worker co-ops have attempted to overcome gender barriers more actively than have many other businesses and organisations. Worker co-ops have been a tool in overcoming gender barriers, but it must be acknowledged that the barriers still exist. . . . Similarly, comparisons of womens status in Basque-area capitalist firms with womens status in worker cooperatives in the Spanish Mondragn system, show that women in Mondragn fare better in several aspects, including representing a higher proportion of the workforce (Hacker and Elcorobairutia 1987; Kasmir 1996), and having higher salaries and greater job security than their counterparts in private firms (Hacker and Elcorobairutia 1987). However, women in cooperatives remain in the lowest pay scales and lowest status jobs (Hacker and Elcorobairutia 1987; Kasmir 1996), lack access to craft skills and technical knowledge, and are more likely than men to have their work hours reduced during slack times (Hacker and Elcorobairutia 1987). Overall, while women in cooperatives fare better than women in traditional firms, they have a lower status relative to men in cooperatives. In addition, womens and mens participation levels in decision making are important in analyzing gender equality. Several studies find womens participation to be lower than mens. In their training manual on Gender Issues in Cooperatives (1995), the ICA, in conjunction with the ILO, notes that women face barriers to their full participation in cooperatives and addresses the need for policies to promote womens participation in decision making in cooperatives globally. Investigations of Canadian cooperatives also find that women participate at a lower rate in decision making than do men (Cline 1997b, 1997c; Conn 1990; Theis and Ketilson 1994). In their study of participatory firms in Chile, Espinosa and Zimbalist (1981) observe that women who are responsible for home and child care work have less time to spend around the firm and in participatory activities, thus participating less than men do. Also, in a study of Chinese local industrial firms that have experimented with participatory management and economic democracy, Tang (1993) finds that women participate to a lower degree in decision making than do men in instrumental and managerial issues. In total, the literature on gender relations in worker cooperatives suggests that although women in cooperatives fare better than in traditional firms, women in co-ops are still under-represented as members, have a lower status than men, and participate less than men do in decision making. This contradicts theories concerning the egalitarian nature of worker cooperatives. However, what is the state of gender equality in U.S. worker cooperatives?

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Surprisingly, despite the importance of studying gender equality in U.S. worker cooperatives, previous analyses of worker cooperatives are often gender-blind, focusing on issues of class inequalities and capital-labor relations, based on the anti-capitalist nature of such firms. As such, studies of U.S. worker cooperatives have been limited to those that consider how economically efficient worker cooperatives are (Pencavel 2001; Jackall and Levin 1984) and those that espouse the democratic nature of cooperatives, focusing on how cooperatives can achieve solidarity (Greenberg 1986; Jackall and Levin 1984). Those studies of workplace democracy in the United States that do reference gender (Collom 2000; Gunn 1984) suggest that feminism is compatible with the cooperative movement, and assume that workplace democracy inherently benefits women (Oerton 1996). Informal and qualitative studies, though, suggest that gender inequality persists in U.S. worker cooperatives. For example, in a study of worker cooperatives in the Pacific Northwest in the 1980s, Pencavel (2001) found that the majority of members of the plywood cooperatives were men with relatively few women members. In addition, the U.S. Federation of Worker Cooperatives (2006, 2008) recognizes issues of gender inequality through its annual conferences and workshops. This includes hosting workshops such as Confronting Internalized Oppression and Fostering Leadership Among Marginalized Groups (2006) and African-American Women in Worker Cooperatives: Then and Now (2008). Both workshops address the intersections of race and gender. The discussion of African-American womens experiences in cooperatives points out the diversity in womens experiences in cooperatives (Nembhard 2008).4 In addition, as one worker co-op member explains regarding sexism experienced by women in her cooperative, The women workers wanted the male workers to know that they did not want their bodies to be objects. . . . They did not want to feel demeaned or not valued. . . .5 Despite these qualitative findings that suggest that gender inequalities exist, formal analyses of womens status in U.S. worker cooperatives are lacking.

3. Analyzing Worker Cooperatives in the United States


Relatively little formal data has been collected on worker cooperatives in the United States. The National Cooperative Business Association collects a limited amount of data, and the U.S. Federation of Worker Cooperatives has begun compiling a list of cooperatives. Also, the University of Wisconsin Center for Cooperatives (2009) has recently begun the first ever, large-scale, nationwide collection of data on cooperatives in the United States. However, none of these sources collects gender disaggregated data. Due to this lack of data, a preliminary survey of cooperatives was conducted by the author during the summer of 2001. The methods used are outlined below, along with suggested methods for analyzing gender and cooperatives.

3.1 Sampling and Response Rate


Worker cooperatives can be identified based on Vaneks (1970) concept of labor management which stipulates (1) complete management by all workers in the firm, through direct and indirect decision-making processes, and (2) ownership and income sharing by all members of the firm. Because this study pre-dated the founding of the U.S. Federation of Worker Cooperatives and the data collection by the University of Wisconsin Center for Cooperatives, it was challenging to
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While the current paper addresses the relationship between gender and economic democracy, the author plans to also examine the intersections between gender and race and ethnicity in cooperatives in future research. In addition, the intersections between gender, sexual orientation, national origin, and religion are also important in understanding economic democracy in worker cooperatives. 5 Personal phone conversation with a current worker cooperative member, November 23, 2009.

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Table 1. Demographic Characteristics of the Sample of Worker Cooperatives Characteristic Size of firm Revenue Revenue per worker Capital-labor ratio Wage differential Age of firm Region Midwest North-Central-East North East South Atlantic West Industry Manufacturing Whole & retail sale Services Number 28 28 28 28 28 28 2 6 3 1 16 9 15 4 7% 21% 11% 4% 57% 32% 54% 14% % Mean 42 $4,408,796 $ 84,459 $ 29,826 2.33 21 Range 2 - 250 $9,000 - $25,000,000 $2,250 - $294,118 $500 - $86,329 1.00 - 10.00 2 - 50

locate an accurate list of worker cooperatives. Ultimately, worker cooperatives were located through the directory, An Economy of Hope, published by the Grassroots Economic Organizing (GEO) Newsletter (2000).6 Based on the information in the GEO directory, eighty-eight cooperatives and 2,387 workers were identified within the cooperative community. However, undercoverage of the population occurred, resulting in selection bias (Lohr 1999).7 A two-stage cluster sample of cooperatives was taken, giving a total of forty-two firms and 424 workers. Selection of firms and workers was based on the cumulative-size method, which samples with the probability of selection proportional to the size of the firm (Sudman 1976). Surveys were distributed to both the cooperatives themselves and a sample of their workers. The co-op-level surveys had a response rate of 67 percent. However, the surveys that asked for information and opinions from the workers themselves yielded a response rate of 32.3 percent, with 137 workers responding. This response rate is fairly low, indicating that there may be a problem of non-response bias. Thus, this survey serves only as a preliminary analysis of gender equality in cooperatives, and acts as a template for further research.

3.2 Descriptive Data


Firm-level descriptive data are displayed in Table 1. Worker cooperatives vary greatly in size, ranging from 2 to 250 workers, with a mean of 42 workers and a median of 28 workers. The
Originally, a list of U.S. worker cooperatives was obtained from John Cline, a researcher and co-op member in Canada. This list was compiled in 1997. In order to find a more recent list, the National Cooperative Business Association (NCBA) was contacted by phone (2001). A representative of the NCBA suggested that a list might be obtained from the Grassroots Economic Organizing (GEO) Newsletter staff. 7 According to an email correspondence with Len Krimerman (2001), a GEO editorial board member, the procedure for compiling the GEO directory, An Economy of Hope (2000), involved calling contacts in the co-op sector, contacting regional cooperative development centers, searching the Internet, and using previous co-op lists established by the ICA Group and other organizations assisting cooperatives. Although this procedure seems to identify a large number of cooperatives, some may have gone unrecorded.
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Table 2. Demographic Characteristics of the Sample of Members Characteristic Job tenure Yearly income Total yearly income Age Children Hours per week at firm Education High school or less Some college or technical school College completed Masters degree or higher Occupation Management and professional Services Sales Construction Production Living with a partner or spouse Not living with a partner or spouse Minority Not minority Number 132 132 132 132 132 132 17 53 45 17 39 11 35 10 37 80 52 20 112 13% 40% 34% 13% 30% 8% 27% 8% 28% 61% 39% 15% 85% % Mean 7.83 $ 31,591 $ 38,779 40 0.336 36.66 Range

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1 - 31 $1,500 - $150,000 $1,500 - $250,000 19 - 72 0-3 4 - 85

average capital-labor ratio in 2000 was $29,826 of assets per worker. The majority of worker cooperatives are in the West (57 percent), the East-North-Central region (21 percent), and the North Eastern region (11 percent), with high concentrations in California, Ohio, Wisconsin, and Massachusetts. Based on the Standard Industrial Classification (SIC) system, most cooperatives are in wholesale and retail sales (54 percent) and manufacturing (32 percent), with a smaller percentage in services (14 percent). On average, the cooperatives had been in existence for 21 years, with an average wage differential between the lowest and highest paid worker in the firm being 2.33. The average revenue for 2000 for the cooperatives is $4,408,796 and the average revenue per worker is $84,459.8 Descriptive data concerning the individual members are displayed in Table 2. The average age of workers is 40 years. Based on the Standard Occupational Classification (SOC) system the majority of workers are in management and professional jobs (30 percent), production jobs (28 percent), and sales jobs (27 percent). The majority of workers live with a partner (61 percent) either through cohabiting or being married, and relatively few have children under the age of 12, as the average number of children for members is only 0.34. Relatively few workers identify as racial or ethnic minorities (15 percent), and most workers have some college or technical training (40 percent) or have completed college (34 percent).
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The mean revenue per worker was calculated by first obtaining the revenue per worker for each individual firm and then taking the average of those figures, yielding a value of $84,459. This figure differs from the value which is obtained from dividing the average revenue by the average number of workers which yields an average revenue per worker of $104,971. The large variation in the size of the co-ops seems to account for this difference. While the mean firm size is 42 workers, the median is 28, and firm size ranges from 2 to 250 workers.

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4. Gender Equality
Because previous studies find that women are under-represented as cooperative members, hold a lower status relative to men, and participate less than men do in decision making, these measurements can be used as indicators of gender equality in this preliminary study.

4.1 Membership and Status


Forty-eight percent of the survey respondents were women, 51 percent were men, and 0.8 percent were intersexed.9 This gender ratio coincides with information provided by the cooperatives themselves, as the data obtained from the firm-level responses indicate that approximately 51 percent of workers are male, while about 49 percent are female. Thus, the survey responses indicate a nearly equal percentage of men and women in the cooperatives, with women being only slightly under-represented as members of U.S. worker cooperatives. In comparison, the ratio of women and men employed in the U.S. labor force in the same year was less equitable, with women making up only 47 percent of employed workers and men comprising 53 percent of those who were employed (Miller and Gallagher unpublished manuscript). Womens status can be analyzed in terms of occupational segregation, job tenure, hours worked, and income. Through occupational segregation, women are often assumed to be crowded into lowskill, low-wage jobs. However, worker cooperatives often emphasize policies of job rotation and cross-training. For example, one co-op member explains that, Our co-op offers great opportunity to cross-train and change departments. Therefore, [everyone] . . . find[s] their natural area of excellence and . . . comfort. . . .10 This suggests that occupational segregation would be less likely. The histogram in Figure 1 shows occupational categories disaggregated by gender, indicating that while women are mainly in management and professional positions (34 percent) and sales jobs (32 percent), men are mostly in production jobs (36 percent) followed by management and professional positions (25 percent). Therefore, some degree of occupational segregation occurs, as indicated in Figure 1. However, it is difficult to interpret the findings here. Women in cooperatives appear to be in more prestigious, white collar jobs relative to mens working-class, blue collar jobs, although women also remain within the so-called pink collar jobs. In addition, the occupational segregation index11
An individual who is intersexed possesses both male and female biological characteristics (The National Institute 2002). An individual may be born as an intersexual or may become intersexed through surgical procedures. In assessing gender differences in this data set, these individuals were grouped with the females in the sample. In this way, the sample was sorted into males and non-males. This was done in order to capture the different effects for other gender categories in comparison to men. In this project, it is theorized that men participate more in decision making and also hold a higher status in cooperatives due to patriarchy. Because patriarchy may be defined in terms of mens dominance as a group over women as a group, it seems plausible that an intersexed individual may have life experiences similar to that of women and other non-men, so that the intersexual respondents may be analyzed in a group with women, to be compared with men as a group. Using traditional gender dichotomies, though, does obscure the diversity of gender identities and may reinforce essentialist notions which this study hopes to challenge. 10 Written response from a current worker cooperative member from a 2001 preliminary survey of U.S. worker cooperatives. 11 The occupational segregation index tells us the percentage of women (or men) that would have to change jobs in order for the occupational distribution of the two groups to be the same. The index of occupational segregation by sex is calculated as i |Mi Fi| where Mi is the percentage of males in the labor force employed in occupation i, and Fi is the percentage of females in the labor force employed in occupation i (Duncan and Duncan 1955). The index would be zero if the distribution of women and men across occupational categories were identical and would be 100 if all jobs were sex segregated (Blau, Ferber, and Winkler 2006).
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40 35 30 Percentage 25 20 15 10 5 0

Women

Men

1=Managerial & Professional, 2=Services, 3=Sales and Office Work, 4= Natural Resources & Construction, 5= Production

Figure 1. Womens and mens occupations


10 9 8 7 6 5 4 3 2 1 0 Years 6.31 9.31

Women

Men

Figure 2. Womens and mens job tenure

41 40 39 38 37 36 35 34 33 32 31 30

Hours 39.77

33.45

Women

Men

Figure 3. Womens and mens hours per week worked at their co-op

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is lower in the cooperatives than that for the general labor force for the year 2001. Based on the broadest occupational categories presented in the Standard Occupational Classification (SOC) system of the Bureau of Labor Statistics, the occupational segregation index for the cooperatives is 27.5 while it is 31.5 for the general labor force (Miller and Gallagher, unpublished manuscript).12 Job tenure, or seniority, is also an indicator of status. Seniority represents a form of firmspecific human capital (Denton and Zeytinoglu 1993), which may influence income and job prestige. In cooperatives, the accumulation of firm-specific human capital may provide workers with the knowledge and skills necessary for participating in business decisions (Denton and Zeytinoglu 1993; Jones and Ilayperuma 1998; Tang 1993; Tolbert and Stern 1991). While the average job tenure for the total sample of individuals is 7.8 years at their cooperative, there is a significant difference (at the five percent level) in job tenure by gender. As shown in Figure 2, on average, mens job tenure is 3 years longer than womens. In a telephone conversation, one worker cooperative member suggested that women were more likely to take leave from their cooperatives for family and household responsibilities, and that this often had an adverse effect on their incomes and job promotions in her cooperative.13 The amount of time spent at the cooperative is also an indicator of status. Income is often based on the number of hours worked, so that differences in time allocation may cause income inequalities. In addition, workers who spend less time at the co-op may be viewed as being less committed to their job, and this may impact their influence in the firm and their participation in decision making. The preliminary survey data suggest that men spend more time working at their cooperatives than do women. The average number of hours per week worked at the firm is 36.7 hours for the overall sample. However, as indicated in Figure 3, men work 6.3 hours more per week than women do, assessing the difference between the means at the 5 percent level of significance. This could impact womens incomes and influence, and may be a result of the traditional division of labor (in heterosexual households). The gender wage ratio is also an indicator of status, as it measures the ratio of womens to mens wages. Within worker cooperatives, though, a low wage differential between the highest and lowest paid workers is often strictly imposed as part of the egalitarian ideology of cooperatives. The preliminary survey data show that the wage ratio between the highest and lowest paid worker in each co-op is fairly low, with an average ratio of just over 2. Estimates of the wage ratio between chief executive officers (CEOs) and average workers in capitalist firms in the United States during the early 2000s suggest that this ratio was slightly over 400 (Klinger et al. 2002; Kroll 2005). Therefore, the wage ratio in cooperatives is substantially lower than that in capitalist firms in the United States. Thus, we would expect to see less of a gender wage gap. Although there was a relatively small sample size from the survey results, the median incomes of full-time workers could be determined. In addition to wages, worker cooperatives pay a share of dividends or surplus from their profits to each worker along with their yearly salaries. Therefore, median yearly incomes were calculated as wages/salaries plus dividends/surplus. The median total income for women was $32,870, while mens was $43,000, giving a wage ratio of 0.76 (Miller and Gallagher unpublished manuscript). Surprisingly, this is the same gender wage

Data for the labor force were obtained from the Current Population Survey for 2001 (Bureau of Labor Statistics 2001b), and yields an index for 2001 similar to that found by other researchers. For example, Gabriel and Schmitz (2007) obtain an index of 31.0 while Hoffman and Averett (2005) calculate an index of 32.1 using broad occupational categories. However, studies that disaggregate occupations into finer and more detailed job categories and descriptions find much higher levels of segregation for this time period, closer to 50.0 (Jacobs 2003). 13 Personal phone conversation with current worker cooperative member, November 23, 2009.

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$50,000 $45,000 $40,000 $35,000 $30,000 $25,000 $20,000 $15,000 $10,000 $5,000 $-

Women

Men $43,000

$32,870 $26,572

$34,944

Co-ops

Labor Force

Figure 4. Median yearly incomes for full-time workers in co-ops and the general labor force Source: Current Population Survey www.bls.gov/cps/cpsa2001.pdf

ratio that is experienced within the general labor force, as Figure 4 shows that for full-time workers, womens median yearly income was $26,572 and mens was $34,944, giving a wage ratio of 0.76. Thus, women and men in cooperatives both earn higher incomes than their counterparts in the general labor force, but the same gender wage ratio persists. These unexpected findings may be due to womens shorter working hours, womens lower job tenure, and/or occupational segregation, as these factors may be intertwined in determining womens status. Overall, despite the egalitarian nature of co-ops, women in U.S. worker cooperatives appear to encounter many gender inequalities, including occupational segregation, lower job tenure, fewer hours worked at their co-op, and lower incomes.

4.2 Participation in Decision Making


Previous studies also suggest that economic democracy, in terms of participation in management, has been limited with respect to gender, as women have been found to participate less than men do in decision making. In order to examine participation levels, a participation index was constructed, based on nine decision-making topics that have been identified to be important decision-making issues (Karlsson 1973; Tang 1993; Jones and Ilayperuma 1998). 14 These areas are shown in Figure 5. The results for the participation index are shown in Table 3. The participation index scores range from 1.00, a complete lack of participation, to 4.00, a perception of a high level of involvement in decision making, with a mean of 2.86. In examining gender differences, the mean participation index for women is 2.86, while the mean participation index for men is 2.87, although no significant difference is found. Therefore, contrary to findings in previous studies, the preliminary data suggest that women in U.S. worker cooperatives do not participate less than men do in overall decision making. However, the relatively low response rate for the survey suggests that further investigations of participation are needed.

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Interview data collected by this researcher from worker cooperatives in Nova Scotia, Canada in 1998 also showed that these issues are major decision-making topics (Miller 1998; Miller and Cline 1998a, 1998b).

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1. 2. 3. 4. 5. 6. 7. 8. 9.

selection of leaders hiring of workers dismissal/firing of workers assignment of work tasks development of new product lines quality control wage and salary levels new investment in tools, equipment, or machinery distribution/sharing of the surplus (or net earnings)

Figure 5. Decision-making areas in participation index

Social, administrative, and personnel problems


1. selection of leaders 2. hiring of workers 3. dismissal/firing of workers

Technical and production problems


1. assignment of work tasks 2. development of new product lines 3. quality control

Problems of economic and financial management


1. wage and salary levels 2. new investment in tools, equipment, or machinery 3. distribution/sharing of the surplus (or net earnings)

Figure 6. Three main decision-making areas

The participation index was also broken down into three particular decision-making areas,based on a three-tier scheme that Espinosa and Zimbalist (1981) cite as being constructed by the International Labor Organization (1969). This includes participation in: (1) social, administrative, and personnel problems; (2) technical and production problems; and (3) problems of economic and financial management. Participation indices are calculated for these three major areas of decision making. Each of the nine individual decision-making topics is categorized as falling into one of the three main decision-making areas as shown in Figure 6. Mean participation scores for the three areas are shown in Table 3. A significant difference in participation is found (at the 5 percent level) only for participation in technical and production problems. For women the mean score is 2.70, while for men the mean is 2.93. Thus, on average, womens participation score in technical and production problems is 0.23 lower than that of men, or on average women participated 8 percent less than men do. That is, although women may not participate less than men do overall, women seem to participate less in the area of technical and production decisions. Why might women participate less than men do specifically in the area of technical and production decisions? This may be due to occupational segregation. Because men predominate in production jobs, this may provide men with more of the skills and knowledge necessary to participate in making decisions regarding technical and production issues, while women may feel less able to make informed decisions regarding technical and production issues.

Miller
Table 3. Testing for the Equality of Means Between Womens and Mens Participation Levels Description Participation Index Three Main Areas: Social, Administrative and Personnel Issues Technical and Production Issues Economic and Financial Management Total Sample 2.86 Women 2.86 Men 2.87 Calculated Z-Value -0.09

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No. of Observations 132

2.95

3.04

2.87

1.20

132

2.82

2.70

2.93

-1.77 *

132

2.81

2.89

2.74

1.00

132

*Significant at the 5 percent level.

As one co-op member stated, . . . I participate in . . . decision making . . . but I dont always have as much personal information about specific decisions so in those cases I let other people have more sway.15 In addition, because production jobs are dominated by men, this may generate a sense of mens domain over technical and production problems even when women and men have similar knowledge about this decision-making area. In this way, because technical and production jobs are often perceived as male-dominated areas, women may be reluctant to participate in these decisions, and men may be resistant to womens participation in technical and production decisions. For example, Theis and Ketilson (1994) interviewed several women leaders in Canadian cooperatives, and explain that, . . . study participants talked about the preconceptions people have that women in decision-making positions are involved in softer areas and will not have technical . . . backgrounds. The irony of this preconception is that it can persist even as women move into areas which once were traditionally male-dominated. These preliminary findings suggest that cooperatives in the United States do not achieve gender equality in participation in making business decisions.16

5. Conclusion
While worker cooperatives operate on a principle of economic democracy, there is a need to investigate the construction of gender relations in such firms. Many studies find that women are underrepresented as cooperative members, hold a lower status, and participate less than men do in making business decisions. However, previous studies have not analyzed the situation of women in U.S. worker cooperatives. This article outlines a method for analyzing gender and
15

Written response from a current worker cooperative member from a 2001 preliminary survey of U.S. worker cooperatives. 16 A further breakdown of the participation index into nine, individual decision-making areas shows that women and men predominate in the decision-making process in different areas. Women participate to a greater degree in leadership selection decisions and in decisions about how much of the surplus to distribute or reinvest, while men participate more in decisions regarding product development and quality control. However, these effects appear to off-set one another such that there is no significant difference in womens and mens total, overall participation levels. Mens greater participation in product development and quality control, though, results in their greater participation in overall technical and production decisions.

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economic democracy in worker cooperatives in the United States. Preliminary survey data suggest that, despite the egalitarian ideology of the cooperative movement, gender inequalities persist. Although women are only slightly under-represented as members, cooperatives may want to implement policies that make it easier and more attractive for women to become members. A more central concern, though, is that the data suggest that women hold a lower status relative to men with respect to job tenure, hours worked, and income, and there is also some degree of occupational segregation. These findings suggest the need for the cooperative community to assess income and work-schedule policies as well as implementing increased job rotation and training. The preliminary findings also indicate that, contrary to previous studies, women in U.S. worker cooperatives do not participate less than men do in overall decision making, but do participate less in the specific area of technical and production decisions. As this finding may be related to mens dominance in the fields of production and technical jobs, this suggests the need for affirmative action and cross-training programs to ensure that women gain access to production and technical knowledge and skills and to encourage men to enter nontraditional jobs. Gender-awareness programs may also be useful. One worker co-op member indicated that her cooperative specifically addresses such issues by hosting anti-oppression work groups in order to challenge male privilege.17 Mentorship programs may also be useful. Overall, worker cooperatives in the United States need to develop programs that permit for greater gender equality in this style of economic democracy. However, further research is needed to examine the complex links between gender and economic democracy in worker cooperatives. This article is a first step in addressing these issues. Declaration of Conflicting Interests
The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.

Funding
The author(s) disclosed receipt of the following financial support for the research, authorship, and/or publication of this article: The preliminary survey was partially funded by a Research Grant provided by the Graduate Student Association of American University.

References
Butler, J. 1990. Gender trouble: Feminism and the subversion of identity. London: Routledge. Cline, J. 1997a. ACEA panel discussion on cooperative development. Accessed July 25, 1997 at www .glinx.com/users/jcline/ACEA.htm . 1997b. Untitled. Accessed July 25, 1997 at www.glinx.com/users/jcline/paper5.htm . 1997c. Untitled. Accessed July 25, 1997 at www.glinx.com/users/jcline/Rpt97.htm . 1997d. Worker coop development survey, English version. Accessed July 25, 1997 at www.glinx.com/ users/jcline/Esurvey.htm Collom, E. 2000. Worker control: The bases of womens support. Economic and Industrial Democracy 21: 211-235. Conn, M. 1990. No bosses here: Management in worker co-operatives. Journal of Business Ethics 9: 373-76. Denton, M., and I. Zeytinolu. 1993. Perceived participation in decision-making in a university setting: The impact of gender. Industrial and Labor Relations Review 46 (2): 320-31. Espinosa, J., and A. Zimbalist. 1981. Economic democracy. New York: Academic Press.

17

Personal phone conversation with a current worker cooperative member, November 23, 2009.

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Gabriel, P., and S. Schmitz. 2007. Gender differences in occupational distribution among workers. Monthly Labor Review, Bureau of Labor Statistics, June: 19-24. Grassroots Economic Organizing (GEO) Newsletter. 2000. An economy of hope. Stillwater, PA. Greenberg, E. 1986. Workplace democracy. Ithaca, NY: Cornell University Press. Gunn, C. E. 1984. Workers self-management in the United States. Ithaca, NY: Cornell University Press. Hacker, S. 1989. Pleasure, power, and technology: Some tales of gender, engineering, and the cooperative workplace. Boston, MA: Unwin Hyman. Hacker, S., and C. Elcorobairutia. 1987. Women workers in the Mondragon system of industrial cooperatives. Gender and Society 1 (4): 358-79. Hoffman, S., and S. Averett. 2005. Women and the economy. Boston, MA: Pearson. ICA (International Co-operative Alliance). 1995. International Cooperative Information Centre: Topic 2 Womens position in society and coops. Accessed January 19, 1999 at www.wisc.edu/uwcc/icic/issues/ gender/ilo-ica/module/topic-2.html . 2000. ICA strategy for promoting gender equality (background info). Accessed May 7, 2009 at www.ica.coop/coop/2000-gender-strategy.pdf. . 2008. Strategy framework for equitable gender participation in cooperatives in Africa. Accessed May 7, 2009 at www.ica.coop/Africa/ra2008/2008-ra-gender-framework.pdf. ILO (International Labor Organization). 1969. Participation of workers in decisions within undertakings. Geneva: Labor-Management Relations Series no. 33. Quoted in Economic democracy, J. Espinosa and A. Zimbalist. New York: Academic Press. . 1984. Payment by results. Geneva, Switzerland: International Labor Organization. . 1995. Gender issues in cooperatives: An ILO - ICA perspective. Accessed May 7, 2009 at www .ica.coop/gender/ica-ilo-manual/ Jackall, R., and H. Levin, eds. 1984. Worker cooperatives in America. Berkeley, CA: University of California Press. Jacobs, J. 2003. Detours on the road to equality: Women, work and higher education. Contexts 2 (1): 32-41. Jones, D., and K. Ilayperuma. 1998. The determinants of employee participation during fading communism and early transition. In Advances in the economic analysis of participatory and labor-managed firms, vol. 6, ed. W. Bartlett and M. Uvalic. Stamford, CT: JAI Press. Karlsson, L. 1973. Experiences in employee participation in Sweden: 1969-1972. Ithaca, NY: Cornell University, Program on Participation and Labor-Managed Systems. Quoted in Economic democracy, J. Espinosa and A. Zimbalist. New York: Academic Press. Kasmir, S. 1996. The myth of Mondragn. Albany, NY: State University of New York. Klinger, S., C. Hartman, S. Anderson, J. Cavanagh, and H. Sklar. 2002. Executive excess 2002. Institute for Policy Studies and United for a Fair Economy. Accessed May 14, 2010 at www.faireconomy.org/files/ Executive_Excess_2002.pdf Krimerman, L. March 7, 2001. Personal e-mail correspondence. Kroll, M. 2005. CEO pay rates: U.S. vs. foreign nations. Accessed May 13, 2010 at www.cab.latech .edu/~mkroll/510_papers/fall_05/Group6.pdf Lohr, S. 1999. Sampling: Design and analysis. Pacific Grove, CA: Brooks/Cole Publishing Company, Duxbury Press. Miller, G. 1998. Interviews by author, tape recording, Nova Scotia, Canada. . 1999. Survey of worker co-operatives. Pilot survey conducted by author. United States. Miller, G., and J. Cline. 1998a. Interviews by author, tape recording, Nova Scotia, Canada. . 1998b. Interviews by author, tape recording, Prince Edward Island, Canada. Miller, G., and L. Gallagher. Unpublished manuscript. Gender equality in non-capitalist businesses: Womens status in worker cooperatives. National Cooperative Business Association (NCBA), Washington, DC. Phone conversation with representative. March 1, 2001.

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The National Institute for Gay, Lesbian, Bisexual and Transgender Education. 2002. www.thenational institute.org. Nembhard, J. G. 2008. NOTES - Workshop: African American women in worker cooperatives. Accessed May 7, 2009 at www.usworker.coop/system/files/NOTES+African+American+Women+in+Worker +Co-ops.pdf Oerton, S. 1994. Exploring women workers motives for employment in cooperative and collective organizations. Journal of Gender Studies 3: 289-97. ________. 1996. Beyond hierarchy: Gender, sexuality and the social economy. Bristol, PA: Taylor & Francis. Pencavel, J. 2001. Worker participation: Lessons from the worker co-ops of the Pacific Northwest. New York: Russell Sage Foundation. Smith, J. 2003. Worker co-operatives. BC Institute for Co-operative Studies, University of Victoria. Accessed May 7, 2009, at http://web.uvic.ca/bcics/research/worker/ Sudman, S. 1976. Applied sampling. New York: Academic Press. Tang, W. F. 1993. Worker participation in Chinese local industries. American Journal of Political Science 37 (3): 920-40. Theis, L., and L. Hammond Ketilson. 1994. Research for action: Women in co-operatives. Saskatoon, Saskatchewan: University of Saskatchewan Printing Services. Tolbert, P., and R. Stern. 1991. Inequality in a company of equals: Participation and control in large law firms. In International handbook of participation in organizations, ed. R. Russell and V. Rus. New York: Oxford University Press. University of Wisconsin Center for Cooperatives (UWCC). 2009. Cooperatives in the U.S. economy: Research on the economic impact of cooperatives. Accessed June 5, 2009 at http://reic.uwcc.wisc.edu/ issues. U.S. Federation of Worker Cooperatives. About worker cooperatives. Accessed April 30, 2009 at www .usworker.coop/aboutworkercoops . 2006. Confronting internalized oppression and fostering leadership among marginalized groups. Accessed May 7, 2009 at wwww.usworker.coop/conference2006/content . 2008. African-American women in worker cooperatives: Then and now. Accessed May 7, 2009 at www.usworker.coop/node/321 Vanek, J. 1970. The general theory of labor-managed market economies. Ithaca, NY: Cornell University Press.

Bio
Genna R. Miller is Visiting Instructor in the Economics Department and Womens Studies Program, Duke University, United States. Her research focuses on worker cooperatives and the labor managed sector in the United States, with an emphasis on gender relations in these firms. She has also conducted research involving the cooperative sector in Canada.

Economics Against Democracy


Manuel Couret Branco1

Review of Radical Political Economics 44(1) 2339 2012 Union for Radical Political Economics Reprints and permission: http://www. sagepub.com/journalsPermissions.nav DOI: 10.1177/0486613411418051 http://rrpe.sagepub.com

Abstract The main purpose of this paper is to demonstrate that mainstream liberal economics is intrinsically contradictory to the democratic ideal. The first stage of this demonstration concerns the deconstruction of the naturalization process of economics, in other words the process through which putative economic laws became equivalent to natural laws, which transformed economic decisions into technical issues supposedly free from democratic debate. The second stage concerns the ways in which the market has managed to legitimize its hegemony in society and the reasons why this contributes to the erosion of democracy. JEL classification: A13, B00, P10 Keywords economic theory, rationality, market, capitalism, democracy

1. Introduction
Even a quick glance at any serious newspaper today will inevitably show how economics has reached the status of a political fact, of a major political fact in reality. Partisan political programs have essentially become economic programs, and economic variables such as interest rates, oil prices, or unemployment have thereby become major global political issues. In an age in which democracy seems to have become the default political regime in almost every corner of the planet, one would expect economics to have accompanied this drift, to have introduced democratic logic into its process of decision making. Unfortunately this does not seem to be the case. Economics has, on the contrary, decisively contributed to the production of a justificatory ideology according to which, in the supposed interest of all, economic decisions depend on calculation rather than on deliberation. The political system resulting from this vision seems, therefore, to be increasingly made of imperatives independent of that collective political will that supports citizenship. As we will see, in mainstream economics there is only one best solution for each economic problem and thus the purpose of policy consists in finding out that solution and not in confronting collective preferences, in other words in engaging in political debate. In the realm of politics transformed into economics, pluralism is, therefore, crowded out; in other words there is no alternative as former British Prime Minister Margaret Thatcher once stated.
1

NICPRI/University of vora, vora, Portugal

Date received: April 20, 2009 Date accepted: July 24, 2010 Corresponding Author: Manuel Couret Branco, Departamento de Economia, NICPRI/University of vora, Largo dos Colegiais, 2, 7000, vora, Portugal Email: mbranco@uevora.pt

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This disregard of economics for democracy is not the outcome of economics having somehow been hijacked by dubious personal interests, in other words doing the right economics wrongly, but of simply following its logic, that is to say of doing the wrong economics rightly (see Branco and Henriques 2010). The conflict between economics and democracy does not result, therefore, from any moral weakness of economic actors but from an intrinsic incompatibility between the logic of economics and that of democracy, between the institutions of economics, such as the market, and the institutions of democracy. The main goal of this article is highlighting some of the ways in which economics conflicts with democracy, better said substantive democracy. In the following lines it will be shown why economics methodology, rationality, and formalization can conflict with deepening democracy in modern society. In order to avoid misunderstandings one should probably start by stating what will be taken here as economics and substantive democracy. Economics will be mainstream economics, an individualistic, utilitarian, and equilibriumdriven approach obsessed with mathematical formalization. Mainstream economics dogmatically believes in the virtues of the market and in the natural driving force of economic behaviors, and has produced a system in which the means seem to have overruled the goals, or rather the means have become the goals, an inversion that is partly responsible for the continuous mismatching between the fates of the economy and the community. Regarding democracy, one must agree that its definition is in itself a broad and ambitious project that throughout history has led to many studies and thereby a wide variety of proposals. I do not intend in this article to participate in this discussion, a task far beyond my skills. A minimalist, and almost formal, version adopted by such unavoidable political scientists as Samuel Huntington or Adam Przeworski, for instance, presents democracy as being the regular performance of competitive elections (see Mazo 2005). Although competitive elections undoubtedly constitute a key element of democracy, this definition seems disappointingly plain. A richer discussion of the relationship between economics and democracy calls, therefore, for a more elaborate definition of democracy, one which, besides elections, demands wide civil liberties including freedom of association and expression and freedom of the press, to be guaranteed; citizens to be deeply involved in the decisions on matters that affect them; and institutions to be strongly committed with responsibility and accountability in the running of public affairs. This is the essence of substantive democracy, a democracy that not only aims at the interest of the governed but also at their meaningful participation in the process of decision making. Without wishing to exhaust the subject, this article will try to reveal the contradiction between economics and democracy in two stages. The first stage concerns the deconstruction of the naturalization process economics has undergone. In this process putative economic laws have been made equivalent to natural laws and economic decisions transformed into plain technical issues supposedly free from democratic debate. The second stage concerns the description of the ways in which the market has managed to legitimize its hegemony in society and the reasons why this contributes to the erosion of democracy. Within this hegemony five aspects will be dealt with: the imposition of a market jurisdiction, the deregulation of the economy, the process of political and economic unaccountability, the de-politicization of choice, and the conflict between the territorialization of democracy and the de-territorialization of the market.

