The Multidimensional Crisis and Inclusive Democracy, Takis Fotopoulos (2005)

Chapter 14:

Economic democracy


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The meaning of economic democracy


The usual definitions given to economic democracy by liberals, socialists and Green economists can be shown to be either inadequate or particular or both, and sometimes they tend to emphasise only one of the two main aspects of economic power: ownership and control.


Neoliberals, for instance, identify economic democracy with “popular capitalism”, which, however, can secure neither democratic ownership nor control. Thus, as the Thatcherite experiment of popular capitalism has shown, a wider spreading in the ownership of shares does not imply a smaller concentration of ownership and economic power. Furthermore, the spreading of shares is not, by itself, related to a higher degree of democratic control since the crucial economic decisions are still taken by managers and technocrats on the basis of profit-making considerations.


The practice of socialist statism tended to define economic democracy in a more narrow sense, namely, as a system that institutionalises the minimisation of socio-economic differences which, according to Marxist theory, were due, “in the last instance”, to the unequal distribution of private property.  This implied that the state should be involved in either a process of redistributing income through taxation and the welfare system (social democracy) or in a process of abolition of private property for the means of production (actually existing socialism). However, as private property of the means of production is only one aspect of economic power, the attempt to minimise the effects of its unequal distribution on income, or even the abolition of private property on the means of production, could not secure, by itself, the elimination of economic power relations. So, the outcome was that the economic power of the capitalist elite controlling the private sector in market economies was simply replaced by the economic power of the party elite controlling the state sector in centrally planned economies, as we saw in chapter 2.


Today, after the collapse of “actually existing socialism”, most self-styled “socialists” have abandoned any vision for a marketless, stateless, noncapitalist society and identify economic democracy with the enhancement of “civil society” within the context of “radical” democracy. Furthermore, they do not propose any dialectical tension between the nation-state and civil society. The enhancement of the latter has nothing to do anymore with the process of withering away of the former, but it solely aims to counterbalance or just check the state’s power, within a market economy system. In other words, the vision of a socialist planned economy, to emerge after a transition period, has simply been abandoned by most “socialists” today.[1]


Finally, some Green economists identify economic democracy with various forms of “employee ownership” and “workplace democracy[2] However, even when such forms of economic organisation presuppose democratic control/ownership, control is narrowly defined to cover only workers and employees and not society at large. Combined with the fact that in this type of economic democracy it is still the market that ultimately determines what is to be produced and how, this could imply that what is involved is not a fundamental change in the nature of a competitive system. In other words, despite the anti-growth rhetoric of mainstream green economists, as long as they take for granted the system of the market economy and its “grow-or-die” dynamic, they indirectly adopt the growth economy itself. Such proposals, therefore, do not imply the abolition of economic power but simply its further decentralisation, while, at the same time, they cannot secure (like the liberal and socialist versions of economic democracy) the pursuit of the general interest. It is therefore obvious that we need a definition of economic democracy which involves the abolition of economic power itself.


For the Inclusive Democracy project, the definition of economic democracy has to imply the abolition of economic power relations. Thus, if we define political democracy as the authority of the people (demos) in the political sphere ―which implies the existence of political equality in the sense of equal distribution of political power― then economic democracy is the authority of demos in the economic sphere ―which implies the existence of economic equality in the sense of equal distribution of economic power. And, of course, we are talking about the demos and not the state, because the existence of a state means the separation of the citizen body from the political and economic process. Economic democracy therefore relates to a social system which institutionalises the integration of society and the economy and may be defined as an economic structure and a process which, through direct citizen participation in the economic decision-taking and decision-implementing process, secures an equal distribution of economic power among citizens. This means that, ultimately, the demos controls the economic process, within an institutional framework of demotic ownership of the means of production.


