Evidence Based Politics and Institutions for Equality

Published on ZNet, by Mark Evans, September 13, 2010.

How Capitalist Economics Institutionalises Inequality: Capitalist economics institutionalises a class system, and with it vast inequalities in economic power, in four key ways:

  • 1.         Private ownership
  • 2.         Hierarchical division of labour
  • 3.         Remuneration for ownership and power
  • 4.         Competitive markets

The first feature creates a class distinction between economic actors – there are those who own the workplace and those who rent themselves out for a wage.  This is the capitalist / working class distinction. 

The second feature also creates a class distinction, but in a different way to the first feature. As already stated, there are those who own (capitalists) and those who rent themselves out (workers), but there is also a class of professional managers who monopolise empowering tasks and decision making authority within the economy.  This is the coordinator class who have their own interests separate from those of both the working class and capitalist class.

The third feature helps reinforces the economic positions of power and privilege of both the capitalist and coordinator class by setting-up a system of reward that perpetuates inequality.

The fourth feature generates an overall logic within the capitalist system that rationalises elitism.  Within the context of competitive markets organising the economy along class lines is a necessity for business survival and as a consequence economic inequality makes sense.

From this basic analysis of capitalism we can draw the following conclusions:

  • Given that, the more inequality we have in our society the less meaningful our democracy becomes, it follows that anyone interested in economic democracy must reject capitalism.  Or put the other way around, given that meaningful democracy requires equality (where people can interact as equals) capitalism is an anti-democratic form of economic organisation.  Furthermore, not only does capitalism institutionalise top-down authoritarian decision-making practices within the economic sphere of society it also undermines meaningful democracy within the political sphere by generating vast levels of inequality amongst citizens.  This fact enables some citizens to impact on the political system more than others (think newspaper ownership) thus distorting the democratic process – in their own favour of course.

Where Socialists Went Wrong: … //

…  Instead of competitive markets (as with capitalism) or central planning (as with socialism) a participatory economy would utilise a participatory planning process.  This entails worker and consumer councils submitting information to a special workplace call an iteration facilitation board (IFB).  An IFB is a workplace where workers process information from both consumer and worker councils regarding consumption and production, respectively.  There are a series of rounds whereby a) councils submit their requests to the IFB. b) The IFB feeds back information to the councils, and c) councils resubmit their requests based on this new information.  This co-operative process continues until a mutually agreed upon plan is identified.  What is most important here is that, unlike competitive markets and central planning, participatory planning maintains economic equality and democracy.

From this basic analysis of participatory economics we can conclude the following:

If we want economic equality and democracy we need a new economic system.  This system will have to have alternative features to those of both capitalism and socialism.  Participatory economics represents such a system.  Each key feature proposed in the parecon model institutionalises economic equality and democracy.  If, for what ever reason, we reject the model altogether or any one of these features we must come up with an alternative  model / features that result in an economy that institutionalises economic equality and democracy. (full long text).


Germany goes global: farewell, Europe, by Ulrike Guerot, 14 September 2010;

How the Chamber of Commerce Allegedly Laundered Millions in Charity Dollars to Beat Back Financial Reform and Re-Elect Republicans
, A watch-dog group charged that the CoC violated U.S. tax laws by funneling $18 million from its charitable, non-profit arm into lobbying, by Joshua Holland, Sept. 13, 20§0;

IMF head says Basel III falls short on bank supervision, on The Economic Times, Sept. 14, 2010.

Comments are closed.