2. The Naturalization of Economics


The first step in demonstrating the conflict between economics and democracy should be taken by dissecting the naturalization process developed since the foundation of mainstream economics in order to be considered on the same foot as natural sciences. However laudable the search for objectivity and certainty by economics may be, the ultimate consequence of liberating itself from

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the complexity of human relations and of transforming itself into the simple application of immanent laws consists, nonetheless, in subtracting an important set of decisions (namely those referring to economic policy) from the political stage, in other words from democracy. Stating in the Wealth of Nations that the desire of bettering our condition is a desire which, though generally calm and dispassionate, comes with us from the womb, and never leaves us till we go to the grave, Adam Smith (1973) sent a powerful yet dubious message to future studies in economic motivation, which is that, although undoubtedly a social phenomenon, the motivation for economic welfare stems from the individual, from the intrinsic nature of the human being, and therefore not only is it independent from societys history but it also cuts across cultures. The culminating point of this attempt to eliminate the historical character of economics can be found in the very instructive story of the resistible rise of the homo economicus, that is to say the stereotype of the economic agent upon which mainstream economics has been built. More than just an imaginary being, in other words an abstraction or a mere playful fiction, characterized by its alleged self interest and maximizing rationality, and to whom some economists would perhaps like us to resemble, the economic man is above all a politically meaningful fiction. Indeed, mainstream economics is perfectly aware of this fantasy, but nevertheless finds surprising comfort in perpetuating it. Robert Lucas, for instance, says, The economic man is a robot pertaining to an artificial economic system . . . in a way which real people never are. The economic man has proven to be an extremely useful and flexible abstraction, but it is assuredly not the best image of what human nature is or should be (Lucas 1994: 85). Paul Krugman, in turn, says Homo Economicus is a poorly plausible caricature, but he adds, it is a very highly productive caricature, and no alternative has been found till now (Krugman 1996: 78). I have already reported elsewhere how, in the light of science, it is impossible for economics to rest on such assumptions (Branco 2000); therefore I will not come back to this in order to concentrate on the purpose of these assumptions. If the idea of a self-interested and rational economic agent still prevails, it is due to the fact that this character is a powerful instrument in reducing complexity, without which, in presenting its interpretation of the world, mainstream economics would not have been able to use mathematics so unrestrainedly. Now if the economic man does not exist, yet he can be found at the root of most mainstream interpretations of economic phenomena, he is therefore elevated from fiction to the category of myth. Briefly, a myth consists of a fabulous interpretation of a given phenomenon with the intention of conveying a practical discourse. The transcription of some admirable lines of philosopher and sociologist Roland Barthes on the semiology of myth perfectly enlightens this argument: . . . myth is constituted by the loss of the historical quality of things: in it, things lose the memory that they once were made . . . . A conjuring trick has taken place; it has turned reality inside out, it has emptied it of history and has filled it with nature, it has removed from things their human meaning so as to make them signify a human insignificance. The function of myth is to empty reality: it is, literally, a ceaseless flowing out, a haemorrhage, or perhaps an evaporation, in short a perceptible absence . . . . It is now possible to complete the semiological definition of myth in a bourgeois society: myth is depoliticized speech. One must naturally understand political in its deeper meaning, as describing the whole of human relations in their real, social structure, in their power of making the world . . . . Myth does not deny things, on the contrary, its function is to talk about them; simply, it purifies them, it makes them innocent, it gives them a natural and eternal justification, it gives them a clarity which is not that of an explanation but that of a statement of fact. . . . In passing from history to nature, myth acts economically: it abolishes the complexity of human acts, it gives them the simplicity of essences, it does away with all dialectics, with any going back beyond what is immediately visible,

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Review of Radical Political Economics 44(1) it organizes a world which is without contradictions because it is without depth, a world wide open and wallowing in the evident, it establishes a blissful clarity: things appear to mean something by themselves. (Barthes 1972 [1957]: 142-143)

We can say, therefore, that Homo Economicus, as the founding myth of mainstream economics, constitutes an attempt to obliterate the historical character of economics, in other words an attempt to conceal the fact that economic actions essentially result from social relations woven by people in the course of time, and not from some mechanical application of putative natural laws that transcend them. The following question economics is called upon to answer concerns the institutions driving the economy so as to allow economic man to express himself at his best. For Adam Smith it is quite clear that this institution is the market. In the Wealth of Nations he states that: Without any intervention of law, therefore, the private interests and passions of men naturally lead them to divide and distribute the stock of every society among all the different employments carried on in it as nearly as possible in the proportion which is most agreeable to the interest of the whole society. (Smith 1973) In a blow of magic an economic system, in other words a set of mechanisms people implement in order to organize the exchange process, such as the market, becomes as natural as our fictional character, and therefore also as mythological, that is to say as deprived of history as the economic man himself. Indeed, in mainstream economic literature there is no testimony of such a thing as the creation of the market. The politically influential French economist Alain Minc, for instance, told magazine vnement du Jeudi that, In the history of mankind, since it became mankind, the market is a natural state of society (in Brune 1997). If it were not for the historical traces concerning the creation of the market, one could almost succumb to the marvelous fable of its natural origin. Indeed, as an institution, the market seems to have been already present by the end of the Stone Age. If its first formal descriptions apparently occur in China in the seventh century before Christ (Chang 1992), and if it appears to be also present during the Roman Empire, the market seems to have played only a mere supporting role until the nineteenth century (Polanyi 1983: 71). According to Jean Pierre Dupuy (1994) the market economy was the answer given by men to the challenge of living together peacefully in a society within which the religious and the sacred were continuously losing social relevance. In other words, market economy seems, after all, to have embodied the victory of the bourgeois order over the ancient regime. Unaware of being both a witness to and an actor within history, Franois Quesnay, a medical doctor at the court of King Louis XV and a reputed specialist in blood-letting, was one of the first economists, so to speak, to have treated economics as a natural science. According to him, economic phenomena were governed by laws identical to those of physics, universal and prior to social conventions. He claimed, for instance, that private property was one of the natural rights, which he defined as those given to men by nature, in the same way as all men, to whom nature has given eyes, should have the right to light (Quesnay [1758] 1985). As a matter of fact, in 1767, one of his followers Dupont de Nemours would entitle this school of thought Physiocracy, which literally means government by nature. Half a century later, David Ricardo, the classical economist who discovered economics while getting bored at a spa, constructed an extraordinary economic theory according to which income distribution essentially obeyed natural phenomena. First, in Ricardos view, the level of rent charged by landlords depended on relative land fertility and demographic pressure, which in turn was explained by a natural population law, as with Robert Malthus. Second, wages earned by workers were essentially governed by the price of wheat, which depended once again on relative

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land fertility and demographic pressure. Finally, entrepreneurs profit consisted merely of a residue after rents and wages were subtracted from general income (Ricardo [1817] 1983). Therefore, something as crucial within economics as income distribution, and with such a political charge, was determined naturally, and hardly disputable by economic policy. Not long after the historicist interruption Karl Marx provoked in economics, Lon Walras, one of the leading scientists of the marginalist school and the father of general equilibrium, resumed and perfected the naturalist interpretation of economics. He spoke of the exchange value of wheat, in other words of the price of wheat, in these terms: The exchange value factor, once established, takes, thus, the shape of a natural fact, natural in its origin, natural in its manifestation, natural in its way of being. But the exchange value is a quantity. It depends on mathematics . . . pure political economy, exchange value theory, or value theory . . . is, like mechanics, like hydraulics, a physical and mathematical science. (in Denis 1993) Mainstream economists can reply that they are not like this anymore, that economic modeling is no longer dominated by physics, but it seems, nonetheless, that the enticing power of natural explanations to economic phenomena is still vivid, and that, in one shape or the other, naturalist rhetoric prevails within mainstream discourse. Let me just cite a peculiar research piece by Gianni de Fraja which proposes an explanation for what he takes as being the universal human desire for increasing consumption. In Frajas own words his paper holds that: . . . this consumption was moulded in evolutionary times by a mechanism known to biologists as sexual selection, whereby a certain traitobservable consumptionis used by members of one sex to signal their unobservable characteristics valuable to members of the opposite sex. It then goes on to show that the standard economics problem of utility maximisation is formally equivalent to the standard biology problem of the maximisation of individual fitness, the ability to pass genes to future generations. (de Fraja 2006) In other words the explanation for this so-called basic economic problem could, once again, be found in nature, not just exclusively human as before, but animal in general. In conclusion, what the natural economics rhetoric purports is that decisions in the so-called economic realm are technical problems and, therefore, transcend people, and consequently transcend democratic debate. Laws concerning dilation of mass are not balloted; climatic cycles, floods, or droughts are not submitted to referendums. Why should one debate, then, such a thing as an equilibrium level of wage or a natural rate of unemployment? The integration of economics amid natural sciences can be viewed, thus, as an attempt to rescue it from the grip of collective preferences, and, therefore, from politics and democracy. Before moving on one should not fail to mention that despite the obvious Marxian influence on soviet leaders, the first alternative to market capitalism also adopted the idea according to which economics is essentially a technical problem. In the first days of the Soviet Union, politics was certainly given a leading role, but on account of the famous objective laws produced by Marxian economics, although historical and not natural, one witnessed a similar kind of de-politicization of politics, consisting of nothing more than the application of such objective laws. Leon Trotsky himself, in his work Terrorism and Communism, wrote that the only conflicts that would prevail within the forthcoming socialist economy would be those developed between what he called technical parties, reducing, thus, economic choices to mere technical options, inevitably out of reach of political debate (Sapir 2002: 179).

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3. Scientific Rationality Against Democratic Rationality


An economic decision, like any other decision, can be divided into three basic stages: a moment to gather relevant information, including values and beliefs socially and culturally transmitted; a moment to screen this information; and finally a moment to produce the decision based on the information gathered. Admitting the reductive character of the following binary classification, this decision can be taken according to either a scientific rationality or a democratic rationality. By scientific rationality one should understand that which is based on knowledge obtained by the means of rigorous procedures, demonstrable and susceptible of being reproduced, and that which allows testing hypothesis and interprets results intended to be objective. By democratic rationality one should understand that which is based on the right possessed by each individual to be consulted on decisions that affect them. A truly democratic society demands not only that every citizen must participate in the making of decisions that concern them but also that decisions must not be served wrapped in a shroud of ignorance. In a democratic society, therefore, scientific and democratic rationalities are complementary, scientific rationality being given the role of enlightening the masses, that is to say the demos. Unfortunately, with mainstream economics it seems rather easy for this complementarity to be transformed into conflict, in other words for economic science to exclude the masses instead of enlightening them.

3.1 Hard Science Is Not Democratically Debatable


Knowledge produced by natural sciences, by hard sciences, can be subjected to two types of discussion only: one concerning the validity of its formulation, resulting from the application of scientific rationality, and another the consequences of its implementation. Although one can utter a preference regarding the latter domain, in other words confront alternatives based on the expression of values, such option is not acceptable when discussing the former. Indeed, it is senseless to utter preferences in relation to scientific interpretations regarding a given phenomenon as they can only be either right or wrong. Therefore, if two scientific interpretations are issued, one of them will necessarily be wrong, if not both. Scientific laws are applied not debated. It is possible, for instance, to democratically debate the location of a nuclear power plant, but it makes no sense at all to ballot the principles which establish the validity of producing nuclear energy through fission of the atomic nucleus. Hence, scientific laws produced by a naturalized economics should naturally receive the same treatment. Indeed, if economics can present an optimal solution for a particular problem affecting the economy, then by definition that solution is the only one which, rationally, society should adopt. Within this framework, the enforcement of economic laws does not constitute a decision per se, insofar as it does not reflect a choice. In a very elucidating manner, the 1983 winner of the Bank of Swedens Prize in Economics in Memory of Alfred Nobel, Gerard Debreu, stated that economics is not an object of personal preference or political opinion, and that economics foundations are scientific and economic problems universal under any regime (Debreu 1984: 80). Now, as Jacques Sapir (2002) puts it well, in a world in which for each problem there is only one corresponding solution, pluralism and democratic debate are senseless. Therefore, putative scientific economic laws, interfering with peoples everyday lives and thereby affecting them, should be by definition exempted from democratic legitimization. The use and abuse of science to legitimize the eviction of democratic debate is not recent. There are several historical examples of how scientific, or pseudo-scientific, rationality was used to hinder democratic rationality, namely by claiming that not all individuals were qualified to participate in the decision-making process, and thereby their participation in elections was

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contradictory to the very idea of democracy. Albert Hirschman in his work entitled The Rhetoric of Reaction, states the following: . . . the undoubted advance of democratic political forms in the second half of the century took place in the midst of a diffuse mood of skepticism and hostility. Then, towards the centurys end, this mood found a more sophisticated expression in social scientific theories, as medical and psychological discoveries showed human behavior to be motivated by irrational forces to a much greater extent than had been acknowledged before. The idea of basing political governance on universal suffrage could henceforth be exposed as a belated product, and, indeed, as an obsolete relic of the Enlightenment . . . . (Hirschman 1991: 23) Bear in mind, nevertheless, that economists as scientists are not against democracy; they do not consider democracy to be dangerous to the expression of economic forces, on the contrary. They simply believe that democracy does not apply to economics; in other words they consider that economic decisions should be exempted from peoples judgment, because economic laws and economic decisions do not belong to the same domain as democracy. That is more or less what Vilfredo Pareto had in mind in his Cours dconomie Politique when he stated that since income distribution is a natural law, it is futile to try to change it and, hence, even to discuss it. As a matter of fact this futility argument is considered by Albert Hirschman one of the three faces of the above mentioned rhetoric of reaction, the two others being perversity and jeopardy (Hirschman 1991). On Paretos rhetoric Hirschman says: Once Pareto had elevated his statistical findings about income distribution to the status of a natural law, important policy implications followed. It could now be claimed that, just as in the case of interference with the Law of Supply and Demand, it was futile (at best) to attempt to change so basic and invariant an aspect of the economy as the distribution of income, whether through expropriation, taxation, or welfare legislation. (Hirschman 1991: 57) The speech on structural adjustment, for instance, fits particularly well into this framework. The guardians of the Washington Consensus, the virtual temple of economic orthodoxy, namely the International Monetary Fund (IMF) and the World Bank, repeat to satiety that there is only one alternative to tear away developing countries from the crisis in which they seem to be stuck: theirs. One is not supposed, therefore, to discuss the validity of the recipe, as this is the product of indisputable scientific laws; at most one can discuss the way in which the recipe should be applied, and indeed it is occasionally recommended that structural adjustment should present a human face (see Cornia et al. 1987).

3.2 The Expert Dictatorship


The above qualified use and abuse of scientific rationality allows economics to resort to yet another subterfuge equally conducive to the marginalization of democracy. Indeed, the growing complexity of problems affecting modern societies has been used to legitimize the transfer of decisions on matters that affect the community, from the hands of elected representatives of the people to those of individuals holding the required knowledge to deal with them: the experts. Even if this process responds to the wish to upgrade decisions, and so render a better service to the public, democracy can end up being hindered. Indeed, as a result of the plea for scientific grounding, one can witness a real privatization of public decisions, in other words an expropriation of democracy. This privatization may nevertheless even be welcomed by the public, in front

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of whom politicians tend to be voluble, whereas experts are unquestionable because they are supposed to hold the power of knowledge. The preponderance of technical arguments for supporting public decisions also implies increasing intellectual difficulty in dealing with problems, crowding out, therefore, lay people from decision processes. Many religions, throughout history, subdued people by resorting to this principle. Indeed, religious dignitaries usually presented themselves as depositaries of a divine revelation, whose interpretation was extremely complex and demanded specific knowledge, maybe even direct access to the creator himself (Brown 2001). In some societies like those of nomadic people in the deserts, whose survival depended on the exactitude of the information about the territories they inhabited, but who, at the time, did not possess precise and detailed maps, mental maps were crucial. By mental map one should understand an implicit and non-materialized spatial representation, a set of ideas regarding more or less vast territories, according to which individuals or groups of individuals act (Lacoste 1993: 379). In such societies the possession of the best mental maps, in other words the most relevant knowledge to drive the nomadic tribes across their indefinite territory, legitimized the exercise of political power. Tom Burns, in a report on the future of parliamentary democracy in Europe, argued that one of the main reasons for which parliamentary systems are progressively marginalized in modern politics and governance rests on the fact that Western societies have become too complicated for a parliament, or any other administration, to control them, to acquire the qualifications needed to deliberate on relevant matters; and he adds that numerous policy conceptions and applications are produced within thousands of agencies (Burns 2000). This ideology of competence (see Gonalves 1996; Marchal 2006), in other words this idea according to which mere citizens, and inclusively politicians, are incapable of understanding the high complexity of social and economic reality and must resign themselves to delegate the power of decision making to a caste of experts, indeed constitutes a powerful argument to debilitate democracy. Former European Commissioner Joo de Deus Pinheiro, for example, argued in a recent interview that submitting the then freshly approved Treaty of Lisbon to a referendum was anti-democratic precisely because of its technical nature. The delegation of power in institutions allegedly independent, such as the emancipated central banks, constitutes a paradigmatic example of the above-mentioned debilitation of democracy, because the adjective independent does not refer to the myriad interests scattered within society, but merely to immunity regarding the mechanisms of democratic control, such as parliaments. One should remember, incidentally, that Edward Prescott and Finn Kydland, who received the 2004 Bank of Swedens Prize in Economics in Memory of Alfred Nobel for their contribution in demonstrating the advantages of independent central banks, were much criticized by renowned mathematicians for making poor use of mathematics with the purpose of justifying questionable hypotheses (Henderson 2006). It is also quite frequent for the IMF to shield itself behind recommendations of its technical staff when trying to justify the polemical wording of some letters of intention, that is to say the resolutions by which countries that have resorted to the fund accept its commandments. These letters of intention, nevertheless, constitute much more than mere technical documents; they often consist in real political programs (see Momani 2004). It is indeed very cynical, to say the least, to take measures that will dramatically reduce public expenditure to alleviate poverty or support child education, for example, as mere technical issues.

4. The Hegemony of Market Ideology


For a long while it seemed that the market had been given the role of an instrument to procure well being, a role in which it succeeded quite well. Once it turned out that the market no longer

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had to face credible competing systems of driving the economy, it stridently claimed a more important role; in other words, slowly, but inexorably, the market has been upgraded into a goal, and consequently has submitted society to its own purposes. More than fifty years ago Karl Polanyi used the term market society to name this inversion of values. According to Polanyi such a society was characterized by the adoption of market rationale not only by the economy but also by society at large (Polanyi 1983: 88). It seems that this transformation was handled both smoothly and effectively. Take schooling for instance: for a long time considered an instrument of citizenship, not always with the best purposes actually, schools today are taken mainly as qualification factories, and their social utility measured by the efficiency displayed in the production of these qualifications. In short, the hegemony of market ideology means that it is not within the competence of the market to serve the interests of society; but rather, on the contrary, it is within the competence of society to serve the interests of the market. The effects of this ideology on democracy will be examined first of all by means of the imposition of a market jurisdiction, in other words as the result of the market becoming both a source and a subject of the law, and the transformation of economic deregulation into a paradigm of freedom; second as a result of political unaccountability and irresponsibility; third as the consequence of what one could call the de-politicization of choice; and finally through the conflict between the territorialization of democracy and the de-territorialization of the market.

4.1 Market Jurisdiction and Deregulation of the Economy


For obvious reasons it is not the purpose here to dig deep into the dogmatic discussion that has been going on for quite a while on the matter of the market becoming a subject of the law. Nevertheless, some explanation of its economic relevance is needed. The question is: can the market, in the same way as individuals or the state, claim to be a subject of the law? In other words can the market claim to be affected by third parties, and consequently demand reparation? This discussion has also been going on regarding animals and nature itself (see Ferry 1992). Therefore, more than just a debate on whether the market should legitimately aspire to being placed on an equal footing legally with both individuals and the state, it is the subordination of individuals and the state to the market that is the key discussion here. The fact that the rights of the market can be ranked higher than those of individuals and the state becomes, therefore, more than just an academic hypothesis, but almost a paradigm in arbitrating rights. Indeed, several decisions of the World Trade Organization (WTO), for instance, constitute a perfect example of the adoption of the principle according to which the rights of the people are subordinated to those of the market. One of the purposes of the above-mentioned organization consists in tracking and identifying national practices that are contrary to the spirit of free markets, or rather deregulated. Thereby, decisions taken democratically within member states of the WTO can be contested on the grounds of an alleged incompatibility of these decisions with the rules of freedom of circulation of goods and services, meaning that the market can overrule citizens. The discussion regarding the innocuousness of certain products originating from genetic engineering, for example, has revealed the existence of a conflict between the principle of precaution and freedom of the market. The former principle demands an independent and unequivocal demonstration of the absence of danger of genetically modified organisms for human health as a condition for its approval and further circulation; the latter argues that, on the contrary, it is not within the competence of producers to demonstrate the innocuousness of their products (see George 1999), but rather it is up to those who fear the possible consequences of their consumption to demonstrate their harmfulness before prohibiting the referred products. This conflict has

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transcended the consumption sphere because, in reality, it opposes two different sources of legitimacy: one of which, democratic, because it derives from the citizen through national parliaments; and the other, technocratic, because, in turn, it arises from the market through the expression of economic interests. A good example of this conflict is given by an almost anecdotal commercial dispute between France and the United States in the 1990s. On the one hand, France was considered to be violating freedom of the market through its refusal to import American beef on the grounds that this was potentially harmful for human health because of the use of growth hormones; and on the other hand, in order to compensate the market for being deprived of its alleged rights, the United States was authorized to punish France by imposing prohibitive taxation on the imports of French Roquefort cheese (George 1999). Inversely one can find the same sort of attitudes, namely concerning a Californian standard imposing a minimum percentage of recycled material in glass containers (Morris 1996: 444). What is at stake here is not only the undeniably fierce competition between the two countries in world markets, but also, and mainly so, the unfolding of a logic that submits democratic decisions, aiming at protecting the environment and public health, to bureaucratic decisions based on the premise of the allocation of rights to the free market. Some words, finally, on the famous Multilateral Agreement on Investment (MAI), negotiated between members of the Organization for Economic Cooperation and Development (OECD) between 1995 and 1998, and which failed after socialist Prime Minister Lionel Jospin withdrew France from the agreement. Its logic contained almost all the perversities described above, especially regarding its procedures. One of the arrangements of this agreement concerned the rigid limitations binding the states willing to withdraw from the agreement after having signed it (Sapir 2002). The near irrevocability of MAI imposed restrictions on governments that went much farther than what was usual in international treaties, intolerably restricting their programmatic freedom, and therefore their citizens choice, tying society to an economic global program rendered unquestionable. Finally by recurrently asking for the removal of barriers to market adjustment, mainstream economics has clearly put economic deregulation at the heart of its program. This deregulation is not merely a situation strategy, in other words an adaptation to modern times; on the contrary the idea of an absence of regulation is deeply embedded in mainstream economic theory since its beginnings. Bernard de Mandeville, a precursor of mainstream economics, argues in his Fable of the Bees that freedom should be taken as the absence of impediments to individual action (Haworth 1994). In the global economy, this deregulation has primarily affected the ability of governments to make economic policy, be it fiscal, monetary, or international, which means that any government that attempts to implement measures that contradict those of the majority of world governments is threatened by the practical neutralization of its policy (Rachline 1998). Not only is this fact, by itself, sufficiently illustrative of the absence of real choice in defining the course to be followed by nations, but as Robin Archer (1995) puts it, democracy doctrinally demands some authority, in other words obstruction to action. Although in terms of human rights, every economist, even a libertarian, will probably agree that freedom is unconceivable without some restraint on individuals, this same restraint does not seem to be desirable for the economy, the Mandeville interpretation of freedom having apparently become a paradigm in mainstream economics. This paradigm is detrimental to democracy. Imagine an economy is characterized by the absence of regulation from the state. In this situation one can say that the whole of national income, for example, is distributed without any interference from political power. In these conditions what will the role of politics and, therefore, of democracy be, asks Jean-Paul Fitoussi (2004)? The opposite example would lead to the same conclusion, although for different reasons. In this case, if national income were to be distributed exclusively by the state, each individuals income would

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depend almost entirely on electoral outcomes, which would lead individuals to build interest coalitions that would make democratic life impossible. Jean-Paul Fitoussi concludes that a distributive system including the state is necessary for democracy, but also that it is crucial that a significant part of each individuals income must be determined through non-political processes (Fitoussi 2004).

4.2 The Dilution of Responsibility and the Unaccountability of the Market


In the beginning of this article responsibility and accountability from those entities which exert power were presented as conditions of democracy. Being responsible and accountable means that the entity to which citizens have democratically conferred legitimacy to decide on their behalf should be answerable to them. This responsibility can be observed in two different instances. The first instance concerns the attribution of the very responsibility to decide, in other words the definition of who has the power, and the second the way according to which citizens can both grant and control the power to decide. Who then has the power in the world of globalized market capitalism? It seems clear that the state is losing power, not as a consequence of some sort of obscure conspiracy, but partly as an outcome of its own programmatic will. Indeed, after deregulating the economy; eliminating the control of capital flows; abdicating monetary policy, exchange policy, and part of fiscal policy, the state has voluntarily given up genuine power to decide on economic issues that really matter. This growing irrelevance of the state has led Michel Beaud to argue that contemporary societies would be suffering an entirely new disease, acracy, in other words helplessness of power, or the loss of political will (Beaud 1997: 237). Thus, one is entitled to wonder if the state is truly responsible, if the legitimacy citizens grant the state on the occasion of elections is not somehow misdirected. The state still has some power and to some extent the crisis following the subprime crash seemed even to revive its role. Warnings from critical insider economists such as Paul Krugman (2009) or Joseph Stiglitz (2007) and a world-wide interventionist surge in the financial system have also suggested the possibility of an inflection in the economic liberalization trend. However, once the first signs of a faint economic recovery were spotted, the libertarian rhetoric resurfaced. On the other hand, the increasingly irrelevant state intervention seems to be characterized by a necessitarian rather than by a normative foundation, in other words by obligation rather than by conviction. How many times have governments resorted to the excuse that they did not have the choice in order to justify controversial decisions to their citizens? One of the most striking aspects of this irresponsibility drift of the state consists in the relegation of certain economic policy objectives. In contrast with what characterized the post-Second World War period until the mid-1970s, when economic policy was formulated in terms of final goals such as full employment or just bettering the living conditions of the people, economic policy after the 1980s became formulated preferentially in terms of intermediary objectives, like budget equilibrium or market flexibility, a drift that more than anything embodies a de-politicization of economic policy. By acting in this manner, the state sweeps responsibility away, or rather the state essentially becomes responsible to the market rather than to the citizen. This subordination of the state to the market was very clearly brought out by a former chairman of the Bundesbank at the World Economic Forum, held in Davos in February 1996. He sustained that political leaders should be aware that, from the moment they were elected, they would be submitted to the control of financial markets (in Petrella 1997). This irrelevancy of the state also stems from the greater ease of corporations, especially as far as multinationals are concerned, in adapting to the role of a global actor, when compared to the state, an eminently national institution (Groupe de Lisbonne 1995: 122).

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Now, if the state is not responsible for the decisions that affect citizens, who is responsible? Who should be held accountable by citizens? The market? If the market is not directly accountable to anybody, much less will it be to citizens. Indeed, in mainstream theory markets in a capitalist society are at the most indirectly accountable to corporations shareholders (Ellerman 2007: 16-17). According to this logic of corporate governance in a capitalist society, decisions are not taken by all those affected by them, but by those who own the capital. Therefore, at best, in a society where economic decisions are mainly taken by the market, as pleaded by mainstream economics, democratic control becomes dependent on each shareholders financial weight; at worst, citizens will be governed by an unaccountable entity. In any of these hypotheses one is facing a flagrant erosion of the democratic idea which has instituted the requirement of accounting for decisions that affect third parties and has granted each adult citizen one vote regardless of their condition. The loss of power by the state should not necessarily in itself be considered anti-democratic. If this loss had corresponded to a transfer of power from the state (usually taken as the bad guy in human rights discourse) to individuals, in other words if it had corresponded to the empowerment of citizens, democracy would not have suffered in the least. Indeed, other forms of appropriation of the social product, such as labor-managed firms or community-based economic institutions (see Ellerman 2007; Alperovitz 2004), and the development of the stakeholder concept (see Driver and Thompson 2002), may be important, but necessarily partial, steps towards economic democracy. However, not only do they apply in practice to a very small minority of firms, but also they clearly do not represent the default system enshrined by mainstream economics. In reality, one has been witnessing a transfer of power from an accountable entity, since those who exert power within the democratic state are both elected and known, to an unaccountable entity, the market, which, by definition, is anonymous. This unaccountability of the market constitutes a serious menace to democracy on the grounds that concentration of power in unaccountable institutions has usually given rise to the abuse of power, as David Korten (1996: 190) stresses. On this matter, the example of the concentration of power in the hands of an unaccountable totalitarian state in the Eastern European political regimes of the second half of the twentieth century should alert all those in favor of a new concentration of power in the hands of another unaccountable entity such as the market. Not only the concentration of power in the hands of an unaccountable entity in those years of so-called scientific socialism was clearly undemocratic, but also it produced an unsustainable economic inefficiency. In this process, according to David Korten, capitalism would be revealing its proverbial self-destructive tendency, not so much for the reasons pointed out by the Marxian critique, but ironically for the same reasons that led scientific socialism to collapse (Korten 1996: 190).

4.3 The De-politicization of Choice or the De-politicization of Politics


In the following lines we shall examine a key element of a substantive version of democracy, one according to which, in the exercise of real democracy, the ultimate issue being balloted is the way we wish to live, in other words the choice of an economic system. As stated above governments that do not comply to market capitalist rules are threatened by the neutralization of their policy. This means that in practice there is no alternative to market capitalism. This absence of alternative is in turn a threat to democracy even if a majority of voters support market capitalism. Let us suppose an electoral process in which market capitalism, among alternative ways of living, is clearly picked by a majority of voters. In this case one can say that market capitalism was democratically chosen as the system under which people wish to live. Let us now imagine another situation in which the same set of voters, whom we know prefer market capitalism, is again called upon to choose the economic system they wish to live under, but where there is no alternative to

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market capitalism. The result of the process will most probably be the same as in the previous call, in other words market capitalism will get the majority of the votes, and will therefore be democratically legitimized. The outcome of both electoral processes is the same: market capitalism wins. These two processes can also be considered democratic in the sense that the will of the majority triumphed. Nevertheless, these processes are fundamentally different from the point of view of substantive democracy. According to Amartya Sen, the fact that, in a process such as the second, there is no available alternative to the voters constitutes a deprivation of freedom, curtailing the democratic character of the electoral process (Sen 1993: 57). Norberto Bobbio shares the same opinion. He states that a democratic political system must not only allow extensive participation of the people in the process of collective decision making but also guarantee that those that are called upon to decide are faced with real alternatives, and are allowed to chose between one or the other of these same alternatives (in Marchal 2006: 113). Colin Hay showed how, in Great Britain for example, Tony Blairs New Labour, rather than an alternative, established itself as the heir to Margaret Thatchers conservative economic policy (Hay 2004). This absence of alternatives is certainly not foreign to peoples growing alienation regarding electoral processes, opening the gates, as Richard Norgaard stresses, to the supremacy of technocratic decisions over those democratically debated, renouncing in fine to the participation of the people in the elaboration of decisions (Norgaard 1994: 145). In summary, market capitalism seems to authorize various streams of thought on how one should live, as long as they think the same. The problem does not concern the absence of freedom of choice in itself; market capitalism allows extensive freedom of choice in various domains, but the de-politicization of choice, the transformation of the citizen into a mere consumer, reduces the reason of the former to the rationality of the latter. Suddenly, the words of an eminent Financial Times editor, claiming that democracy consists in knowing what brand of cereals one will choose for breakfast (in Collin 1997: 173), makes perfect sense.

4.4 The Territorialization of Democracy versus the De-territorialization of the Market


As it has been previously stressed, one of the conditions demanded of a democratic regime is the right of the people to participate in the process of making decisions that will affect them. Such participation is usually obtained through free and competitive elections involving every citizen of age. In this sense the only true problem here is to decide who is a citizen and who is not. This is a very important question because a decision can only be democratically legitimate if it is sufficiently independent of influences and interactions originated outside the demos (Collin 1997; Dahl 1997). The democratic system is, thereby, confined to the political geography of a given community. That is why the historical development of the democratic idea followed the steps of the evolution of this political space. According to Michel Beaud both Greek democracy and the tax payers democracy of European pre-capitalist city-states expressed themselves within a finite space. The physical boundaries of both these democracies matched those of the city and the interests at stake corresponded to those of very specific groups, citizens of antiquity in the first case and merchant bourgeoisie in the second (Beaud 1997: 233). Modern democracy, in turn, expanded its political space by matching its territory with the boundaries of the nation-state and by adopting universal suffrage. The path taken by market capitalism is substantially different, however. The spatial confinement that the very notion of market suggests, that is to say the setting where trade takes place, gave way in the global era, not to the expansion of its territory, but to its disentanglement; in other words to

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a de-territorialization of the mechanisms of creation, production, and distribution of goods and services, contrasting sharply with the territorialization of democracy. Thus, whereas a substantial part of major economic decisions is made within a de-territorialized frame, better said within a virtual territory woven in network by the world markets, the mechanisms of democratic participation and its constitutive institutions are, on the contrary, confined to the growing narrowness of the nation-state. The result is an increasing physical separation between the centers of decision and the people affected by those same decisions (see Cassen 1997), thus weakening the scope of democracy. It seems that the transformation of the economy is going on at a faster pace than the transformation of the polity. Is this a coincidence or is it part of a deeper movement? According to David Morris this increasing separation between governance and citizenship is part of a long process also characterized by the separation between the producer and the consumer or between the city dump and the dustbin (Morris 1996: 220). The separation between the decision and the community affected by that same decision would then be the political expression of specialization and social division of labor, two of the fundamental characteristics of the development of a market economy. In this sense the conflict between the global economy and democracy could be interpreted as a normal outcome of the expansion of market capitalism. This does not mean that only small communities closed to the outside world could really live in democracy, but that new ways of participating democratically in the decisions that are shaping the world today need to be found. In the more than likely absence of the state, if the actual trend should persist, who could be called to replace it? As we have already argued, corporations, most especially large multinationals, can hardly aspire to play that role since, within the system advocated by economics, they are only responsible to shareholders. Organizing a new democracy around corporations would, therefore, contribute to shrink the demos to its proto-democratic limits. On the other hand, the difficulties that have been experienced in the construction of supra-national democracies, within the European Union as much as within international organizations (see Held 1997; Dahl 2000), also show that there is still no serious alternative to the nation-state.

5. Conclusion
By stating in his Democracy in America that when searching for what is best business entrepreneurs may disregard the essential, which is to remain their own masters, Alexis de Tocqueville was already pointing out that economics could play a pernicious role in the process of deepening democracy (Tocqueville 1986). Despite being an inveterate liberal, Tocqueville understood the necessary submission of economics to politics in democracy, in that he questioned many of his fellow liberals who believed in the natural character of economics. As seen above, the purpose of a naturalized economics was depoliticizing economics, better said rescuing it, not only from the obvious links binding it to society, but also, through a baptism of nature, to impose its analytical schemes and its conceptions of the right behavior. In dehumanizing economics, mainstream thought is thereby asserting the idea that humans have neither the ability nor the power to change it, in other words to construct a different economics, placing it above political debate. Thwarting the hegemony of market ideology depicted above does not suppose the elimination of the market, though. On the one hand, the market per se is not intrinsically contradictory to democracy. As Amartya Sen puts so well, denying decentralized driving of the economy constitutes a denial of the very idea of democracy as it would mean the same as objecting to people having a conversation, the liberty of exchanging goods and services being equivalent after all to the liberty of exchanging words (Sen 1999: 19).

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On the other hand, as Jean-Paul Fitoussi puts it, relations between the market and democracy are more complementary than conflicting, since by preventing exclusion by the market, democracy would reinforce the economic systems legitimacy, and by restricting political control over peoples lives, the market would favor a deeper adhesion to democracy (Fitoussi 2004: 49). If the market reveals a tendency to disregard democracy, making democracy an absolute goal could, paradoxically, lead to the same outcome. A world where every single choice would result from democratic deliberation would not only be unviable but also insupportable, and more than anything very undemocratic. Thwarting the hegemony of market ideology is not about replacing the market by democracy as well, but about preserving the political character of public space. Nowadays, within mainstream economics discourse, economic phenomena seem to be brooding over our heads like the great mysteries of nature. Economic bulletins strangely resemble weather forecasts, commodity prices float as temperatures, and unemployment suffers from seasonality. Within this framework people are put in the position of a powerless spectator attending the dazzling show nature is performing. This sort of economics is not at the service of the people; on the contrary, it seems to subjugate them. If it is impossible to respect the search for substantive democracy in a given set of economic rules, one should not necessarily give up on substantive democracy, but rather enrich this system and change its rules. It is by doing so that, instead of submitting the people to its specific purposes, economics will fulfill its real duty, which is to afford the means to pursue peoples proclaimed goals. Declaration of Conflicting Interests
The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.

Funding
The author(s) received no financial support for the research, authorship, and/or publication of this article.

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Cornia, G. A., R. Jolly, and F. Stewart. 1987. Adjustment with a human face, 2 vols. Oxford: Clarendon Press. Dahl, R. 1997. Procedural democracy. In Contemporary political philosophy, ed. R. Goodin and P. Pettit, 109-27. Oxford: Blackwell. Dahl, R. 2000. Democracia. Translated by Teresa Braga. Lisboa: Temas e Debates. Originally published as On democracy (New Haven: Yale University Press, 1999). Debreu, G. 1984. La supriorit du libralisme est mathmatiquement dmontre. Le Figaro Magazine, March 10. de Fraja, G. 2006. The origin of utility. CEPR Discussion Papers Series n 5859. London: Centre for Economic Policy Research. http://www.cepr.org/pubs/dps/DP5859.asp de Tocqueville, A. 1986 [1840]. De la dmocratie en Amrique. Paris: Robert Laffon, Bouquins. Denis, H. 1993. Histria do pensamento econmico. Lisboa: Livros Horizonte. Driver, C., and G. Thompson. 2002. Corporate governance and democracy: The stakeholder debate revisited. Journal of Management and Governance 6 (2): 111-30. Dupuy, J. P. 1994. Intervention au dbat quoi sert la science economique. Lettre de lAFSE, Juillet. Ellerman, D. 2007. On the role of capital in capitalist and in labor-managed firms. Review of Radical Political Economics 39 (1): 5-26. Ferry, L. 1992. Le nouvel ordre ecologique: Larbre, lanimal et lhomme. Paris: Grasset. Fitoussi, J. P. 2004. La dmocratie et le march. Paris: Grasset. George, G. 1999. Le commerce avant les liberts. Le Monde Diplomatique, Novembre. Gonalves, M. E. 1996. Cincia e poltica em Portugal: O caso da Doena das Vacas Loucas. In Cincia e democracia, ed. M. E. Gonalves, 121-39. Lisbon: Bertrand Editora. Groupe de Lisbonne. 1995. Limites la comptitivit. Paris: La Dcouverte. Haworth, A. 1994. Anti-libertarianism: Markets, philosophy and myth. London: Routledge. Hay, C. 2004. The normalizing role of rationalist assumptions in the institutional embedding of neoliberalism. Economy and Society 33 (4): 500-27. Held, D. 1997. Democracy: From city-states to a cosmopolitan order. In Contemporary political philosophy, ed. R. Goodin and P. Pettit, 78-101. Oxford: Blackwell. Henderson, H. 2006. The cuckoos egg in the Nobel Prize nest. Heterodox Economics Newsletter (35), 20 November. http://l.web.umkc.edu/leefs/htn35.htm Hirschman, A. O. 1991. The rhetoric of reaction: Perversity, futility, jeopardy. Cambridge, MA: Belknap Press of Harvard University Press. Korten, D. C. 1996. The mythic victory of market capitalism. In The case against the global economy, ed. J. Mander and E. Goldsmith, 183-92. San Francisco: Sierra Club Books. Krugman, P. 1996. Development, geography and economic theory. Cambridge, MA: MIT Press. Krugman, P. 2009. The return of depression economics and the crisis of 2008. New York: Norton. Lacoste, Y., ed. 1993. Dictionnaire de gopolitique. Paris: Flammarion. Lucas, R. 1994. tica poltica, econmica e a compreenso do desenvolvimento econmico. In Aspectos sociais e eticos da economia, ed. M. Silva, 85-95. Lisboa: Comisso Nacional Justia e Paz. Marchal, J. P. 2006. conomie, thique et politique. In La dmocratie au pril de leconomie, ed. M. Humbert and A. Caill, 93-123. Rennes: Presse Universitaires de Rennes. Mazo, E. 2005. What causes democracy? CDDRL Working Papers, Stanford Institute on International Studies, n 38. Momani, B. 2004. American politicization of the International Monetary Fund. Review of International Political Economy 11 (5): 880-904. Morris, D. 1996. Free trade, the great destroyer. In The case against the global economy, ed. J. Mander and E. Goldsmith, 218-28. San Francisco: Sierra Club Books. Norgaard, R. 1994. Development betrayed: The end of progress and co-evolutionary revisioning of the future. London: Routledge.

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Petrella, R. 1997. Vers une socit de welfare mondial, les limites du capitalisme de march. Paper presented at the International Seminar on Social Europe, Lisbon: Calouste Gulbenkian Foundation, May. Polanyi, K. 1983. La grande transformation, aux origines politiques et conomiques de notre temps. Paris: Gallimard. Originally published as The great transformation: The political and economic origins of our time (New York: Farrar and Rinehart, 1944). Quesnay, F. 1985 [1758]. O quadro econmico. Lisboa: Fundao Calouste Gulbenkian, 3rd ed. Rachline, F. 1998. conomie mondialise et souverainet etatique. Les Temps Modernes (600), Juillet/ Aot/Septembre. Ricardo, D. 1983 [1817]. Princpios de economia poltica e de tributao. Lisboa: Fundao Calouste Gulbenkian, 3rd ed. Sapir, J. 2002. Les economistes contre la dmocratie. Paris: Albin Michel. Sen, A. K. 1993. thique et economie. Paris: Presses Universitaires de France. Sen, A. K. 1999. Development as freedom. New York: Alfred Knopf. Smith, A. 1973. An inquiry into the nature and causes of the wealth of nations. New York: The Modern Library (original edition 1776). Stiglitz, J. 2007. Making globalization work. New York: Norton.

Bio
Manuel Couret Branco is associate professor of economics at the University of Evora, Portugal, where he teaches Development Economics, History of Economic Thought, Political Economy of Social Policy, and Political Economy of Human Rights. His latest publications include Economics versus Human Rights, The Political Economy of the Human Right to Water, Family, Religion and Economic Performance, and Ethnicity, Democracy, and Economic Development.

Challenging the Presumption in Favor of Markets


Colin Donnaruma1 and Nicholas Partyka1

Review of Radical Political Economics 44(1) 4061 2012 Union for Radical Political Economics Reprints and permission: http://www. sagepub.com/journalsPermissions.nav DOI: 10.1177/0486613411418052 http://rrpe.sagepub.com

Abstract There is a pervasive presumption in the literature on political economy that substantial use of competitive markets is appropriate and necessary for organizing economic activity. Markets, however, are undemocratic, inefficient, and incentivize anti-social behavior. These shortcomings are often minimized or accepted as necessary evils because of the belief that there is no alternative to market structures. This belief is mistaken. Sophisticated alternative models of economic organization, such as participatory economics, have been proposed which are substantially more consistent with important social values. We contend that in light of these alternatives, the presumption in favor of markets should be reversed and market proponents should carry the burden of proof of demonstrating why, given their numerous shortcomings, markets should continue to occupy a privileged position as the default mode of economic organization. JEL classification: A13, L10, P16 Keywords market structure, democracy, participatory economics

1. Introduction
A dogmatic assumption has pervaded the philosophic literature on social justice and political economy for at least a generation now. From free market fundamentalists like Milton Friedman to liberal icons like John Rawls it is considered an entirely ineluctable truth that the substantial use of markets is an appropriate and necessary means by which to allocate goods and services, as well as determine prices within an economy. In light of the failure of Soviet-style command economies, markets currently occupy a privileged position for most contemporary thinkers. Conservative thinkers tend to favor markets that are as free as possible, that is have the fewest restrictions on economic activity, whereas liberal thinkers advocate effective regulation. Both ends of the political spectrum, however disparate and antithetical, accept the underlying assumption that market arrangements are the most appropriate system for achieving the economic and social goals of human societies. In this paper we want to (i) point out the pervasive nature of a certain way of thinking about markets in the philosophic literature on political economy, (ii) show that this assumption is
1

University at Albany, Albany, NY, USA

Date received: December 7, 2009 Date accepted: January 21, 2011 Corresponding Author: Colin Donnaruma or Nicholas Partyka, Philosophy Department HU257, University at Albany, Albany, NY 12222, USA Email: cdonnaruma@hotmail.com or np181856@albany.edu

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problematic, and (iii) argue that because of the problematic nature of this assumption the burden of proof in arguments about markets as the proper mode of economic organization should be shifted. For quite some time it has been incumbent on critics of markets to prove to market proponents that markets should be rejected. However, given that markets have some not insignificant problems, and that there are alternate models of economic organization more consistent with democratic values, the burden of proof should be, and should have been all along, with the market advocates. The problems that markets have are neither so marginal nor so easily remedied that they can be written off as more than compensated for by the efficiency they offer. If then there are other models of economic organization which are institutionally more congruent with important democratic values, the presumption should be against using markets, rather than for using them.1

2. The TINA Problem


Margaret Thatcher made famous the phrase there is no alternative, or TINA, during her reign as British prime minister. The phrase reflects the belief that a market structure is the only way to organize the production, consumption, and allocation of goods and services. This belief has come to hold a dominant position not only in politics but also in the literature on political philosophy and political economy. As a result, a consensus seems to have emerged over the past thirty to forty years within the philosophical literature concerning social justice and political economy that the debate over what form the economy should take is ultimately limited to a choice between some form of market socialism or a modified, i.e. ideally regulated, capitalist market system. This forced dichotomization of acceptable forms of political economy is both fallacious and highly problematic. This in turn has led the philosophic literature to put the burden of proof in this debate on the wrong party, that is on the markets critics rather than on its proponents. To get a sense of just how wide-spread and pervasive this assumption is it will be worthwhile to take a sample of surprisingly similar quotes from a diverse collection of authors. Political philosopher Andrew Levine, for instance, has written that: with central planning in disrepute, there appears to be no satisfactory alternative to market mechanisms.2 Charles Lindblom agrees, and writes that despite the shortcomings of the competitive market its elimination may pose more obstacles to a fuller democracy than does its continuing imprisoning of policy making.3 Harry Eckstein similarly writes that liberal democracies are associated with (perhaps require) market economies. This statement may seem a truism, in that a monolithic command economy can hardly be conducted by democratic means.4 Robert Dahl has also stated that the command economy is the only alternative to market arrangements, but because no government is up to the task the coordination and control provided by markets is necessary.5 The Russian economic historian Alexander Nove put this idea concisely when he wrote: in a complex industrial
1

At least as regards the employment of markets for land, labor, and capital. These three markets in particular have been claimed to be central to the modern capitalist mode of production by thinkers like Karl Polanyi. See The Great Transformation, 1944. 2 Andrew Levine, Rethinking Liberal Equality: From a Utopian Point of View (Cornell University Press, 1998: 45). 3 Charles Lindblom, The Market as Prison, in Philosophy and Democracy (Oxford University Press, 2003: 281). 4 Harry Eckstein, Russia and the Conditions of Democracy, in Can Democracy Take Root in Post Soviet Russia? (Rowman & Littlefield Press, 1998: 363). 5 Dahl, Why Market-Capitalism Favors Democracy, in On Democracy (Yale University Press, 1998: 168-9).