On the basis of the above definition of economic democracy, the following conditions have to be satisfied for a society to be characterised as an economic democracy:

  • No institutionalised economic processes of an oligarchic nature. This means that all “macro” economic decisions, namely, decisions concerning the running of the economy as a whole (overall level of production, consumption and investment, amounts of work and leisure implied, technologies to be used, etc.) are taken by the citizen body collectively and without representation, although “micro” economic decisions at the workplace or the household levels may be taken by the individual production or consumption unit, and

  • No institutionalised economic structures embodying unequal economic power relations. This implies that the means of production and distribution are collectively owned and directly controlled by the demos. Any inequality of income is therefore the result of additional voluntary work at the individual level. Such additional work, beyond that required by any capable member of society for the satisfaction of basic needs, allows only for additional consumption, as no individual accumulation of capital is possible, and any wealth accumulated as a result of additional work is not inherited. Thus, demotic ownership of the economy provides the economic structure for democratic ownership, whereas direct citizen participation in economic decisions provides the framework for a comprehensively democratic control process of the economy. The demos, therefore, becomes the authentic unit of economic life, since economic democracy is not feasible today unless both the ownership and control of productive resources are organised at the local level. So, unlike the other definitions of economic democracy, the definition given here involves the explicit negation of economic power and implies the authority of the people in the economic sphere. In this sense, economic democracy is the counterpart of political democracy, as well as the foundation of an inclusive democracy in general.

Historically, even when direct democracy was introduced in the political realm, this was not necessarily associated with economic democracy. Thus, in classical Athens the question of economic power was never a public issue, except in the narrow sense of redistribution of income and wealth. The reason was, of course, that the accumulation of capital was not a structural characteristic of the Athenian democracy and therefore of the dominant social paradigm. As a result, questions about the way economic resources were to be allocated did not belong to the public realm, (Aristotle was explicit about it)[3] except to the extent that they referred to the setting of social controls to regulate the limited market, or to the financing of “public” spending. No wonder that, as Hansen points out, “the Athenians of the classical period had a complicated network of political institutions but, as far as we can tell from the sources, no parallel economic organisations”.[4]


It was only when the market economy appeared, two centuries ago, that the question arose of how important economic decisions should be taken (how, what and for whom to produce) and how economic power in general should be shared.  It is equally clear that the forms of economic organisation that have prevailed since the emergence of the market economy, that is, capitalism and socialist statism, were just versions of economic oligarchy, where economic power was concentrated in the hands of capitalist and bureaucratic elites respectively.


However, even when socialist attempts to reduce the degree of inequality in the distribution of income and wealth were successful, they were never associated with meaningful attempts to establish a system of equal distribution of economic power in general. Therefore, in contrast to the institutionalisation of political democracy, there has never been a corresponding example of an institutionalised economic democracy in the broad sense defined above. This has been the case, despite the fact that in the type of society which has emerged since the rise of the market economy, there was a definite shift of the economy from the private realm into what Hannah Arendt called the “social realm”, to which the nation-state also belongs. It is this shift that today makes hollow any talk about democracy which does not also refer to the question of economic power. Therefore, to talk about the equal sharing of political power, without conditioning it on the equal sharing of economic power, is at best meaningless and at worse deceptive. It is not therefore accidental that the present decline of representative democracy has led many liberals, social democrats and others to pay lip service to direct democracy, without referring to its necessary complement: economic democracy.


From this point of view, I think that statements like the following one by Noam Chomsky which describe the United States as “a very free, very democratic society (in which) unlike many other places in the world, we can act and speak in all sorts of ways without fear of state punishment and retribution,”[5] are obviously wrong. I think that such an assessment would only stand if we could separate political freedom and equality from economic freedom and equality. Therefore, even if one agrees that a significant degree of political freedom may have been secured in the United States at the legislative level (though, of course, one may have serious reservations about how the relevant legislation is implemented with respect to minorities, etc.), still, the very high degree of economic inequality and poverty that characterise this country with respect to its level of economic development would definitely not classify it as “a very free, very democratic society”!


A model of economic democracy


The aim of this section is to outline the conditions under which an inclusive democracy could work under today’s conditions. Even though it is up to the citizens’ assemblies of the future to design the form an inclusive democracy will take, I think that it is important to demonstrate that such a form of society is not only necessary, as I tried to show in the first part of the book, but feasible as well. This is particularly important today when the self-style “left” has abandoned any vision of a society that is not based on the market economy and representative “democracy”, which they take for granted, and dismiss any alternative visions as “utopian” (in the negative sense of the word). It is therefore necessary to show ―as I tried to do in the first part of the book― that it is in fact the “Left’s vision of “radical” democracy which, in taking for granted the present internationalised market economy, may be characterised as  utterly unrealistic. But, I think it is equally important to attempt to outline how an alternative society based on an inclusive democracy might try to sort out the basic socio-economic problems that any society has to deal with, under conditions of scarce resources and not in an imagined state of post-scarcity. Such an attempt may, not only help supporters of the democratic project form a more concrete idea of the society they wish to see, but also assist them in addressing the “utopianism” criticisms raised against them.