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economy the interrelations between its parts can be based in principle either on freely chosen negotiated contracts . . . or on a system of binding instructions from planning offices. There is no third way.6 Several developments have conspired to bolster the seeming credibility of TINA arguments. First, the collapse of the Soviet state system signaled to many that communism was a failure, and that as a result the very notion of a non-market based economic system was ipso facto discredited in perpetuity. Many have come to identify all non-market economies with Soviet communism and its command economy. Conceiving of socialism as necessarily a kind of monolithic totalitarian regime more akin to an Orwellian hell than a Marxian utopia further entrenched the idea that market capitalist systems are unavoidable for human society. If, as the reasoning goes, any form of nonmarket economy will be a duplicate of the U.S.S.R and the Soviet system collapse, then, because of that failure, there are no other alternatives and thus markets must be employed in our economy. The problems with this argument are obvious at first inspection. In the first place it is surely not the case that any and all forms of non-market economies will resemble the U.S.S.Rs command economy. Nearly all anti-market thinkers denounce the Soviet Union as a failure and reject its rigidly hierarchical model of state controlled planning as inefficient and unjust. There are other non-market based economic models that do not fall prey to these obvious and unwanted shortcomings. Nonetheless, this form of TINA argument and its accompanying false dichotomy between markets and Soviet-style command economies have come to be widely accepted in political philosophy over the last generation. Second, Rawlss work provided liberal defenders of markets a reasonable philosophic platform that lent further credence to the notion that markets were the only way for human societies to organize allocation. In A Theory of Justice Rawls appears to endorse precisely the TINA argument that we have claimed lies at the heart of the false dichotomy narrowing the scope of debate about potential modes of political economic organization. In Justice as Fairness Rawls goes through a process of whittling down our options with regard to political economic organization and explicitly makes the mistake mentioned above. Specifically, Rawls proposes five candidates for possible political economic arrangements: (a) laissez-faire capitalism, (b) welfare-state capitalism, (c) state socialism with command economy, (d) property-owning democracy, and (e) liberal (democratic) socialism.7 If one endorses, and there is ample reason why one ought to, the two principles of justice then (a), (b), and (c) will have to be rejected because they are mutually inconsistent with the principles of justice. In the first case (a) secures only formal equality, and rejects both the fair value of equal political liberties and fair equality of opportunity, while in the second case (b) also rejects the fair value of political liberties.8 Third, (c) is the model condemned by the historical failure of the Soviet Union, and is in Rawlss view one that violates the equal basic rights and liberties, not to mention the fair value of these liberties.9 By elimination then, Rawls comes to the view that there are really only two legitimate candidates capable of satisfying his two principles of justice, i.e. property-owning democracy and liberal socialism. The choice between these latter two (d) and (e) being an open question according to Rawlss view, the actual choice is left to be determined by the specific historical circumstances of the society making the decision. Rawlss two options are both market based views of political economy, and so he is still guilty of rejecting the idea that we could do without markets entirely. In fact in Theory he claims, All regimes will normally use the market to ration out the
6

Alexander Nove, quoted in The Political Economy of Participatory Economics, Robin Hahnel and Michael Albert: 57. 7 John Rawls, Justice as Fairness (2001: 136). 8 Ibid.: 137. 9 Ibid.: 138.

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consumption goods actually produced. Any other devices will be resorted to only in special cases [emphasis added].10 The employment of markets as the presumptive tool for organizing substantial economic activity is the constant feature of both the ideal capitalist and ideal socialist regimes envisioned by Rawls. It is this Rawlsian presumption in favor of markets as the default mechanism for organizing most economic activity that has become so pervasively accepted in the literature. It has not only served as the cornerstone for the spread of neoliberal economics but is seen as the default tool for organizing a substantial portion of economic activity even in democratic Scandinavian socialist economies. The result has been a sweeping presumption in favor of markets, a tendency to minimize their problems, and the erection of a strong burden of proof against alternatives such as democratic planning and participatory economics that attempt to challenge this presumption. In the next section we look at a number of reasons why this is highly problematic.

3. Why Markets Are Problematic


In the last section we saw that the TINA assumption is pervasive in the literature. In this section we offer reasons to think that this assumption is problematic economically as well as morally. The privileged status of markets is undercut in two primary ways. First, markets have practical shortcomings which lead to allocational and pricing inefficiencies and produce socially destructive outcomes. These shortcomings include: (i) markets failure to internalize externalities; (ii) markets underproduction of public goods; (iii) markets creation and exacerbation of inequalities; and (iv) markets inability to function under idealized conditions in the real world. Second, even assuming arguendo that these practical shortcomings can be corrected for by political oversight, markets still have features intrinsic to their very structure that encourage anti-social competitive behaviors that undermine solidarity, equality, self-management, and erode democracy. Accepting the TINA assumption means that we will be stuck with these problems, many of which only get worse over time.

3.1 What Markets Do Well


Before addressing the two categories of problems referenced above, it is important to acknowledge that competitive markets certainly do many things quite well. Markets are dynamic structures that have proven to be capable of generating rapid innovations in technology. Additionally, markets are adaptable to changing consumer demands and they tend to be responsive to the diverse desires within pluralistic populations. Markets are also capable of facilitating startling growth and are considered to provide strong incentives to motivate individuals to exert their energies and talents within an economy. Moreover, markets are capable of functioning with a high degree of autonomy, minimizing the need for government supervision and oversight of day-to-day economic decisions and processes. Samuel Bowles has pointed out that, the beauty of the market, some would say is that it works well even if people are indifferent toward one another, nor does it require complex communication or even trust among its participants to function.11 The competitive market structures the economy in such a way that, in theory, individuals can pursue their own self-interest, and in so doing the economy and society as a whole will benefit. This reflects Adam Smiths foundational claim that by pursuing his own interest [man] frequently promotes that of the society more effectually than

10 11

John Rawls, A Theory of Justice (1971: 239). Hahnel, 2002: 178.

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when he really intends to promote it.12 The market in this sense is considered to function as an invisible hand that guides self-interested behavior in a way that is socially beneficial. The market, therefore, is considered to be highly efficient in comparison to more cumbersome alternatives of economic organization. In addition it should be noted that most modern markets do not function in a vacuum, but instead function as mixed markets within the context of political systems that regulate them and attempt to smooth over rough edges. It is not surprising, considering the numerous advantages outlined above, that markets have become the de facto means of allocating goods and services throughout the world with virtually every significant industrial nation utilizing some version of the competitive market. All things being equal, therefore, markets would appear to be an exceptional way to organize allocation and pricing that should be wholeheartedly embraced over alternative non-market models. All things, however, are not equal because closer examination reveals significant practical and moral problems with markets.

3.2 Practical Inefficiencies of Markets


Markets suffer from several practical problems that undermine their perceived efficiency. 3.2.1 Externalities. A significant and widely acknowledged failure of markets is their inherent tendency to encourage the externalizing of costs. An externality is a situation in which the private costs or benefits to the producers or purchasers of a good or service differs from the total social costs or benefits entailed in its production and consumption.13 Externalities of either the "positive" or the "negative" sort create a problem for the effective functioning of the market to maximize the total utility of the society.14 This is the case because the "external" portions of the costs and benefits of producing a good are not factored into its supply and demand functions because rational profit-maximizing buyers and sellers do not take into account costs and benefits they do not have to bear. Thus, a portion of the costs or benefits will not be reflected in determining the market equilibrium prices and quantities of the good involved. As a result the price of the good or service producing the externality will tend to reflect the marginal personal cost to the producer and the marginal personal utility to the purchaser, rather than the marginal social cost of production and the marginal social utility of consumption.15 As economist Robin Hahnel has described the problem: when buyers or sellers promote their private interests by externalizing costs onto those not party to the market exchange, or internalizing benefits from third parties without compensation, their behavior introduces inefficiencies that lead to a misallocation of productive resources.16 A traditional example of an externality is the external cost associated with pollution. For instance, excluding all costs but the private costs incurred by the buyer and seller of a large SUV greatly enlarges the benefits to those private parties by externalizing the costs of smog, noise pollution, traffic congestion, and greenhouse gas emissions by passing them on to the public. Under normal market conditions, therefore, a non-optimal overproduction of SUVs will occur from the point of view of society as a whole. Moreover, because of the high transaction cost and

12 13

Adam Smith, Wealth of Nations, book I, ch. 2 (1776). Paul M. Johnson, A Glossary of Political Economy Terms. Available at: http://www.auburn.edu/ ~johnspm/ gloss/externality. 14 Ibid. 15 Ibid. 16 Robin Hahnel, Economic Justice and Democracy: From Competition to Cooperation, 2005: 86.

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free rider problems associated with organizing a diffuse group of affected individuals, it will be extremely difficult for the public to organize against this overproduction.17 Certainly in a competitive market system a company, call it Company A, could attempt to act against market incentives and adjust their prices and practices to reflect externalities and true social costs. Doing so, however, would be considered irrational economic behavior and Company A would be forced to compete against companies who do not act responsibly, and would thus be able to gain competitive advantage against Company A through lower production costs. This would allow the irresponsible company to undersell Company A and presumably drive them out of business, in effect punishing them for attempting to act in a socially conscious way. Liberal supporters of markets are quick to respond that governments can correct for this market failure by accounting for externalities through taxes, fees, or penalties. While this is certainly true, and may go some way toward ameliorating the negative consequences of the externalities problem, externalities are generally not so easy to correct for politically. As commentators like E. K. Hunt have pointed out, externalities are totally pervasive . . . the vast majority of productive and consumptive acts are social, i.e. to some degree they involve more than one person.18 Thus, it seems to fair to say the misallocation and mis-pricing due to externalities is the rule rather than the exception in market systems. This makes it extraordinarily difficult for a political body supervising the economy to properly account for all the relevant externalities associated with any given transaction and, after the fact, correct for prices that were set incorrectly to begin with. Moreover, those who benefit financially from externalities tend to gain disproportionate bargaining power that often results in yielding them disproportionate political influence. This state of affairs significantly weakens claims about the superior efficiency of the market.19 3.2.2 Public Goods. A second widely acknowledged failure of markets is their underproduction of public goods. Unlike public goods, private goods, such as an ice cream cone, involve exclusivity and rivalry. If you want to eat your ice cream cone, you can exclude us from its delicious benefits. Public goods, by contrast, have the properties of non-exclusivity and non-rivalry. When the government takes steps to reduce regional air pollution, for example, people living in that region will benefit from these efforts whether they have paid for it or not; there is no way to exclude them from its benefits. Non-rival goods are goods for which benefits can be provided to additional users at zero marginal social cost. The problem with public goods is that they encourage free riding. If other people paid for the reduction of air pollution, and if we could not be excluded from the benefits of these efforts, why would we be prepared to pay for it on the open market? Thus, markets will tend to under-allocate resources to public goods. Again consumers and producers can act against market incentives by consuming and producing to benefit the public good. For instance, consumers could purchase more expensive green products that will produce the public good of reducing pollution, just as factories could use more expensive, but environmentally friendly, energy sources. The problem is that markets often discourage this behavior by placing obstacles, in the form of extra costs, in the way of acting in a socially responsible manner, while simultaneously making it easy to purchase or produce cheap but environmentally harmful products. Thus, acting in a socially responsible manner will often place consumers and producers at competitive disadvantages. As Robin Hahnel points out: [m]arket incentives are perverse, [they] lead people to consume less green and more dirty than is socially efficient. The extent to which people ignore the perverse market incentives and act on the basis of concern for the environment, concern for others . . . is
17 18

Albert, 2004: 74-75. Hunt, E. K., On Lemmings and Other Acquisitive Articles, Journal of Economics, June (1973). 19 Hahnel, 2002: 92-93.

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Review of Radical Political Economics 44(1) important for the environment . . . but it does not make the market incentives any less perverse.20

Certainly, situations can arise in which market incentives happen to align with socially beneficial ends. The current energy crisis in the United States, for instance, has created a context in which it is in the competitive interest of private entrepreneurs to develop alternative sources of energy. Similarly, the demand for eco-tourism can encourage private companies to preserve ecosystems and protect endangered species. The problem is that markets are entirely indifferent as to whether it is encouraging socially beneficial or socially harmful behavior. If devastating that same ecosystem will reduce production costs for a company and give it a competitive advantage over a competitor, the market encourages the company to do so despite harm to the public. The market, therefore, systematically encourages anti-social and environmentally damaging behavior, while simultaneously disencouraging socially minded economic decisions that benefit the public good. Under this perverse system someone is actually considered to be an irrational homo economicus if they take others well-being into account. Thus, governments are once again required to step in to attempt to ameliorate the negative results of markets and to attempt to compensate for their underproduction of public goods vital to political democracy. 3.2.3 Markets Subvert Equity. Markets, simply stated, subvert equity. As Joseph Stiglitz puts it, even if all the conditions of the basic competitive model were satisfied, this would only mean that the economy was efficient. The resulting distribution of income might still be totally unacceptable.21 The goal of a competitive market is efficiency, not equity, and the latter is often sacrificed in the name of the former. As the prominent Yale economist and political scientist John Roemer has pointed out, unequal outcomes can occur simply through the exchange of goods in competitive markets when people start with different initial stocks of goods. Robin Hahnel elaborates on this point when he writes: if those who are initially better off capture a higher percentage of the increased economic efficiency that results from exchange than those who are worse off, although exchange will be voluntary and mutually beneficial, it will also increase the degree of inequality in the economy.22 In a laissez-faire competitive system, these inequities can take the form of the shocking inequality that ran rampant during the industrial revolutions in England and America in which the multitude of workers barely eked out a living wage while the owners of factories made millions. Even in todays more heavily regulated American market economy, a single individual such as Bill Gates can amass more wealth than hundreds of thousands of working class families combined.23 However, even in a public enterprise, or more ideally regulated private enterprise, economy in which the government takes steps to ensure an equitable distribution of income, the use of the market still leads to inequitable and anti-social results. This is the case because in a labor market, wages are still determined by supply and demand. The government can institute minimum wage laws and progressive tax rates to ameliorate the worst effects of the market and ensure a more equitable distribution of income, however the system will not be truly equitable because as Michael Albert explains, markets . . . permit those with greater abilities to reap greater economic reward than those of lesser abilities even when those of greater abilities exert less effort and sacrifice.24 As will be elaborated in more detail in section 4, we believe that this is not
Hahnel, 2002: 91. Joseph Stiglitz, Principles of Macro-economics, 1997: 143. 22 Hahnel, 2002: 65. 23 For empirical data on rising levels of inequality both internationally as well as within the United States see David Dollar, Globalization, Poverty, and Inequality Since 1980. 24 Albert, 2004: 59.
21 20

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an acceptable way to remunerate labor. Instead we contend that a just economy should reward the effort and sacrifice that one exerts while working, rather than rewarding superior ability or the fact that ones skill set is in higher demand. It is important to see that remuneration based on the markets valuation of ones labor differs significantly from remuneration based on the social value of ones labor. The market then subverts equity in the sense that: the market weighs peoples desires by the income behind them, the value of contributions in the marketplace is determined not only by consumers needs and desires but by the distribution of income . . . . according to the market the value of the contribution of a plastic surgeon with a practice in Hollywood is greater than the market value of the contribution of a family practitioner saving lives in a poor rural area.25 Thus, the market will value the cosmetic surgery more than the public good of ameliorating rural poverty. This is the case not because cosmetic surgery is more socially valuable than providing medical care to low-income families; it is the case because those who have skills in greater demand are more highly valued by the market and receive higher wages. Higher income individuals have more income and resources to express their preferences, and influence market value, thus their demand will outweigh the demand of those in poverty because they do not have the economic clout to back up their preferences.26 This means that the demand force in the labor market is not tied to, and in fact often is incongruent with, social values. So once again government must step in to correct for the shortcomings of the market, and in this case its neglect of important social values. In response, significant and also often cumbersome governmental regulations and oversight will be required to try to ameliorate this market shortcoming. As will be elaborated on in section 4, alternatives such as participatory economics democratically take our social values, such as equity, into account from the beginning when determining prices and allocation, rather than requiring burdensome checks post hoc. 3.2.4 Markets Do Not Function Under Idealized Conditions. Most economic models that tout the efficiency of markets begin with the unstated premise that competitive markets will function under idealized conditions in which rational, well-informed, and self-interested consumers interact with rational, profit-maximizing firms in an open competitive marketplace with price-taking behavior.27 This is the competitive market model, within which efficient, i.e. market clearing, equilibriums are reached. As economists freely admit, however, economies functioning in the real world rarely, if ever, match this idealized model. Thus, claims about the efficiency of markets in the real world must be scaled back to accurately reflect their real world operation. Moreover, economic theorists further assume that markets in equilibrium will be in a Pareto optimal state only if there are no external effects or public goods. 28 As we saw above, however, external effects are pervasive and public goods are a serious concern. It makes little sense therefore to trumpet the efficiency of the idealized competitive model and Pareto-optimal states if these do not accurately reflect the functioning of markets in the real world.29

25 26

Hahnel, 2005: 174. Albert, 2004: 60. 27 Stiglitz, 1997: 30. 28 Hahnel, 2002: 92. 29 Ibid.

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3.3 Intrinsic Structural Shortcomings of Markets


Even assuming that governments could adequately correct for the pervasive affect of externalities, the significant under-production of public goods, the tendency toward inequity, and the fact that markets do not operate efficiently under non-idealized conditions, nonetheless markets are still not morally desirable as economic structures because of their intrinsic anti-social and undemocratic features. Specifically, markets pit people against one another in an antagonistic manner that undermines solidarity, cooperation, and collective decision making. Markets also operate in a way that is economically undemocratic. This is vital because how we regulate our exchange and coordinate our disparate economic activities influence what kind of people we become.30 By organizing people into isolated, self-interested competitors, markets negatively influence the kind of people we become. These problems are intrinsic to the very structure of markets and cannot be corrected for by government intervention. As Elson has written: intervention in markets changes the current parameters (prices, interest rates, exchange rates, tax rates, level of demand, etc.) that market-makers and other decision-makers face, but not the characteristics of the market process itself. In particular, it does not change the social isolation of decision-makers, so that there remain overwhelming pressures for each to pursue their own interests in a myopic fashion.31 These intrinsic problems fall into two broad categories: (i) the problems associate with antagonism and competitive-isolation, and (ii) the problems associate with the undemocratic structure and nature of market competition. 3.3.1 Antagonistic Competition vs. Cooperative Solidarity. A central component of the rationale behind competitive markets, as expressed by Adam Smith, is that by pursuing our own selfinterest in a competitive market structure, the greater good is served. However, in so doing markets encourage individuals to act in a narrowly self-interested manner. That is, what is considered to be rational economic behavior in a market system is the maximization of ones own advantage, rather than cooperation or the advancement of collective interests. This system of competitive incentives leads to both inefficiencies and anti-social consequences. Robin Hahnel writes that: [m]arket economies cast people into antagonistic roles of buyers and sellers every day where empathizing with ones opponent is counterproductive to ones own well-being. Market prices are systematically biased against social activities in favor of individual activities. Markets make it easier to pursue well-being through individual rather than social activity by minimizing the transaction costs associated with the former and maximizing the transaction costs associated with the latter . . . . Markets and hierarchical relations contribute to the erosion and disappearance of . . . worthy traits by rewarding those who ignore democratic and social considerations . . . .32 As Thomas Pogge has adriotly discussed, in the pharmaceutical industry drug companies develop drugs in competition with other corporations.33 The goal under the competitive market framework is
Hahnel, 2005: 178 (Hahnel quoting Samuel Bowles from What Markets Can and Cannot Do, Challenge Magazine (July 1991): 13). Elson in Pat Devine, Market Socialism or Participatory Planning, Review of Radical Political Economics 24 (3&4)(1992): 77. 32 Hahnel, 2005: 179. 33 See Thomas Pogge, World Poverty and Human Rights, 2nd ed. (Yale University Press, 2008): ch. 9.
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to create a profitable product which means securing intellectual property rights over that drug in order to be able to limit its production and thus extort higher prices. Thus, the rational decision in a market system is for companies to focus billions of dollars on the development and marketing of drugs to treat erectile dysfunction and baldness, for which wealthy individuals will pay exorbitant sums, rather than provide drugs to prevent and treat diseases in the Third World. Even where companies do develop drugs to treat diseases such as AIDS, the rational market decision is to produce fewer drugs and price them at levels that will be beyond the reach of most lowerincome people, but will allow companies to earn a higher profit from wealthier consumers in industrialized nations with good health insurance. The horrific suffering and premature death of hundreds of thousands of people is the consequence of the rational decision that is encouraged and rewarded under the market system because it will maximize profits and place a corporation in a stronger competitive position. In this way, markets promote a warped, antisocial pattern of human development.34 This effect of markets can also be seen in the context of globalization, where all too often the decision that is demanded by shareholders and rewarded by Wall Street is the exportation of jobs to places where workers can be more easily exploited through non-living wages, unsafe working conditions, and not having to provide benefits. Doing so cuts costs and places businesses in better competitive positions and is therefore generally favored by the competitive market system. As Michael Albert appropriately describes it, [i]f you cannot abide hurting others or at least ignoring the hurt endured by others, in a competitive [market] context you are at a severe disadvantage when it comes to your own self-advancement.35 Again, one certainly can act in a solidaristic and cooperative manner within a competitive market system, but to do so often means having to go against the grain and place oneself at a competitive disadvantage. Moreover, the lack of concrete qualitative information, as well as the obscuring of social ties and connections in market economies, makes cooperation difficult, while competitive pressures make cooperation irrational.36 As noted earlier, there are certain contexts in which competitive market incentives will happen to align with socially beneficial goals, for example where a certain type of worker is in high demand and in limited supply, the market will encourage employers to generously compensate such workers. The market, however, is at best indifferent to the social value of what it encourages, and recent history suggests that the situations in which market incentives align with socially valuable goals are the exception rather than the rule. Thus, once again, governments and international organizations must step in to attempt to correct for the inhumane and anti-social tendencies of markets that leave sick individuals without medicine and promote the exploitation of vulnerable workers. Even if such corrections could be instituted effectively, which has not always proven to be the case, serious ethical questions would remain about utilizing mechanisms such as markets, which encourage such patently anti-social behavior and which are ethically indifferent to the suffering and degradation of human beings. 3.3.2 Markets are Undemocratic. It is an obvious point, but one which warrants further examination, that markets are undemocratic. The market functions through impersonal laws of exchange; at no point do consumers or producers meet to consciously discuss and vote on the wisdom of decisions. Rather, such decisions are taken out of the hands of the markets participants and left to the whims of impersonal market forces. That markets are undemocratic is a fact that is rarely considered, in part because we are told that the market is an institution that simply functions more efficiently without democratic participation, and in part because we are told that the only alternative to an undemocratic market is undemocratic state-planned socialism. This,
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Hahnel, 2005: 178-80. Albert, 2004: 57. 36 Ibid.: 66.

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however, entirely ignores models of democratic participatory planning which offer an alternative that does not rely on the command mechanisms of state-centric economies. In his book Rethinking Liberal Equality, Andrew Levine touches on the issue of democracy and markets when he describes how markets are helpful for dealing with the complex and interdependent information-processing problems that must be solved if economic assets are to be utilized efficiently. But this advantage is obtained at the expense of efforts to democratize the economic sphere.37 Some prominent thinkers like Habermas have argued that this is perfectly fine and the economic realm can be appropriately distinguished from the political realm where discourse and democratic input are required.38 We reject this dichotomization of the economic and the political; we feel that it does not adequately account for the profound affects that economic structures play in shaping the lives and determining the conditions of individuals within a society. Moreover, in addition to the fact that markets are internally undemocratic, many thinkers have pointed out that markets also undermine democratic political institutions within society. Sam Bowles, for instance, has pointed out that [i]f democratic governance is a value, it seems reasonable to favor institutions that foster the development of people likely to support democratic institutions and able to function effectively in a democratic environment. As we have seen, markets may provide a hostile environment for the cultivation of the necessary traits.39 This is the case because markets encourage individuals to act in isolated pursuit of their self-interest and discourage collective-democratic decision making that takes others interests into account. The corrosive effects of markets on cooperation, solidarity, and collective democratic participation are particularly stark in private enterprise economies that utilize corporate hierarchical division of labor, in which the vast majority of workers have no say in the operation or direction of their workplace. Moreover, markets have also been shown to erode democratic participation even in economies in which businesses are worker-managed. In the former Yugoslavia, for example, under Tito businesses were operated in a democratic manner in which workers controlled their workplaces, but a competitive market system was kept in place. Under these conditions, the democratic intra-firm features of the system were often overwhelmed by the inter-firm need to compete in the marketplace and maximize profits. As Michael Albert argues, in the old Yugoslavia competitive market pressures forced firms into competitive and antagonistic roles whereby they had to continuously lower production costs in order not to be undersold by their competition.40 Under these conditions any action taken by Firm A to increase worker pay and benefits, to invest in environmentally sustainable practices, or to give back to the community would create an opening for rival Firm B to undercut them in the marketplace. While certainly in the context of relative scarcity it will always be necessary to make difficult choices that one would rather not make and which may be against ones interests, the presence of market competition adds a distinct and separate incentive for firms to interact in an antagonistic manner whereby they must work to undercut their competitors or else face being undercut themselves. Under this kill or be killed system of competition, the potential for broader cross-firm cooperation, solidarity, and collective democratic decision making about production decisions is eroded, if not eliminated altogether. This is a distinct anti-social pressure that is intrinsic to competitive markets and separate from the unavoidable pressures of scarcity and efficiency.
Levine, 1998: 45. See Jrgen Habermas, The Theory of Communicative Action, Volume 2, System and Lifeworld: A Critique of Functionalist Reason (Beacon Press, 1987). 39 Hahnel, 2005: 180, quoting Bowles. 40 Albert, 2004:181.
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Alternative forms of democratic participatory planning facilitate and encourage broader cross-firm democratic cooperation. As will be discussed in section 4, such systems have important advantages in cultivating a democratic and solidaristic citizenry and society. While scarcity as well as supply and demand will inevitably limit the range of choices, under more democratic alternative models there would not be an added need to undercut rivals, undermine cooperation, and continually drive down production costs.41 Samuel Bowles wrote that even if it functioned with perfect economic efficiency the market would still fail if it supported an undemocratic structure of power or if it rewarded greed, opportunism, political passivity, and indifference toward others.42 As the above discussion demonstrates, markets intrinsically do just that. It is in large part because of these intrinsic shortcomings associated with market competition that we do not whole-heartedly endorse Scandinavian-style political economy that employs both market and non-market arrangements. To be clear, we feel that such arrangements are substantial and important improvements over more neoliberal style capitalist economic arrangements. It is a good thing that Scandinavian-style market socialism is able to successfully soften some of the sharp edges of market competition and is often able to overcome market pressures toward inequality, underproduction of public goods, and the noninternalization externalities. However, even if these goals can be successfully accomplished, the intrinsic problems with market competition described above remain; namely its undemocratic and anti-participatory nature and its tendency to pit people in antagonistic and isolated rather than cooperative and solidaristic roles. Spending a high percentage of GDP on public spending, as countries like Sweden and Denmark do, while admirable, does nothing to address the more fundamental concerns about the lack of democratic processes, values, incentives, and institutions within an economy that relies substantially on market mechanisms. It is this combination of intrinsic and extrinsic shortcomings of markets that makes the search for alternative economic systems that are more consistent with our underlying democratic values so pressing. In the next section we will briefly examine one such alternative.

4. The Parecon Alternative and the Need to Shift the Burden


In the previous sections we have shown that the TINA assumption is pervasive in the literature, and that this assumption is problematic because of the significant drawbacks that come with market arrangements. In this section we present a non-market model of political economy that does not suffer the same drawbacks, and is at the same time more consistent with our democratic values. If then this alternate model of economic organization ameliorates some of the most significant problems attending markets, as well as helps to foster the kinds of democratic values necessary in democratic-political community, the burden of proof in the debate about forms of political-economic organization should be placed on the market advocate, and not on the markets critics. The description that follows is an admittedly broad overview of the participatory

41

While the experience of the fall of the old Yugoslavian regime was extremely complex and involved a myriad of complicating factors, our example is intended to highlight one salient aspect of that experience, namely the limitations of cooperation and democratic self-management in the context of non-democratic competitive market-based economic planning. It is this idea about the need to combine workplace democracy with broader democratic planning economically that underlies our arguments in section 4 about the need for democratic allocation procedures. What distinguishes the failed Yugoslavian model of worker control from a participatory economic model is that it attempted to achieve the former without the latter, a position that we contend is untenable. 42 Samuel Bowles, quoted in Hahnel, 2002: 100.

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economics model. We explicitly do not intend this as a full-fledged explanation or defense of participatory economics. Rather, it is intended to provide the reader with a reasonably detailed sketch of one democratic non-market alternative.43 For a fully detailed account of the participatory economics model readers are encouraged to read Michael Albert and Robin Hahnel, The Political Economy of Participatory Economics (1991) and Michael Albert, Parecon: Life After Capitalism (2004). The Parecon approach, in its most germinal phase, consists of an insight that economic and political institutions have significant influence over the kinds of needs, wants, and desires that we have as well as will come to have. This influence is so great indeed that, as Rawls among others claims, these institutions determine in part the sort of person [we] want to be as well as the sort of person [we] are.44 From this initial intuition recognizing the importance of the effects of the institutions of the basic structure of society, the Parecon approach asserts that there need be congruence between what we value and the design of the institutions of the basic structure of society. Since these structures wield such pervasive influence, and given that as a human community we value certain things as regard our mode of social organization, then if we wish to promulgate the traits we value it follows that we must arrange our institutions so as to best achieve the goals established by our values. Importing a worn out bit of corporate phraseology, Parecon recognizes as critical, and aims to achieve a synergy between, institutional design and social values. According to Thomas Christiano, if citizens have a right to play a certain role in the making of law and policy and certain activities are required for the adequate exercise of this right, the institutions must be designed with an eye to giving the citizens the opportunities to exercise these rights adequately.45 Thus, if we think our social institutions should be constructed such that they foster the values we desire and aid in achieving the goals we set for ourselves, then to the extent such institutions do not do so they are inadequate: if then we persist with inadequate institutions we are not committed to the values or principles we have claimed to be committed to. It can be seen now that values will play a unique and important role in the choice of institutions for the basic structure of a just society. Indeed, because the choice of these institutions involves some view of human good . . . this choice must, therefore, be made on moral and political grounds as well as on economic grounds.46 The Parecon approach takes it that the construction of a model of political economy must begin with the choice of values to which we as a human community are committed. Thus, Michael Albert in expounding the Parecon model sets out five values to which he thinks we are, or ought to be, committed as a political community. These values, not in order of importance, include but are not limited to: (a) equity, (b) solidarity, (c) self-management, (d) diversity, and (e) efficiency. It is in terms of these values that the Parecon approach assesses economic institutions, meaning that Parecon accepts or rejects a particular institution depending on to what extent it promotes or inhibits the traits and values supported by the community. This valuecentric approach implies that the Parecon approach examines and evaluates economic institutions
The Parecon model is simply one non-market based system of political-economic organization. There are many others which we have not focused on that we could easily have. We have not made mention of the work of thinkers like Branko Horvat, Jaroslav Vanek, Christopher Gunn, or Mario Nuti simply because rhetorically we need only present one viable alternative to make our case. 44 Rawls, 1971: 229. 45 Thomas Christiano, The Rule of the Many, 1996: 132. 46 Rawls, 1971: 229.
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first and foremost in human terms, i.e. based on the effect of those institutions on human beings. According to Charles Lindblom, We have come to think not of human need and aspiration but of the market system as the fixed element in light of which we think about policy, and it is precisely this trend that the Parecon approach fundamentally reverses.47 Some discussion of the values proposed will be needed here since they play such a large role in the institutional design of Parecon, and their content will not necessarily be limpid to all. Again taking the values in no specific order, diversity (d) as a value, in the socio-political context of Parecon, aims at preserving what someone like Rawls would call the plurality of reasonable comprehensive conceptions of the good. Efficiency (e), as an economic value, means that we must bake bread, i.e. we must accomplish a certain range of tasks in order to produce the means of subsistence for social life as we know it (or might desire it), and with as little waste as possible. It should be noticed that efficiency is not the chief value as regards economic institutions, but simply one among several that must be balanced according to our human needs, wants, and commitments. Our third value, solidarity (b), implies only that all things considered it would be better rather than worse for the members of a society to care about the well-being of their fellows. It is not insignificant to note in connection with this that even someone like Hobbes recognizes the import of solidarity, which is why he goes through the effort of helping us escape the state of nature in which there can be only a life that is poor, solitary, and short.48 The choice of values (a) and (c) however stirs up controversy because of the various and often contradictory interpretations that can be given them. Beginning with (c) self-management as a value of economies concerns how much influence each individual ought to have apropos of economic decision making in the workplace. The Parecon answer to the latter question is that each individual ought to have a say in both political and economic decision making to the degree that the individual is affected by any particular decision. Underpinning this move, extending democratic control to the economic realm, is the idea that if it is wrong to have a political elite decide our political conditions because we should have some say in this, then surely it is also wrong for an economic elite to decide our economic conditions on the same grounds that we should each have some say in this.49 Self-management is what allows individuals to pursue the diverse ends that the value of diversity promotes. For the Parecon approach valuing self-management is valuing each individuals ability to direct the course of their own lives both as a citizen and as a worker. Perhaps even more controversial than self-management is the value of equity (a). As a value of economic institutions, equity has two aspects in the Parecon view, namely equity in income and equity in circumstances. As regards the first, equity in income is the idea that each person ought to be remunerated in a fair way, in a way that accords with our ethical principles. In the Parecon approach valuing equity in income means that we will remunerate individuals based on their level of effort and sacrifice made in the workplace. This is because each individuals own effort and sacrifice at work is what is most within ones power to control and is thus the most morally salient feature of each of us in the decision as to a norm of remuneration. Thus, it is because effort and sacrifice constitute a morally non-arbitrary basis on which to regulate income distribution that it

47 48

Charles Lindblom, The Market as Prison, Philosophy and Democracy, 2003: 282. Thomas Hobbes, Leviathan, 1668. Hackett Publishing Company: 1994. 49 Albert, 2004: 39.

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is employed in the Parecon model as the norm of remuneration.50 As to the second aspect, equity of circumstances, it means that each of us in addition to being remunerated equitably in income should also have a measure of fairness in the conditions of work themselves. How is one to justify the fact that some who receive higher wages enjoy quite comfortable, even very pleasant and empowering, work conditions, while others making precipitously less often toil unceasingly in over-heated, unventilated, perhaps toxic, or even perilous conditions? In the Parecon view, since there is no morally salient feature of persons that prompts the necessity of such an arrangement as there is for example in Plato, there needs to be more equity with regard to the levels of enjoyment and empowerment for individuals in their workplace in a just economy.51 The aforementioned principles then are what the Parecon approach takes as guiding values, as the basis from which it will critique economic and political institutions. Now it will be useful to see just what institutions Parecon chooses, and for what reasons it chooses those institutions specifically. Laconically the Parecon institutional arrangement is the following: (i) participatory planning instead of competitive markets, (ii) social ownership of the means of production, (iii) nested workers and consumers councils, (iv) balanced job complexes both within and across workplaces, and (v) remuneration according to effort and sacrifice. These institutions have been chosen specifically so as to both reflect the social values we affirm, and inculcate the socially beneficial and democratic behaviors and outcomes that we desire. About remuneration according to effort and sacrifice we have already said that the Parecon model chooses this because of its commitment to equity, and the fact that remunerating on other bases is morally arbitrary. In the Parecon approach no one can be said to deserve in any meaningful way the endowments of nature or luck, and as such it is inappropriate to come to gain more by them. To reward on these bases is to reward arbitrary features of the individual, features the individual had no control over. Simply because someone had the good fortune to be born the son of John Rockefeller or Bill Gates, thereby possessing seemingly unlimited financial resources, is a morally insignificant reason why that person ought to be able to reap greater rewards. For similar reasons the Parecon approach also rejects remunerating based on natural assets. No one can truly deserve what the happenstance of nature has bequeathed them, and thus to profit disproportionately by them is morally unacceptable given that equity is something we value. Remunerating on this basis also neglects the social character of the development of talents. Excepting the extremely rare geniuses who require no prodding, no encouragement, and no nurturing, those talents that are displayed in an individual are in part the product of the work of many other individuals. As a norm for remuneration this also assumes that many if not most people have no socially useful talents, or lack the ability to develop such talents, which is patently false. Moving on to balanced job complexes as an integral feature of the Parecon institutional arrangement, we can see the Parecon view recognizes that inequalities arising from differentials in empowerment resultant from the capitalist division of labor are as important as the inequalities arising from differences in the ownership of the means of production. These differences in
50

One might worry that it will be too difficult to precisely quantify effort and sacrifice, particularly between individuals with different capabilities and endowments. However, we note that markets face the same problem and remunerate based on impersonal market forces that have no relation to social values. Parecon, by contrast, takes the question of measuring effort and sacrifice and places it in the hands of those best positioned to adjudicate it, namely ones co-workers. Thus, workers themselves will be empowered to democratically structure norms of remuneration. Thank you to a reviewer for pointing to this important question. 51 See Republic, Book III: 414a-415e.