The type of economic democracy proposed here does not assume what Arendt calls the “communistic fiction” that there is one interest in society as a whole. Such an assumption (which implies that the “invisible hand” in a market economy ―or, alternatively, the planning process in a state socialist economy― would satisfy the general interest) abstracts from the essential fact that social activity is the result of the intentions of numerous individuals.[6] What I propose, instead, is to explicitly assume the diversity of individuals (which, in turn, implies that consensus is impossible) and to institutionalise this diversity through the adoption of a combination of democratic planning procedures on the one hand and voucher schemes within an artificial “market” on the other. The aim is to secure an allocation of resources that ensures both freedom of individual choice and the satisfaction of the basic needs of all citizens.


Furthermore, the proposed economic democracy assumes away the mythical stage of free communism and addresses the issue of how, within the context of a scarcity society, i.e. a society where resources are still scarce with respect to needs, a method of resource allocation might be found which ensures that the above aim is achievable. From this viewpoint, it is not accidental that some modern libertarians who support the “politics of individualism” find it necessary, in order to attack democracy, to resort, on the one hand, to the myth of free communism and, on the other, to the distortion that democracy involves a kind of “rule”, in the form of majority rule. The intention is clear: the former makes economic democracy superfluous, whereas the latter makes direct democracy undesirable.[7]


Briefly,[8] the main characteristic of the proposed model, which also differentiates it from socialist planning models, is that it explicitly presupposes a stateless, moneyless and marketless economy that precludes private accumulation of wealth and the institutionalisation of privileges for some sections of society, without having to rely on a mythical post-scarcity state of abundance, or having to sacrifice freedom of choice.


However, given today’s high degree of concentration of economic power and international interdependence, it is difficult even to imagine a radically different form of society based on economic democracy. Is such a society feasible today? What should be the system of allocation of resources that would be compatible with economic democracy? The magnitude of the questions asked obviously implies the need for significant collective research work. Here, we can only make some tentative proposals about the general guidelines for such an undertaking. Of course, theory can only explore possibilities, and it is up to social “praxis” to give concrete content to the new form of social organisation. In what follows an attempt is made to put forward a new vision of economic democracy, as well as some concrete proposals about how such a democratic model of the economy could function. In this double sense, the approach proposed here represents an original demos-oriented model of the economy.


As with the case of direct democracy, economic democracy today is only feasible at the level of the confederated demoi. In other words, it involves the demotic ownership of the economy, i.e. the means of production belong to each demos. This is something radically different from both the two main forms of concentration of economic power (capitalist and “socialist” growth economy), as well as from the various types of collectivist capitalism, either of the “workers’ control” type, or of the milder versions that social democrats of the post-Keynesian variety suggest.[9]


The preconditions of economic democracy, which we shall briefly examine next may be defined as follows:

  • demotic self-reliance,

  • demotic ownership of productive resources, and

  • confederal allocation of resources.

Demotic Self-reliance


Self-reliance is meant here in terms of autonomy, rather than in terms of self-sufficiency, which, under today’s conditions, is neither feasible nor desirable. A useful definition of self-reliance is the one given by the 1974 Cocoyoc Declaration of non-aligned countries as “reliance primarily on one’s own resources, human and natural, and the capacity of autonomous goal-setting and decision-making”.[10] Thus, although self-reliance implies maximal utilisation of local resources and sources of energy, it should not be confused with autarchy and should always be seen within the context of confederalism. As the direct democratic control of the economy and society is only possible today at the local level, it is obvious that self-reliance is a necessary condition for political and economic autonomy.


However, it is not only the demand for autonomy that necessitates self-reliance, so that control over one’s own affairs can be restored. Self-reliance becomes also necessary by the fact that the historical trend away from self-reliance has had important adverse implications at the macro-economic, the cultural, the environmental and the social levels.


At the macro-economic level, millions of people all over the world have been condemned by the market forces (that ultimately control their fate once they have moved away from self-reliance) to unemployment, poverty and even starvation. Today, local economies depend on outside centres for the organisation of production and work, for covering their needs in goods and services, even for the provision of social services (education, health, etc.). For example, to attract investors, very expensive incentives are used which usually overlook the ecological implications, while the investments themselves do not maximise local employment and create a significant outflow of local income. The World Trade Organisation, for instance, has made self-reliance in agriculture almost impossible, destroying in the process the livelihood of millions of farmers all over the world and transforming agriculture into an even more chemical-intensive process controlled by big agro-business. On the other hand, local self-reliance implies maximal utilisation of local resources and sources of energy, a process that leads to a corresponding maximisation of local employment and, through the “multiplier effects”, of local income.


At the cultural level, the shift away from self-reliance has led to the dismantling of the social ties and values that unite communities, or even whole cultures. The market values of competitiveness and individualism have replaced the community values of solidarity and co-operation, transforming human beings into passive citizens and consumers.


At the environmental level, the trend away from self-reliance has led to the irrationality of a system that has to rely, for its everyday functioning, on the transport of goods and people over huge distances, with all the implications on the environment that this massive movement implies.[11] It should therefore be stressed that self-reliance is a necessary condition (though, of course, not a sufficient one as well) for the creation of an ecologically sustainable world order. This is so because self-reliant demoi constitute today the only way to reverse the process of overproduction and overconsumption that is the main effect of the growth economy, as well as the main cause of the ecological threat.


Finally, the trend away from self-reliance has also been associated with significant socio-economic costs that have been particularly emphasised by green economists.[12] Thus, de-skilling, vulnerability and economic dependence are the respective costs of the division of labour, specialisation and free trade. In other words, the trend away from self-reliance implies a radical shift away from individual and social autonomy.


Economic democracy is therefore impossible without a radical decentralisation of economic power so that self-reliance becomes feasible. However, a radical decentralisation implies, in fact, that the type of development which historically has identified Progress with economic growth and efficiency has to be abandoned. The trend away from local economic self-reliance was, in fact, an inevitable by-product of the rise of the market economy. In other words, the features associated with this trend (division of labour, specialisation, exploitation of comparative advantage through free trade) followed inevitably from the expansionary nature of the system of the market economy and its grow-or-die dynamic. Similarly, the Marxist adoption of the idea of Progress, led to the “socialist” growth economy, where the huge concentration of economic power in the hands of the bureaucrats controlling central planning destroyed any change for self-reliance.


Today, a form of decentralisation is taking place within the internationalised market economy, a decentralisation which is due to technological changes. Stages within the production process (for some products, even the production process itself) that used to take place in advanced capitalist countries have been moving to the semi-periphery (Mexico, Korea, Taiwan, Mediterranean Europe) or the periphery (Thailand, Malaysia, China, Eastern Europe). TNCs have now the technological capability to shift parts of productive activity from the centre to the periphery, in order to minimise production costs (including environmental costs). But, the decentralisation that takes place within this process is physical, not economic, since economic power remains at the metropolitan centres. The very dynamics of the neoliberal phase, which is a process of liberating markets from the “constraints” imposed by the state in the statist phase of marketisation, lead to further concentration of economic power at the metropolitan centres, as it was shown in the first part of this book. This is what I call dependent decentralisation, a process constituting an integral part of today’s process of concentration of economic power in the metropolitan centres, which implies a reproduction of the hierarchical division of labour and the dominance/dependence relations.


A clear example of dependent decentralisation is the “principle of subsidiarity” that has been adopted by the European Union to calm the fears of the European peoples, who see even their present minimal capability to self-determination being usurped. This principle, which requires decisions to be taken at the lowest possible level, refers mainly to the decentralisation of political decisions whereas the main economic decisions are left to be taken at the centre, by the political and economic elites. Thus, the metropolitan areas determine the quantity and content of development of the peripheral areas not only at the micro-economic but also at the macro-economic level: at the micro level, because it is from the metropolitan areas that the multinational capital, needed for peripheral development originates; and at the macro level, because the economically stronger areas are able, through the European Union institutions (particularly the European central bank), to impose directly their will on the weaker ones.


Opposed to this type of decentralisation is a self-reliant decentralisation that can only be founded on the horizontal interdependence of economically self-reliant demoi. The economic relations between the confederated demoi should therefore be structured in a way to enhance mutual self-reliance, in the context of collective support, rather than domination and dependency, as today. This could only be achieved within the framework of a confederal democratic planning process. Self-reliance within this framework should imply that the basic needs, democratically defined, should, as far as possible, be covered at the local level, although the level of satisfaction of these needs should be the same across the confederation. Therefore, exchanges between the demoi in a confederation are both necessary and desirable, given that self- reliance can never lead to the satisfaction of all needs. The real issue is who controls such exchanges: is it the demos itself, as for instance happened in the free medieval cities,[13] or the “market”, namely, those who, because of their economic power, are in a position to control the market, i.e. the economic elite?