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empowerment lead those empowered to develop the kinds of skills needed to effectively participate in democratic political forums, while those disempowered feel just the opposite effect. Those disempowered lose the ability to fight and defend themselves through purely political institutions, while those empowered gain the ability to use the system to extract even more benefits for themselves because they are able to participate in the political process and make their voices heard. It is because Parecon is committed to equity, self-management, and solidarity that it chooses balanced job complexes. In any workplace there are variously many tasks that need to be accomplished for the practical business of the firm to be carried out successfully, and these tasks must be divided among the workers. Certain of these tasks will be bundled together into job complexes, and in the Parecon model each task in each workplace is rated by the workers themselves, and afterwards job complexes, or agglomerations of tasks, are designed such that each workers job complex has the same average empowerment score. This process is then carried out over all workplaces in the economy so that differentials in empowerment do not reach such proportions so as to subvert the political process. The basic idea here is only that there should be an equitable distribution of empowering and disempowering tasks. It is also because Parecon values equity, self-management, and solidarity that it chooses social ownership of the means of production. Private ownership of the means of production places workers and owners in an antagonistic relationship, both amongst themselves and between each other, that sees each trying to secure advantages for themselves where gain to one is a loss to the other. This situation is certainly not one in which solidarity could arise let alone thrive. Moreover, allowing private ownership undercuts equity in that ownership relations like these both engender and perpetuate disproportionate bargaining power for owners as well as a disproportionate ability to make use of opportunities and talents to secure benefits for ones self. Private ownership destroys self-management insofar as the owner or manager is the one who ultimately decides how, when, where, and on what the means of production he controls are to be used. The further ability of owners to pass on ownership of means of production, as well as money-capital, to offspring serves only to exacerbate inequalities that accrue during individual lifetimes, and thereby extend the disproportionate power wielded by owners both over the workers themselves and over the political process. The choice of nested workers and consumers councils illustrates Parecons commitment to self-management and economic democracy through proportional influence as well as its commitment to rejecting any sharp division of the political sphere from the economic sphere. This commitment is reflected in the nature of the council structure in that as members of a society the two most salient aspects of each individual are their roles as worker and consumer. Each citizen would then have access to democratic structures in which proportional influence obtains in each of the two largest aspects of their lives such that each individual has the ability to have enough influence over ones circumstances at work and at home. This arrangement is made so that the political influence that inevitably attends economic power does not corrupt the integrity of the political process as it does in bourgeois-democratic regimes. Further, by combining this with social ownership of the means of production, the undue political influence that results from economic power derived by private ownership never arises. By employing parallel council structures Parecons institutional apparatus reflects its commitment to self-management in that these councils are organized starting with simple self-managed units, i.e. it begins with individual firms, and then moves up to a council composed of all the firms in a specific sector of the economy, and last to a council of all the sectors of the economy, thus increasing the scope of the decisions made and the number of people effected at each level. The consumers council apparatus will begin with individual consumption-groups; these groups could be for example family units, and then moving up to councils for individual neighborhoods, cities, counties, states, and eventually nations. It is very important to note that national councils are not to be construed as the sovereign political

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body in Parecon. This means that bottom level councils are not entirely beholden to top level councils, i.e. there is no rigid hierarchy of power relations structured such that those at the top have the last word. These councils do not operate such that orders issue from the top and obedience is expected at the bottom. Rather it should be seen as a horizontal network of democratic self-managed associations. The commitment to democratic control of workplaces, and social ownership of the means of production, implies that Parecon will not use markets because the former two are inconsistent with the latter. The Parecon view then makes use of participatory planning as the tool for allocating goods and services throughout the economy. The council structure outlined above is chosen so that the participatory planning process can be implemented over an entire economy. The horizontal nesting of workers and consumers councils reflects in the design of institutions the increasing scope of the decisions to be made, and the increasing level of social organization at each successive council. The higher level councils embody the perspective, and give voice to the interests, of the collective at ascending levels of social organization in the process of participatorally planning an economy.52 Thus the council structure is designed so that those at the bottom have robust self-management, while the top gives a voice to the collective and its needs and interests, e.g. a neighborhood as constituted by its members has interests that can differ from those of the sum total of the interests of its members. Having neighborhood, city, state, and national councils gives the collective a voice in the process of coordinating economic activity at all levels of social organization. One might worry here that the council structure employed in Parecon leaves no room for accountability through exit competition.53 This worry is based on important work done by thinkers like Alert Hirschman and Robin Archer who both emphasize the significance of exit and voice as vehicles by which individuals, be they workers or consumers, can communicate their preferences to institutions, e.g. firms or political organizations.54 The worry is that while Parecon emphasizes voice as a means for individuals to communicate with institutions it does not, to its detriment, incorporate exit as well. Hirschman and Archer, for example, would both point out that exit and voice work differently in different situations so that the same vehicle will not be feasible in all circumstances, such that some kind of optimal mix between the two will be necessary in order for important kinds of information about workers or consumers preferences can be communicated to the relevant parties who can then use that information to guide their institutions decision making. Our reply to this worry is that Parecon in fact does incorporate exit. Workers are at all times
A reviewer was quite right to point out that this system of participatory democratic planning has the potential to lead to personal subordination in some cases through the actions of individuals or committees. We certainly acknowledge that this is a serious concern that would need to be addressed within Parecon. However, we think that participatory economics is also uniquely well-qualified to minimize the risks of such subordination and to provide institutional checks to respond to such concerns. This is the case because the hallmark of participatory economics is the horizontal nesting of the councils, which minimizes the ability of individuals and committees to have power over others. Under the council structure representatives are readily recallable. Furthermore, given that individuals have proportional decision-making power they could have up to full veto power over the decisions of committees if their interests are deeply affected by that decision. With any system there are costs and benefits, but on the whole the costs associated with personal subordination under Parecon seem to be substantially less severe and more readily checked than the costs associated with competitive market economic arrangements which offer little to no institutional checks or direct democratic oversight over the effects of impersonal market oppression. 53 Thank you to a reviewer who pointed out this potential worry. 54 Robin Archer, The Politics of Feasible Socialism,1995; Albert Hirschman, Exit, Voice, and Loyalty, 1970.
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free to exit the production units to which they currently belong and to join or start another. Consumers likewise are at all times free to exit the consumption units they currently belong to and join or start another. In fact Parecon more robustly secures exit competition since in exiting either a production or consumption unit an individuals access to the means of subsistence is not in jeopardy, as it is in a capitalist economy. Of course there is another worry one might have which threatens to undermine all of the preceding. This is namely the issue of whether Parecon is a feasible economic system at all. It is quite plain that there is a conditional argument which if not resolved would undermine our argument here; if it is the case that Parecon simply could not in principle work as a mode of politico-economic organization, then quite logically it cannot constitute a feasible alternative to markets. The question then is whether Parecon and its tatonnement procedure is practicable as a way of generating efficient prices. This question is a much debated and highly technical issue that we could not hope to do justice to here. Nonetheless it is important for us to say something on the subject in this paper. The most appropriate response seems to be to claim that if a tatonnement process is considered an impractical way to generate efficient prices, this impracticality problem will cut both ways. This is because, following Oskar Lange, tatonnement is also how prices are arrived at under market arrangements.55 Thus if the tatonnement process is a problem for a socialist economy it must also be a problem for a capitalist economy; that is, the process is just as inefficient in both cases, so its alleged inefficiency in a planned economy makes such a system no worse than a market economy on this score. An important thing to note about this debate is that it is by no means a settled matter. Some may argue that the historical record has shown us that the arguments advanced by F. A. Hayek in the socialist calculation debates were correct, and that as a result planned economies cannot work.56 The obvious first reply is that in the calculation debates Hayeks arguments are focused exclusively on central planning and not participatory planning.57 There is of course a world of difference between the two forms of planning, even though both would count for Hayek as attempts at rationally planning an economy. A second reply would be to claim that in fact Parecon, in its institutional design, incorporates the essential insight of Hayeks critique of central planning, namely that decentralization in the economy is vital. Parecons participatory planning scheme is designed to facilitate efficient price generation in an economy that is decentralized. Thus the kinds of local knowledge that Hayek claims will ultimately undermine the efforts of central planners to arrive at market-clearing prices will be available for use in constructing prices in Parecon.58 A last pass at a reply would point out that efficient prices under a system of competitive markets include under the definition of efficiency a surplus of value, i.e. a profit, for the capitalist. Parecons system includes no such surplus in its definition of economic efficiency, and in that way would be more efficient than competitive markets. Some might still be skeptical that Parecon could efficiently achieve all the pricing and allocative functions of a market, believing that the technical challenges are simply too large for human beings to overcome. This worry is we think born out of an overly pessimistic view of human beings

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Oskar Lange, 1936: 57-60. Friedrich Hayek, The Uses of Knowledge in Society, The American Economic Review 35 (1945); Socialist Calculation: The Competitive Solution, Economica 7 (1940). 57 Hayek, 1945: 521. 58 It is important to note that Hayeks critique of economic planning is essentially not about the, in principle, ability of planned economies to generate prices, as was Ludwig von Misess, but rather about the practical ability of planned economies to generate efficient, i.e. market-clearing, prices. See Lange, On the Economic Theory of Socialism: Part One, The Review of Economic Studies 4 (1936).

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ability to rise to the occasion, to overcome obstacles that appear insurmountable. Throughout the course of human civilization there is a clear track record of our ability to overcome technical problems that were long considered impossible. If it is the case that human beings were able, not just once but several times, to put men on the moon, then why should we think that participatory planning is too large a technical problem to make Parecon a feasible way to organize an economy? This worry seems to be saying to us that sure we can overcome the technical problems involved in splitting the atom or breaking the sound barrier, but that the technical challenges of participatorily planning an economy are simply too large for us. Moreover, advancements in computer technology over the past few decades have drastically increased our capacity to collect, organize, and synthesize large volumes of information in an efficient and manageable manner, a fact which makes the prospect of participatory planning less daunting. This largely rhetorical response is of course not a technical reply showing exactly how the technical challenges of Parecon would be solved. However, given homo sapiens track record of overcoming significant technical problems in other endeavors, we do not think it is wildly optimistic or irrational to believe that with some effort the technical challenges of Parecon can adequately be met. There are plenty of other very important and very interesting questions about Parecons institutional structure; for example, one might worry that participatory decision making should be limited to important social decisions since it will be inefficient to have it so pervasively structure social interaction as it does in Parecon. One might wonder how Parecon incorporates, if it does, a value like environmental sustainability into its thinking about institutional design, and how this value would rank in comparison to the five mentioned above. One might be curious just how consumption and production proposals will be implemented. These are all reasonable and important questions but they simply fall beyond the scope of what could possibly be addressed in a paper of this length. We note that these issues have been addressed in detail elsewhere by other thinkers and the debate about them is important and will continue.59 We do not believe, however, that the success or failure of the argument of this paper hinges on the practical feasibility of participatory economics, and we have specifically not made any definitive claims on this question. We have gestured at reasons for thinking the typical arguments against the feasibility of participatory planning are at the very least overstated, but have not staked out a definitive position one way or the other in this paper. Rather, we believe the value of our paper lies in: (i) identifying the pervasiveness of the assumption in favor of substantial use of markets; (ii) describing why this presumption is highly problematic and leads to undemocratic results; (iii) explaining how there are alternative economic models that are not similarly incongruent with important values; and (iv), as will be elaborated on in our conclusion, arguing that in light of the proceeding the presumption in favor of markets should be reversed and it is market advocates who, because of the undemocratic nature of markets, should bear the burden of proof about their appropriateness and necessity. We believe that this argument not only holds together without the addition of a discussion of feasibility, but that it is a radical argument that flies in the face of widely held beliefs and raises critical questions about how this debate should be approached and conducted.

5. Conclusion: Shifting the Burden of Proof


In this paper we have attempted to challenge a fundamental assumption among philosophers, economists, and political theorists that competitive markets are the best way to organize the
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For a thorough and technical account of the practical feasibility of the Parecon system, see Albert and Hahnel, The Political Economy of Participatory Economics, 1991.

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production and allocation of goods and services within an economy, an efficient means that is compatible with the political morality of liberal democracy. Our strategy was first to demonstrate the ubiquity and pervasiveness of this presumption in favor of the idea that substantial use of markets is both an appropriate and the presumptive way to organize economic activity. We demonstrated how liberal icons like John Rawls, among others, have accepted the presumption in favor of markets and assumed that their use is consistent with a just organization of a democratic society. Second, we attempted to: (a) show that markets are not necessarily as efficient as they are sometimes portrayed to be, but instead face serious practical problems; and (b) illustrate several important ways in which competitive markets are intrinsically undemocratic and encourage anti-social and undemocratic behavior. Third, we introduced participatory economics as an alternative economic model whose institutional structure is substantially more consistent with democratic values. Fourth, we argued that in light of these shortcomings, and the presence of an alternative participatory economic system that is more consistent with important democratic values, the presumption in this debate should be reversed and placed with the markets advocates instead of the markets critics. If robust political democracy is an important value, then the burden of proof should be on opponents to demonstrate why it is necessary to use economic mechanisms that conflict with democratic values. Thus, we are not necessarily advocating the abolition of markets in toto.60 Rather, we are advocating for a reversal of the Rawlsian presumption described in section 1 that ordinarily all regimes will use market mechanisms, and any other devices will only be resorted to in special cases. We wish to turn this presumption on its head and say that ordinarily all democratic regimes should not use market mechanisms because of their undemocratic nature. Rather, market mechanisms should only be resorted to in special cases. In their place we think that ordinarily democratic regimes should utilize democratic and participatory planning unless opponents can convincingly demonstrate their absolute necessity. The burden should therefore be on the markets proponents to compellingly demonstrate why we have to utilize an economic mechanism that is antithetical to fundamental democratic values when there are ways of organizing our economic life which are consistent with our deeply held democratic values. We believe that this shift in the burden of proof that defines the debate would represent a monumental paradigm shift in the terms of the debate. For too long the literature has been dominated by the belief that substantial use of markets is an unquestionable necessity. Any alternative which attempts to challenge this cornerstone of political economic thought faces a redoubtable burden of proof and a strong presumption against it. This has, can, and does often lead otherwise bright thinkers to beg a rather important question. What we are advocating for is the reversal of this presumption. We believe that all things being equal economic systems that are consistent with, and further, democratic values should be favored over those that do not. We have gone to some lengths to show several important ways in which markets subvert democracy. Markets should therefore carry a heavy burden of proof to demonstrate why, despite this critical shortcoming, they should nonetheless be utilized. Declaration of Conflicting Interests
The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.

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Again, as mentioned earlier, at least as regards the use of competitive markets for certain commodities vital for the continuance of a cycle in the process of expanded reproduction, e.g. those for land, labor, and capital. See Polanyi, 1944.

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The author(s) received no financial support for the research, authorship, and/or publication of this article.

References
Albert, M. 2004. Parecon: Life after capitalism. New York, NY: Verso Press. Albert, M., and R. Hahnel. 1991. The political economy of participatory economics. Princeton, NJ: Princeton University Press. Albert, M., and R. Hahnel. 1992. Socialism as it was always meant to be. Review of Radical Political Economics 24 (3&4): 46-66. Archer, R. 1995. Economic democracy. Oxford: Clarendon Press. Arneson, R. 1981. Prospects for community in a market economy. Political Theory 9 (2): 207-27. Bowles, S. 1991. What markets can and cannot do. Challenge Magazine (July): 15-16. Christiano, T. 1996. The rule of the many. Boulder, CO: Westview Press. Clark, B., and H. Gintis. 1978. Rawlsian justice and economic systems. Philosophy and Public Affairs 7 (4): 302-25. Devine, P. 1992. Market socialism or participatory planning. Review of Radical Political Economics 24 (3&4): 67-89. Freeman, S. 2007. Rawls. New York: Routledge. Grcic, J. 1980. Rawls and socialism. Philosophy & Social Criticism 7: 18-35. Habermas, J. 1987. The theory of communicative action, vol. 2. System and life world: A critique of functionalist reason. Boston, MA: Beacon Press. Hahnel, R. 2002. The ABCs of political economy: A modern approach. London: Pluto Press. Hahnel, R. 2005. Economic justice and democracy: From competition to cooperation. New York: Routledge. Hayek, F. 1940. Socialist calculation: The competitive solution. Economica 7. Hayek, F. 1945. The uses of knowledge in society. The American Economic Review 35. Heilbroner, R., and L. Thurow. 1998. Economics explained. New York: Touchstone. Hirschman, A. 1970. Exit, voice, and loyalty. Cambridge, MA: Harvard University Press. Hunt, E. K., and R. C. dArge. 1973. On lemmings and other acquisitive articles. Journal of Economics 7 (2). Lange, O. 1936. On the economic theory of socialism: Part one. The Review of Economic Studies 4. Levine, A. 1998. Rethinking liberal equality: From a utopian point of view. Ithaca, NY: Cornell University Press. Lindblom, C. 2003. The market as prison. In Philosophy and democracy, ed. T. Christiano, 275-84. Oxford: Oxford University Press. Mill, J. S. [1848] 1994. Principles of political economy, ed. J. Riley. Oxford: Oxford University Press. Nove, A. 1983. The economics of feasible socialism. Boston, MA: George Allen and Unwin. Plato. 1992. Republic. Translated by G. M. A. Grube and Rev. C. D. C. Reeve. Indianapolis, IN: Hackett Publishing Company. Pogge, T. 2008. World poverty and human rights. 2nd ed. Cambridge, UK: Polity Press. Polanyi, K. [1944] 2001. The great transformation. Boston, MA: Beacon Press. Rawls, J. 1971. A theory of justice. Cambridge, MA: Belknap Press of Harvard University. Rawls, J. 2001. Justice as fairness. Cambridge, MA: Belknap Press of Harvard University. Roemer, J. 1982. A general theory of exploitation and class. Cambridge, MA: Harvard University Press. Schweickart, D. 1978. Should Rawls be a socialist? A comparison of his ideal capitalism with workercontrolled socialism. Social Theory and Practice 5 (1): 1-27. Smith, A. [1776] 1982. The wealth of nations. New York, NY: Penguin Classics. Stiglitz, J. 1997. Principles of macro-economics. New York, NY: W. W. Norton.

Donnaruma and Partyka Bios

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Colin Donnaruma is an attorney, political organizer, and fourth-year doctoral student in the Philosophy Department at the University of Albany, SUNY. He graduated from Albany Law School magna cum laude with a concentration in constitutional law and civil rights. His dissertation work is focused on studying the relationship between competitive market structures and democracy. Nicholas Partyka is a fifth-year doctoral student in the Philosophy Department at the University of Albany, SUNY. He is currently writing a dissertation on the need for economic democracy as the necessary institutional complement to political democracy. He is president of the University at Albany Philosophical Association and is a member of Save Our SUNY Coalition, which is working to defend public higher education in New York State.

Participatory Economic Democracy in Action: Participatory Budgeting in Porto Alegre, 19892004

Review of Radical Political Economics 44(1) 6281 2012 Union for Radical Political Economics Reprints and permission: http://www. sagepub.com/journalsPermissions.nav DOI: 10.1177/0486613411418055 http://rrpe.sagepub.com

Adalmir Marquetti,1 Carlos E. Schonerwald da Silva,2 and Al Campbell3

Abstract This paper is a case study of a particularly important and well known experiment in participatory economic democracy, participatory budgeting (PB) in Porto Alegre under the Workers Party. Its intention is to draw both positive and negative lessons from this experience. There are three fundamental parts to the paper. The first part sets the frame for understanding this experiment by reviewing several relevant considerations of participatory democracy in general, and then describing the institutional structure of Porto Alegres PB. The second part is an empirical investigation for this case of three central issues in participatory economic democracy: participation, the nature of choices, and the resulting redistribution. A third part considers a number of limitations of the PB process as it occurred in Porto Alegre from the perspective of economic democracy. JEL classification: H72, R50 Keywords participatory democracy, participatory budgeting, fiscal policy, redistribution

1. Introduction
In its election campaign for the city government of Porto Alegre1 in 1988, the Workers Party proposed a new type of economic democracy, participatory budgeting (PB). At that time they
1

Porto Alegre, the state capital of Rio Grande do Sul, had 1,420,667 inhabitants in 2007. Its per capita GDP was US$8,901 in 2005, 1.7 times the per capita GDP of Brazil. The life expectancy was 71.6 years, the illiteracy rate was 3.45 percent in 2000, and the coefficient of infant mortality was 12.37 per 1,000 live births in 2006. Despite these numbers, there are enormous inequalities among the citys neighborhoods.
1 2

Pontifcia Universidade Catlica do Rio Grande do Sul, Porto Alegre, Brazil Universidade Federal do Rio de Janeiro, Rio de Janeiro, Brazil 3 University of Utah, Salt Lake City, USA Date received: May 3, 2009 Date accepted: December 17, 2009 Corresponding Author: Adalmir Marquetti, Departamento de Economia, Pontifcia Universidade Catlica do Rio Grande do Sul, Av. Ipiranga 6681, Porto Alegre RS, CEP 90.910, Brazil Email: aam@pucrs.br

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had only a broad vision for this democratic political and economic innovation: to increase direct popular participation in the citys economic public policy decisions. A particular concern from the beginning was to actively involve the poor in the projected popular economic management. They had some general ideas about organizing popular councils based on the principles of the Paris Commune (Genro 1997), but their ideas were far from concrete enough to be considered a model. Rather, PB has evolved in practice, starting with the first meetings in five regions of Porto Alegre in August 1989 to discuss the budget for the following year. PB rapidly transcended the limits of Porto Alegre. Wampler (2007) and Cabannes (2004) estimated that between 1990 and 2004 more than 250 municipal governments in Brazil instituted PB, while Cabannes (2006) estimated that more than 1,000 of Brazils roughly 16,000 municipalities had adopted it by 2006. In the late 1990s and the 2000s much smaller numbers of PB initiatives spread to other countries in Latin America, and then worldwide. Cabannes (2004) discusses 25 experiences in Brazil, the rest of Latin America, and Europe. Allegretti and Herzberg (2004) and Sintomer et al. (2008) consider a number of European experiences. Shah (2007) discusses studies of experiences in five regions and then seven case studies from throughout the developing world. So PB has established itself on a world scale as one of a number of important experiments going on today on how to replace the present economic order, which is characterized by great inequalities not only of wealth but also of economic power, with economic democracy. A broad definition of PB is relatively straightforward. PB is a form of participatory democracy in which citizens and civil society organizations have the right to participate directly in determining fiscal policy. In particular they take part in determining how and where resources are employed in their communities. But how this broad concept is translated into concrete institutions and practices takes many forms, as one would expect from PBs focus on local concerns and local determination, its need to integrate with existing forms of local governance, and its continual evolution over time even in a specific location, all of which vary greatly. Cabannes (2004) lists seven dimensions in which PB experiences around the world take different forms: (i) direct democracy versus community-based representative democracy, (ii) city-based participatory democracy versus community-based participatory democracy, (iii) what body is in charge of the participatory decision making, (iv) how much of the total budget is controlled by the participatory bodies, (v) who makes the final budget decision, (vi) social control and inspection of works once the budget has been approved, and (vii) the degree of formalization and institutionalization. One could present other dimensions in which the individual experiences differ, but the point here is only to underline that for any experiment one must carefully study in addition to its general nature as PB, the unique specifics of that particular experience in order to meaningfully evaluate its performance. PB has been recognized as an important institutional innovation in economic democracy for different reasons. The literature on PB, and in particular the significant part of that literature that is on Porto Alegre, has emphasized four particular results. First, it supports the ideal of democracy, and not only in economic matters but throughout society. Second, it has a pedagogical effect in that participants learn about rights and responsibilities. Beyond that, participants develop new capabilities that lead to a desire to further expand their capabilities, rights, and responsibilities. Third, PB improves the fiscal performance of governments. It increases the efficiency of the use of public resources, including the important issue of reducing corruption. Finally, it has distributive effects in the spending of public resources, and in particular it tends to improve the quality of life of the poor. This paper will study the PB experience in Porto Alegre from 1989 to 2004. With the loss of the municipal government in 2004 by the Workers Party (Partido dos Trabalhadores or PT), PB did continue but under conditions of less support and more actual opposition from City Hall. This

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caused a significantly different performance by PB. Because the purpose of this paper is to provide a case study of possibilities, problems, and limitations with this type of economic democracy when it is being seriously promoted, as opposed to this paper being a history of Porto Alegre, we close the period investigated with 2004. Among progressives in the English speaking world there is not much knowledge concerning the process in Porto Alegre beyond the most general understanding that there is some sort of popular participation in the budgeting process. Two recent books address the Porto Alegre process in rich detail: Abers (2000) and Baiocchi (2005).2 Their focus, however, is different from that of this paper. They carefully describe the social-political processes that gave rise to the PB experience, the nature of the society it arose in, the people who constituted it, and the PB institutions they formed and how they functioned. The purpose of this short paper rather is to contribute a more concrete and empirical economic consideration of the PB process as an experiment in economic democracy. This will be done in four parts: consideration of the economic and social nature of the participants in PB, consideration of the projects selected in the PB process, consideration of the economic redistributive nature of PB, and finally consideration of some of the most important limitations of PB as it was implemented in Porto Alegre from the perspective of economic democracy. We want to stress that we do not subscribe to an economic reductionism, which sees the essence of PB as redistribution, improved standards of living, improved fiscal efficacy, or any other concrete narrow economic goal. We hold that PB, and more broadly any expansion of economic democracy, is about changing the role of humans in society, and through that enabling humans to change both the society and themselves; enabling them to build a better world. It is, however, important to understand what narrow economic results any economic process gives, as well as understand the change in process it involves, as part of understanding its total significance, and this paper will hence do some of both. The paper is organized as follows. Sections two and three are necessary background for understanding the main contributions of the paper. Section two is a short discussion of participatory democracy, the concept which PB is intended to apply to the economic sphere, and to the budgeting process in particular. Section three then presents just enough of the concrete details of the PB process so that the reader can understand the relation of that process to the results discussed. Sections four to six then discuss the economic and social nature of the participants, the process and nature of their social choices and their effects, and the overall redistributive nature of PB. Section 7 considers a number of limitations of the PB process as it occurred in Porto Alegre from the perspective of economic democracy, considerations that hopefully can lead to making the next generation of PB experiences still better than this generation. Section 8 concludes.

2. Participatory Democracy
The freedom for the participants to collectively determine their own institutions and practices precludes that there can be a precise detailed definition of participatory democracy. In the literature, it is broadly defined in opposition to the elitist conception of democracy represented by
2

While the focus of Wampler (2007) is PB throughout Brazil, it not only has a chapter devoted to Porto Alegre (comparing it to another experience), but also much of the material in its chapters on the general nature of PB in Brazil applies to Porto Alegre. Its broad approach is like Abers (2000) and Baiocchi (2005), and is a valuable addition to those works.

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the Schumpeterian definition.3 As a starting point for indicating the general nature of participatory democracy one can begin with the criteria proposed by Dahl (1989) to consider a decisionmaking process to be democratic. These are: Effective participation: all citizens have equal opportunities to express their preferences. Voting equality at the decisive stage: votes are counted with equal weight at the final stage of a collective decision. Enlightened understanding: each citizen must have equal opportunity to learn about the issue to be decided in the democratic process. Control of the agenda: citizens must control the issues to be decided by the democratic process. Inclusion of adults: the demos must include all adult citizens. Participatory democracy emphasizes the participation of the politically, economically, and socially weaker sections of society, and their equality in the decision-making process with the elites. When this does not happen, existing inequalities are reproduced. This participation goes beyond a formal equality of voting at the final stage of decision making, and includes in particular that ordinary citizens or their representatives have a central role in the determination of the agenda. Once this happens, the questions which are debated and decided become those that are linked directly to the problems of the majority low-income social sectors. For example, as we will see, the social choices in the PB process in Porto Alegre are dominated by the debates about infrastructure and public services for the poor areas of the city. There are two (related) central ways that participatory democracy transcends the standard liberal concept of authentic democracy as indicated above. Both of these are dynamic issues, while the mainstream concept of democracy is static. These are: 1. Participatory democracy goes far beyond the aggregation of previously defined preferences as a process to make decisions. The interactions in the social process of participatory decision making constitute a learning process, in which people are very likely to change some of the preferences they had before they entered the process, particularly as they come to understand the situations and points of view of other people. The literature on discursive democracy or deliberative democracy emphasizes this process of people changing their preferences through social interaction in decision making.4 This is particularly true because participation is not restricted to the voting process, but it also occurs in the determination of the agenda to be considered, and in the implementation and monitoring of the decisions. Since one can have increased participation in the decision-making process alone, in Brazil the literature has developed a distinction
Schumpeter proposed a minimalist conception of democracy: The democratic method is that institutional arrangement for arriving at political decisions in which individuals acquire the power to decide by means of a competitive struggle for the peoples vote (Schumpeter 1942: 269). Peoples participation is restricted to choosing by a vote a section of the elite which will control the government. See Santos and Avritzer (2002). 4 For a brief overview of deliberative versus liberal democracy, see Miller (1993). Deliberative or discursive democracy is actually limited in comparison to participatory democracy in that (i) it focuses on the decision-making process alone, and not the larger process of agenda setting, decision making, implementation, and monitoring; and (ii) it does not address the transformation of the participants capabilities and desire to participate in the proces. But it does discuss extensively and richly the issue of changing preferences in the process.
3

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Review of Radical Political Economics 44(1) between this, which is called participatory democracy of low intensity, and the cases where there is also participation in agenda design, implementation, and monitoring, which is referred to as participatory democracy of high intensity. Sen (1999) argues that the method by which choices are made not only reacts back on the participants preferences as just indicated, but it also reacts back on the menu that the group considers, from which it makes its social choices. 2. In the process of participatory democracy the participants themselves are changed, such that both their skills for exercising democracy and their desire to do so are expanded. Pateman (1970) calls attention to the role that participatory democracy has in developing capabilities in the participants in such processes in their local communities, workplaces, etc. There are two types of learning. First, people develop their knowledge about the topic through the debate and exchange of information. This not only directly changes their ability to decide by giving them more information, but it can also cause them to change to using more intelligent criteria for making decisions (Feld and Kirchgssner 2000).5 Second, the participants become full political actors with the development of psychological aspects and the gaining of practice in democratic skills and procedures (Pateman 1970: 42). In addition, the desire to participate and the ability to participate develop in a symbiotic relationship participation feeds on itself (Devine 1988: 159).

The concept of the equality of all participants at first seems to indicate that all votes should necessarily be treated equally at the decision phase. However, consideration of the historical treatment, and from that the internal attitudes, of various social groups as they enter a participatory democratic process suggests that it might be more authentically representative to allow higher weights for sub-represented social groups in the first stages of the voting process (Dahl 1989: 110). This pro-poor policy has been incorporated into a few PB experiences. For example, in So Paulo (Brazil) the groups referred to as vulnerable sectors have a higher delegate to constituent ratio than other participants. Participatory economic democracy, the extending of the participatory democratic process to the economic sphere, is among the main goals of participatory democracy. It has two aspects: what economic institutions it involves and what economic decisions it involves. First, the participatory democratic process must embrace all economic institutions: those in the government sector, public and private firms, cooperatives, unions, economically oriented NGOs, etc. (Pateman 1970). Second, all economic decisions should be made using participatory democracy. This includes decisions on what economic activities to conduct, how the economic activities are conducted, and what to do with the product of the economic activities. The PB process is a concrete example in todays world of such an economic participatory democratic process. Citizens debate and decide how taxes, a part of the social surplus, will be expended in their cities.

3. How PB Works
PB in Porto Alegre, Brazil, was established in 1989, after the victory of the Workers Party in the municipal elections. It is an innovative institutional arrangement from the perspective of economic democracy. Citizens both as individuals and through their civil society organizations participate in all three phases of the local investment budgetary process: the definition of the
These authors also consider the effect participation has on changing preferences, the previous point considered.
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citizens preferences, the translation of these preferences into the investment budget, and the monitoring and control of its execution. While all three phases have important aspects of expanded democratic input, the first phase is the most different in this regard from previous standard local budgetary processes. Social preferences are determined by direct democracy in public meetings in which all citizens have the right to participate, speak, and vote. To make this form of direct democracy meaningful, a first consideration was to establish an appropriate scale for this procedure. Hence the newly elected municipal government divided Porto Alegre into sixteen regions as a first step in the process of introducing PB. The regions were established on the basis of creating some degree of economic and social homogeneity among the constituents, and as a result their size varied considerably. The largest, Downtown (Centro), had a population of 266,896 in 2000, while the smallest, Northeast (Nordeste), had a population of 28,518. All the regions, however, were limited to a size at which it was felt the proposed structure could generate direct participation in a way that it would not be able to if the entire city was treated as one unit. Until 2001, the PB process started with a series of meetings in each region from March to June. There were two main regional meetings, called first and second rounds. These were coordinated by City Hall, but the agenda was set jointly by the local regional leaderships and City Hall. In addition, the communities organized several local meetings called intermediaries between rounds.6 These regional meetings based on direct democracy had two fundamental tasks. The first purpose of the regional assemblies was to discuss local questions and then to democratically decide on local investment priorities. Input into the discussion that served as the basis for the decision could come from any citizen, local civil society organizations, and spokespeople for City Hall. Each regional assembly then chose three from a uniform set of urban investment priorities.7 Most of the services indicated by these priorities were of course better provided to the middle class than to the poor. This thus gave the poor a strong incentive to participate in the PB process in order to increase their consumption of those urban services that they considered the most important. The second purpose of the regional assemblies was to choose delegates for later stages in the PB process that involved representative democracy. Members were elected to the city-wide PB Council, which we will discuss further below, and to the Forum of Delegates. This latter group monitored public works, kept the community informed during the PB process, and collected new demands for future work. Parallel to the regional meetings were the city-wide thematic assembly meetings. Their purpose was to discuss themes of general interest to the city,8 and to improve the planning capacity of PB. They were introduced in 1994 as the process continually modified itself, and like the regional assemblies these were open to the direct participation of citizens, their civil society organizations, and spokespeople for City Hall.

The process of direct citizen participation changed in 2002 to simplify public participation. We will here outline only the process up to 2001, because that covered most of the time period we are considering, but also because the changes after that were only technical and did not change the essence of the process. 7 The choice set of priorities was: basic sanitation; water and sewage system; land, human settlement regulation, and housing construction; street paving; education; social assistance; health; transport and circulation; parks; leisure and sports; public lighting; economic development and tax system; culture; and environment. 8 The thematic assemblies are: city organization and urban and environmental development; health and social assistance; economic development and taxation; transport and circulation; culture; and education, sport, and leisure.

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The second phase of the PB process of determining the investment budget began after the second round in June, and involved representative democracy. The PB Council consisted of 48 members, two each elected from each region and each thematic group, two others,9 and two from City Hall that have voice but no vote. Each councilor had a one-year mandate, with the possibility to be elected for only two consecutive terms. During this phase the PB Council met at least once a week, and the meetings were all open to the public. The investment budget was determined in two steps. In the first step the PB Council selected the three main priorities for the city as a whole for the coming year. This was done on the basis of the priorities determined by each regional assembly and the proposals from the thematic assemblies. City Hall could again make suggestions in this phase. The city government had an additional important role in providing technical knowledge and support by personnel linked to the Mayors Office for the elaboration of the investment budget. At this point the city-wide priorities that had been determined through this extensively democratic process were subject to a much discussed limitation, which we will mention again in section 7. City Hall specified to the PB Council how much the total investment budget could be. Operating under this constraint, the PB Council then proceeded to elaborate the investment budget for the city. The investment budget document was submitted to the City Council at the end of September. Thus technically it was the City Council and not the PB Council that determined the investment budget. However, while the city councilors did propose some changes, given the extensive public involvement in the creation of the PB Councils proposal it was generally accepted largely as proposed. Having determined the city-wide investment in accord with the democratically determined priorities, the PB Council then turned to the second step in establishing the concrete investment budget: distributing the resources among the regions. The criteria for the allocation were the following: lack of public services and/or infrastructure in the region; total population in the region; correspondence of the priorities chosen by a region with those chosen by the city as a whole. Each criterion gave a certain number of points for a region. The resources were then invested in proportion to the points obtained by a region. These criteria had the goal of benefiting the poor areas of the city, and were known by many of PB participants when they made their decisions. The process of allocation among the regions was worked out in October and November. By December the PB Council prepared a written presentation of this final stage of the investment determination, the Plan of Investment and Services (PIS). This booklet listed the entire configuration of the budget and all public works finally approved for all regions. The implementation of the budget by the executive branch then started in January. The third phase in the process of democratically determining investment was monitoring to assure that the popularly decided investment projects were actually executed. There were four main channels of monitoring. All of them were democratic in nature, two of them representative and two of them direct and participatory. The first was the continued oversight by the PB Council, which continued its existence until the new PB Council was elected after the second round of the local assemblies. The second representative channel was the elected Forum of Delegates, whose
One from the civil servants trade union and one from the Association of Community Organizations of Porto Alegre.
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Table 1. Participation in Porto Alegre by Household Income Distribution2002, % Rounds Up to 2 monthly minimum wages From 2 to 4 monthly minimum wages Above 4 monthly minimum wages
Source: CIDADE (2003); ObservaPoA (2007).

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Delegates 23.7 31.8 44.5

Council-members 21.7 28.3 50.0

Porto Alegre 22.7 20.8 56.5

39.4 29.9 30.7

monitoring responsibilities were mentioned above. A first direct and participatory channel was the local and thematic meetings that began again in March. Report-backs on the results from the previous year were part of the discussion for preparing the priorities for the coming year. The final direct and participatory channel involved the PIS. This booklet indicating all the public works finally approved was distributed among the citizenry. This then empowered the entire population of each region to directly monitor the city government to see if it was executing the agreed upon projects.

4. Popular Participation
One of the central questions about the PB experience is who the citizens are that participate in this process. The answer to this question is directly linked to the effects of the PB experiences on the lives of the participants and on the life of the city as a whole. As indicated above, the participants determine the preferences of the municipality, their representatives coordinate the elaboration of the budget and the plan of investment and services, and they monitor the delivery of the public services. If an important goal of PB is to empower the social sectors traditionally excluded from governmental politics, the social sectors formed by the poor citizens must participate. Otherwise one would expect that the result of PB would be similar to the results obtained by standard representative democracy. The Center for Urban Studies and Advising, CIDADE, an active non-governmental organization in the city of Porto Alegre, conducted research on the social and economic profiles of the PB participants in 1995, 1998, 2000, and 2002. The profiles of the participants were similar in all four years. The results show strong participation by traditionally underrepresented groups in three dimensions: income, education, and gender. Table 1 presents the participation in PB in Porto Alegre by household income in 2002. The typical participant in the rounds has a monthly household income of up to four times the minimum wage (69.3 percent of the participants). Narrow majorities of both the delegates (55.5 percent) and council-members (50.0 percent) still have household incomes in this range. Since only 43.5 percent of households in Porto Alegre are this poor, we see that the PB process not only does not discriminate against traditionally underrepresented low-income people, it actually incorporates them in a greater percentage than their weight in the population as a whole. As expected, this overrepresentation of the poor is strongest in the direct participation part of the process, the rounds. Table 2 breaks down the participants in PB in Porto Alegre by formal education in 2000. Here the data are recorded with an entry for participation in the PB process, but that is essentially equivalent to the entry in Table 1 for participating in the rounds, since so many more people participate in the rounds than are elected delegates or council-members. 50.8 percent of the participants in PB have no formal schooling or do not have a complete primary education. This same group represents 37.1 percent and 23.1 percent of the Forum of Delegates and the PB Council, respectively. Although as one would assume the council-members are typically somewhat more educated than the delegates, who in turn are somewhat more educated than the general participants in PB, the overall system has a significantly higher representation of less educated people than

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Table 2. Participation in PB in Porto Alegre by Education2000 (%) Delegate No formal schooling Some primary Complete primary Some secondary Complete secondary Some university No answer 0.6 36.5 12.6 9.4 17.6 20.1 3.1 Council-member 23.1 15.4 10.3 18 28.2 5.1 PB 6.4 44.4 13.3 7.8 16 12 0.1

Source: CIDADE (2003). Note: Primary education comprises the first eight years of school. Secondary education comprises the following three years.

Table 3. PB Participation by Gender in Porto Alegre2005 Female Regional Thematic Total 5815 1757 7572 % 58.9 51.9 57.1 Male 4036 1624 5660 % 40.9 48.0 42.7 No answer 23 2 25 % 0.2 0.1 0.2 Total 9874 3383 13257

Source: Gugliano et al. (2008).

the population as a whole. Again by this second measure PB serves to generate strong participation by people traditionally underrepresented in traditional democratic processes. We want to consider PBs record in regards to the third dimension of social exclusion, gender, in four different ways. Table 3 presents the profile of PB participants by gender in Porto Alegre10 in 2005.11 It reveals that women comprise more than half of the participants in both regional and thematic assemblies. It also shows that women participate in a slightly higher percentage in the regional assemblies than in the thematic meetings. Once again in this third dimension PB is seen to strongly include traditionally excluded actors. As discussed above, the regional and thematic assemblies are more directly participative than the elected PB Council. It might be expected that given the history of a much greater number of males in elected positions in Brazil (as in almost all countries in the world), the elected PB Council would continue this tradition despite the majority participation by women in the thematic and regional assemblies (where recall the latter elects the PB Council). Figure 1 displays the evolution of the percentage of female and male counselors in the PB Council. It shows in fact an important change in this regard over time. Women constituted only about 10 percent of the PB Council in the beginning, but by the second decade this had risen to fluctuate around 45 percent. Table 4 presents a third way to consider effects of gender on social exclusion, the interaction of gender and income among PB participants. It presents an interesting and important extension to the results indicated in Table 3. Women achieve their majority participation in the face of a more difficult income situation. Table 4 indicates that a significantly greater percentage of female participants in PB, 43.5 percent, have a household income in the low poverty range of less than

Gugliano et al. (2008) obtained these numbers from the lists of attendance that participants in the regional and thematic assemblies sign. The East region (regio Leste) is not counted because this information was not in the files at City Hall. 11 A study by CIDADE (2003: 18) found very similar percentages.

10

Marquetti et al.

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100%

80%

Female

Male

60%

40%

20%

0% 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Figure 1. Composition of the PB Council by gender, 1990-2007 (%)


Source: CIDADE (2009a).

twice the minimum wage. This compares to only 34.1 percent for male participants, while only 22.7 percent of all families in Porto Alegre are that poor. A fourth way to consider the effects of gender on social exclusion is to note the difference between the genders in the participation in the different thematic assemblies (Table 5). The thematic assembly concerned with healthcare and social assistance, concerns that many would argue are traditional female concerns (tied to their role as prime caregivers and guardians in the family), was strongly dominated by women. The rest of the assemblies were fairly evenly balanced, with women comprising a small majority in education; sport and leisure; and city organization and urban and environmental development. Men constituted a small majority in culture; transport and circulation; and economic development and taxation. In the next section we will further consider an aspect of social choices that is related to gender. Another characteristic of PB participants that is both interesting and important for building democracy more broadly is their links to various associations in the city. Despite the slight fall over time in the share of participants who have such links, 61.1 percent of round attendees in 2002 participated in at least one organization. These organizations are mainly neighborhood associations, community centers, and street associations. This connection transmits influences both ways: on the one hand it brings improved organizational capabilities to these sometimes poorly organized or even chaotic groups, while on the other hand it solidly anchors the PB process in local concerns. Consideration of participation in PB also presents the question of what groups are underrepresented or missing from the process. Three groups stand out. Two groups would be expected to be underrepresented and many progressives would find this non-problematic, given all the other channels of power they have at their disposal. The underrepresentation of the third group both needs explanation and is a concern for many progressives. Capitalists and businessmen are underrepresented. The attempt of the new administration to attract these social groups to the PB was a failure. Basically, the cause for this underrepresentation

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Table 4. Distribution of PB Participants in Porto Alegre by Household Income and Gender Female Until 2 monthly minimum wages From 2 to 4 monthly minimum wages Above 4 monthly minimum wages
Source: CIDADE (2003); ObservaPoA (2007).

Male 34.1 31.5 34.4

Porto Alegre 22.7 20.8 56.5

43.5 28.6 27.9

Table 5. Participation in the Thematic Assemblies by Gender in Porto Alegre2005 (%) Thematic City organization and urban and environmental development Economic development and taxation Culture Health and social assistance Transport and circulation Education, sport, and leisure
Source: Gugliano et al. (2008).

Female (%) 53.8 46.3 45.7 69.2 45.9 56.4

Male (%) 46.3 53.7 54.3 30.8 54.1 43.4

No answer (%)

Total 480

0.2

0.1

420 825 364 518 776

is that because PB was designed with the goal of attracting the participation of the poor and marginalized, the PB agenda is dominated by their concerns, and therefore is of minimal interest to the concerns of capitalists and businessmen. A second group (whose members overlap with the first group but only partially) is underrepresented for the same reason, though less so: the middle and upper-middle classes. A third group of a very different nature that is underrepresented in PB is unions and unionized workers. The basic argument they usually presented to explain their limited participation is the regional character of PB, which is not consistent with their structure. In addition, unions consider themselves to be responsible for many issues related to general working conditions that lie outside the sphere of municipal government responsibility. Related to these concerns, it is important to note that unions are the associations with the largest participation in the thematic assembly of economic development and tax system. This is the thematic assembly which most closely approximates the role played by unions in Brazil. Thus, PB has as intended attracted participation by poor people from disadvantaged neighborhoods. In addition, it has attracted elevated participation by people traditionally underrepresented in democratic process along dimensions of marginalization other than poverty: education and gender. An important contribution to increasing the social influence of PB is the high percentage of participants who are organized in a series of community associations. As one would expect, delegates and council-members have higher economic and educational levels than the typical participant in the base rounds, but they also are poorer, less educated, and a higher percent women than the average population of the city. Marquetti et al. (2008) shows similarly that in So Paulo, Belo Horizonte, and Belm the majority of the participants in the main assemblies come from the poor.

5. Social Choices and Their Effects


Table 6 reveals two types of information concerning the social choices made in Porto Alegre. The first shows which of the thirteen possible choices PB prioritized. Less immediately but in many

Table 6. Evolution of Priorities in the PB in Porto Alegre, 1992-2007 2004 1st 3rd 2nd 3rd 1st 3rd 2nd 1st 3rd 2nd 3rd 2nd 1st 1st 2nd 1st 3rd 2nd 3rd 2nd 1st 3rd 1st 2nd 2nd 3rd 1st 3rd 2nd 1st 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 3rd 1st 2nd 1993 1st 3rd 2nd 1992 1st 3rd 2nd

Priorities

2007

2006

2005

Basic sanitation Housing Street paving Education Social assistance Health Transport and circulation Parks Leisure and sports City organization Economic development Culture Environment

1st 4th 2nd 3rd

1st

2nd 4th 3rd

1st 3rd 2nd 4th

Source: PMPA (2007).

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regards more interestingly, one can see how certain priorities changed over time, reflecting the resolution of certain priority concerns of the marginalized population. Throughout the 1990s, housing, street paving, and basic sanitation were the top priorities. But the evolution of these three concerns was different. Basic sanitation started off being generally the top concern. By 2000 it had essentially ceased to be a concern, reflecting major improvements effected in this period. The Municipal Department for Water and Sewage (DMAE) was responsible for the expansion of these services. It is a public enterprise with its own budget, which charges for the consumption of water and the use of the sewage system. We can thus draw two conclusions from the experience of PB with basic sanitation in Porto Alegre in the 1990s: first, that democratically receiving a high priority in the PB process can promote the resolution of a social problem; and second, contrary to the anti-democratic ideology of privatization that is a piece of neoliberalism, public enterprises may be the appropriate vehicles in at least some cases to address the needs of the poor population and generally to promote social development. The experience with street paving was essentially the same. Up to 2001 it was generally the first or second priority. This too led to efforts that we will see shortly, after which it dropped to third, fourth, or a lower priority. The history of the priority given to housing, however, reflects the failure to resolve that problem despite its democratic priority. In the 1990s PB assigned it a priority that fluctuated between third, second, and first. The combination of the great improvements in the two priorities from the 1990s that were generally higher with the lack of progress in improved housing, however, moved housing up to nearly consistently first priority from 2000 to 2007. Again, it was the success of the system in addressing the democratically chosen priorities of basic sanitation and street paving that allowed education to move up to second priority from 2002, and social assistance to become the next most consistent high priority from 2003. Table 7 gives more evidence demonstrating the response to the democratically established priorities of PB. In the 1980s before the institution of PB the provision of garbage collection and new road pavement were relatively stable. These both showed a large increase between 1989 and 2000, during the PTs first, second, and third mandates. It was only during the PTs last mandate from 2000-2004 that garbage collection dropped marginally and new paving dropped sharply. We have already addressed what we consider the fundamental reason for this. As we saw above, by 2000 the population considered basic sanitation to have been satisfactorily (relative to other concerns) addressed, and similarly for street paving by 2002. A second reason for the decrease that was particularly important in its effect on new street paving was the large city financial deficit that developed at that time. Access to drinking water and connection to the sewage system were also essential basic sanitation issues. The percentage increases here do not strike one immediately as dramatic, but they represented significant investment by the city, especially considering that some of these were particularly costly to connect, which is why they had not been connected before. In 1989, 95 percent of the population of Porto Alegre had access to drinking water and 70 percent of the households were connected to a sewage system. The Municipal Department for Water and Sewage (DMAE) managed to connect 163,000 household units to its water supply and drain pipes during that period, and by 2001 almost the entire city had access to drinking water (99 percent). The connection to the sewage system increased by an even greater percent, reaching 83 percent of the households. The increase in the supply of these public services was higher in the poor areas of the city where the population also grew at the fastest rate.

6. Redistribution
As shown in section 4, the typically marginalized actors constitute the majority at all levels of PB in Porto Alegre. The influence on PB decisions of still broader circles of typically underrepresented

Marquetti et al.
Table 7. Evolution of Provision of Garbage Collection and New Pavement1982-2006 Years 1982 1985 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 2000 2001 2002 2003 2004 2005 2006
Source: PMPA (2005, 1999, 1992).

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Garbage collection (ton) 157,213 145,094 147,258 179,448 186,118 220,247 171,13 185,904 189,516 218,994 245,208 265,618 282,321 280,163 285,479 276,080 255,051 254,429 255.138 278.410

New asphalt (m2) 121,979 327,197 290,454 81,399 235,122 396,686 519,151 411,177 444,758 502,565 947,816 871,809 667,557 819,555 613,431 440,250 275,335 318,955 185.335 156.524

actors than those who actually participate in PB is then effected through the high level of membership by PB participants in many organizations in the city. As we will see in this section, the empowerment of poor and organized citizens has had important distributive effects in the city. Navarro (1998) compares the redistributive aspect of PB in Porto Alegre to an affirmative action program. The Workers Party administration explicitly stated as one of its central goals the principle of inversion of priorities of the municipal expenses. This involved transforming City Hall through economic participatory democracy from a place where the interests of the wealthy were hegemonic into a place which redistributed social resources obtained through taxes to the poor neighborhoods. As an indication of the potential importance of such redistribution, the total receipts of City Hall corresponded to 12.2 percent of the gross domestic product of Porto Alegre in 2003. As any large city, Porto Alegre is characterized by large neighborhood differences in population, public services, political organization, income per capita, educational level, housing conditions, etc. It is important for understanding the process of PB to understand that the division of the city into various regions for the purposes of this program of redistribution was itself part of PB. This was one of the first actions of the PB process, and it was carried out through negotiations between the Workers Party, city administration, and the local communities. The aim was to define the regions to have maximal similarities within them and maximal differences between them in terms of social indicators and community organization. The process resulted in defining 16 regions in the city. As described above in section 3, near the end of the yearly cycle of PB a Plan of Investment (PIS) is elaborated. This contains all the projects proposed by PB, which are referred to as demands. The data below will refer to all the demands executed or in the process of execution. Not all demands in the yearly PIS get executed. After the first two start-up years for PB in 1990 and 1991, the number of demands stayed relatively constant for the rest of the Workers Party

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7 6 Demands per 1.000 inhabitants 5


Humait/Navegantes/Ilhas Nordeste Extermo Sul Glria Cristal

4 3 2 1

Lomba do Pinheiro Sul Norte Restinga Eixo Baltazar Cruzeiro

Centro Sul Leste

Partenon

Noroeste

Centro

10

12

14

16

18

Average nominal income of the household in monthly minimum wage in 2000

Figure 2. Average nominal income of the household head in monthly minimum wages and the number of public works per thousand inhabitants in the PB regions in Porto Alegre1990-2004
Source: ObservaPoA (2007); PMPA (2004).

period between a high of 482 and a low of 329. After 100 percent of the demands were met in the two start-up years, the percent executed dropped marginally to around 95 percent by the last three years of the 1990s. With the onset of the financial crisis for the city in 2000 referred to above, the percent executed dropped to 90, 80, 77, 68, and 77 percent respectively in the last five years of the Workers Party administration of City Hall, 2000-2004 (CIDADE 2009b). The analysis below of the PB redistributive effects takes into account 3,323 demands executed or in execution in the regions over the period 1990-2004.12 First we consider the redistribution in regards to the economically disadvantaged. Figure 2 shows the relationship between per capita demands per region in the period 1990-2004 and the average nominal income of the household head in monthly minimum wages in 2000. The figure demonstrates a clear negative association between the average nominal income of the household head in the region and the number of demands per capita executed in the region. PB has a clear redistributive effect toward the economically disadvantaged. It should be noted that these public works not only in themselves improve the living quality in these regions, but further they also have an effect in raising the value of the assets of people living in the poor areas. And of course as everywhere, inequality in the distribution of assets is higher than in the distribution of income. It is theoretically possible that the richer neighborhoods got significantly more costly projects and so measurement by demands greatly overstates the redistributive nature of this spending. Figure 3 confirms that when measured by per capita investment, the relation is nearly identical. The important point here is that using the per capita demands as a measure of resources going to an area is appropriate. Figure 4 considers the issue of redistribution toward the educationally disadvantaged. This dimension of exclusion gives the same result: the democratic nature of PB makes it strongly redistributive toward the disadvantaged.
12

The information is available on the official website of the PB (Oramento Participativo).

Marquetti et al.

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1600

Extremo Sul

Per capita investments, R$ 2005

1200

Nordeste

800
Lomba do Pinheiro Restinga

Glria

Cristal Partenon

Humait-Navegantes-Ilhas

400

Eixo da Baltalzar Norte Cruzeiro Centro Sul Leste Noroeste

Sul

Centro

0 0 2 4 6 8 10 12 14 16 18 Average nominal income of the household in monthly minimum wage in 2000

Figure 3. Average nominal income of the household head in monthly minimum wages and the per capita investments in the PB regions in Porto Alegre1996-2005
Source: ObservaPoA (2007); PMPA (2004).

Demands per 1.000 inhabitants

Nordeste Extremo Sul Glria Cristal Humait/Navegantes/Ilhas Lomba do Pinheiro Norte Restinga Cruzeiro Eixo Baltazar Centro Sul Partenon Leste Sul

Noroeste

0 2 4 6 8 10 Education level of the household head in 2000

Centro

12

14

Figure 4. Education level of the household head and the number of public works per thousand inhabitants in the PB regions in Porto Alegre1990-2004
Source: ObservaPoA (2007); PMPA (2004).

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7. Limitations of PB in Porto Alegre


Based on the above evidence we consider the PB experience in Porto Alegre under the Workers Party administration to have been an experiment in economic democracy of world importance. It has opened channels of direct political participation for the poor population and the working class to influence the state, and in particular the executive power, which has the main responsibility for the definition and implementation of most public policies. For the first time in Brazilian history, these social groups are playing an influential role in the definition of public policies. Nevertheless, in the frame of desirable economic democracy, there are many limitations to the Porto Alegre PB experiment. Here in a very abbreviated form we will indicate seven important limitations. We will not explicitly discuss what would be necessary to overcome these to extend economic democracy, since in all cases that is obvious simply from stating what the limitations are. (1) A first limitation is the inadequate financial resources of City Hall. For example, the total revenue of City Hall represented 12.2 percent of Porto Alegres GDP in 2003, while investments represented between 10 and 15 percent of total revenue. Therefore, even if PB participants deliberated over the total amount of investments, this would represent less than 2 percent of Porto Alegres GDP. This represents inadequate resources in relation to the needs of the population. This constitutes a limitation not only in the sense of the resulting inadequate resources, but also in the important sense that the PB process itself has no control over the amount of the resources available to it. That is determined outside the PB process. (2) This problem of inadequate resources is exacerbated when the city faces a financial crisis as happened in Porto Alegre starting in 2001. As we commented above, this began a process of delay in the execution of most of the demands defined by the PB process. As in the first point just discussed, this represents a limitation in two ways: both in the sense of even more restricted resources, and again also in the sense that this further restriction comes from something that PB has no control over, in this case a downturn in the economy. (3) A third limitation has both an aspect of a limitation on resources and an aspect of a limitation on the set of projects that can be democratically considered. PB has been almost entirely restricted to operating at a city level. Hence it neither has access to the resources of, nor is it allowed to democratically determine the economic decisions on, the state or national level. Of course, PB itself would have to be adapted from how it is structured on the city level to operate on these new scales. However, the essence of PB that it allows the low-income and marginalized sectors of population to have greater influence and control over the economy would remain the central issue.13 (4) Porto Alegre beginning in 2005 reflected a fourth limitation of PB. The potential for the PB process depends among other necessary factors on the political commitment of the mayor and other municipal authorities who are elected outside of the PB process itself. In the case of Porto Alegre, the new administration that came to power in 2005, while it did not feel it could eliminate the PB process given its history and popularity in Porto Alegre and the number of such processes nationwide, has worked to weaken the process. While as mentioned above this deterioration of PB in Porto Alegre after
Operating on the national level would include in particular participatory control of the central bank, with all the democratic control that would give to what is now a fully neoliberal relation of the Brazilian state to finance capital.
13

Marquetti et al. 2004 is not the topic of this paper, one measure of the undermining of PB is the sharp drop in the number of demands per year and the resources they represent, and further by the sharp drop in the execution of even this reduced number of demands. (5) A fifth limitation on the PB process is the sensitivity of its outcomes, and even its success versus failure, on the specifics of its institutional engineering. There are many significantly different PB experiences (Wampler 2007). Its design is important to determine both the technical functioning of the process, and the democratic issue of the real empowerment of the participants over the process. There are three main aspects associated to the design of PB. The first is how preferences of the city are defined, which involves who the participants are, how participation is organized, and what issues it is organized to address. The second is how the process of decision making works, which is related to how the budget is written and who writes it. The third is related to how the monitoring process is organized. (6) A sixth limitation is PBs focus, because of its focus on the composition of the budget, only on short- and some medium-term issues (these latter through the effects of some of its investment choices). It is only marginally concerned with long-term and other medium-term issues, as addressed typically in any system by city planning. The PB emphasis on local problems in the different regions of the city reinforces this shortterm outlook. There is no conceptual barrier to organizing a participatory urban planning component to PB, but this has not occurred in experiments to date. (7) Finally, perhaps the broadest limitation of PB from the perspective of economic democracy is that, notwithstanding the importance of what it is concerned with, it is only concerned with the government budget in economies that are dominantly private. As an important example of the sort of limitations this yields concretely, PB in Porto Alegre produced a very limited number of income generating programs for the low-income population. From the late 1990s forward, the municipality did undertake a few projects to stimulate the micro-economy in certain neighborhoods. The city established recycling facilities, promoted the formation of cooperatives, and organized a micro-credit institution called Portosol. However, these efforts were extremely minimal when compared to the socio-economic problems of the poorer segments of society.

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This limitation on the ability to influence income generation and distribution allowed the occurrence of the following slightly ironic result. Notwithstanding the significant improvement in the conditions of their lives that resulted from the demands from the PB process, the income share of the poorest 20 percent declined from 2.6 percent in 1991 to 1.9 percent in 2000, while the income share of the richest 20 percent rose from 60.3 percent to 64 percent. While of course this deterioration of their income position could not be caused by a lack of a particular mechanism to improve their income position and must have been caused by something else,14 this inability of PB to influence income generation and distribution in favor of the poor prevented these from being available to mitigate or offset their income deterioration that did occur.

8. Conclusion
Participatory budgeting is an important democratic experiment and experience about how ordinary people can share and debate ideas and from that make (economic) decisions. Crucial to this

14

A very plausible cause, almost certainly accompanied by others, is the increasingly neoliberal structure of the Brazilian economy over the past two decades.

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process is how they can come to understand the needs of both their neighborhood (not just their family), and beyond that and particularly important the needs of neighborhoods they are not part of. People become engaged and responsible in defining government policies to run the whole city, and in so doing change the way they see the world and thus change themselves. Participatory budgeting is an institutional innovation from both the democratic and fiscal perspectives. From the fiscal perspective participatory budgeting has promoted a more efficient, transparent, and accountable administration of public resources, an outstanding achievement in itself. By using fairness criteria in budget allocations and bottom-up processes, it has also improved the living conditions of poor and marginalized communities by reversing priorities that were used to favor higher income areas. Our concern in this paper has been in particular the inclusive democratic aspects of participatory budgeting. This process has opened new possibilities by involving citizens and civil society organizations in the elaboration of the fiscal policy of their municipalities, taking part in the definition of how and where they will be employed in their neighborhoods and their city. It is a new form of making fiscal policy. Indeed, ordinary people are active agents during the decisionmaking process, which is central to most radical progressive agendas for building a new more democratic and humane world. The process of participatory budgeting is becoming more complex, and the cause is the increasing demand for more power by the popular participants. This involves not only the budget but also other spheres of the government, both its economic and non-economic functions. Thus, the participatory budgeting experience has given some preliminary indications that it can be at least part of the bridge to transform societys understanding of (economic and from that all) democracy from its currently passive to a more active concept, and through that transform ourselves from objects to subjects of all the social processes that we are part of. Declaration of Conflicting Interests
The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.

Funding
The author(s) received no financial support for the research, authorship, and/or publication of this article.

References
Abers, P. 2000. Inventing democracy: Grassroots politics in Brazil. Boulder, CO: Lynne Reinner Publishers. Allegretti, G., and C. Herzberg. 2004. Participatory budgets in Europe: Between efficiency and growing local democracy. TNI Briefing Series N. 2004/5. Amsterdam: Transnational Institute. Baiocchi, G. 2005. Militant citizens: The politics of participatory democracy in Porto Alegre. Stanford, CA: Stanford University Press. Cabannes, Y. 2006. Les budgets participatifs en Amrique Latine. Mouvements 47: 128-38. Cabannes, Y. 2004. Participatory budgeting: A significant contribution to participatory democracy. Environment and Urbanization 16: 27-46. CIDADE. 2009a. ORAMENTO PARTICIPATIVO - Representao no Conselho do Oramento Participativo. Porto Alegre: Cidade. CIDADE. 2009b. De olho no Oramento. Cidade: Porto Alegre, 13: 2. Accessed April 17, 2009. http://www. ongcidade.org/ site/arquivos/jornal/DeOlhoabril49e3a39d18779.pdf. CIDADE. 2003. Quem o pblico do oramento participativo em 2002? Porto Alegre: Cidade. Dahl, R. 1989. Democracy and its critics. New Haven, CT: Yale University Press. Devine, P. 1988. Democracy and economic planning. Boulder, CO: Westview Press.

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Feld, L., and G. Kirchgssner. 2000. Direct democracy, political culture, and the outcome of economic policy: A report on the Swiss experience. European Journal of Political Economy 16: 287-306. Genro, T. 1997. Oramento participativo e democracia. In Oramento participativo: A experincia de Porto Alegre, ed. T. Genro and U. Souza, 7-41. So Paulo: Fundao Perseu Abramo. Gugliano, A., A. Orsato, R. Loeck, and A. Pereira. 2008. A incluso das mulheres no oramento participativo de Porto Alegre (2005). In Movimentos sociais, participao e reconhecimento, ed. L. Luchamnn, C. Sell, and J. Borba. Florianpolis: UFSC (Boiteux). ObservaPoa. 2007. Banco estatstico. Porto Alegre: Prefeitura Municipal de Porto Alegre. Accessed May 12, 2007. http:www2.portoalegre.rs.gov.br/observatorio. Marquetti, A., G. Campos, and R. Pires. 2008. Democracia participativa e redistribuio: Anlise de experincias de oramento participativo. So Paulo: Ed. Xam. Miller, D. 1993. Deliberative democracy and social choice. In Prospects for democracy, ed. D. Held. Cambridge: Polity Press. Navarro, Z. 1998. Affirmative democracy and redistributive development: The case of participatory budgeting in Porto Alegre, Brazil [1989-1997]. Cartagena: Programas Sociales, Pobreza y Participatin Ciudadana. Pateman, C. 1970. Participation and democratic theory. Cambridge: Cambridge University Press. PMPA. 1992. Anurio estatstico 1991. Porto Alegre: Prefeitura Municipal de Porto Alegre. PMPA. 1999. Anurio estatstico 1998. Porto Alegre: Prefeitura Municipal de Porto Alegre. PMPA. 2004. Prestao de Contas: acompanhamento de obras. Porto Alegre: Prefeitura Municipal de Porto Alegre. Accessed May 15, 2007. http://www2.portoalegre.rs.gov.br/op. PMPA. 2005. Anurio estatstico 2004. Porto Alegre: Prefeitura Municipal de Porto Alegre. PMPA 2007. Prioridade temtica. Porto Alegre: Prefeitura Municipal de Porto Alegre. Accessed May 12, 2007. http://www2.portoalegre.rs.gov.br/op. Santos, B., and L. Avritzer. 2002. Introduo: Para ampliar o cnone democrtico. In Democratizar a democracia: Os caminhos da democracia participativa, ed. B. Santos. Rio de Janeiro, Brazil: Civilizao Brasileira. Schumpeter, J. 1942. Capitalism, socialism and democracy. New York: Harper Perennial. Sen, A. 1999. Democracy as a universal value. Journal of Democracy 10: 3-17. Shah, A. 2007. Participatory budgeting. Washington, DC: World Bank. Sintomer, Y., C. Herzberg, and A. Rcke. 2008. Participatory budgeting in Europe: Potentials and challenges. International Journal of Urban and Regional Research 32(1): 164-78. Wampler, B. 2007. Participatory budgeting in Brazil. University Park: Pennsylvania State University Press.

Bios
Adalmir Marquetti is a Professor of Economics at the Department of Economics, Pontificia Universidade Catolica do Rio Grande do Sul. His current research interests are economic growth, Brazilian economy, and democracy. He is co-editor of Democracia Participativa e Redistribuicao (Xama, 2008). Carlos E. Schonerwald da Silva is Assistant Professor at the Center for International Studies, Universidade Federal do Rio de Janeiro (UFRJ). His research is focused on history of economic thought, macroeconomics, and econometrics. Al Campbell is a Professor Emeritus of Economics at the University of Utah. He is a member of the Steering Committee of the Union for Radical Political Economics and a coordinator of the Socialism Working Group of the International Initiative for Promoting Political Economy. His research interests include economic democracy and worker participation, planning, socialism, and current developments of capitalism.

The Fonds de Solidarit: Historical and Political Foundations, What Lessons for Economic Democracy?
Philippe Morin1

Review of Radical Political Economics 44(1) 8299 2012 Union for Radical Political Economics Reprints and permission: http://www. sagepub.com/journalsPermissions.nav DOI: 10.1177/0486613411418057 http://rrpe.sagepub.com

Abstract This article illustrates the uniqueness of Canadas first workers fundsthe Fonds de solidaritin terms of its historical background and the precedents that laid the ground for its creation. The differences and similarities with comparable initiatives in other countries will be highlighted.The article concludes by evaluating the controversial union strategy of acquiring and investing in firms within the capitalist system in order to achieve greater economic democracy. JEL classification: J54, J51 Keywords labor-sponsored venture capital funds, Fdration des Travailleurs du Qubec, Fonds de Solidarit des Travailleurs du Qubec, economic democracy

1. Introduction
The existence of labor-sponsored venture capital funds (LSVCF) has been studied by various economists and financial market analysts (Suret 1990; Vaillancourt 1997; Lalibert 1998; Osborne and Sandler 1998; Secor 2001; Cumming and MacIntosh 2007). For the most part, these evaluations of the LSVCF and its pioneer, the Fonds de Solidarit (FSTQ), take for granted the existence of these institutions and seem to analyze them as if they had emerged out of a political vacuum. In my opinion this is a major mistake that hinders the understanding of the mission as well as the functioning of the Fonds de Solidarit especially from the perspective of economic democracy. This article will show that no real debate or analysis of the capitalist system has been performed by the founders of the Fonds de Solidarit. Nevertheless, by founding a collective investment institution based on social considerations, the founders of the FSTQ were to have, maybe without their own knowledge, an impact on economic democracy and what it can mean to us today.
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Institut dtudes Politiques de Paris, Paris, France

Date received: January 16, 2010 Date accepted: January 20, 2011 Corresponding Author: Philippe Morin, Institut dtudes Politiques de Paris, 550 Boulevard Ren Lvesque Est, Qubec, QC G1R 0A8, Canada Email: philippe.morin@sciences-po.org

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To this date, no independent study of the historical political context in which the first LSVCF emerged has been carried out. This article intends to do just that. By first providing an understanding of what economic democracy can mean, the paper intends to lay out a framework to evaluate the inception of the Fonds de Solidarit. Needless to say, when they created the Fonds de Solidarit, the FTQ trade unionists were influenced by debates raging elsewhere in the world. The economic action of American trade unions as well as the wage funds launched by the Swedish labor unions will help us understand the specific contributions of the FSTQ to a quest for economic democracy. Ultimately, this article will show how a concept of economic democracy was fathomed by the founders of the Fonds de Solidarit and the limits of their proposal for the achievement of a greater economic democracy. The first part of this article provides a working definition of economic democracy as a postcapitalist economical system. This definition, drawing from the contribution of David Schweickart and Alec Nove, will allow us to assess the potential of the Fonds de Solidarit and its contribution to the ongoing debate on economic democracy. The second part deals with the mission and the functioning of the Fonds de Solidarit as a venture-capital fund, launched by a labor federation. The understanding of the creation of such a labor-sponsored fund and its significance for economic democracy requires an explanation of the history and structure of the Fdration des Travailleurs du Qubec (FTQ), the labor federation that created the Fonds de Solidarit. The third part of the article is dedicated to a comparative analysis with the scenario of wage funds that were popular in Sweden at the time of the creation of the Fonds de Solidarit. The comparison with the Swedish initiatives and, to a lesser extent, with the American labor unions concern over the management of pension funds, allows us to understand how the specific nature of the Quebec context shaped the structure of its first workers fund. The fourth part proceeds to illustrate the political and economic context that allowed for the conception of the FSTQ. Through the discourse of the founders and the minutes of the different meetings I will identify the power struggles and the political conditions that made the creation, and survival, of the Fonds de Solidarit possible. Finally, the article attempts to evaluate the relevance of these initiatives in the building of an economic democracy and a radically different economic and political order. This evaluation is made a posteriori, since the Fonds de Solidarit is already active. I will not try to judge how the Fonds de Solidarit actually performs in terms of economic democracy but rather will try to comprehend how the concept of economic democracy was understood by the political and economic actors who launched the fund and how that shaped its foundation and structure.

2. Economic Democracy: Power and Profit


In 1968, S. T. Payne (1968), vice-president of the Confdration des Syndicats Nationaux, a rival union to the FTQ, wrote in the journal Relations Industrielles / Industrial Relations: The labour movement must not only defend the worker as a wage earner, but also as a Canadian citizen and a human being. The old bread and butter unionism must be completed by policies of cooperation in order to create for Canada a true economic democracy which will be distinguished by efficiency, freedom and public responsibility. This call for economic democracy permits the identification of three key elements of the concept: efficiency, freedom, and public responsibility. Although the concept of economic democracy can be traced back up to Naphtali (1928), for the purpose of this paper I will draw from contemporary authors. Schweickart (2002) identifies three basic features of economic democracy as worker self-management, the existence of a largely

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free market, and social control of investments. This definition helps us distinguish the different checks and balances that would allow for the existence of an economic system that would go beyond industrial democracy, which is understood as granting managing power to the workers qua workers. Economic democracy would extend power to other stakeholders such as unemployed people, future generations, and the general community. Worker power can stem from different sources. For Laporte (1983) there are three kinds of possible participation for the workers: participation in capital or ownership participation in results or profits participation in management In the economic democracy envisionned by Schweickart (2002) and Nove (1991), workers would have a great participation in management but they would nonetheless have to deal with the pressure of producing goods and services that appeal to consumers in a market society. In Noves socialized firms workers would have managing power but would not own the businesses. By my standards, in an economic democracy, workers qua workers would not necessarily have a participation in ownership. For an economy to be considered democratic, the bulk of the economic activity would have to be generated in firms where the ownership is either statal, social, or cooperative. By social, I mean where ownership does not lie in the hands of a few individuals but rather is shared by the general public through collective institutions such as workers unions. The state and these collective institutions would therefore be responsible for the social control of investment. Social control of investment also means that investment would be primarily done for reasons other than profit. Management would be entrusted to the workers of each firm. For us, and as we will see for the FSTQ, industrial democracy therefore refers to the granting of managing power (not ownership) to workers. Managing power goes from the day-today decisions on procedures and schedules, to the more extended choices on the long-term orientations given to a firm. The economic freedom wished by S. T. Payne would be pursued by the existence of a market for goods and services; economic democracy would therefore not be a centralized Soviet-style economy. In short, economic democracy would be a post-capitalist economic system defined by the combined action of various collective institutions owning the capital and directing investment for social purposes, the existence of a largely free market of goods and services, and the selfmanagement of firms. A post-capitalist economic system means that economic democracy would have more to do with the expropriation of capitalists and the socialization of profits rather than with a Keynesian project aiming at stimulating demand and investment.

3. Building on Labor Movement History 3.1 The Fonds de Solidarit: Its Mission and Function, an Overview
The Fonds de Solidarit was founded through the adoption of Bill 192 by the Qubec National Assembly on June 23, 1983, thereby establishing the Loi constituant le Fonds de solidarit des travailleurs du Qubec. Constituted as a corporation, its mission is fourfold: 1. to invest in admissible1 businesses and to provide them with services with the objectives of creating, maintaining, or saving jobs;
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An admissible business is defined as a business actively exploited of which the majority of the employees reside in Qubec and of which the assets are below $100,000,000 or of which the net assets are below $50,000,000.

Morin 2. to promote the training of the workers in the economic field and to allow them to increase their influence on Qubecs economic development; 3. to stimulate Qubecs economy by making strategic investments that will benefit Qubecs workers and businesses; 4. to promote the development of admissible businesses by inviting workers to participate in this development by subscribing to shares of the fonds.

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Right now, Qubecs residents can buy shares in the FSTQ and benefit from tax advantages of 15 percent at the provincial level and 15 percent at the federal level for a maximum of $5,000 in shares. If the FTQ shares are invested in a registered retirement savings plan (RRSP, similar to the U.S individual retirement accounts) the tax advantages are even greater and can amount to the government covering up to 78.2 percent of the total cost. The shares invested in an RRSP must be kept until retirement (with some exceptions). On May 31, 2009, the FSTQ boasted having 570,889 shareholders. The fair value of its growth capital was about $4.6 billion, making it the single most important venture-capital investor in Qubecs and one of the top ones in Canada (Fonds de Solidarit FTQ 2009). Between 1985 and 2008, the rate of returns of the FSTQ oscillated between 13 percent (1991) and 11.4 percent. Every year, the FSTQ must respect a condition of its constitutive law stating that 60 percent of its net assets must be invested in admissible businesses. More than 25 years after its creation, the FSTQ now offers 16 regional funds as well as 87 micro funds. The FSTQ does not invest exclusively in workplaces represented by labor unions. However, before investing, a social audit is undertaken where issues such as health and safety and the relationship between the workforce and the owners are considered (Bernier et al. 2003). The Fonds de Solidarit also has a training department that teaches the employees of the investee firms how to read a financial balance sheet and assess the health of the business that extracts a surplus-value from their labor. The FSTQ is managed by a board of directors where FTQ representatives occupy a majority of the seats. The composition of this board will be further analyzed in the last section of this article. The Fonds de Solidarit, a financial institution created and managed by a labor federation, is a somewhat unique organization. To understand the conditions that made possible the creation of such an organization and its attitude in respect to potential economic democracy requires a knowledge of the labor federation which initiated the Fonds de Solidarit project.

3.2 The Fdration des Travailleurs du Qubec, History and Structure


In 1916, Gustave Francq founded Le Monde Ouvrier/The Labor World, which is still the official newspaper of the Fdration des Travailleurs du Qubec (Quebec Workers Federation), the FTQ. In addition to the practice of his craft as a typographer, this labor leader was also a shopkeeper, hiring employees for his own company. In 1909, the dual position of Francq as both a labor representative and an employer was challenged by other labor leaders (Leroux 2001). For Francq, the antagonistic relationship of labor and capital was not irreconcilable. As Dionne (1991) showed, the kind of trade unionism that Francq practiced was not meant to challenge the existence of the capitalist system but rather to organize powerful trade unions who try to seize the greatest piece of the pie possible. In Le Monde Ouvrier of December 11, 1926, Francq writes that [l]abour and Capital must realize that they are partners who have common interests. Highly interested in the potential of retail cooperatives, Francq believed that the necessary funding could come from workers savings or from cooperative banks managed by the labour

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organizations; financial institutions then, managed by the workers and who would benefit the working class (Leroux 2001). Cooperative banks are seen as a potential tool for the democratization of productive investment. Following union activity in the United States, the typographer exhorted trade unionists to become collective capitalists by founding labor banks. The FTQs summary of Francqs biography makes it clear that this typographer was not a socialist and that he differed from the socialists who wanted to seize the means of production (Mass 2002). Economic democratization is therefore seen more as the penetration of workers in the capitalist system on a collective basis than as the establishment of an alternative mode of production threatening the capitalist class. Francqs ideas were so influential in the founding of the Fonds de Solidarit that its board of directors decided to name its meeting room after him. Following the merger of the American Federation of Labor (AFL) and the Congress of Industrial Organizations (CIO) in the United States, in 1957, the FTQ was founded by the merger of two labor unions active in Qubec (Fdration des Travailleurs du Qubec 2007). At the time of the creation of the FSTQ, the FTQ had 425,850 members, thereby being the biggest union federation in Qubec (Rouillard 1989). The supreme authority of the FTQ is the congress, which assembles delegates every three years (every two years at the time of the foundation of the FSTQ). Between congresses, authority lies in the general council while the bureau manages the daily operation of the FTQ. It is worthwhile to mention that the FTQ has had the same president for four decades: from 1964 to 1991 Louis Laberge could pride himself for leading the biggest union of the most densely unionized region of North America.

4. The International Context: Insights into the Labor Movement in Sweden and the United States
Prior to June 1983, when the law establishing the FSTQ was adopted, the Fdration des Travailleurs du Qubec manifested a growing concern over the issue of full employment and the use of workers savings. This concern found an echo in different countries, particularly in Sweden and in the United States.

4.1 The Swedish Wage Earners Funds: The Gradual Decomposition of an Anti-capitalist Project
In 1951, Gsta Rehn and Rudolf Meidner published a report to the Swedish blue-collar trade union Landsorganisationen (LO) where they established the basis of what would be known as the Swedish model, a set of proposals including projects for wage funds. The LO congress of 1971 asked a team led by Meidner to inquire into how the excess profit appropriated by the private sector could be redistributed to the workers since a part of these profits had been generated by a solidarity wage policy where high-wage workers agreed to moderate their salary in order to reduce wage inequality with low-income workers (Gill 1989). The proposal for wage earners funds, theorized by Meidner (1978), was adopted unanimously by LO at its 1976 congress, and, under a modified form, by the Swedish Social Democratic Party (SPA) in 1978. The initial LO proposal stated that shares of a companys profits were to be issued to a fund managed by representatives of the firms employees. In a very gradual way, workers would be able to secure collective control over their firms by nominating members to the board of directors. The voting rights were to be 50 percent for local unions and 50 percent for the wage earners funds (Mathews 1989). The assets of the wage earners funds would be equities in existing capitalist firms and not invested as venture-capital for future firms. Ownership would therefore

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gradually be transferred not to individual workers but to collective institutions, the funds. Workers would also get a greater say in management since their local unions would have votes on the firms boards of directors. Gill (1989) quoting Asard (1980) highlights that [i]mplicit in the LO plan was a self-critical approach, saying that it was not enough just to simply manage capitalism in a more humane way: the issue of power and ownership of the means of production must also be placed on the political agenda. Meidner's plan also advocated for a form of decentralization where a central fund would play the role of a holding company and regional or sectoral funds would appeal to the workers sense of identification (Mathews 1989). The proposal of LO, supported by the SPA, as Asard (1980) points out was very ambitious and, ultimately, threatened the very existence of a capitalist system based on the private ownership of capital. While, as we will see, the capitalist lobbies were skeptical towards the creation of the FSTQ, in Sweden they adamantly fought the Meidner plan. The Swedish Employers Association (SAF) published a counter-proposal where the funds would not be funded by mandatory contribution from the employers but through the individual savings of the workers. This is exactly how the FSTQ works. After the 1976 electoral defeat of the SPA, the 1976 proposal was rewritten in order to make room for contributions not only from employers (through the emission of stock from the excess profit) but also from workers savings (Albrecht and Deutsch 1983). Despite this watering down of the scheme where the perspective of undermining the capitalist system was lost and replaced by participation of the workers in the existing system, the SPA still lost the 1979 election, during which the concept of the wage earners funds was a central issue (Mathews 1989). These two electoral defeats of the Social Democratic Party led to a deeply transformed version of the wage earners funds. Regional funds were finally established in 1983. The funds took their resources from a 0.2 percent payroll tax and from a special annual profit tax of 20 percent (Rolland and Tremblay 1995). None of these five regional funds could own more than 8 percent of the voting shares of a company, making it impossible for them to have collective majority control over a company. In 1982, even before their foundation, SPA leader Olof Palme also announced that they would cease to exist in 1990. Although LO had a clear project that would undermine the capitalist system, albeit in a very gradual way, a series of SPA defeats forced the Social Democrats to modify the original plan to such an extent that its essential transformative features were lost. The SAF Employers Association did not cooperate and opposed the existence of these regional funds; so much so that Rolland and Tremblay (1995) recall a march of 100,000 bosses on October 3, 1983, protesting the whole prospect of undermining private property, even in such a gradual way.