An important question that has to be asked with respect to self-reliance is the size of the economic unit (i.e., the size of the demos), which, on the one hand, makes self-reliance viable and, on the other, is compatible with direct and economic democracy. As regards economic viability, no general a priori answer can be given, in view of the significance of such factors as the access to raw materials, climate, geography and others. However it is indicative that, at the beginning of the 1990s, 70 percent of the countries with less than 100,000 in population belonged to the group of countries classified by the World Bank as “high-income” or “upper-middle income”.[14] This illustrates the fact that economic viability is not determined exclusively or even decisively by size, provided, of course, that it exceeds a certain minimum (say, 30,000) that would allow the local satisfaction of many, if not most, basic needs.


It is therefore compatibility with direct and economic democracy, that is, the feasibility of decision taking in face-to-face assemblies, that should be the basic determinant of the size of the self-reliant demos. On these grounds, the demos emerges as the most appropriate economic unit that could constitute the nucleus of an inclusive democracy. However, given the huge size of many modern cities, this implies that many of them will have to be broken up for this purpose. Still, this does not require their immediate physical decentralisation ―which is obviously a long-term project― but only their institutional decentralisation, which could be introduced immediately.


Demotic Ownership of Productive Resources


The question of ownership refers to who owns and controls the productive resources and should not be confused with the issue of allocation of resources, which refers to the mechanism through which the basic questions of what, how and for whom to produce are answered. The two modern forms of ownership of productive resources are the capitalist and the socialist ones, whereas the two main forms of allocation of resources are the market and the planning mechanisms. Historical experience has provided us with all sorts of combinations between systems of ownership/control and allocation of resources, from state-owned firms within a market economy system to capitalist firms within a planned economy.


By the same token, the question of ownership should not be confused with the question of control. I do not just refer to the usual argument about the divorce of ownership from control in today’s giant stock companies, where shareholders are the owners but actual control is exercised by managers and technocrats. In fact, the famous “divorce” is in this case meaningless since shareholders and managers/technocrats in a sense ―the most important one from our viewpoint― share common motives: to make profits and to reproduce the hierarchy relations that exclude most of the employees from effective decision taking. I also refer here to the case where a firm may be owned by its employees and still be managed and effectively controlled by technocrats, managers and others (e.g., the Mondragon[15] type of workers’ co-op). In that case, potentially, there may be a real divorce of interest between those who own the firm (workers) and those who control it (managers, etc.) since, even if profitability is a common aim, hierarchy may not be. This conflict of interest is illustrated by the fact that, as even supporters of workers’ co-ops admit it, “many co-operatives have indeed suffered from mismanagement, primarily due to a lack of discipline with respect to shop floor workers ignoring management orders”.[16]


The capitalist system of ownership implies private ownership of productive resources and is usually associated with a market system of allocating them among various uses. Private ownership of productive resources, irrespective of whether it is combined with a market system or not, implies control to serve particular interests (of shareholders, managers or workers) rather than the general interest. Furthermore, when private ownership of productive resources is combined with a market allocation of resources the inevitable result is inequality, concentration of political/economic power, unemployment and maldevelopment or “inappropriate” development.[17] Furthermore, the grow-or-die dynamic that inevitably develops in such a system leads to systematic efforts to conquer nature and, consequently, to ecological damage. Therefore, this system is clearly incompatible with an inclusive democracy.


On the other hand, the socialist system of ownership implies a “social ownership” of the means of production, which can exist within either the market or the planning system. This historically has taken two main forms:

  • nationalised enterprises and

  • collectivised self-managed enterprises.

In nationalised enterprises, a real divorce between ownership and control is introduced: whereas formal ownership and control belongs to society at large, effective control of production belongs to either technocratic elites (in a market economy system) or to bureaucratic elites (in a planned system) which take all important economic decisions, as a rule pursuing their own particular interests. This is true, either such enterprises function within a market economy system (in which case they usually do not differ —from the point of view of the real objectives pursued— from normal capitalist firms) or within a “socialist” planned system (in which case they are controlled by the party elite, through its control of the state apparatus, within the context of a bureaucratic top-down control). It is therefore obvious that nationalised enterprises are incompatible with economic democracy.


In collectivised self-managed enterprises, the ownership belongs, wholly or partially, to the worker/employees of the enterprise. Historically, we meet self-managed enterprises both within a market economy system (e.g., the Mondragon co-ops) and within a “socialist” planned economy (e.g., the Yugoslav self-managed enterprises). The main problem with such self-managed enterprises is that the more independent of each other and of society at large they are the more they tend to satisfy the particular interest of their employees, as against the general interest of citizens. Thus, if nationalised industries mainly serve the particular interests of the managers and party elites controlling them, self-managed enterprises mainly serve those of their employees. Also, to survive in a competitive world, they usually have to use the same production methods as capitalist firms (methods which may be alienating, damaging to the environment, labour saving, etc.). Furthermore, collectivised self-managed enterprises tend to compete with each other for productive resources (land, labour, etc.) in a way very similar to the competition among capitalist firms. Finally, such forms of self-management cannot secure the autonomy of the worker as citizen. Thus, although some forms of it, supported by syndicalists and parts of the green movement, may promote democratic procedures within the enterprise (what we call “democracy in the social realm”), they do nothing to promote democracy in general. So, these forms of self-management, as Bookchin observes, usually represent “exploitative production with the complicity of the workers”[18] since they cannot guarantee freedom from the tyranny of the factory and rationalised labour. Therefore, collectivised self-managed enterprises are, also, incompatible with an inclusive democracy in general and an economic democracy in particular.


It is therefore clear that economic democracy requires a new type of enterprise characterised by a form of social ownership which secures a democratic ownership and control of productive resources. This is the demotic enterprise which is based on demotic ownership. This type of ownership leads to the politicisation of the economy, the real synthesis of economy and polity ―a synthesis, which can only be achieved within the institutional framework of an inclusive democracy. This framework, by definition, excludes any divorce of ownership from control and secures the pursuit of the general interest. This is so because, as I will try to show in the next section, economic decision making is carried out by the entire demos, through the citizens’ assemblies, where people take the fundamental macro-economic economic decisions which affect them as citizens, rather than as vocationally oriented groups (workers, technicians, engineers, farmers etc.). At the same time, people at the workplace, apart from participating in the demotic decisions about the overall planning targets, would also participate as workers (in the above broad sense of vocationally oriented groups) in their respective workplace assemblies, in a process of modifying/implementing the Democratic Plan and in running their own workplace. Thus, the democratic planning process would be a process of continuous information feedback from demotic and confederal assemblies to workplace assemblies and back again. Finally, the running of the demotic enterprises could be supervised by a kind of supervisory board appointed by the workplace assembly. This supervisory board should include personnel with specialist knowledge and its members would be constantly recallable by the workplace assembly, apart from being indirectly controlled by the demotic assemblies. Thus, workplace assemblies will function both as institutions of “democracy in the social realm” and as fundamental components of economic democracy, given their role in the process of democratic planning. As such, workplace assemblies, together with citizen’s assemblies, and with clearly delineated responsibilities and functions, constitute the core of the inclusive democracy.


Confederal allocation of resources


This precondition implies that the decision mechanism for the allocation of scarce resources in an inclusive democracy should be based at the confederal rather than the demotic level, i.e. at the level of the confederation of demoi. This is in order to take into account the fact that in today’s’ societies many problems cannot be solved at the local level (energy, environment, transportation, communication, technology transfer –to mention a few).


Apart, however, from the problems of co-ordination, there is also the problem of the mechanism that would secure a fair and efficient allocation of resources both within and between the demoi. The mechanism proposed here aims to replace both the market mechanism and the central planning mechanism.


The former is rejected because it can be shown that the system of the market economy has led, in the last two hundred years since its establishment, to a continuous concentration of income and wealth at the hands of a small percentage of the world population and, consequently, to a distorted allocation of world resources. This is because in a market economy the crucial allocation decisions (what to produce, how and for whom to produce it) are conditioned by the purchasing power of those income groups which can back their demands with money. In other words, under conditions of inequality, which is an inevitable outcome of the dynamic of the market economy, the fundamental contradiction with respect to the market satisfaction of human needs becomes obvious: namely, the contradiction between the potential satisfaction of the basic needs of the whole population versus the actual satisfaction of the money-backed wants of part of it.