4.2 The American Shareholder: The Alpha and the Omega


As acknowledged by Gustave Francq as early as 1920, labor unions were in the process of acquiring or creating banks, thinking that they could advance labors interest by making funds available to union-minded employers (Belfer 1953). Writing on labor unions management of their own funds, Bartell (1965) concluded by saying that [r]elatively few unions have invested in common stocks or the debt securities of companies with which they bargain. Contrary to some predictions, the overwhelming majority of unions appear to be uninterested in using funds at their disposal to influence, as owners or creditors, the decisions of private corporations. Concerned with mismanagement of workers pension money, in 1980 the AFL-CIO Executive Council Committee on the Investment of Union Pension Funds (1980) presented a report highlighting 4 objectives:

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(1) an increase in employment through reindustrialization, including manufacturing, construction, transportation, maritime, and other sectors necessary to revitalize the economy; (2) an advancement of social programs, such as worker housing and health centers; (3) an improvement in the ability of workers to exercise their rights as shareholders in a coordinated fashion; and (4) an exclusion from union pension plan investment portfolios of companies with policies hostile to workers rights. Despite the gains that this shareholder activism has been able to generate (OConnor 2001; Marens 2004), their main pitfall is, as Stanford (1999) and Sauviat (2001) pointed out, that they claim that stock markets do contribute to the financing of business and of productive investment. Stanford (1999) brilliantly showed that, in Canada, the paper economy was responsible for only 6 percent of investment in the real economy, understood as the non-financial sector: [i]nternal financing typically accounts for about 95% of gross fixed investment expenditure by Canadian businesses. Workers who are lucky enough to have stable well-paying jobs may have an increasing share of the capital involved in the financial sector, but if this capital is not used in a productive manner or if it needs to cut jobs in order to generate returns we can hardly claim that we have gotten any closer to economic democracy or that socialism is an accomplished fact, to quote Drucker (1976). The building of low-cost housing by several unions was maybe the closest American unions got to channelling their funds for productive and social uses. However, as Botein (2007) showed, the AFL-CIOs involvement in the provision of low-cost housing followed a diminishing trend by the 1980s and ultimately ended up resulting in market-price mortgages as this investment existed primarily on the basis of securing returns for its investors. As Henry (1977) clearly showed, contrary to Druckers claims, ownership is not equal to control. Although shareholders activism has helped workers win some battles, this strategy also demonstrates a major lack of analysis concerning the contradictions between wage labor and capital. Whereas the Swedish LO union had a plan threatening the domination of capital but was unable to realize it, American unions have had trouble imagining or designing such a plan. It is striking how close the diagnosis made by the AFL-CIO in 1980 was to the one made at the very same time in Qubec. The main difference lies in the promotion of shareholders rights, which is still at the core of the agenda of U.S. labor unions, while, as shown below, the simultaneous proposals of the Qubec labor movement rested more on the overarching decision making of a collective institution, a workers fund controlled by labor representatives. This represents the ideological difference between the American labor activists and their Qubec counterparts. Despite these differences in the project, the major and determining difference lies in the political context: the election of Ronald Reagan in January 1981 made Barber (1982) declare that the proposal of the AFL-CIO is now obviously dormant. As will be shown below, the Qubec labor movement benefited from a grace period in which it was able to set up institutions that were not challenged politically after their inception.

5. The Early 1980s and the Fonds de Solidarit: A Pragmatic Answer to the Recession
In 1960, amid major changes that saw the replacement of the bitterly anti-union premier of Qubec (Maurice Duplessis) by a younger and more progressive leader (Jean Lesage), the FTQ, faithful to its socialist orientation, promoted the nationalization of important public services including hydro

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power as well as establishment of a predominant role for the state in the planning of the economy. Concerning unemployment, the FTQ blamed the absence of a coordination of the economic means, the shortage of economic thought and governmental indifference (Fdration des Travailleurs du Qubec 1962). In 1962, Lesage created the Socit Gnrale de Financement (SGF), a holding company with the mission of investing in Qubec companies. The FTQ opposed the creation of the SGF as Lesage conceived it, arguing that this crown corporation would be an instrument for troubleshooting downward sliding companies and the catapulting of new institutions, and that its capitalization was extremely insufficient in solving the problem of unemployment or in insuring the economic emancipation of the Qubec people (Tremblay 1972). The FTQ suggested the SGF become a financing society able to take efficient measures to channel popular savings and make the State one of the great capital holders in the province (Tremblay 1972). This desire to channel popular saving is, ironically, a similar attitude to the one eventually held by the Swedish Employers Association in regards to the Meidner plan, with the difference that the Qubec labor federation grants the state a major role. The state is here seen as the major vehicle for economic change and planning. From an opposition to what Duplessis represented, the FTQ becomes favorable to state intervention and planning of the economy. This goes hand-in-hand with a move towards a more nationalist position and therefore a dialog with a new political party, the Parti Qubcois2 (Cyr and Roy 1981). Ren Roy, current secretary general of the federation, recalls that the partnership mode of the FTQ started when Ren Lvesque, leader of the Parti Qubcois, was elected in 1976. At the 1977 congress, the delegates inspired by the Swedish model adopted a resolution in favour of a dialog at all levels when it is in the interest of the members (Roy 2001). In March 1979, a delegation of the FTQ, led by president Louis Laberge, traveled to Sweden to learn from the experience of labor unions there. The Monde Ouvrier of April and May 1979 reported that the Qubec delegates not only met their LO comrades, but also the executive officer of the Swedish Employers Association (SAF) to discuss among other things, the modes of partnership and negotiation with the (union) federations. It is ironic that a trade union would meet with a foreign employers association to inquire about partnership. This visit occurred in the midst of the debate over the Swedish wage funds, and the harsh disagreement between the Swedish trade unions and the employers association must have had an impact on the Qubec trade unionists. The following edition of the Monde Ouvrier of June 1979 dedicated 5 pages to the Sweden journey where a large place is given to praising the training offered by the Swedish unions but also their knowledge of the economic state of firms and the possibility for them to have access to the books of the employers. Louis Laberges biography also recalls that the union leader inquired about the Swedish wage funds (Fournier 1992). The following congress of the Qubec federation, in November 1979, saw the adoption of a resolution to define objectives . . . related to collective bargaining, pension funds and social legislation (Fdration des Travailleurs du Qubec 1979). This congress reiterated the commitment of the union towards democratic socialism and defined this socialism as not being authoritarian, nor centralizing, at the very contrary, it aims for the increased participation of the workers and the citizens to the decisions that matter to them. For the congress, the first objective of economic development must be to seek and realize full employment. In the midst of factory shutdowns, this full employment policy would contribute to increase productivity by a
2

The Parti Qubcois, a nationalist social-democratic political party active at the provincial level, was founded in 1968 and led by Ren Lvesque, a former journalist and minister in the Lesage cabinet. The Parti Qubcois remained in power from 1976 to 1985.

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more efficient use of current capacities and the creation of new competitive production capacities and should create a stable level of activity and a new climate which would be favourable to productive investment, both public and private. According to Fournier (1992), the place dedicated to full employment in the congress, becoming an almost incantatory leitmotiv, was inspired by the Swedish lesson. The 16th congress had bittersweet words for private businesses. Although it recognized their place, the delegates asked for better leadership and more respect. Of particular relevance for our topic, the congress adopted a proposition asking private businesses to share or give up their management of the workers collective savings in pension plans, insurance and other social benefits. This concern was expressed at the same time by the U.S. unions. This congress summarized different features of the FTQ political stance that would be crystallized with the foundation of the FSTQ. The support for the role of the private sector, a commitment to full employment, the support of a non-authoritarian state, the recognition of the need to increase productivity, and the demand for labor unions involvement in the management of workers pension plans are key elements of the organizations vision. It is noteworthy to recall that the 16th congress was held months before Qubec first independence referendum where the FTQ actively campaigned, alongside the Parti Qubcois, for the unsuccessful yes side. Ownership, profit-sharing, and employment are major concerns, as is labor unions participation in the management of pensions, but, in the 16th congress, no commitment is made towards a radical break in the ownership structure of the economy or the management of the workplace. The 17th congress, held in 1981, illustrates the worsening of the economic situation in Qubec and of employment in particular. The first point on the agenda, entitled a situation that cannot continue, renewed the demand for an active effort toward full employment. The tone was as defensive as traditional: businesses must open their books, labor unions must mobilize and increase pressure on the government. The labor unions rejected the mandatory expansion of private pension regimes that would benefit mainly the financial sector and demanded a public pension regime that would guarantee retired workers a similar standard of living to the one they had while working. The congress then asked not for the abolition of private pensions but for an improvement of these plans (Fdration des Travailleurs du Qubec 1981). This improvement would be achieved, for instance, by the representation of the workers by their labor unions on the management committee of the pension plans. The participation of union delegates was not seen as a radical move that would alter the fundamental function of investment by the pension funds but simply as an improvement. According to the FTQ, it was nonetheless a step towards greater economic democracy. As in other FTQ congresses, the position of the delegates in the 17th was largely a reflection of the line defined by the president, Louis Laberge, in his inaugural speech. For Laberge, the number one problem for workers was unemployment. He suggested a massive plan for the construction of public and private housing and a more direct intervention in the economy, both fairly traditional Keynesian interventions. The president asked for a nationalization and the channeling of savings and a ceiling on the interest rates for mortgages and loans to small and medium enterprises and farmers. The leader also demanded imaginative and courageous moves by the government to end the crisis (Fdration des Travailleurs du Qubec 1981a). The strategy was still defensive and militant, asking for increased mobilization and a systematic boycott of excessive interest rates. As shown earlier, the AFL-CIO Committee on the Investment of Union Pension Funds shared similar concerns, although faith in state involvement in the economy was remarkably less important in Washington. Less than two years before the adoption of the law constituting the FSTQ, a financial organization with no precedents in Canada, neither the inaugural speech nor the 1981 congress, discussed this project clearly. The inaugural speech mentioned that one of the means of creating

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and maintaining jobs is through workers participation in the financing and management of the firms. The concept represented a fresh strategy with profound ideological consequences but it was one sentence in a 20-page document. From a traditional stance of pushing for greater state intervention and an improvement of work conditions through collective bargaining, the FTQ was about to become the employer itself, without an open internal debate. While economic indicators have been declining since 1979, the 1980s recession hit Qubec hard. In 1982, Qubec unemployment rate reached 13.9 percent, 23 percent for people from 15 to 24 years of age. In one year, over 150,000 jobs were lost. On June 8, 1982, the Qubec government of Premier Ren Lvesque announced a revival fund for construction resumption. This announcement was the consequence of a partnership meeting with the labor unions that began in February 1982. By that time, Robert Dean, former FTQ vice-president, had become a member of the National Assembly3 with Lvesque's Parti Qubcois. The plan, elaborated by the FTQ, had the objective of building 37,000 housing units between June 1982 and March 1984 by reducing the interest rate affecting home-owners (Fdration des Travailleurs du Qubec 1982). In its mission and operations, the plan was very similar to housing construction initiatives taken by American union-managed pension plans. It is in this plan that we can see the first experiment of direct, active involvement by the FTQ in job creation. In September 1982 the term fonds de solidarit (solidarity fund) was coined. The money involved was not to come from the government but from a wide base of workers, supported by the government. One of the ideas submitted was a special offering of government bonds, with low interest rates and fiscal advantages (Fdration des Travailleurs du Qubec 1982a). The chronology of events leading to the foundation of the FSTQ seriously undermines any claim that it constituted a radical move towards an innovative project conceived by the rank-and-file members. On March 3, 1983, Louis Laberge, president of the FTQ and Fernand Daoust, secretary general, sent a letter to Premier Lvesque in which they made an official proposal for the creation of a fonds de solidarit. The labor unionists pled their case, arguing that the workers will be involvedby the intermediary of the fundin the analysis, the financing project and the monitoring of their firms dossiers (Fdration des Travailleurs du Qubec 1983). They also claimed that the fund could be operating as early as September 1983. The FTQ leaders were resolute in their quest for job creation. When Ren Lvesque received the letter, Qubecs unemployment rate had skyrocketed to 14 percent, and 16 percent of the unemployed workers had been without a job for more than 12 months, twice the proportion in 1981. While the situation needed a quick and original response, the choice of September as the month to start was puzzling. To be in operation as early as September would require a positive vote at the National Assembly before the summer, a very short deadline considering the letter was sent in March. Such a vote would however have been somewhat convenient since it was set to occur before the next FTQ congress, the highest authority of the union, scheduled in the fall of 1983. In the bureau meeting of April 25, 1983, Claude Morisseau, president of the Canadian Union of Public Employees-Qubecs (CUPE), the FTQs largest constituency, challenged the legitimacy of the bureau to create this fund without a clear mandate from the general council. On May 24, 1983, Morisseau informed the bureau that his union, CUPE, adopted a resolution at its congress that asks the FTQ to postpone until the next Congress the launch of the Fonds de solidarit or to call a special Congress on the matter (Fdration des Travailleurs du Qubec 1983a). The bureau did not grant this request, arguing that the fund had already been launched and was on the eve of being made official by law.
3

As the seat of provincial Parliament is called in Qubec.

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After long debates between the Parti Qubcois members of the National Assembly (supporting the creation of the Fonds de Solidarit) and the provincial Liberals (much more skeptical), Bill 192 was finally adopted on the last day of the legislative calendar. Hebb and Mackenzie (2001) offer an original perspective on the adoption of the constitutive bill: they settled all outstanding issues, and the bill passed. By that time, however, it was very late, beyond the official close of the legislative session. The members of the Qubec Legislature agreed to turn the clocks back to midnight to establish the Solidarity Fund. Once the FSTQ was founded it still needed tax benefits to encourage Qubec residents to invest their savings in this union-led venture-capital fund instead of the regular private financial sector. Generous fiscal benefits were granted by the Parti Qubcois government, but nothing came from the federal Liberals in Ottawa. On September 4, 1984, federal elections saw a landslide victory of Progressive Conservative Brian Mulroney and an end of the Liberal reign in Ottawa. As Fournier (1992) recalls, the FTQ officially gave its support to the New Democratic Party, the traditional federal social-democratic party, but actively asked its members to defeat the Liberals, a strategy that would inevitably lead to the victory of the Conservatives. While the Progressive Conservatives received 12.6 percent of the popular vote in Qubec in 1980, they got 50.2 percent in 1984. Mulroney thanked the FTQ by granting tax advantages to FSTQ subscribers, as well as $10 million to support the federations initiative. The Progressive Conservatives remained in power for 10 years and not only supported the FSTQ initiative, they also created federal legislation encouraging workers unions in other provinces to create similar funds.

6.The Fonds de Solidarit: Inspired by Economic Democracy?


The Fonds de Solidarit, as the fruit of labor union involvement in economic production, remains an original initiative. For American union orthodoxy, it would seem socialist to create a collective institution directing investment. Making comparisons with the French context, Laurent Mauriac (2005) wrote in Libration that for a union to launch a pension fund would be a surprising idea, also breaking with union orthodoxy. In order to weight the Fonds de Solidarit initative in the light of economic democracy, it might be interesting to recall the definition given earlier. For us, economic democracy would be a post-capitalist economic system defined by (1) the combined action of various collective institutions owning the capital, and (2) directing investment for social purposes, (3) the existence of a largely free market of goods and services, and (4) self-management of firms. A post-capitalist economic system means that economic democracy would have more to do with the expropriation of capitalists and the socialization of profits than with a Keynesian project aiming at stimulating demand and investment.

6.1 Collective Ownership of Capital


The FSTQ, as a kind of mutual fund, owns shares in publicly traded firms and in private businesses. The FSTQ itself then sells shares to the general public. These shares are shares of the fund, not of any specific business in which the fund invests. Ownership of the FSTQ was clearly meant to be by those who buy shares of the fund. The government would contribute to the fund, but the shares issued would be special G shares stripped of any voting rights. The shareholders would include workers unionized with the FTQ, but not exclusively. The core idea of a workers fund like the FSTQ is to channel the savings of Qubec residents towards productive use. For the Fonds de Solidarit founders, the funding base would be broad and specifically linked with wage earners. The press conference of March 3, 1983, where the FTQ made its initiative public for the first time, explained that the fund would be fueled by voluntary deduction from pay and

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that it would involve the contribution of participating workers (Fdration des Travailleurs du Qubec 1983b). The scenario was that 150,000 workers would contribute about $2 per week or the equivalent of one hour of wage a month (Fdration des Travailleurs du Qubec 1983c). The name solidarity was coined specifically because the resources would come from the workers and not from capitalists. In terms of ownership, the base would therefore be wide and specifically aimed towards wage earners and not towards individuals with large amounts of assets to invest. But the FTQ could also have wished for a universal contribution to the funds that would extend beyond voluntary wage earners and therefore include the bulk of the workforce: a greater socialization. We here have to look at the haste with which Bill 192 has been adopted to understand why such socialization did not materialize. The rules of procedures of Qubecs National Assembly make it impossible for a bill to be adopted in the Spring session if it has been presented between May 15 and June 23. The only exception to this is if all the elected members of the National Assembly consent unanimously to proceed to the vote. The FTQ therefore would have to get the agreement of the members of the Liberal opposition. Articles 25 to 29 of the original version of Bill 192 made it possible for a workers union, by the adoption of a majority vote, to establish a mandatory contribution to the fund for every worker represented by the union. This mechanism, known as the Rand formula in Canadian labor law, was bitterly opposed by the Liberal Pierre Paradis. These articles were therefore removed from Bill 192 in order for the vote to take place (Blanger-Martin 1993). Ownership of shares of the FSTQ is therefore an individual choice, as it is in the American context. The voluntary nature of the FSTQ surely adds a dose of freedom to the scheme but further polarizes the workers between those who earn enough to save and those who do not. For the Swedish LO, a voluntary and individualistic saving scheme like the FSTQ would defeat the goal of granting a greater influence to the workers (Rolland and Tremblay 1995). What the FSTQ founders did not envision was that, in fact, the savings rate of Qubec workers is very low and that, as Stanford (1999) showed, investment in RRSPs is mainly done by individuals in the top half of the income scale. If articles 25 to 29 had been included in Bill 192 the situation could have been different. It could have enlarged the contributing base of the FSTQ by forcing reluctant unionized workers to contribute and therefore be eligible to returns once retired. It could however also have furthered the divide between unionized workers (with better current and future incomes) and non-unionized ones as well as with unemployed and disabled workers. By widening the base and by providing pension revenue to workers who would not necessarily have subscribed to a pension plan, the FSTQ marks a step in the right direction towards greater economic democracy. However, in my opinion, economic democracy should not only be sought out by well-paid wage earners. Evaluating the setback of the Swedish wage funds, Korpi (1978) argued that a true democratization of investment and capital would require the setting up of citizens funds rather than wage-earners funds. I support this conclusion. Despite the shortcomings of the voluntary nature of the FSTQ contributions, it nonetheless constitutes a collective institution owning the capital and therefore could be made part of a post-capitalist economic democracy where various institutions like the FSTQ would compete and own the productive elements of the economy. The structure of the FSTQ recalls the socialized firms envisioned by Alec Nove in his model for a feasible socialism. Regarding the functions of economic actors, Noves various editions of The Economics of Feasible Socialism differ. While the 1983 version (Nove 1983) states that the credit institutions and banks should be state firms, centrally administered and controlled, the second revisited edition (Nove 1991) puts these institutions in the realm of socialized enterprises, benefitting from a total autonomy from the state. In contrast to cooperatives, in these socialized firms, ownership would belong to the

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state or to another public authority. To the extent that a workers union federation would be considered a public authority the FSTQ would fit Noves model.

6.2 Investment for Social Purposes


Louis Laberge, in front of an audience of the Board of Trade of Montreal, announced that for the FTQ profit was not a dirty word and that the federation was not opposed to profit but to maximum profit (Fournier 1992). This concern for profit is also present in the letter to Qubecs Premier Ren Lvesque that stated that the fund must be profitable and generate a return to its investors. For Bachand (2001), himself a former CEO of the Fonds de Solidarit, the fund looks for an equilibrium between the creation and preservation of jobs and returns for future retired workers who are its investors. However, when the fund was created, profit was not intended to be in equilibrium with but rather subordinate to the primary mission of preserving and creating jobs (Fdration des Travailleurs du Qubec 1983b). Job creation was the distinctive feature of the FSTQ and the reason why governments would grant fiscal benefits to the contributors. In this sense, we can say that investment is made for social purposes. Without denying the importance of fighting unemployment, by focusing solely on job creation, the FSTQ risks losing track of the greater picture of the collective good. We can easily understand that the Fonds de Solidarit is the answer to a recession, but in order to last and make positive contribution to the achievement of a post-capitalist era, the FSTQ would have to make investments that go beyond Keynesian measures of job creation. This myopia may at least theoretically lead to ecologically unsound investments that are justified in terms of job creation and returns on investment.

6.3 A Largely Free Market


The founders of the Fonds de Solidarit had very little sympathy for the idea of a Soviet-style planned economy. Although they agreed that the state had a role to play, their very initiative of creating an autonomous investment fund was consistent with their defense of a free-market economy.

6.4 Self-Management of Firms


If we can admit that the creation of the FSTQ was a step in the right direction in terms of socialization of profits, collective ownership of the means of production, and investment based on other considerations than strictly maximizing profit, the situation is less gleaming in terms of the power ascribed to the rank-and-file workers. Confusion existed among the founders of the FSTQ over who would manage the Fonds de Solidarit. According to President Louis Laberge, the fund would be managed by the workers with the collaboration of the government (Fdration des Travailleurs du Qubec 1982c). A few weeks after this declaration, the FTQ bureau agreed that this fund, launched by the FTQ, will be controlled by the workers since it is financed by them. This is where the FSTQ pioneers hit the same conceptual knot as Drucker (1976) who proclaimed that socialism had been accomplished through the exponential growth of pension plans in the United States. Ownership does not mean control. Presidents of various member unions of the FTQ have a majority of seats on the board of the FSTQ but there seems to exist confusion in the minds of the FSTQ founders between workers and their elected representatives. The general council of the federation, an authority between the bureau and the congress, elects 10 members to the fund, a majority. The shareholders of the FSTQ (generally unionized workers but not necessarily)

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can nominate two board members out of 17. There is no spot on the FSTQ board for a delegate of the employees working in firms in which the FSTQ invests or for other stakeholders such as organizations of unemployed workers or environmental groups. This is a major setback in the quest for economic democracy. In fact, the FTQ offered a seat to a representative of another union, the Centrale des Enseignants du Qubec, a teachers union, but this friendly principle was never clearly stated at the FSTQs creation nor is it established in the funds constitutive law. Discussing the challenges and limits of the Swedish model of wage funds, Gill (1989) distinguishes between the laws that would set the conditions for an industrial democracy and those for the establishment of wage funds for investment. The industrial democracy would be determined by the workers participating in the decisions while the funds are linked to a collective participation in ownership, not management. The FSTQ has never favored industrial democracy understood as self-management or even co-management, which it labeled as dangerous. It has historically favored collective bargaining that keeps the rank-and-file in ranks while the leadership negotiates with the employer in the name of the members. The creation of the FSTQ did not threaten this mechanism as only the labor unions chiefs were to be granted decisional power in the Fonds de Solidarit, while no change in the management structure of investee firms would be made. While the Swedish proposal granted voting power to local unions, the FSTQ scheme aimed at keeping firms management intact, just as in the atomized version of American pension fund socialism. Workers in investee firms would get economic training in order to understand the financial performance of their employers, but this measure was seen rather as a way to reconcile workers with management instead of a means to an end of empowering workers for self-management. It is thanks to this refusal to change the management structure that the FTQ has been able to get the silent consent of the employers association, who bitterly opposed co-management (Fournier 1991).

7. Conclusion
Bernier, Bouchard, and Lvesque summarized the idea of the FSTQ by stating that: [i]n short, the Solidarity Fund may be contributing less to the democratization of the workplace as such than to the democratization of the economy and to opening up the economy to social considerations (Bernier et al. 2003). The FTQ leaders therefore serve as a form of proxy for the general interest. By founding a collective institution pooling the savings of wage-earners, the FTQ has created an organization that could potentially play a role in the socialization of profits. But the fact that the contributions to the FSTQ arise not from expropriation of the capitalist profits (as in the Swedish plan) but rather from savings of individuals, and that savings are inversely proportional to income, suggest that this hardly is a radical break from capitalism. After the adoption of Bill 192, no attempts were made to reintroduce the botched articles 25 to 29. By channeling savings of individuals and providing pensions, the FSTQ is in competition with other mutual funds but also with the public and universal pension plan. Although the founders of the Fonds de Solidarit probably could not imagine the growth that their fund would accomplish, they also could not envision that someday the CEO of the FSTQ would tell an audience that we need to increase the Qubcois awareness about savings and retirement. The solution passes through financial products that allow them, early in their active life, to regularly contribute to the retirement funds instead of counting on the minimal benefits of the State for their old days (Fonds de Solidarit FTQ 2010). This kind of talk would no doubt have been blasphemy in 1983. In order to attract savings, the Fonds de Solidarit has then an objective interest in dismantling the welfare state while the FTQ, the labor union, has an opposite interest.

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In my view, to be coherent with the definition of economic democracy that was laid out previously, economic democracy cannot be achieved without a move towards self-management of the workplace. Otherwise, we risk, as does Drucker (1976), confusing ownership with management. Democracy, as a living political concept, is not just about owning resources but about having power, and this power stems from a combination of ownership and management. Democracy also requires transparency and deliberation. As was previously shown, the rank-and-file members of the labor federation were excluded from the conception of the FSTQ and were consulted only after the fund had been established. Although the founders of the fund could claim that the dramatic level of unemployment justified resolute and quick action, the FSTQ founders not only established the fund without a clear mandate by the congress but also took care to leave the information, training, and research divisions of the federation out of the discussion because these divisions were perceived as being more ideological (Blanger-Martin 1993). Democracy, in the FSTQ case, was seen as an obstacle, hardly a good sign for the future. The sums of money invested in pension plans are astronomical and need to be taken into account by anyone serious about going beyond capitalism in the Western world. I do contend that the trade union movement should harness pension power. This can lead to more social investment as the FSTQ case proves. But, in agreement with Hebb and MacKenzie (2001), I share their belief that the control of these vehicles is not an end in itself but rather a critical first step toward a democratic investment agenda based on the premise that workers generate capital and should also direct its uses. Declaration of Conflicting Interests
The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.

Funding
The author(s) received no financial support for the research, authorship, and/or publication of this article.

Authors Note
The author acknowledges the support and advice of Grard Cornilleau of the Institut dtudes Politiques de Paris, Eric Shragge of the School of Community and ric Pineault from the Universit du Qubec Montral. He would also like to acknowledge the openness and availability of Isabelle Reny from the archives of the FTQ, Mario Tremblay, public and corporate affairs vice president of the FSTQ, and Gatan Morin, first vice president for investments. All errors are obviously mine.

References
AFL-CIO Executive Council Committee on the Investment of Union Pension Funds. 1980. Investment of union pension funds. Washington, DC. Albrecht, S. L., and S. Deutsch. 1983. The challenge of economic democracy: The case of Sweden. Economic and Industrial Democracy 4 (3): 287-320. Asard, E. 1980. Employee participation in Sweden 1971-1979: The issue of social democracy. Economic and Industrial Democracy 1 (3). Bachand, R. 2001. Le Fonds de Solidarit FTQ: Une contribution originale de la FTQ au dveloppement conomique du Qubec. In La FTQ, ses syndicats et la socit Qubcoise, ed. Y. Blanger, R. Comeau, and C. Mtivier. Montral: Comeau & Nadeau. Barber, R. 1982. Pension funds in the United States: Issues of investment and control. Economic and Industrial Democracy 3 (1): 31-73. Bartell, H. R., Jr. 1965. National union assets, 1959-1961. Industrial and Labor Relations Review 19 (1): 80-91.

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Blanger-Martin, L. 1993. La cration du Fonds de Solidarit des Travailleurs du Qubec (FTQ): Analyse politique du processus de formulation de la stratgie. Sciences de la Gestion. Montral: cole des Hautes tudes Commerciales. M.Sc. Blanger, G. 1994. La premire caisse populaire de Montral fut fonde par des leaders du mouvement ouvrier. La Revue Desjardins 60 (3): 23. Belfer, N. 1953. Trade union investment policies. Industrial and Labor Relations Review 6 (3): 337-351. Bernier, L., et al. 2003. Attending to the general interest: New mechanisms for mediating between the individual, collective and general interest in Qubec. Annals of Public and Cooperative Economics 4 (3): 321-347. Botein, H. 2007. Labor unions and affordable housing: An uneasy relationship. Urban Affairs Review 42 (6): 799-822. Bourque, G. L. 2000. Le modle Qubcois de dveloppement: De lmergence au renouvellement. SainteFoy: Presses de l'Universit du Qubec. Cumming, D. J., and J. G. MacIntosh. 2007. Mutual funds that invest in private equity? An analysis of labour-sponsored investment funds. Cambridge Journal of Economics 31: 445-487. Cyr, F., and R. Roy. 1981. lments d'histoire de la FTQ: La FTQ et la question nationale. Laval: ditions coopratives Albert Saint-Martin. Dionne, B. 1991. Histoire du syndicalisme Qubcois. Montral: Boral Express. Drucker, P. F. 1976. The unseen revolution: How pension fund socialism came to America. New York: Harper & Row. Fdration des Travailleurs du Qubec. 1962. Mmoire sur le chmage. Fdration des Travailleurs du Qubec. 1979. Procs-verbal - 16e congrs de la FTQ - 26 au 30 novembre 1979. Qubec. Fdration des Travailleurs du Qubec. 1981. Procs-verbal - 17e congrs de la FTQ - 16 au 20 novembre 1981. Montral. Fdration des Travailleurs du Qubec. 1981a. S'unir pour vrai... partout: Discours inaugural du Prsident Louis Laberge. Montral. Fdration des Travailleurs du Qubec. 1982. Procs-verbal runion conseil gnral - 14 et 15 juin 1982. Montral. Fdration des Travailleurs du Qubec. 1982a. Procs-verbal runion du bureau - 27 septembre 1982. Montral. Fdration des Travailleurs du Qubec. 1982c. Procs-verbal runion du conseil gnral. Jonquire. Fdration des Travailleurs du Qubec. 1983. Objet: Cration d'un fonds de solidarit - Lettre Monsieur Ren Lvesque. Qubec. Fdration des Travailleurs du Qubec. 1983a. Procs-verbal runion du bureau - 24 mai 1983. Montral. Fdration des Travailleurs du Qubec. 1983b. Procs verbal runion extraordinaire conjointe du conseil gnral et du conseil consultatif de la FTQ - 4 mars 1983. Montral. Fdration des Travailleurs du Qubec. 1983c. Procs-verbal runion du bureau - lundi 28 fvrier 1983. Montral. Fdration des Travailleurs du Qubec. 2007. Cinquante ans: Album-souvenir 1957-2007. Montral: FTQ. Fonds de Solidarit FTQ. 2009. Rapport de gestion. Fournier, L. 1991. Solidarit Inc.: Un nouveau syndicalisme crateur d'emplois. Montral: Qubec/Amrique. Fournier, L. 1992. Louis Laberge: Le syndicalisme c'est ma vie. Montral: Qubec/Amriques. Gagnon, G. 1991. Demain l'autogestion. In La participation politique: Leons des dernires dcennies, ed. J. Godbout. Qubec: Institut Qubcois de la Culture. Gill, L. 1985. Partenariat social et actionnariat ouvrier. Du rachat dentreprises aux Fonds de Solidarit . Interventions conomiques pour une Alternative Sociale 14-15(Fall): 261-272. Gill, L. 1989. Les limites du partenariat. Montral: Boral. Hebb, T., and D. Mackenzie. 2001. Canadian labour-sponsored investment funds: A model for U.S. economically targeted investments. In Working capital: The power of labors pensions, ed. A. Fung, T. Hebb, and J. Rogers. Ithaca, NY: Cornell University Press.

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Henry, J. 1977. How pension fund socialism didnt come to America. Working Papers for a New Society 4 (4). Korpi, W. 1978. The working class in welfare capitalism: Work, unions and politics in Sweden. London: Routledge and Kegan Paul. Lalibert, P. 1998. The economic impact of labour-sponsored venture capital corporations: A case study from Qubec. International Labour Review 137 (1): 47-60. Laporte, J.-P. 1983. Les syndicats et la gestion participative. Ottawa: Les ditions Agence dARC. Leroux, . 2001. Gustave Francq: Figure marquante du syndicalisme et prcurseur de la FTQ. Montral: VLB diteur. Marens, R. 2004. Waiting for the North to rise: Revisiting Barber and Rifkin after a generation of union financial activism in the U.S. Journal of Business Ethics 52 (1): 109-123. Mass, G. 2002. Gustave Francq (1871-1952): Prcurseur de la FTQ. Retrieved December 10, 2009, from http://ftq.qc.ca/modules/pages/index.php?id=34&langue=fr. Mathews, J. 1989. The democratization of capital. Economic and Industrial Democracy 10: 165-193. Mauriac, L. 2005. Au Qubec, une fin dactivit en pleines actions. Libration. Paris: 7622. Meidner, R. 1978. Employee investment funds. An approach to collective capital formation. London: Allen and Unwin. Naphtali, F. 1928. Wirtschaftsdemokratie: Ihr Wesen, Weg und Ziel, Verlagsges. Berlin: Gewerkschaftsbundes. Nove, A. 1983. The economics of feasible socialism. London: G. Allen & Unwin. Nove, A. 1991. The economics of feasible socialism revisited. London: Harper Collins. OConnor, M. 2001. Labors role in the shareholder revolution. In Working capital: The power of labors pensions, ed. A. Fung, T. Hebb, and J. Rogers. Ithaca, NY: Cornell University Press. Osborne, D., and D. Sandler. 1998. A tax expenditure analysis of labour-sponsored venture capital corporations. Canadian Tax Journal 14: 253-277. Payne, S. T. 1968. Opinions syndicales sur les structures syndicales. Relations Industrielles / Industrial Relations 23 (4): 649-660. Rolland, D., and D.-G. Tremblay. 1995. Les fonds dinvestissement des travailleurs, la politique salariale et la dmocratie conomique en Sude: Relance du capital ou socialisme syndical? In Concertation et performance conomique: Vers de nouveaux modles?: Actes du 12e Colloque de lAssociation dconomie politique, D.-G. Tremblay. Montral: Presses de lUniversit du Qubec. Rouillard, J. 1989. Histoire du syndicalisme au Qubec: Des origines nos jours. Montral: Boral Express. Roy, R. 2001. Lobsession de lemploi: Constante de laction socio-conomique de la FTQ. In La FTQ, ses syndicats et la socit Qubcoise, ed. Y. Blanger, R. Comeau, and C. Mtivier. Montral: Comeau & Nadeau. Sauviat, C. 2001. Syndicats et marchs financiers: Bilan et limites des stratgies Nord-Amricaines. Quelle valeur dexemple pour les syndicats en Europe? La revue de lIRES 36 (2): 61-96. Schweickart, D. 2002. After capitalism. Oxford: Rowman & Littlefield Publishers. Secor. 2001. Analyse de limpact conomique des investissements du Fonds de Solidarit des Travailleurs du Qubec. Rapport prsent au Fonds de Solidarit des Travailleurs du Qubec. Montral. Simard, M. 1978. Lautogestion Tricofil: Lutte sans avenir ou avenir dune lutte. Revue Esprit (March): 45-59. Stanford, J. 1999. Paper boom: Why real prosperity requires a new approach to Canadas economy. Toronto: J. Lorimer. Suret, J.-M. 1990. Les initiatives Qubcoises dans le domaine de la capitalisation des entreprises: Le point de vue des investisseurs. Canadian Public Policy16 (3): 239-251. Thriault, Y. 1983. Rapport sur les activits lgislatives. Revue Parlementaire Canadienne (Fall): 41. Tremblay, L.-M. 1972. Le syndicalisme Qubcois - Idologies de la C.S.N. et de la F.T.Q. Montral: Les Presses de l'Universit de Montral. Vaillancourt, F. 1997. Labour-sponsored venture capital funds in Canada: Institutional aspects, tax expenditure and employment creation. In Financing innovative enterprise in Canada, ed. P. Halpern. Calgary: University of Calgary Press.

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Philippe Morin is a scholar and organizer active in Montral, Canada. After completing degrees at McGill University, Sciences-Po Paris, and Concordia University, Philippe has decided to focus on the grassroots level. He is now active in community organizing, more specifically around issues related to housing and poverty.

What Radical Means in the 21st Century

Being Radical or Radical Being?


Ben Fine1

Review of Radical Political Economics 44(1) 100106 2012 Union for Radical Political Economics Reprints and permission: http://www. sagepub.com/journalsPermissions.nav DOI: 10.1177/0486613411423890 http://rrp.sagepub.com

1.The Radical as Intellectual?


Just as one does not judge an individual by what he thinks about himself, so one cannot judge such a period of transformation by its consciousness, but, on the contrary, this consciousness must be explained from the contradictions of material life, from the conflict existing between the social forces of production and the relations of production.1 Here Marx deploys our lack of trust in opinion or representation of oneself as a metaphor for ideology. But it is equally telling in the opposite direction. We know that radicals are defined by their context, not by self-designation. The anti-monarchist in a republic is not a radical but is liable to be beheaded in other circumstances. In short, being a radical is not a personal nor fashion choice although it can be projected and even commercialized as such, not least with Che tee-shirts. To be a radical is to be attached to radicalism, with corresponding boundaries from above and from below, or left and right if you prefer. To be a communist in China is not to be a radical but to be a conformist and part of an elite. Elsewhere in the world, it can also run the risk of being self-defeating by virtue of marginalization. The hermit is not a radical in anything other than life-style, although it is possible for hermit or other individual to serve as a symbol for a social movement. Radicalism, then, first and foremost is defined both by social association and personal and collective practices. If I am a radical, I wish I were so in different circumstances, and so a radical of a different substance, one more actively submerged in a collective movement for socialism as opposed to being primarily prominent as an academic radical economist. The latter is presumably the reason why I have been asked to contribute to this series. Without wishing to denigrate the academic and intellectual communities to which I belong, and from which I so much benefit, this is radicalism on a limited social scale. This is also why I offer a personal account of being radical as opposed to reeling off a swathe of oppressions, injustices, powers, conflicts, hierarchies, utopias, and movements which I support or on which I have adopted appropriately radical stances. So, by circumstance as much as choice, my radicalism derives from my role as an intellectual, although I have both been a member of the Communist Party of Great Britain and have placed my services at the disposal of trade union and other progressive movements on demand. Undoubtedly,

K. Marx, Preface to A Contribution to the Critique of Political Economy, Progress Publishers, Moscow, 1977, first published 1859, http://www.marxists.org/archive/marx/works/1859/critique-pol-economy/preface.htm
School of Oriental and African Studies, London, UK

Date accepted: July 20, 2011 Corresponding Author: Ben Fine, Economics, School of Oriental and African Studies, Russell Square, Thornhaugh St., London WC1H 0XG, United Kingdom Email: bf@soas.ac.uk

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the latter has contributed as much if not more to my own intellect as vice-versa as it offers new perspectives both on ways of seeing and what is seen. As a radical, could I have done more in extending my activities beyond academia? The answer is, and always is, yes. But my own personal disposition, and comparative advantage to coin a phrase, to undertake intellectual work has no doubt prejudiced me towards the view that such effort does not necessarily bear fruit. It has often been suggested, for example, that I address a larger audience through popular texts. I deeply applaud the intention behind such suggestions but have difficulty in envisioning what a text would be like that would be fit for purpose. So my response is to ask to be given examples in economics, or otherwise, to be emulated. Success in such popular texts are now fleeting, few, and far between. And the public, especially radical, intellectual, in profile and substance, is a thing of the past, by historical comparison in the British context, with the likes of H. G. Wells, George Bernard Shaw, and Bertrand Russell. It has been displaced by the contemporary frenzy for meeting the induced demands of short-term media exposure. Is the popular, radical text over for all but a few exceptions that prove the rule, indicatively ranging from Noam Chomsky to freakonomics (the latter now with its own touring stage show)? For some time, I was taxed with how the media might be exploited to convey the message without losing the message, not only as a goal of popularization but also as an intellectual exercise in its own right in reflecting upon the nature of contemporary capitalism, and its materially-based consciousness. Such conundrums are highly contingent upon the strength and practices of progressive movements, and an unsettling light was thrown upon them when I appeared in a short film made by Ken Loach defending Clause 4 of the Labour Party Constitution, committing it to the public ownership of the means of production. The clause was lost in 1995 and the film sank without exposure or trace. If someone as accomplished, successful, and prominent as Loach could not succeed in this single, transparent issue, what chance is there for the rest of us?

2.The Radical as Intellectual


So what allows or defines me to be a radical also reduces dramatically what this can be. My own road has been as an academic. In current circumstances, I see this very much in terms of keeping progressive ideas and capacities alive in response to an unprecedented assault on alternatives over the thirty years or more of neoliberalism. Here I like to distinguish between academics and intellectuals, although few are the latter without being the former these days. Academics are not of necessity but should be radicals, and hence intellectuals, by virtue of disposition. This is for the simple reason that they are required to think inside the box, as it were, in order to be able to think outside of the box. And, even more, to teach and encourage others to do likewise. In practice, though, academia has unquestionably become more heavily professionalized, especially for economics, the more it is Americanized and attached to broader postures on social and economic developments and policy and, thereby, increasingly confined to an in-the-box rather than an out-of-the-box ethos. I suspect this is less so in the sciences where, although there is no denying social determinants of direction and content taken, intellectual challenges to received conventional wisdoms remain both welcome and endemic.

3.The Radical as Economist


By contrast to the general run-of-the-mill academic, I take the intellectual to be someone who frequently questions others and self on a continual and broad-based fashion. Our own discipline of economics is remarkable for the extent to which it is an intellectual-free zone as a systemic characteristic, the more so, and even accelerating, over the past sixty years. There is little or no interest in the history of economic thought, methodology, and alternatives from such origins or

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otherwise. These aspects have been marginalized by those who dominate the discipline to an unprecedented degree. In this light, it is important to stress the following fundamental features of the contemporary mainstream. First, as with economics imperialism (as symbolized by freakonomics), it has sought to widen its scope of application on the basis of a narrow set of flawed principles and techniques. Associated with methodological individualism of a special type (homo economicus), usually wedded to efficiency, optimization, and equilibrium, this widening scope of application has most recently prompted a range of new approaches around behavior and techniques which has been parasitic on its chosen prey. For economics imperialism equally tends to reduce appropriated conceptual content and richness as found elsewhere in other disciplines to the dictates of its own methods and content, thereby further exposing its own analytical weaknesses and inconsistencies. Third, the mainstream can live with this so confident is it in its core concepts, techniques, and theory. Fourth, this means that the mainstream can and does change very rapidly without really changing very much at all. Fifth, then, radicalism within or around the mainstream economics may appear as such but is often no such thing. For me, and perhaps this is where I should have begun definitionally (and even ended), radicalism must involve close, or surely token, attention to issues of power, class, conflict, capital, capitalism, and the latters history and dynamic. This is all endemically absent from the mainstream including much of its radical versions. Sixth, by the same token, radicalism within economics is elusive. It is so intolerant of alternatives and dissent and analytically fragile around its standard concepts and techniques that, intellectually, even minor modifications are liable to be self-defining as heterodox in ethos; or, if you are (un)lucky seized upon and developed prodigiously both axiomatically and empirically as a novel twist on orthodoxy. So, thirty years of neoliberalism have not only hollowed out the political, institutional, and ideological foundations for alternatives, they have also done as much to economics as well. Interestingly, on a personal note, I find myself these days much in demand as speaker and participant in events and initiatives for which I was previously shunned. No doubt this reflects the understandable dissatisfaction with orthodoxy and the desire for more radical solutions in the wake of the global crisis. But, other than for the tired nostrums of market imperfection economics at micro and macro levels, these solutions can only be found at considerably more radical extremes. As it were, the establishment gets not only the orthodoxy it deserves, but also its own, equally diminished, heterodoxy, although it is everyone else who bears the consequences.

4.The Radical as Personal


In light of these evolving characteristics of economics, my own journey as a radical necessarily displays both personal idiosyncrasies and an evolving social context. As a student in the sixties, I was specifically radicalized by the struggle against the Vietnam War through to the demand for individual liberties of the most basic sorts against university authorities. From my family background, rich by circumstance in both human capital and material deprivation, I had an almost instinctive belief in egalitarianism and lack of respect for undeserved authority and privilege. My education from the age of fourteen to twenty was almost exclusively dedicated to mathematics as part of a paternal family ethos; four of my five brothers also essentially studied mathematics as well, only the youngest rebelling as an archaeologist (no sisters and my mother had studied history at university). And an early exposure to the unimaginable inefficiencies of British industry also, at least prior to deeper radicalization, wedded me to the idea that things could and should be run better. I worked in a school holiday for a manufacturer of vending machines that had reduced itself to importing German models and simply modifying the coin mechanism; the UK parent company was bloated on defence contracts. Spare parts were being hoarded without attention to their cost, their ease of

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supply, their storage costs, or frequency of need (some stocks would last a few days, others for a thousand years). None of this was seen as a problem let alone one to be addressed on cost-benefit terms for which my math was seen as an asset by the consultant charged at last with a more efficient formulaic stock control (and who was himself deeply resented by the long-established, literally, army of progress-chasers that littered the enterprise, the total antithesis of just-in-time Toyotaism on the horizon). Whilst my university education was in math, and never doubting that I wanted to study further, I found that I had reached my intellectual limits and so turned to economics. A double irony is that I failed to win a scholarship to do an MBA in the United States for which I was motivated by the wish to learn how to make business more efficient. And I was recruited with scholarship from the math department by Jim Mirrlees to study economics, reflecting the ethos that math is more important than economics for studying economics even forty years ago and a taste of times to come. These anecdotes reflect the roots or origins of my personal, academic radicalism but not its subsequent direction and content. Of necessity, my earlier training offered me a starting point of some comparative advantage in deductive methods and an early and easy command of orthodoxy, especially in its technical aspects. From this I was soon to gain professional security in terms of PhD, publications, and tenured post. But my commitment to other issues that orthodoxy could not resolve and, equally important, the capacity to pursue them to some extent in courses or on my account, necessarily involved an intellectual journey away from such starting points other than as the raw materials for critical deconstruction. Indeed, much of my early academic career was marked by parallel endeavors of unremitting critique of the orthodoxy and engaging in close and detailed debates over interpretations of Marxs and Marxist political economy. But I was also soon equally concerned with applied and historical work, around the British economy in general and the British coal industry in particular. Subsequently, my work has ranged over a much wider variety of fields and topics, some chosen, some accidentally engaged, and some commissioned. These include, by reference to books published, history of economic thought, consumption (especially food), development, social capital, labor, and South Africa. Throughout these endeavours, my commitment to Marxist political economy has remained crucial and irreducible if, at times, strategic in order to engage with those who do not share this commitment. But my work has ranged far beyond reduction to interpretations of the law of value and, I hope, my radicalism has been both deepened and enriched by critical engagement not only with mainstream economics (which always offers a sounding board for alternatives) but with other heterodoxies and social science more generally. For the latter, postmodernism in particular has offered a welcome exhortation to unpick the concepts we use critically (if not to go to the extreme of overlooking the material processes, structures, and agents that underpin them). And, more generally, the key concepts of social science such as institutions, the state, and culture also offer critical points of departure for enriching political economy in its application and even in its core content as it is reproduced at more complex levels and analyses. I am unsure of the extent to which my intellectual radicalism continues to be marked by the path dependence of the journey that I have taken from mathematics to social science. Certainly, I have had to question the limits of axiomatics and traditional and unthinking approaches to (social) science and to incorporate appropriately other forms of analysis from an initial grounding in technical expertise (beyond which the mainstream, and more, rarely acknowledge let alone address). As a consequence, revisiting my notion from above of radical academic as intellectual with critical integrity, my practice in research is to engage with any contribution of relevance irrespective of its disciplinary origins (although, no doubt, the criteria of relevance may display, or conceal, disciplinary and personal prejudices).

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I am, however, acutely conscious that my capacity to be a radical academic in this vein is a luxury that is not now so readily open to others with origins and roots within economics. There are unremitting pressures upon those who want to be an academic economist to conform to the dictates of orthodoxy. And, even for those with the inclination and resources in terms of funding for education to be otherwise, there are very few places where it is possible to gain a more rounded training in economics, both commanding orthodoxy and incorporating methodology, history of economic thought, and heterodox alternatives. And the reaction to the peculiarities of the discipline, so striking on first meeting, soon succumb to its unsubtle charms. For even to be proficient in orthodoxy in order to be able to criticize it is a formidable task in and of itself quite apart from the socializing aspects involved in accepting received knowledge. And, when it comes to economics (and its assumptions, concepts, methods, and realism), the orthodox devil does not have the best or easiest of tunes! But they are the only ones on the overwhelming majority of jukeboxes.

5. Radical Prospects
There are, then, severe constraints upon the formation of radical economists. If you want to understand the economy, the last thing to study is economics. To do so would be to invest an enormous degree of energy in studying ephemera and technique. To establish yourself, it is increasingly necessary to compromise with such orthodoxy, itself a slippery slope for the radical, as virtue is made out of necessity and turns to vice. So intolerant is the orthodoxy that intellectual concessions to access its ear are almost certainly self-defeating and delusional, although my experience is that this has changed substantially over my time as an economist. Some neoclassicals of yore were much less aggressive against alternatives, recognizing the limitations of their principles in and of themselves as well as in their scope of application, and they were much more willing to concede to the scholarly merits and insights of other social sciences as opposed to seeing them as resources to be plundered for their own reduced colonization of the corresponding subject matter. They even tolerated alternatives and welcomed debate with them. This is no longer the case.

6.The Radical as Collective


Such considerations just before the crisis broke brought home to me the extent to which the reproduction of future generations of political economists was at risk. I was also acutely aware of the privilege of being at the School of Oriental and African Studies (SOAS) where, for a number of reasons, political economy had managed both to survive and be hegemonic within an economics department. But it was also apparent that more needed to be done than simply to provide a refuge for such alternative thinking. So, with others, the goal was set of seeking ways of promoting political economy on a broader basis, drawing upon the strengths available at SOAS and its connections and potential connections elsewhere, possibly uniquely extensive in numbers involved and impact, especially in development economics (and with a separate, even larger Department of Development Studies with similar ethos on a broader canvas). In this way, the International Initiative for Promoting Political Economy (IIPPE) was born, and it has gone from strength to strength, having held three workshops for research students and two international conferences, www.iippe.org. Its organizing principles involve contributing to Marxist and heterodox political economy, thereby also engaging critically with the mainstream, constructively with other social sciences, and, as far as possible, with activism and progressive organizations and movements.

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7. The Radical Against and Beyond Finance


Of course, the global crisis and its consequences have expanded the space for radicalism. And, to be a radical as far as economics is concerned on the contemporary scene could not be both easier and harder at the same time. For, as mentioned, thirty years of neoliberalism has itself squeezed out alternative ways of thinking let alone conceiving and implementing policy. Understandably, as it was in the 1930s if not the 1970s, to be against finance (or financialization) and to hold it responsible for, or at least complicit with, the crisis is hardly a radical idea. Indeed, it is, or ought to be, commonsense. In this light, since the crisis broke, I have found myself returning again and again to the following quotation from Sir Josiah Stamp, a member of the Board of the Bank of England, and reputedly the second richest man in the UK in the 1930s:2 Banking was conceived in iniquity and was born in sin. The bankers own the earth. Take it away from them, but leave them the power to create money, and with the flick of the pen they will create enough deposits to buy it back again. However, take it away from them, and all the great fortunes like mine will disappear and they ought to disappear, for this would be a happier and better world to live in. But, if you wish to remain the slaves of bankers and pay the cost of your own slavery, let them continue to create money. This radical critique of finance from the past poses two tasks for radicals today. First is to persuade others of this stance, not least in the wake of assaults upon working people as in Greece and elsewhere. Second is to go beyond this stance. For though powerful imagery may be conjured up, it is insufficiently filled out in terms of other agencies, processes, structures, and mechanisms. It does also advise of the vulnerability of progressive policy to the flick of the pen, the bankers or otherwise, against which safeguards need to be put in place through more deep-seated transformation in the ownership and organization of the means of production for the people and by the people. As Marx put it, money is in love with commodities but the course of true love never did run smooth. Now it might be better put that money is in love with finance. But nor has the romance between radicalism and communism run smooth. Back in the 1970s, with a visa for the United States stamped to reveal my membership of the Communist Party for all to see, the U.S. immigration official, unbelieving that I could be a public employee, demanded whether I looooooooooooooved communism before I was shunted off to a compound full of blacks, criminals, and the insane. Now such controls no longer seem to be necessary. Is this progress or has control been imposed more deeply and surreptitiously? The task of the radical is surely to identify what has changed, what has not other than in form, and to translate such understanding into support for change of a deeper and more progressive kind. Acknowledgments
Thanks to Dimitris Milonakis and Alfredo Saad-Filho for comments on an earlier draft.

Editors Note
We are launching a new section on What Radical Means in the 21st Century. We are challenging notable people on the left to address this question.
2

See http://en.wikipedia.org/wiki/Josiah_Stamp,_1st_Baron_Stamp

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Ben Fine is Professor of Economics at the School of Oriental and African Studies, University of London. Recent books include From Political Economy to Economics: Method, the Social and the Historical in the Evolution of Economic Theory, awarded the 2009 Gunnar Myrdal Prize, and From Economics Imperialism to Freakonomics: The Shifting Boundaries Between Economics and Other Social Sciences, awarded the 2009 Deutscher Prize, both with Dimitris Milonakis, Routledge. He has served as advisor to trade unions and other progressive organizations, and to international, national, and local agencies and governments, and served as one of four international expert advisors on President Mandelas 1995/96 South African Labour Market Commission. He currently sits on the Social Science Research Committee of the UKs Food Standards Agency, for which he chairs the Working Group on Meat Controls.

Book Review

Review of Radical Political Economics 44(1) 107123 2012 Union for Radical Political Economics Reprints and permission: http://www. sagepub.com/journalsPermissions.nav http://rrp.sagepub.com

Theories of Social Capital: Researchers Behaving Badly. Ben Fine; London: Pluto Press. 2010, 304 pp., $45 pb. DOI: 10.1177/0486613411418058
Accepted December 19, 2010

Social capital is the degradation of, not a contribution to, social science. Fine (2010: 2)

Ben Fines new book on social capital continues and elaborates upon key themes laid down in his 2001 book on the subject. The gist of his argument is that the concept of social capital, which has swept through the social sciences like a wildfire in the past 15 years, is so fundamentally flawed as to illuminate next to nothing about social reality; and that on the contrary, it leads us off the pathways we ought to be on to develop valuable, meaningful, and accurate conceptualizations of social life. As commonly used, the term social capital refers to those features of social organization, such as networks, norms, and trust, that facilitate coordination and cooperation for mutual benefit (Putnam 1993: 35). When the discourse took off in the 1990s, social capital embedded in civil-society organizations was often said to have great scope for improv[ing] the efficacy of society (Putnam 2000: 167). As Fines first book pointed out, this complemented the evolving post-Washington Consensus consensus, which acknowledged that markets do not always maximize social welfare, but which also viewed government economic interventions as likely to crowd out the beneficial things that civil-society organizations could instead do. In the decade that followed, the literature grew exponentially and expanded across the disciplines, infiltrating political science, sociology, economics, development studies, business studies, social psychology, health, education, social work, and many subfields (such as crime, housing, and migration). While the initial positive ideological gloss has worn off, its proponents continue to put it forth like a universal dark matter: pervasively yet unevenly distributed, missed by previous researchers, and capable of explaining all sorts of previously puzzling social and economic phenomena. Fines new book gives a critical overview of these wide-ranging new developments and refines and extends his arguments about the uselessness of the concept. Some of his arguments have been made elsewhere in thoughtful critiques of social capital.1 Important here is the fundamental vagueness of the concept, wherein it is fine to use as metaphor but not as an analytically meaningful social-science construct. This can be seen from its contrast with human capital, understood as intangible productivity-enhancing attributes (knowledge, skills, aptitudes) which individuals accumulate via education, training, and experience. Social capital is also supposed to be intangible productivity-enhancing attributes, but what exactly are they? How are they produced or acquired? Who actually owns them and/or regulates access to them? How can they be measured? Here the literature is a confusing clutter of definitions, hypotheses, and proposed categorizations, which falls short of establishing how and why social relations should be conceptualized as a type of capital.
1

See e.g. Durlauf and Fafchamps (2005) and Knorringa and van Staveren (2007).

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(a) Middle-range approach

Social capital

Outcome

(b) Full-range approach embedding social capital in social structures and forces

Social capital

Outcome

Figure 1. Social causalities and social capital


Source: Fine (2010: 23-27).

At the same time, Fines critique is novel in two ways that make it of special interest to radical political economists. First, Fine (23-27) offers a valuable differentiation between proximate and ultimate causes of social phenomena that helps to situate issues of social capital in their broader social, economic, and political contexts. As shown in panel (a) of Figure 1, proponents of social capital typically put it forth as a middle-range theoretical construct, calling attention to some direct, apparently causal link between some type of social capital and a given outcome of interest. For example, a study of low-income neighborhoods may find that levels of social capitaltrust, density of social ties, willingness to help neighbors, etc.present in the community apparently affect how well its children do in school. Econometric methods may be used to try to make sure the observed association is causal rather than a correlation, by finding some way to capture effects of exogenous variations in social capital. But this just establishes a proximate causality running from social capital to educational outcomes; it does not raise the question of what social structures and social forces gave rise to the variations in social capital across communities in the first place, nor does it check whether these in turn affect the outcome of interest directly. This broader notion of ultimate causalities is shown in panel (b) of Figure 1. Broader social structures and forces (A) such as trade unions, class, or the state may condition social capital directly, and/or via intermediating variables and processes that also affect it (B); focusing only on the nested connection from social capital to the outcome of interest ignores these fundamental causes of the outcome while highlighting a proximate cause that may be relatively unimportant. For example, in the case where relatively high social capital is found to be associated with good school outcomes for children, the policy upshot may seem to be to find ways to boost social connections among residents of low social-capital communities, e.g. by building community centers. But if variations in availability of jobs and daycare play a major role in variations across communities in social capital, and these affect education outcomes directly as well as via social capital, tackling the causes of these problems will be far more important for improving outcomes for children than trying to promote social interactions among people preoccupied with difficulties of making ends meet.

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This brings us to the second novel aspect of Fines critique, which concerns his answer to the question: if social capital is such a fundamentally flawed concept, why has its discourse expanded so phenomenally in the past 15 years? Durlauf and Fafchampss (2005) answer is that social capital is not so much a theoretical concept as it is a praxis, a code word used to federate disparate but interrelated research interests and to facilitate the cross-fertilization of ideas across disciplinary boundaries. In contrast, Fines answer (underlined in the subtitle of the book) is that researchers jumped on the social-capital bandwagon because it was the new new thing: having a buzz around it of being able to illuminate all sorts of social and economic phenomena, those who joined in the discourse could boost their odds of publishing in top journals, winning lucrative grants, participating in high-profile conferences, producing popular punditry, etc. (5). To Fine, this was a matter of herding around a flimsy idea, with almost none of the research that resulted serving to advance knowledge. Perhaps more could have been learned by developing Bourdieus understanding of social capital, which is both narrower (because it is not the same as cultural or symbolic capital) and broader (because it is rooted in notions of power, class, hierarchy, and conflict) than the Putnam-inspired concept that the literature followed (Fine 2010: 4, 85-89). But in the end, Fine thinks we should jettison social capital altogether in favor of class-based political economy (155), which does have potential to excavate ultimate causes of socio-economic phenomena. I have two relatively small quibbles with this generally rich and well-argued book. First, the critique of social capital is so devastating, one hardly wants to continue reading after the first chapter. That would be a mistake, however, as much interesting analysis follows, especially the discussion of the irresistible rise of social capital at the World Bank (ch. 6) and its relatively late incursion into management studies (ch. 7). Second, perhaps I am too scarred from being forced to swallow the stark individualism of neoclassical economics during graduate school, but I confess to finding it refreshing to see economic research that tries to re-situate people in networks of social relations, even if much of what has been done so far is unsatisfying. Thus, I would recommend reading Durlauf and Fafchampss (2005) evaluation of research on social capital along with Fines, as they share Fines broadly critical view of existing literature, but also discuss ideas for how research in this area could reasonably proceed. In the end, however, Fine is surely right that macro-social processessuch as inequality, power, and exclusion by class, race, gender, and ethnicitycannot be understood without political economy, and that the concept of social capital does little to help illuminate how these processes work. Martha A. Starr American University 4400 Massachusetts Ave. NW Washington, DC 20016 E-mail: mstarr@american.edu References
Durlauf, S., and M. Fafchamps. 2005. Social capital. In Handbook of economic growth, ed. P. Aghion and S. Durlauf, vol. 1, 1639-99. Amsterdam: North Holland. Fine, B. 2001. Social capital versus social theory: Political economy and social science at the turn of the millennium. New York: Routledge. Knorringa, P., and I. van Staveren. 2007. Beyond social capital: A critical approach. Review of Social Economy 65(1): 1-9. Putnam, R. 1993. The prosperous community: Social capital and public life. American Prospect 13 (Spring): 35-42. . 2000. Bowling alone: The collapse and revival of American community. New York: Simon and Schuster.

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Working in the Shadows: A Year of Doing the Jobs (Most) Americans Wont Do. Gabriel Thompson; New York: Nation Books, 2010, 320 pp., $24.95. DOI: 10.1177/0486613411418059
Accepted November 15, 2010

Gabriel Thompson represents the voice of a new generation of labor journalists in the best tradition of George Orwell, Rheta Childe Dorr, Studs Terkel, and Barbara Ehrenriech. In this book, Thompson, a 30-year old New York based writer and community organizer, takes to the road in search of employment in sectors populated mainly by immigrant labor and undocumented workers. His journey takes him to Doles lettuce fields in Arizona, a Pilgrims Pride poultry plant in Alabama, and the food service and flower markets of New York City. His goal was to work for two full months at each job and to write about his experiences and the lives of those he encountered in the process. Thompson first takes the reader through the process of applying for jobs in the low-wage sector. In every case, from farm work to poultry processing and food service, Thompson, who is white, is offered positions that are not normally filled by Latinos or African-Americans. He must repeatedly insist upon being assigned to jobs cutting lettuce, deboning chickens, and delivering take-out orders. His experience documents the persistent and wide-spread racial segregation of entry level work. Then, once he is on the job and actually performing low-wage labor, he is able to carefully examine the nature and diversity of work practices generically categorized as low-skill. This combination of participant observation with ethnographic research into the largely Spanish-speaking immigrant and migrant work force reveals some key differences in the structure and practice of low-wage work. For example, in describing the labor process involved in the lettuce harvest in Yuma, Arizona, Thompson breaks down the back-breaking process of cutting lettuce in such detail that he uncovers the complex hand-eye coordination necessary to develop the proper technique to effectively remove the outer leaves while leaving the lettuce head unscathed all the while adjusting technique to different sizes and field conditions. He recounts his constant struggle to keep pace and finds that even, after two months on the job, he is still the least productive member of the crew. Because of the tacit skill and knowledge necessary to perform lettuce cutting there has been no effort to mechanize the process. Thompson also describes the work organization and the system of collective labor whereby workers helped Thompson by doubling or tripling up, moving into his row to harvest the heads that he could not. Workers at Dole are paid an hourly wage of $8.37 and are represented by the Teamsters. While he readily agreed to pay union dues, he notes that, since Arizona is a right-to-work state, the two women in his first-day orientation cohort declined to pay dues. The next job Thompson takes on is poultry processing. Unlike lettuce cutting, the poultry plant is an industrialized system with a detailed division of labor lifted straight from the Taylorized system of mass production of the early 20th century. Ford engineers got their original idea for the assembly line from the dis-assemby line in meat packing (Hounshell 1984), and modern poultry plants are models of de-skilling. Thompson cites the frequent use of line speed-up, racial segregation of labor on the plant floor, and a campaign of intimidation and fear intended to discipline an increasingly immigrant workforce. He documents the way that Pilgrims Prides antiunion philosophy is instilled in workers as soon as they go through their new employee orientation. Alabama officials are proud of their states status as low-tax and right-to-work. Indeed, for those living in Russellville, Alabama, the two main employers are Pilgrims Pride and Wal-Mart. It is not uncommon for workers to bounce back and forth between the two. Thompson discusses the geographic origins of meatpacking in northern cities with growing union representation. By contrast poultry processing took root with small farmers living along the eastern shore states of Delaware, Maryland, and Virginia before the Second World War. The locus of production shifted to the Deep South, and production technology turned toward the assembly line in

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order to meet the growing consumer demand for cheap protein. In doing so the author is careful to weave the current plight of poultry workers into a story of industrialization and mass production that never participated in, and therefore never benefitted from, the legacy of unionization. Working in the Shadows portrays low-wage workers as thoughtful, moral, and complex. Since Thompson spends months with his co-workers he is able to engage in lengthy conversations both on the job and off. As a result he is able to reveal some of the thought processes taking place in the minds of workers who rejected the UFCWs campaign to unionize the plant in 2006. For example, he is told that during the campaign management called individual workers off the line to watch a video linking unions with violence and bloodshed. Since a large contingent of the workforce emigrated from Guatemala and El Salvador the message was especially chilling. Immediately after the workers rejected the union the plant management celebrated by speeding up the line. Thompson notes that in 2009 many of those same workers regretted their vote and would side with the union if there was another election. Yet the high turnover at the plant meant that only a small fraction of those around during the 2006 vote were still employed at the plant. In the final section the author takes us to New York Citys low-wage jobs, first in the flower district and then in the restaurant sector. The flower district is a remnant of New Yorks legacy as a wholesale center, a spatial hub in a global distribution chain. Much of the work gets done on the street and sidewalk where floral displays are constructed and plants are displayed for sale. The public performance of low-wage labor does not make it any less rife with labor violations, most notably wage theft. Wage theft occurs when employers refuse to pay minimum wage, require unpaid hours, misclassify workers as independent contractors, or fail to issue a final paycheck for terminated workers (Interfaith Worker Justice 2010). But Thompson also reported another, more unexpected, form of abuse in Manhattan: a constant torrent of emotional assault and verbal bullying. This, he notes, creates a psychologically harmful working environment that is far less easily captured in traditional labor law violations. The final job Thompson takes on is in the restaurant industry delivering food by bicycle. The income from this and most restaurant jobs is based on tips. The federal minimum wage for restaurant workers is $2.13 per hour; in New York it is $4.65. Thompson describes an industry marked by low pay, long hours, and dangerous conditions, both in the kitchen where cuts and burns are common and on the road where bicycle collisions are frequent. In the restaurant industry discriminatory hiring practices help to segregate the back of the house (food prep and dishwashing) from the front of the house (manager and wait staff). By physically inserting himself into low-wage labor Gabriel Thompson is able to describe and reflect upon the diversity of low-wage work, the range of skills usually ignored when defining low-wage as low-skill, and the variety of workplaces ranging from multinational corporations to small independent establishments. In addition, he remains committed to telling the stories of workers and their struggle in a way that portrays their dignity in the face of oppression. In the high school and college classroom, this book would make an excellent contribution to courses in introductory economics, labor economics, economic geography, sociology, and labor studies. Bruce Pietrykowski Center for Labor and Community Studies University of Michigan-Dearborn Dearborn, MI 48128 E-mail: bpie@umich.edu References
Hounshell, D. 1984. From the American system to mass production, 1800-1932. Baltimore, MD: Johns Hopkins University Press. Interfaith Worker Justice. Wage theft: Expanded definition. http://www.iwj.org/template/page.cfm?id=147 .Accessed on September 7, 2010.

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Deep History. David Laibman; New York: State University of New York Press, 2007, 210 pp., $65. DOI: 10.1177/0486613411418060
Accepted December 19, 2010

My project is to reach behind the rich veins of human experience, in all its forms, through the entire time of our existence on Earth, and seek out explanatory principles that might help organize our understanding of that recordour basic sense of ourselves, where we have been and where we are going. Except for those still enjoying the wordplay of postmodernism, political theorists will appreciate opening a book with such a stated goal. And the main strength of the book is that it lives up to its promise, offering nothing less than a total conception of the pattern of history. David Laibman is a Marxist and the explanatory principles that he offers are derived from Marxs writings. But this book is not an exegesis of Marxs model of history; it is an adoption of these conceptual tools to entirely new formulations and ways of looking at the evolution of human societies. Direct quotes from Marx are few because the author does not want to reheat past debates about orthodoxy, but rather knuckle down to the substantive issue: what concepts explain the deep structural evolution of human history? Laibmans answer is that there is a high level construct, the abstract social totality (AST), that explains the logic of historical development. To be clear, for Laibman the AST is not a metaphor or helpful illustration; it is an explanatory, scientific, testable theory. Philosophically, the AST model is based on a particular notion of dialectics. The author believes in transcending contradictions. Most importantly for his project, Laibman believes he has found a way to transcend the apparent dichotomy between theories about history and the tangle of formless empirical material1 that arises from the study of specific historical moments. The notion of transcendence of contradiction is, of course, perfectly orthodox in Marxisms Hegelian inheritance. But an insightful transcendence of the Hegelian kind is, in fact, relatively rare in human thought. We are talking of radical shifts of perspective that allow us to see that what had formerly appeared to be irreconcilable concepts are in fact one-sided features of a more dynamic, dialectical, totality. By contrast, for example, to say that the difference between apples and pears can be resolved by understanding them both as fruit is not very profound or dialectical in the above sense. Several times while reading this book I felt that the author was offering us apparently transcendent solutions to problems, but that his actual formula lacked the penetration necessary to really convince the reader that they were fundamental resolutions of contradictions rather than metaphysical constructions. With regard to the critical question of whether the dynamics of history can be explained at an abstract high level, without their having to be adapted to specific historical detail in such a way as they lose their explanatory power, Laibman writes as follows:

David Laibman, Deep History (New York: State of New York Press, 2007), p. 4.

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My suggestion is to overcome this dichotomy, by developing a theory that is simultaneously hard and soft. I posit level of abstraction, and arrange these into a hierarchy, so that at the highest level we find the abstract social totality (AST) and at a lower level the (more) concrete social formation reflecting geo-climatic and developmental variation. At still lower levels numerous contingent and accidental factors, including the personalities and capacities of individuals, come into play and infuse variety into the picture, which thus approaches the concreteness of the actual historical record.2 The idea then is that the two opposites (crudely: theory and data) affect each other, but not equally. The AST encompasses both the next level down, social formations, and below that, very particular events. This schema is consistent with Laibmans notion of dialectics. Dialectics refers not simply to mutual interaction, but to interaction between unequal poles. In a dialectical interaction, dominant determination runs from one pole to the other; without this, the dialectic characterizes the mutual conditioning of the poles, their relational consistency, but does not reveal a dynamic movement in the system that they constitute.3 This formulation is different to the HegelianMarxist tradition and the worry here is that we are being offered a metaphysical construction that asserts the primacy of the AST rather than demonstrating how it arises from the concrete historical record. The most important theoretical assertion by Laibman is that the abstract social totality (AST) explains the pattern of history. Given perfect conditions, human society would necessarily go through certain historical periods: primitive communism, slavery, feudalism, and capitalism. This periodization is derived not from historical observation, but from the logic of the structures of the AST. What are those structures? They are the productive forces (PF) and the production relations (PR) that are derived from the works of Marx and Engels and the huge subsequent literature about them. The PFs and PRs form a consistent whole, the mode of production (MP). Laibman, probably wisely given that it would lead away from his main purpose, does not spend a great deal of time on the debates about these concepts. Rather he formulates two propositions that are important for developing his logical stages view of history: first, that PRs are progressively replaced over time with ever more sophisticated PRs, and second, there is a tendency to development in the PFs. Because any particular set of PRs tend to stasis, a tension develops within a mode of production, resolved if a revolution takes place leading to a new mode of production. The first transition Laibman believes arises from AST considerations is that from primitive communism to the slave mode of production. Laibman asserts that slavery is logically and necessarily the first form of systematic surplus extraction. But no argument is provided to explain why the first form of class society has to be slavery rather than, say, one based on the extraction of tributes from peasants. Suppose agriculture to have reached the point that it is possible to generate significant surpluses and suppose coercion necessary to gather this surplus to a ruling elite, why would the person being exploited be, in the first instance, a slave, the chattel of another person? Is it not as likely, in fact, that initially the first elites would not be able to leap from primitive communism straight to owning other human beings, but rather, and perhaps over many centuries, their privileged position would have arisen through the gradual tightening of their control over the limited surplus available to society? If we leave the terrain of logic and structure to follow E. Gordon Childes account of the actual origins of class society on this planet, then as well as the appearance of slavery we find examples,
2 3

Ibid. Ibid: 51.

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such as that of ancient Egypt, where tomb paintings show peasants coming in to pay their rent or dues, always in kind, while a scribe notes down on papyrus what each man brings and an overseer with a whip keeps the tributaries up to the mark.4 This latter source of wealth was almost certainly far more important initially than that created by slaves.5 It is possible for Laibmans schema to be adjusted to take into account the above point, but this shaky start undermines confidence in the whole model. Nevertheless, accepting then that a slave mode of production has come into being, is there a dynamic, at the AST level, that explains what will happen to it? Laibman follows earlier Marxist historians in saying that there is a fundamental problem for the stability of a slave mode of production in that it is continually obliged to seek outside its own territory for new sources of slaves and to devote an increasing share of the surplus to supporting this activity. The slave MP also, because of the lack of incentive for the slave to develop the productive forces intensively, has a tendency to expand them extensively: larger agricultural holdings, construction projects, etc. The PFPR model therefore points towards a crisis of the mode of production, as more and more of the share of the surplus is devoted to the means of coercion and control in this expanding system. For Laibman, the explanation for the overrunning of Rome by Germanic and other peoples ultimately lies at the level of the AST.6 There are many accounts of the fall of Roman civilization as well as an increasing number of both Marxist and non-Marxist studies that argue the fall has been exaggerated.7 My own preference is for that of G. E. M. de Ste. Croix. This differs from Laibmans AST explanation in one very important aspect. The author of Deep History believes that the backdrop of small-scale peasant production against which the gangs of slaves are working is an inert medium within which the slave dynamic occurs. For Ste. Croix, on the other hand, the decline of the importance of slavegenerated surpluses (for, approximately, the reasons given above) caused a massive tightening of the screw by the Roman elite on the non-slave lower social classes. The ruination and demoralization of the once-free Roman peasantry is what contributed, above all, to the inability of the empire to save itself from invasion.8 The difference is important for the question of methodology. Laibmans book is an attempt to distil a few high level explanations for the pattern of history; it does not suit this project to have to constantly adjust hard theory with soft lower-level historical data. But without amendment, the explanation offered for the conquest of the Western Roman Empire in Deep History seems inadequate. According to the AST model, the crisis of the slave mode of production gives way to the feudal mode. Laibman argues that this change is a necessary one because it is not possible for a slave mode of production to move directly to a capitalist mode. Now again, adhering strictly to the logic of the model and setting aside actual historical events for the moment, why must the end of slavery mean specifically feudalism? There are several theoretical ways in which surpluses could be extracted from a laboring class. Excluding the possibility of a capitalist form does not necessitate a feudal form; that needs to be demonstrated. In Laibmans discussion of the economic dynamics of feudalism, he convincingly demonstrates that their most important feature is that, by contrast with slavery, there is an incentive for

E. Gordon Childe, Man Makes Himself (London: Fontana, 1966), p. 166. Chris Harman, A Peoples History of the World (London: Bookmarks, 1999). 6 Laibman, Deep History, p. 30. 7 Bryan Ward-Perkins, The Fall of Rome and the End of Civilization (Oxford: Oxford University Press, 2007). 8 G. E. M. de Ste. Croix, The Class Struggle in the Ancient Greek World (London: Duckworth, 1980), pp. 453503.
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the producers to improve the techniques of production. As a consequence, the PFs advance to what Laibman terms the second-most-difficult of the revolutionary transitions: to capitalism.9 Capitalism is the next mode of production for the AST treatment. The model suddenly becomes less compelling, however, when Laibman wants to distinguish the capitalist mode of production from the other modes of production on the grounds that it has within it a nest of evolutionary stages. The justification for this layering is that of complexity: there are long cycles at the level of AST, within which are shorter cycles of structures that still remain above the level of full historical contingency. But Laibman does not address why, intrinsically, capitalism deserves this treatment and not the other modes of production. According to the authors system, we are in stage III of capitalism, one where there is a troubled and protracted move from the cold war towards a totalized global capitalist world, stage IV. Stage IV would involve a global, passive, state, an end to diffusion.10 It requires the global state that transnational capitalist class theorists observe as immanent in the emerging world institutions (World Bank, IMF, etc.).11 It is strange, having discussed history at a very philosophical level up until now, to suddenly find the book invoking specific historical institutions. Once again the reader is told that this model is genuinely theoretical in the sense that the move from one stage to another is chain linked. But then very distinct political beliefs are given to the reader as being derived from the model, such as the authors belief that Islam is fundamentally more reactionary than Judaism and Christianity;12 that a very long time period must elapse before an end to the capitalist mode of production is possible;13 that the Gorbachev era represented a mature version of socialism in Soviet Russia;14 and that even now the post-Soviet Russian social formation is not capitalist.15 Surely these relatively low level statements (compared to the books entire theme of deep history) have to be analyzed at a much more historically concrete level, or we end up having an AST theory that threatens to become crudely determinist. A theory intended to operate over ten thousand years is suddenly applicable to decades. All in all, there is a fundamental difference in approach to making generalizations about history between that of Marx and that evident in Deep History. Marxs generalizations about history were derived by examining particular historical moments, their contradictions, and thus arriving at powerful insights that were sometimes at a very high level, such as his famous Preface to A Contribution to the Critique of Political Economy. By contrast Deep History takes the methodologically opposite approach of starting with an abstract schema and attempting to fit historical evidence into it. To finish, however, on a positive note: Deep History is a very refreshing book. It is rare these days to encounter historiographical works of any sort that deal with an entire, totalizing, conception of history. Conor Kostick Department of History, Trinity College Dublin, Ireland E-mail: kosticc@tcd.ie
9

Laibman, Deep History, p. 36. Ibid: 136. 11 Ibid. 12 Ibid: 139. 13 Ibid: 137. 14 Ibid: 1812. 15 Ibid: 183.
10

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The Green Collar Economy: How One Solution Can Fix Our Two Biggest Problems. Van Jones; New York, NY: Harper Collins. 2008, 238 pp., $25.99 hardback. The Ecological Revolution: Making Peace With the Planet. John Bellamy Foster; New York, NY: Monthly Review Press, 2009, 328 pp., $17.95 paperback. DOI: 10.1177/0486613411418061
Accepted December 8, 2010

1. Green Politics
It is the summer of 2010, and as I write this review the BP oil disaster is wreaking ecological and social havoc throughout the Gulf Coast of the United States. Hemorrhaging oil is grounding shrimping fleets, fouling oystering beds, and bankrupting businesses. The disaster presents an acute threat to the cultural life-ways of indigenous groups who for centuries have been forced to negotiate the impacts of capitalist development and cultural imperialism. The stress caused by such social upheaval and insecurity cannot be underestimated and has already resulted in at least one suicide (Mitchell 2010), adding to the deaths of the 11 workers killed in the initial explosion on the Deepwater Horizon oil rig. With revised and worsening estimates of leakage-rates and with no end in sight, concerns over ecological and social outcomes are extending well beyond the Gulf Coast and well into the future. Of course, the disaster is not merely an accident that showcases the dangers intrinsic to an industrialized, dirty-energy economy. Nor should it be understood as simply the result of a disturbing lack of government oversight over a particularly egregious corporate actor. Rather, the disaster asks us to consider the conditions that produce such a perilous project and implores us to respond. For a complacent U.S. public, the BP disaster resounds a call for the creation of a new sustainable and green economy, a vision and discourse that has gained considerable purchase across divergent political projects in recent years. In Western Massachusetts where I live, for example, the social landscape is increasingly washed with a green hue: such endeavors as universitycampus initiatives, insurance companies, realtors, and banks market themselves through claiming their commitments to green initiatives. Even a local TacoBell, invested in factory farming and mass production, encourages customers to go green by eating in its LEED certified building. And of course environmentalists and green movements have long histories of internal political diversity and dissonance reflecting racialized class differences and divergent cultural and political traditions. At a recent local sustainability conference, I was reminded of the breadth of projects coming from the left that a green economy might accommodate. The event itself was hosted by Co-op Power, a social justice organization committed to sustainable and community-owned energy and was held on the grounds of Nuestras Raices, a grassroots organization involved in multiple community and economic development initiatives such as urban gardens, environmental justice projects, and youth programs. Participants included a local permaculture expert, a worker-owned cooperative specializing in retrofits, retailers hawking green products and information sessions, a university recruiting for a program in sustainability, a family-owned maple syrup business utilizing solar powered harvesting techniques, massage therapists, a company that converts diesel cars to run on vegetable oil, and a non-profit clean energy utility.

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This multifarious political terrain suggests numerous theoretical and practical challenges for social transformation. How do we work towards a sustainable future that is not co-opted by the entrenched interests and investments of the capitalist class and elites? Moreover, how do we assess, negotiate, and/or reconcile the range of initiatives that are staking claims to a green economic future? Two recent publications directed towards U.S. audiences can help us think through some of these questions and dilemmas. Van Joness The Green Collar Economy and John Bellamy Fosters The Ecological Revolution at first glance might be understood as conflicting left perspectives. Taken together, they might be able to point to a way forward.

2. The Green Collar Economy


Part manifesto and part policy playbook, Joness clarion call sounded in near concert with the election of the Obama presidency in 2008, a time of hopeful possibility for the left in the United States; throughout his book, Jones embodies this optimistic spirit, advocating for cooperation and solutions over opposition and critique. Jones begins by outlining what he refers to as the dual crisis of our times: rampant environmental destruction and radical socio-economic inequality. For Jones these crises mark an opportunity for political-economic transformation. Jones sees on the horizon the makings of a green new deal that would leverage government monies to spur and support a market-led transition to a new green economy. This green wave of investment would then create new markets and new jobs through low-tech opportunities like retrofits, green technological innovation, and new green industries. Jones contrasts the environmental project at hand with two earlier eras of environmental activism: conservation and regulation. These previous movements, Jones tells the reader, while leading to increased environmental awareness and important protections, excluded the interests and contributions of poor people and people of color and consequently largely excluded them from the benefits. Echoing the tenets of the environmental justice movement that rose in response to conventional environmentalism, Jones insists that a green collar economy must be characterized by eco-equity; in other words, equal protection and opportunity across axes of race and class. If the green wave of investment is to be transformative and redistributive, however, a movement will have to emerge that has the capacity to overcome entrenched interest bound up in what Jones describes as the military-petroleum complex (83). Jones calls for a multi-class and multi-racial populist alliance founded on and organized around a set of moral principlesequal protection for all, equal opportunity for all, and reverence for all creationin order to create an inclusive, broad-based movement. Jones lays out what his Green Growth Alliance looks like: students, social justice activists, environmentalists, labor, and faith organizations in partnership with business. The alliance would then engage with government at every level in order to create favorable policies. Jones highlights actually existing examples of green pathways to prosperity (115) in the areas of energy, food, waste, water and transportation (115). These examples include the development of wind farms on Native American land; urban agriculture projects that provide health food, jobs, and job training; policies that provide financial incentives for recycling; a non-profit and a workerowned co-op that salvages and resells building materials; and the creation of water capture systems in Los Angeles. Finally, Jones proposes a broad policy agenda at the national and local levels that could help to create an inclusive green economy. This sweeping agenda would include cap and trade legislation; worker training and employment; increased fuel and energy efficiencies; renewable energy legislation; investment in mass transportation; funding and support for sustainable agriculture; a number of innovative investment, conservation, and efficiency measures; and taking a leadership role in international climate change negotiations and efforts.