The latter is rejected because it can be shown that centralised planning, although better than the market system in securing employment and meeting the basic needs of citizens (albeit at an elementary level), not only leads to irrationalities (which eventually precipitated its actual collapse) and is ineffective in covering non-basic needs, but it is also highly undemocratic.


The system of allocation proposed by the Inclusive Democracy project aims to satisfy the twofold aim of

  • meeting the basic needs of all citizens ―which requires that basic macro-economic decisions are taken democratically and

  • securing freedom of choice ―which requires the individual to take important decisions affecting his/her own life (what work to do, what to consume etc.)

Both the macro-economic decisions and the individual citizens’ decisions are envisaged as being implemented through a combination of democratic planning and an artificial “market”. So, the system consists of two basic elements:

  • a planning element that involves the creation of a feedback process of democratic planning between workplace assemblies, demotic assemblies and the confederal assembly.

  • a “market” element that involves the creation of an artificial “market”, which will secure a real freedom of choice, without  incurring the adverse effects associated with real markets

In a nutshell, the allocation of economic resources is made first, on the basis of the citizens’ collective decisions, as expressed through the demotic and confederal plans, and second, on the basis of the citizens’ individual choices, as expressed through the voucher system.


The main assumptions on which this model of social organisation is based are, as shown in the diagram below, as follows:

  • the demotic assembly —the classical Athenian ecclesia is the ultimate policy-making decision body in each self-reliant community;

  • the demoi are co-ordinated through regional and confederal administrative councils of mandated, recallable and rotating delegates (regional assemblies/confederal assembly);

  • productive resources belong to each demos and are leased to the employees of each production unit for a long-term contract; and

  • the aim of production is not growth but the satisfaction of the basic needs of the demos and those non-basic needs for which members of the demos express a desire and are willing to work extra for.

The general criterion for the allocation of resources is not efficiency, as it is currently defined in narrow techno-economic terms on the basis of the system’s capability to satisfy money-backed wants. Efficiency should be redefined to mean effectiveness in satisfying human needs.


As far as the meaning of needs is concerned, a distinction is drawn between basic and non-basic needs and a similar one between needs and “satisfiers” (the form or the means by which these needs are satisfied). The distinction between basic and non-basic needs is introduced here because each sector is assumed to function on a different principle. The “basic needs” sector functions on the basis of the communist principle “from each according to his/her ability to each according to his/her needs”. On the other hand, the “non-basic needs” sector is assumed to function on the basis of an artificial “market” that balances demand and supply, in a way that secures the sovereignty of both consumers and producers. Also, the distinction between needs and satisfiers is introduced to secure freedom of choice even in the satisfaction of basic needs.


So, what constitutes a need ―basic or otherwise― is determined by the citizens themselves democratically. Then, the level of need-satisfaction is determined collectively and implemented through a democratic planning mechanism, whereas the satisfiers for both basic and non-basic needs are determined through the revealed preferences of consumers, as expressed by the use of vouchers allocated to them in exchange for their “basic” and “non-basic” work. All vouchers are issued on a personal basis, so that they cannot be used, like money, as a general medium of exchange and store of wealth.


Basic vouchers (BVs ―allocated in exchange for “basic” work, i.e. the number of hours of work required by each citizen in a job of his/her choice so that the confederal basic needs are met) are used for the satisfaction of basic needs. These vouchers, which are issued on behalf of the confederation, entitle each citizen to a given level of satisfaction for each particular type of basic need, but do not specify the particular type of satisfier, so that freedom of choice may be secured. The BVs scheme will represent also the most comprehensive “social security” system that has ever existed, as it will cover all basic needs (according to the definition of basic needs given by the confederal assembly) not only of those able to work but also of those unable to work. The overall production targets with respect to the confederal basic needs are determined by the confederal assembly but the specific production levels and mix for each workplace are determined by workplace assemblies, on the basis of the targets set by the confederal plan and the citizens’ preferences, as expressed by the use of vouchers for each type of good and service.