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3. Ecological Revolution
While Jones tells us that a move towards a green economy offers a solution to both environmental and economic crises, Foster argues that this economy has to be by definition a socialist one. Fosters 2009 book consists of a collection of reworked and expanded essays written over the course of more than a decade. These essays, comprising chapters in the book, are organized into three sections that, taken together, make the case for revolutionary transformation that is at once ecological and socialist. Foster builds his analysis in opposition to what he identifies as the dominant, mainstream response towards ecological crisis in the United States, a green industrial revolution that relies on technological invention and technocratic intervention to remediate and provide solutions to ecological and social problems. For Foster, green industrialism is doomed from the start, as it exists within a global capitalist order that necessarily produces ecological destruction. In the first section, The Planetary Crisis, Foster discusses some of the major ecological contradictions of global, industrial capitalism including environmental pollution, peak oil, and climate change. Most salient to his argument, Foster attests that growing awareness around, and the material consequences of, these contradictions have not led to any significant, let alone fundamental, transformation in social-environmental practices on a global scale or, most especially, by the United States which Foster understands as the hegemonic power of the capitalist system (130). On the contrary, Foster posits that the logics and processes associated with capital accumulation ultimately win out over ecological concerns. Rachel Carsons ecological critique and the social awareness and action it propelled has not prevented the proliferation of antibiotics in factory farms, pesticides in fruits and vegetable production, or government complicity with businesses who benefit from the production of synthetic chemicals in the United States. The energy crisis portended by peak oil has led to imperialist machinations to secure oil and more intensive extraction rather than conservation or significant investment in renewable energies. And, despite the overwhelming evidence that climate change will result in catastrophic social and ecological changes, the U.S. government has refused to comply with even the most modest reductions in greenhouse gas emissions proposed through international agreements. In the second section, Marxs Ecology, Foster makes the case that Marxs original works provide fundamental and critical insights towards understanding and responding to ecological crisis. Foster asserts that Marx was deeply concerned with issues of ecological limits and sustainability (183), and shows how both political eventslike the disconnection of Soviet thought from ecological issues (192)and constructed scholarly historicities have obfuscated Marxs ecological contributions. Throughout the section, Foster elaborates on Marxs development of the biological theory of metabolic rift, a concept which helps to explain the dialectical relationship between nature and society through the labor process. Human beings labor and produce, which changes nature, which in turn changes the nature of the relationship and the conditions under which labor is conducted. With capitalist relations of production, which commodifies nature, human beings become alienated from nature; and the process of capital accumulation leads to a constant intensification and enlargement of the metabolic rift between human beings and the earth (148). One example that Foster returns to in order to help illustrate his theory of metabolic rift is the division of labor created between town and country, both within capitalist centers and between nations in the capitalist system. As industrialization increased and agriculture became more systematized, nutrients in the soil were carried away from agricultural areas and towards urban centers. As production increased, fertilizer was needed to keep the land productive. First massive amounts of guano and then nitrates were exported from peripheral countries to the center, resulting in increased pollution in industrial areas and depletion of soil in agricultural areas. This

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metabolic rift, Foster suggests, is an underlying problem in ecology and can only be solved through a transformation in the relations of production. The final section, Ecology and Revolution, is a mere 25 pages. Foster uses this space to summarize his arguments and reiterate that only an ecological revolution can adequately respond to environmental crisis, and that the transition to socialism and the transition to an ecological society are one (277).

4. Revolutionary Politics?
When comparing the two projects, it is important to note that Joness vision of a green economy does not neatly match up with the mainstream green industrialism that Foster critiques. For example, Joness primary referents for green technology are renewables like solar and wind power, technologies that Foster implies might not readily correspond with the green industrial revolution (20, 21). And, more significantly, Jones intends to inspire a grassroots, populist alliance that stands in stark contrast to Fosters characterization of green industrialism as a top-down (28) and elite-led transformation. Moreover, Jones appears to be writing to the heart of the mainstream environmental movement and to mainstream liberals he is hoping to activate; in other words he is writing to the center that he is hoping to inspire to action. In contrast, Fosters intended audience is at once more scholarly and further to the left. Still, if we read Joness call to action against Fosters theoretical analysis, Joness politics might appear nave, insouciant, and problematic. Joness prescription largely takes for granted capitalist social relations. He calls for tax incentives, market-based policies, and policy changes. Rather than revolution, Jones appears to favor policy changes and reform that can help expand the economy and redistribute wealth. If we read Jones against Foster, Jones is doomed from the start. But if Jones is doomed from the start, Foster provides us little place from which to begin. Foster commits to us a global capitalist system whose structuring logics are unassailable. If we are to heed Fosters arguments, the only recourse for usand the only hope for human society is to transform the relations of production; but how is this possible if our efforts are carried within a juggernaut (61) of a system run through a seemingly, near totalizing inner logic (61)? The authors J. K. Gibson-Graham (2006) may provide a way forward. In place of a global system or container, they ask us to envision the economy as a diverse array of economic practices scattered across a landscape. For example, different arrangements of surplus production, appropriation, and distribution can be viewed as co-existing in different locations. And, rather than a result of an inevitable structuring logic or systemic outcome, class processes and social relations are contingent and overdetermined in place; thus each place can be a location of economic possibility and becoming. With this perspective, Joness project (or any!) can take on revolutionary implications. Joness politics no longer appear confined to operating within the system; instead we can begin to see that a new green economy, even one that is spurred through policy reforms, can and does include different social arrangements around, and dispositions towards, the relations of production. In this context, we can work to amplify efforts to build alternative and local markets that suck capital from multinationals. We can organize and leverage government funds to create community-owned energy companies. We can even work with local elites to fund networks of worker-owned businesses (see the Evergreen Cooperatives in Cleveland for example). Of course, the establishment of new economic practices locally might not immediately constitute a global-ecological revolution. They might not, immediately and in and of themselves, subvert the geo-political calculus of BP Oil and U.S. imperialismJoness military-petroleum complexbut they can be seen as significant counter-hegemonic moves towards an egalitarian and sustainable future. Indeed, as Gramsci tells us, revolution requires an engagement in a war of position, an ongoing, hegemonic struggle carried out in a multiplicity of political and cultural

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arenas throughout society. In other words, in order to realize an ecological revolution, we need to create the ideological and broader cultural conditions from which a new world might be imagined and created, rather than simply critiquing and/or protesting the deplorable actions of entrenched corporate and elite interests. Establishing non-capitalist class processes locally, and in the process creating non-capitalist practices and dispositions, can help to build and, indeed, enact revolutionary politics in the here and now (Gibson-Graham). Boone W. Shear University of Massachusetts, Amherst 373 Montague Rd. Amherst, MA 01002 E-mail: bshear@anthro.umass.edu References
Foster, J. B. 2009. The ecological revolution: Making peace with the planet. New York: Monthly Review Press. Gibson-Graham, J. K. 2006. A postcapitalist politics. Minneapolis: University of Minnesota Press. Jones, V. 2008. The green collar economy: How one solution can fix our two biggest problems. New York: Harper Collins. Mitchell, G. 2010. Despondent boat captain, hired by BP for cleanup, commits suicide. The Nation, June 23. http://www.thenation.com/blog/36570/despondent-boat-captain-hired-bp-gulf-cleanup-commits-suicide

The Gramscian Moment: Philosophy, Hegemony and Marxism. Peter D. Thomas; Leiden: Brill, 2009. 477 pp., hardback. DOI: 10.1177/0486613411418062
Accepted December 8, 2010

Peter D. Thomass reassessment of Gramscis key philosophical concepts is of the utmost significance for the revaluation of Marxism as an identity of theory and praxis (Thomas 2009: 380). Furthermore, this novel reading of the Prison Notebooks emphasizes Gramscis contribution as crucial in ensuring the validity of Marxism in the age of cynical neoliberalism. The general aim of this book is to overcome the contemporary post-Marxist misapprehensions concerning the possibility of creating a socialist hegemony (Wood 1986). Whereas these postMarxist thinkers such as Laclau and Mouffe subdivide Gramscis corpus into several autonomous research topics, Thomas succeeds in realigning the Prison Notebooks as a coherent project. Thomas shows in a convincing manner that Gramsci expanded the basic tenets of Theses on Feuerbach whereby theory itself is to be understood as a determinate activity alongside other activities with its own specific tasks to fulfil, a theoretical moment that can be immanent to the social practices it seeks to comprehend because those practices are already immanent to it (Thomas 2009: 363). The first two chapters introduce a synthesis of the erroneous interpretations of Althusser and Anderson. These chapters are necessary to counter their prevalent ideas on Gramsci which still tend to dominate current debates. In addition, Thomas states that Althusser and Gramsci represent the last two great debates on the theoretical conjuncture of Marxism and are necessary as a point of departure. Althussers critique was permeated with his theoretical anti-humanism and opposition to the supposed Hegelian expressive totality. The author therefore continuously engages in

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arenas throughout society. In other words, in order to realize an ecological revolution, we need to create the ideological and broader cultural conditions from which a new world might be imagined and created, rather than simply critiquing and/or protesting the deplorable actions of entrenched corporate and elite interests. Establishing non-capitalist class processes locally, and in the process creating non-capitalist practices and dispositions, can help to build and, indeed, enact revolutionary politics in the here and now (Gibson-Graham). Boone W. Shear University of Massachusetts, Amherst 373 Montague Rd. Amherst, MA 01002 E-mail: bshear@anthro.umass.edu References
Foster, J. B. 2009. The ecological revolution: Making peace with the planet. New York: Monthly Review Press. Gibson-Graham, J. K. 2006. A postcapitalist politics. Minneapolis: University of Minnesota Press. Jones, V. 2008. The green collar economy: How one solution can fix our two biggest problems. New York: Harper Collins. Mitchell, G. 2010. Despondent boat captain, hired by BP for cleanup, commits suicide. The Nation, June 23. http://www.thenation.com/blog/36570/despondent-boat-captain-hired-bp-gulf-cleanup-commits-suicide

The Gramscian Moment: Philosophy, Hegemony and Marxism. Peter D. Thomas; Leiden: Brill, 2009. 477 pp., hardback. DOI: 10.1177/0486613411418062
Accepted December 8, 2010

Peter D. Thomass reassessment of Gramscis key philosophical concepts is of the utmost significance for the revaluation of Marxism as an identity of theory and praxis (Thomas 2009: 380). Furthermore, this novel reading of the Prison Notebooks emphasizes Gramscis contribution as crucial in ensuring the validity of Marxism in the age of cynical neoliberalism. The general aim of this book is to overcome the contemporary post-Marxist misapprehensions concerning the possibility of creating a socialist hegemony (Wood 1986). Whereas these postMarxist thinkers such as Laclau and Mouffe subdivide Gramscis corpus into several autonomous research topics, Thomas succeeds in realigning the Prison Notebooks as a coherent project. Thomas shows in a convincing manner that Gramsci expanded the basic tenets of Theses on Feuerbach whereby theory itself is to be understood as a determinate activity alongside other activities with its own specific tasks to fulfil, a theoretical moment that can be immanent to the social practices it seeks to comprehend because those practices are already immanent to it (Thomas 2009: 363). The first two chapters introduce a synthesis of the erroneous interpretations of Althusser and Anderson. These chapters are necessary to counter their prevalent ideas on Gramsci which still tend to dominate current debates. In addition, Thomas states that Althusser and Gramsci represent the last two great debates on the theoretical conjuncture of Marxism and are necessary as a point of departure. Althussers critique was permeated with his theoretical anti-humanism and opposition to the supposed Hegelian expressive totality. The author therefore continuously engages in

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the Althusserian tradition to discover the contradictions that plagued the formers reading of Gramsci (Thomas 2009: 35). In The Antinomies of Antonio Gramsci, Anderson sets out the classic case for the reintegration of Gramsci into Western Marxism. The result is a reconstruction by detours via detours (Thomas 2009: 52) presenting Gramsci without the innovativeness of the research program in the Prison Notebooks. Andersons influence initiated a definite reading of Gramsci in regard to concepts like hegemony, civil society, and political society. Andersons version of the research project presupposes the impossibility that Gramsci sublated Croce or former Marxian thinkers, which resulted in the novelty of his concepts. This erroneous perspective has been reproduced by numerous authors in the 1980s, although it cannot be denied that early forms of criticism already existed (Buci Glucksmann 1980: 174-175). Thomas agrees with the Italian expert Francioni that Anderson alienated Gramsci from his research program in order to create his own rebuttal of the Eurocommunist interpretation. The Antinomies of Antonio Gramsci is principally flawed because it lacks methodological and philological accuracy (Thomas 2009: 80). Nonetheless, Thomas and Anderson have a mutual goal: to refute the myth of inconsistency in the Prison Notebooks. Andersons misinterpretation has brought forth key philological assertions about the very nature of Gramscis concepts. This sharp scepticism is already widely shared by recent Italian research, and Thomass expertise on this matter allows us to rethink the old paradigms of the 1970s and 1980s. Chapter three discusses the literary form of the Prison Notebooks, which have caused tremendous confusion understanding Gramscis itinerary. This chapter comprises the spine of Thomass venture, showing that the philosophy of praxis opened a completely new road to comprehend the dialectical unity between Marxism as a concrete Weltanschauung on the one hand, and the potential to grasp its own formation within a historical context on the other hand (Thomas 2009: 253). It is commonly presupposed that the specific nature of the conceptual languagethe codewords of the notebooks existed because Gramsci had to apply self-censorship in order to elude the prison guards (Thomas 2009: 53). At the same time he rarely invents new terms or concepts instead works with previous existing terminology that his readers will be familiar with from other authors or contexts . . . and transforms them (Ives 2004: 65). Thomas convincingly shows that Gramscis language has very specific purposes and he warns that it would be imprudent to suggest selfcensorship is the reason why he wrote his Prison Notebooks in this peculiar way. Furthermore, Gramscis critique of classical philosophical conceptsfor example Croces historicismonly serves as a tool to create a complete new way of hegemonic thinking. Researchers such as Finocchiaro only partially reconstruct the critique but never integrate its content into the overall hegemonic project (Finocchiaro 1988: 8-27). Through this method, Gramsci imbued existing concepts with a completely new meaning. Thomas warns the reader that nothing should be taken for granted in Gramscis labyrinth of meaning and that the seeming familiarity of the concepts possess unknown dimensions (Thomas 2009: 93). Thomas gives two concrete examples of shifting meaning and content: (1) the state, integral state, and political society; (2) base, superstructure, and ideology (Thomas 2009: 95-102). These shifts have to be placed in the overarching composition of the notebooks containing three chronological phases. The fragmentary character can therefore be regarded as a deliberate, incomplete, and open articulated totality. These notes . . . thus internalise the historically incomplete situations they attempt to document and to analyse (Thomas 2009: 123). Chapter four discusses the categories of passive revolution and integral state within the analysis of the historical transformations of bourgeois hegemony. Gramscis research on the integral state presents the reader with the historical dialectical process between civil society and political society within the unified framework of the state-form. Thomas sketches the crisis of early liberal modernity and reconstructs Gramscis inquiry into which methods were employed by the bourgeoisie in defence of the capitalist society. The interpenetration of civil and political society

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created a completely new form of institutionalization of class struggle, which sublated the contradictions of organic crisis into a new unity called the integral state (Thomas 2009: 133-52). Chapter five integrates these categories into the machinery of hegemony which differentiates and expands the concepts of state and society. Thomas denies any opposition between coercion and consent because they belong to the same unitary political power similar to the unitary distinction between civil and political society. Hegemony . . . in civil society is necessarily comprehended in political society and overdetermined by it (Thomas 2009: 194). Surprisingly, Thomas does not explicitly mention the operational methodological meta-level, although Gramsci clearly masters a very specific way of dialectical thinking throughout his differentiation of the concept of hegemony. At the same time the author refers to the Marx-Hegel connection on other topics (Thomas 2009: 170-90). Chapter six elaborates the unique character of Gramscis concepts within the history of Marxist political philosophical thought including a specific reference to Lenins legacy. Chapters seven to nine are without any doubt the most innovative sections. Thomas tackles the three most disputed concepts: absolute historicism, absolute humanism, and absolute immanence. These concepts should be regarded as three attributes of the constitutively incomplete project of the development of Marxism as the philosophy of praxis . . . can be considered as brief resums for the elaboration of an autonomous research programme in Marxist philosophy today, as an intervention on the Kampfplatz of contemporary philosophy that attempts to inherit and to renew Marxs original critical and constructive gesture (Thomas 2009: 448). Gramscis immanent critique of metaphysical traditions paralleled the Althusserian research project on the epistemological break between classical forms of philosophy and Marx. Thomas contrasts Althussers triad ideology-philosophy-science with Gramscis politics-history-philosophy as well. Althussers critique on humanist Marxism and Stalinism resembles the same strategy employed by Gramsci concerning the critique of Croce and Bukharin. The fundamental difference is that the Althusserian project created its own pitfall stemming from the inability to integrate the tension between synchronic and diachronic time. Gramscis non-contemporaneity of the present allows the reader to become aware of the very complex nature of class struggle as a symptomatic index. The present, as the time of class struggle, is necessary and essentially out of joint, fractured by the differential times of different class projects (Thomas 2009: 285). Absolute humanism redefines the historical evolution of men as subjects of class struggle. Humans as subjects make their history according to the configuration of social relations within a social formation. The result is a complex series of mediations between subjects and their social structures. Each and every mediation is therefore a continuous becoming and a convergence of ideology and relations of production (Thomas 2009: 393-96). Furthermore, absolute historicism negated the old status questionisas Marx didon the hypostatized opposition between subjectivism and objectivism. The philosophy of praxis as absolute immanence emphasizes the dialectical process between people and their historical context, and truth is located in the world rather than transcending it (Thomas 2009: 306). Science and theory were and will be a particular mode of historical being (Thomas 2009: 358). The scientific research helps to constitute a socialist hegemony and to transform everyday common sense into a critical self-awareness (Thomas 2009: 373-74). The philosophy of praxis is founded on the unitary identity of difference between theory and practice. This knowledge should enable the organic Marxist intellectual to engage with the daily class struggle. Thomas single-handedly redefined and redesigned the research program on the very nature of the Prison Notebooks. Thomass Gramsci could well be the solution to another seeming aporia, the Althusser-Thompson-Anderson debate. In time, researchers will take advantage of Thomass groundbreaking work. It should be read by everyone who is concerned about

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revitalizing Marxian thought. Intended for both graduate students and Gramsci scholars, this book has to be read in combination with cited works on Gramscis thought. Jelle Versieren Ghent University Riedekens 26 Oudenaarde 9700, Belgium E-mail: jelle.versieren@ugent.be; jelleversieren@skynet.be References
Buci-Glucksmann, C. 1980. Gramsci and the state. London: Lawrence & Wishart. Boston: South End Press. Femia, J. V. 1981. Gramscis political thought. Oxford: Clarendon Press. Finocchiaro, M. A. 1988. Gramsci and the history of dialectical thought. Cambridge: Cambridge University Press. Gramsci, A. 1971. Selections from the Prison Notebooks. New York: International Publishers. . 1995. Further selections from the Prison Notebooks. London: Lawrence & Wishart. . 1996. Prison Notebooks II. New York: Columbia University Press. . 2007. Prison Notebooks III. New York: Columbia University Press. Ives, P. 2004. Language and hegemony in Gramsci. London: Pluto Press. Thomas, P. D. 2009. The Gramscian moment: Philosophy, hegemony and Marxism. Leiden: Brill. Wood, E. M. 1986. Retreat from class: A new true socialism. London: Verso.

Books Received

We encourage contributors to take the initiative to prepare reviews of significant books not on this list of interest to readers of the RRPE. We would also welcome a more ambitious examination of bodies of literature that should be better known by our readers. I would be pleased to assist in obtaining review copies for this purpose. We also have a number of books that we have received from publishers interested in having reviews appear in the RRPE. We encourage people to request them. Reviews should be 1,200-1,500 words in length, and submitted within 60 days of your receipt of the book, together with an electronic copy in MS Word. More detailed instructions will accompany the book when it is sent to you. We welcome review essays encompassing 3 or 4 books that bring together an important literature in significant areas for political economists; generally, these reviews are about 2,500 words. The Book Review Editor and one other member of the Editorial Board referee reviews of single books. Suggestions for making this section more useful for readers are particularly encouraged. This list is updated regularly on the RRPE Web page. Book Review Editor: David Barkin Universidad Autnoma Metropolitana - Xochimilco Calzada del Hueso 1100 Col. Villa Quietud 04960 Coyoacn, D.F. MEXICO E-mail: barkin@correo.xoc.uam.mx Manuscripts of reviews should be sent to: Dr. Hazel Gunn, Managing Editor, RRPE 106 W. Sibley Hall Cornell University Ithaca, NY 14853 E-mail: hg18@cornell.edu References
Aligica, P. D., and P. J. Boettke, eds., Challenging institutional analysis and development: The Bloomington School, (London: Routledge, 2009). Ash, A., ed., The social economy, (London: Zed Books, 2009). Balakrishnan, R., D. Elson, and R. Patel, Rethinking macro economic strategies from a human rights perspective: Why MES with human rights II?, (New York: Marymount Manhattan College, 2009). Barra, X. de la, ed., Neoliberalisms fractured showcase: Another Chile is possible, (Leiden: Brill, 2011). Bayliss, K., B. Fine, and E. Van Waeyenberge, The political economy of development: The World Bank, neoliberalism, and development research, (London: Pluto Press, 2011).
Review of Radical Political Economics, Volume 44, No. 1, Winter 2012, 124-130 2012 Union for Radical Political Economics

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Bebbington, A., Social conflict, economic development and extractive industry: Evidence from South America, (London: Routledge, 2011). Bedford, K., Developing partnerships: Gender, sexuality, and the reformed World Bank, (Minneapolis: University of Minnesota Press, 2009). Bellofiore, R., and R. Fineschi, eds., Re-reading Marx: New perspective after the critical edition, (New York: Palgrave Macmillan, 2009). Best, B., Marx and the dynamic of the capital formation: An aesthetics of political economy, (New York: Palgrave MacMillan, 2010). Birch, K., and V. Mykhnenko, eds., The rise and fall of neoliberalism: The collapse of an economic order?, (London: Zed Books, 2010). Blaney, D. L., and N. Inayatullah, Savage economics: Wealth, poverty and the temporal walls of capitalism, (London: Routledge, 2010). Bockman, J., Markets in the name of socialism: The left-wing origins of neoliberalism, (Stanford, CA: Stanford University Press, 2011). Bracking, S., Money and power: Great predators in the political economy of development, (London: Pluto Books, 2009). Brancaccio, E., and G. Fontana, eds., The global economic crisis: New perspectives on the critique of economic theory and policy, (London: Routledge, 2011). Brass, T., Labour regime change in the twenty-first century, (Leiden: Brill, 2011). Brenner, A., R. Brenner, and C. Winslow, eds., Rebel, rank and file, (London: Verso Books, 2011). Brennan, G., and G. Eusepi, eds., The economics of ethics and the ethics of economics: Values, markets and the state, (Cheltenham: Edward Elgar, 2010). Bolender, K., Voices from the other side: An oral history of terrorism against Cuba, (London: Pluto Press, 2010). Bowles, S., and H. Gintis, A cooperative species: Human reciprocity and its evolution, (Princeton: Princeton University Press, 2011). Bronk, R., The romantic economist: Imagination in economics, (Cambridge: Cambridge University Press, 2009). Budd, J., The thought of work, (Ithaca, NY: ILR, Cornell University Press, 2011). Camic, C., and G. M. Hodgson, eds., Essential writings of Thorstein Veblen, (London: Routledge, 2011). Carchedi, G., Behind the crisis: Marxs dialectics of value and knowledge, (Leiden: Brill, 2011). Cassano, G., ed., Class struggle on the homefront: Work, conflict, and exploitation in the household, (London: Palgrave-Macmillan, 2010). Chan, A., ed., Walmart in China, (Ithaca, NY: ILR Press of Cornell University, 2011). Chandler, S., and J. B. Jones, Casino women: Courage in unexpected places, (Ithaca, NY: ILR, Cornell University Press, 2011). Chiarella, C., P. Flaschel, and W. Semler, Reconstructing Keynesian macroeconomics, vol. 1, (London: Routledge, 2012). Clavel, P., Activists in city hall: The progressive response to the Reagan era in Boston and Chicago, (Ithaca, NY: Cornell University Press, 2010). Couret, M., Economics versus human rights, (London: Routledge, 2009). Cypher, J. M., and R. Delgado Wise, Mexicos economic dilemma: The development failure of neoliberalism, (Lanham, MD: Rowman & Littlefield, 2010). Cypher, J. M., and J. L. Dietz, eds., The process of economic development, (London: Routledge, 2009, 3rd ed.). Dale, G., First the transition, then the crash: Eastern Europe in the 2000s, (London: Pluto Books, 2011). Deb, D., Beyond developmentality: Constructing inclusive freedom and sustainability, (London: Earthscan, 2009).

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DeMartino, G., The economists oath: On the need for and content of professional economic ethics (Oxford: Oxford University Press, 2011). Deneault, A., Offshore: Tax havens and the rule of global crime, (New York: The New Press, 2011). Doyran, M. A., Financial crisis management and the pursuit of power: American pre-eminence and the credit crunch, (London: Ashgate, 2011). Dugger, W. M., and J. T. Peach, eds., Economic abundance: An introduction, (Armonk, NY: M. E. Sharpe, 2009). Dumnil, G., and D. Lvy, The crisis of neoliberalism, (Cambridge: Harvard University Press, 2010). Dutt, A. K., and B. Radcliff, Happiness, economics, and politics: Towards a multi-disciplinary approach, (Cheltenham: Edward Elgar, 2009). Early, S., Embedded with organized labor: Journalistic reflections on the class war at home, (New York: Monthly Review, 2009). Edwards, S., Beyond childs play: Sustainable product design in the global doll-making industry, (Amityville, NY: Baywood Publishing Company, 2009). Ege, R., and H. Igersheim, eds., Freedom and happiness in economic thought and philosophy: From clash to reconciliation, (London: Routledge, 2011). Eisenstein, H., Feminism seduced: How global elites use womens labor and ideas to exploit the world, (Boulder, CO: Paradigm Publishers, 2009). Elliot, G., Hobsbawm: History and politics, (London: Pluto Books, 2010). Elsner, W., and H. Hanappi, eds., Varieties of capitalism and new institutional deals: Regulation, welfare and the new economy, (Cheltenham: Edward Elgar, 2009). Engelskirchen, H., Capital as a social kind: Definitions and transformations in the critique of political economy, (London: Routledge, 2010). Eriksson, R., and J. O. Andersson, Elements of ecological economics, (London: Routledge, 2010). Everard, M., Common ground: The sharing of land and landscapes for sustainability, (London: Zed Books, 2011). Fernando, J. L., The political economy of NGOs: State formation in Sri Lanka and Bangladesh, (London: Pluto Press, 2011). Figart, D., and J. Marangos, eds., Living standards and social well-being, (London: Routledge, 2010). Fine, B., and D. Milonakis, From economics imperialism to freakonomics: The shifting boundaries between economics and other social sciences, (London: Routledge, 2009). Fontana, G., Money, uncertainty and time, (London: Routledge, 2009). Forrant, R., Metal fatigue: American Bosch and the demise of metalworking in the Connecticut River Valley, (Amityville, NY: Baywood Publishing, 2009). Gallagher, K. P., and D. Chudnovsky, Rethinking foreign investment for development: Lessons from the Americas, (New York: Anthem Press, 2009). Gallagher, K. P., and R. Porzecanski, Climbing up the technology ladder? High-technology exports in China and Latin America, (Stanford, CA: Stanford University Press, 2010). Gill, S., ed., Global crises and the crisis of global leadership, (Cambridge: Cambridge University Press, 2011). Giampietro, M., K. Mayumi, and A. H. Sorman, The metabolic pattern of societies: Where economists fall short, (London: Routledge, 2012). Goldberg, G. S., ed., Poor women in rich countries: The feminization of poverty over the life course, (Oxford: Oxford University Press, 2009). Goldsmith, W. W., and E. J. Blakely, Separate societies: Poverty and inequality in U.S. cities, (Philadelphia: Temple University Press, 2010). Gowdy, J. M., Microeconomic theory: Old and new, (Stanford, CA: Stanford University Press, 2010). Haglund, L., Limiting resources: Market-led reform and the transformation of public goods, (University Park, PA: Penn State University Press, 2010).

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Hanlon, J., A. Barrientos, and D. Hulme, Just give money to the poor: The development revolution from the global South, (Williamsburg, MA: Kumarian Books, 2010). Harris, J. M., and N. R. Goodwin, Twenty-first century macroeconomics: Responding to the climate challenge, (Cheltenham: Edward Elgar, 2009). Harcourt, W., Body politics in development: Critical debates in gender and development, (London: Zed Books, 2009). Hart, K., J.-L. Laville, and A. D. Cattani, The human economy, (Cambridge: Polity Press, 2010). Harvey, D., A companion to Marxs Capital, (London: Verso, 2010). Hawley, J. P., S. J. Kamath, and A. T. Williams, eds., Corporate governance failures: The role of institutional investors in the global financial crisis, (Philadelphia: University of Pennsylvania Press, 2011). Heinrich, C., and J. K. Scholz, eds., Making the work-based safety net work better, (New York: Russell Sage, 2009). Heinrich, M., An introduction to the three volumes of Karl Marxs Capital, (New York: Monthly Review, 2011). Heller, H., The birth of capitalism: A 21st century perspective, (London: Pluto Press, 2011). Hickey, S., and D. Mitlin, Rights-based approaches to development: Exploring the potential and pitfalls, (Williamsburg, MA: Kumarian Books, 2009). Hill, R., and T. Myatt, The economics anti-textbook: A critical thinkers guide to microeconomics, (London: Zed Books, 2010). Hollander, S., Friedrich Engels and Marxian political economy, (New York: Cambridge University Press, 2011). Holloway, J., Crack capitalism, (New York: Pluto Press, 2010). Jameson, F., Representing capital, (London: Verso Books, 2011). Jarsulic, M., Anatomy of a financial crisis: A real estate bubble, runaway credit markets, and regulatory failure, (New York: Palgrave, 2010). Jespersen, J., Macroeconomic methodology: A post-Keynesian perspective, (Northampton, MA: Edward Elgar, 2009). Kahn, S. R., and J. Christensen, eds., Towards new developmentalism: Market as means rather than master, (London: Routledge, 2010). Kanth, R. K., The challenge of Eurocentrism: Global perspectives, policy and prospects, (London: Palgrave, 2009). Kates, S., Macroeconomic theory and its failings: Alternative perspectives on the global financial crisis, (Cheltenham: Edward Elgar, 2010). Katzner, D. W., At the edge of Camelot: Debating economics in turbulent times, (Oxford: Oxford University Press, 2011). Keen, S., Debunking economics: The naked emperor dethroned? 2nd ed., (New York: Zed Books, 2011). Korten, D., Agenda for a new economy: From phantom wealth to real wealth, (San Francisco: Berrett Koehler, 2009). Laibman, D., Political economy after economics: Scientific method and radical imagination, (London: Routledge, 2011). LaJeunesse, R., Work time regulation as sustainable full employment strategy, (London: Routledge, 2009). Lambie, G., The Cuban revolution in the 21st century, (London: Pluto Press, 2010). Lee, F. S., and J. Bekken, eds., Radical economics and labor: Essays inspired by the IWW centennial, (London: Routledge, 2009). Lefebvre, H., State, space, world: Selected Essays, (Minneapolis: University of Minnesota Press, 2009). Lebowitz, M. A., The socialist alternative: Real human development, (New York: Monthly Review Press, 2010). Lee, F., A history of heterodox economics: Challenging the mainstream in the twentieth century, (New York: Routledge, 2009).

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Levenstein, C., ed., At the point of production: The social analysis of occupational and environmental health, (Amityville, NY: Baywood Publishing, 2009). Lilley, S., ed., Capital and its discontents: Conversations with radical thinkers in a time of tumult, (Oakland, CA: PM Press and Merlin, 2011). Liodakis, G., Totalitarian capitalism and beyond, (London: Ashgate, 2010). MacEwan, A., and J. A. Miller, Economic collapse, economic change: Getting to the roots of the crisis, (Armonk, NY: M. E. Sharpe, 2011). Maeckelbergh, M., The will of the many: How the alterglobalisation movement is changing the face of democracy, (London: Pluto Books, 2009). Magdoff, F., and M. D. Yates, The ABC of the economic crisis: What working people need to know, (New York: Monthly Review Press, 2009). Markkanen, P., Shoes, glues and homework: Dangerous work in the global footwear industry, (Amityville, NY: Baywood Publishing Company, 2009). Martinez, M. A., The myth of the free market: The role of the state in a capitalist economy, (Williamsburg, MA: Kumarian Press, 2009). Mason, P., Live working or die fighting: How the working class went global, (Chicago: Haymarket Books, 2010). McDermott, J. F. M., Restoring democracy to America: How to free markets and politics from the corporate culture of business and government, (University Park: Penn State University Press, 2010). McDonough, T., M. Reich, and D. M. Kotz, eds., Contemporary capitalism and its crises: Social structure of accumulation theory for the 21st century, (New York: Cambridge University Press, 2010). McNally, D., Monsters of the market, (Leiden: Brill, 2011). Mehta, L., The limits to scarcity, (London: Earthscan, 2010). Mellor, M., The future of money from financial crisis to public resource, (London: Pluto Books, 2010). Merrifield, A., Magical Marxism: Subversive politics and the imagination, (London: Pluto Books, 2011). Mszaros, I., Social structure and forms of consciousness: Vol. 1, The social determination of method, (New York: Monthly Review Press, 2010). Mszaros, I., The structural crisis of capital, (New York: Monthly Review Press, 2010). Mszros, I., The challenge and burden of historical time: Socialism in the twenty-first century, (New York: Monthly Review, 2009). Milions, J., and D. P. Sotiropoulos, Rethinking imperialism: A study of capitalist rule, (New York: Palgrave Macmillan, 2009). Mishel, L., J. Bernstein, and H. Shierholz, The state of working America 2008-2009, (Ithaca, NY: Cornell University Press, 2009). Morgan, J., Private equity finance: Rise and repercussions, (New York: Palgrave Macmillan, 2009). Mulder, C. P., Unions and class transformation: The case of the Broadway musicians, (London: Routledge, 2009). Napoleoni, L., Maonomics: Why Chinese communists make better capitalists than we do, (New York: Seven Stories Press, 2011). Ness, I., Guest workers and resistance to U.S. corporate despotism, (Chicago: University of Illinois Press, 2011). Ness, I., and D. Azzellini, eds., Ours to master and to own: Worker control: From the commune to the present, (Chicago: Haymarket Books, 2011). OFlynn, M., Profitable ideas: The ideology of the individual in capitalist development, (Leiden: Brill, 2011). Panayotakis, C., Remaking scarcity: From capitalist inefficiency to economic democracy, (London: Pluto Press, 2011). Peet, R., Unholy trinity: The IMF, World Bank and WTO, (London: Zed Books, 2009, 2nd ed.).

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Pereira, L. C. Bresser, Globalization and competition: Why some emergent countries succeed while others fall behind, (New York: Cambridge University Press, 2009). Perelman, M., The invisible handcuffs of capitalism: How market tyranny stifles the economy by stunting workers, (New York: Monthly Review Press, 2011). Pleyers, G., Alter-globalization: How actors contest globalization, (Cambridge: Polity Press, 2010). Pollard, J., C. McEwan, and A. Hughes, eds., Postcolonial economics, (London: Zed, 2011). Post, C., The American road to capitalism: Studies in class structure, economic development and political conflict, 1620-1877, (Leiden: Brill, 2011). Pressman, S., ed., The legacy of John Kenneth Galbraith, (London: Routledge, 2011). Puttaswamaiah, K., ed., Milton Friedman: Nobel monetary economist, a review of his theories and policies, (Enfield, NH: Isle Publishing Company, 2009). Quigley, D., A. Lowman, and S. Wing, eds., Tortured science: Health studies, ethics and nuclear weapons in the United States, (Amityville, NY: Baywood Publishing, 2011). Raman, K. R., and R. D. Lipschutz, eds., Corporate social responsibility: Comparative critiques, (New York: Palgrave Macmillan, 2010). Reiss, M., What went wrong with economics: The flawed assumptions that led economists astray, (UK: Goldhurst Press, 2011). Rich, B., To uphold the world: A call for a new global ethic from ancient India, (Boston: Beacon Press, 2009). Rist, G., The delusions of economics: The misguided certainties of a hazardous science, (London: Zed Books, 2011). Ross, A., Nice work if you can get it: Life and labor in precarious times, (New York: NYU Press, 2009). Ryan, ., Chocolate nations: Living and dying for cocoa in West Africa, (London: Zed Books, 2011). Saad-Filho, A., and G. L.Yalman, Economic transition to neoliberalism in middle-income countries: Policy dilemmas, economic crises forms of resistance, (London: Routledge, 2010). Salamon, L. M., Rethinking corporate social engagement: Lessons from Latin America, (Sterling, VA: Kumarian Press, 2010). Sardoni, C., Unemployment, recession and effective demand: The contributions of Marx, Keynes and Kalecki, (Cheltenham: Edward Elgar, 2011). Saros, D. E., Labor, industry, and regulation during the Progressive Era, (London: Routledge, 2009). Schutz, E., Inequality and power: The economics of class, (London: Routledge, 2011). Secondi, G., ed., The development economics reader, (London: Routledge, 2009). Sherman, H. J., The roller coaster economy: Financial crisis, Great Recession, and the public option, (Armonk, NY: M. E. Sharpe, 2009). Silverman, R. M., and K. L. Patterson, eds., Fair and affordable housing in the U.S., (Leiden: Brill, 2011). Slatin, C., Environmental unions: Labor and the superfund, (Amityville, NY: Baywood Publishing, 2009). Standing, G., Work after globalization, (Cheltenham: Edward Elgar, 2010). Stanfield, J. R., and J. Bloom Stanfield, John Kenneth Galbraith, (New York: Palgrave Macmillan, 2010). Stout, J., Blessed are the organized(Princeton, NJ: Princeton University Press, 2011). Storm, S., and C. W. M. Naastepad, Macroeconomics beyond the NAIRU, (Cambridge: Harvard University Press, 2011). Surin, K., Freedom not yet: Liberation and the next world order, (Durham, NC: Duke University Press, 2009). Tavasci, D., and J. Toporowski, eds., Minsky, crisis and development, (New York: Palgrave Macmillan, 2010). Thomas, P., Gramscian moment, (Leiden: Brill, 2009). Todorova, Z., Money and households in a capitalist economy, (Cheltenham: Edward Elgar, 2009). Tully, J., The devils milk: A social history of rubber, (New York: Monthly Review Press, 2011).

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Vail, M. I., Recasting welfare capitalism: Economic adjustment in contemporary France and Germany, (Philadelphia: Temple University Press, 2009). Varoufakis, Y., The global minotaur: America, the true origins of the financial crisis and the future of the world economy, (London: Zed Books, 2011). Veltmeyer, H., ed., Imperialism, crisis and class struggle, (Leiden: Brill, 2011). Walberg, E., Postmodern imperialism: Geopolitics and the great games, (Atlanta, GA: Clarity Pres, 2011). Wallman, S., The capability of places: Methods for modeling community response to intrusion and change, (London: Pluto Books, 2011). Weeks, J., Capital, exploitation and economic crisis, (London: Routledge, 2011). Westra, L., ed., Globalization, violence and world governance, (Leiden: Brill, 2011). Widdows, H., and N. J. Smith, eds., Global social justice, (London: Routledge, 2011). Wiegersma, N., The women gender and development reader, 2nd ed., (London: Zed, 2011). Wilson, T. D., Womens migration networks in Mexico and beyond, (Albuquerque, NM: University of New Mexico Press, 2009). Wolf, E., The transformation of the American pension system: Was it beneficial for workers?, (Kalamazoo, MI: W.E. Upjohn Institute, 2011). Wolff, R. D., Capitalism hits the fan: The global economic meltdown and what to do about it, (Northampton, MA: Olive Branch Press, 2009). Zamagni, S., and V. Zamagni, Cooperative enterprise: Facing the challenge of globalization, (Cheltenham: Edward Elgar, 2010). Zarembka, P., ed., The national question and the question of crisis, (London: Emerald, 2010). Zedalis, R. J., The legal dimensions of oil and gas in Iraq: Current reality and future prospects, (Cambridge: Cambridge University Press, 2010).