Non-basic vouchers (NBVs ―allocated in exchange for “non-basic” work) are used for the satisfaction of non-basic needs (non-essential consumption) as well as for the satisfaction of basic needs beyond the level prescribed by the confederal assembly. NBVs, unlike BVs, are issued on behalf of each demos, so that greater choice at the local level could be achieved. Work by citizens over and above the “basic” number of hours is voluntary and entitles them to NBVs, which can be used towards the satisfaction of non-essential needs. The “prices” of the non-basic goods and services in the proposed system, instead of reflecting scarcities relative to a skewed income and wealth pattern (as in the market economy system), indicate scarcities relative to citizens’ desires and function as guides for a democratic allocation of resources. Therefore, prices, instead of being the cause of rationing ―as in the market system― become the effect of it and are assigned the role of equating demand and supply in an artificial “market”, which secures genuine sovereignty of both consumers and producers. The “prices” formed in this way, together with a complex “index of desirability” drawn on the basis of citizens’ preferences as to the type of work which they wish to do, determine a “subjective” rate of remuneration for non basic work. This is in place of the “objective” rate suggested by the labour theory of value, which, apart from its internal problems, cannot also secure freedom of choice. Therefore, the rate of remuneration for non-basic work, namely, the rate which determines the number of non-basic vouchers a citizen receives for such work, should express the preferences of citizens both as producers and consumers.


The effect of the proposed system on the distribution of income will be that a certain amount of inequality will inevitably follow the division between basic and non-basic work. But, this inequality will be quantitatively and qualitatively very different from today’s inequality: quantitatively, because it will be minimal in scale, in comparison to today’s huge inequities; qualitatively, because it will be related to voluntary work alone and not, as today, to accumulated or inherited wealth. Furthermore, it will not be institutionalised, either directly or indirectly, since extra income and wealth ―due to extra work― will not be linked to extra economic or political power and will not be passed to inheritors, but to the community.


As the above brief description of the model of economic democracy makes clear, the project for an inclusive democracy refers to a future international political economy which transcends both the political economy of state socialism and that of the internationalised market economy. This new international political economy should obviously include not only a system of “internal” exchanges between demoi, but also of external exchanges between confederations.[19] 



[1] See, e.g., the article of Robin Blackburn, editor of the once radical New Left Review, that now advocates a “socialised market”!; R. Blackburn, “Fin de Siècle: Socialism After the Crash,” New Left Review (Jan./Feb. 1991), pp. 5-68.

[2] See, for instance, M. A. Lutz & K. Lux, Humanistic Economics (NY: Bootstrap, 1988), Ch. 12; C. George Benello et al., Building Sustainable Communities (NY: Bootstrap, 1989), Chs. 18-20.

[3] Aristotle, Politics, Book 1.

[4] Hansen, The Athenian Democracy in the Age of Demosthenes, p. 63.

[5] See Chomsky’s interview for the NBC/Washington Post network (<>) (October 2, 2001).

[6] Hannah Arendt, The Human Condition (Chicago: The University of Chicago Press, 1958), p. 44.

[7] See e.g. L. Susan Brown, The Politics of Individualism, pp. 127-28.

[8] For the full version of this model see, TID, Ch. 6; see, also, Takis Fotopoulos, “Pour une democratie economique”, Agone, No. 21 (1999), pp. 137-158.

[9] See, e.g., the work of G. Hodgson, The Democratic Economy (Gretna, LA: Pelican, 1984), Economics and Institutions (Cambridge: Cambridge University Press, 1988), and Rethinking Economics (Edward Elgar, 1992).

[10] Quoted in Paul Ekins, Trade for Mutual Self-Reliance (London: TOES publication), 1989, p. 13.

[11] See, e.g., Paul Ekins, Trade for Mutual Self-reliance, p. 9.

[12] For an examination of this topic from a green economics perspective, see, e.g., Paul Ekins, Local Economic Self-reliance (London: TOES publication, 1988).

[13]  Kropotkin, Mutual Aid , pp. 181-86.

[14] In 1990-91, 27 out of 45 countries with less than 500,000 population and 9 out of 13 with less than 100,000 belonged to the “high income” category; Britannica World Data, 1992. Of course, the fact should be taken into account that size may play a less significant role with respect to the economic viability of an export-led small economy than for that of a self-sufficient one, but then, again, the technology used by the two types of economies may be radically different.

[15] M. A. Luts & K. Lux, Humanistic Economics, Ch. 12.

[16] Ibid., p. 258.

[17] See for a definition of appropriate/inappropriate development, Ted Trainer, “What is development?”, Society & Nature, Vol. 3, No. 1 (1995).

[18] Murray Bookchin, “Municipalization: Community Ownership of the Economy,” Green Perspectives (Feb. 1986).

[19] See for details TID, Ch. 6.