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Desirable International Economic Relations
by Robin Hahnel and Michael Albert
In many areas of life, we humans have discovered benefits from social cooperation. We can all eat and dress better when some of us grow food and others weave clothes. We can educate our children better when some of us teach elementary school, others teach high school math, and most of us do no formal teaching at all. To put it differently, it would be a shame if we had to forego the benefits of specialization because we could not arrange to enjoy them fairly and democratically.
Even taking considerations traditionally ignored into account, there are circumstances under which the entire populations of two countries can be better off with specialization and trade rather than living self-sufficiently. No doubt the advantages have been considerably overestimated since important environmental and human costs have long been ignored, as other articles in this issue point out. The private costs of transportation are considerably less than the social costs. (Morris) Long run costs to the environment and human health of modern, chemical-based agriculture have been largely ignored, as have the environmental and human benefits of small scale, organic farming. (Kaufman) And the human and public costs associated with the dislocation of work patterns brought about by changes in the international division of labor are typically ignored by those who reap a greater share of the benefits from international specialization and shoulder a lesser share of the costs of adjustment. (McGaughey) But when there are benefits from international cooperation, the question becomes how to take advantage of them without sacrificing (1) real democracy (decision making input in proportion to the degree one is affected by the outcome), (2) equity (benefits in proportion to sacrifices), and (3) diversity.
We developed a model of a participatory economy that can be understood as a way of helping people discover when there are benefits from cooperation, and then helping them take advantage of these opportunities equitably and democratically. But we had not responded to frequent inquiries about how a participatory economy would interact with other economies. At the risk of making all too clear why we hesitated, let us consider how economies that are internally democratic, equitable, and ecologically sustainable should relate to other, similar economies. This may shed some light on important issues in less ideal settings.
If the procedures of participatory planning are internally efficient, equitable, democratic, and ecologically sound, as we believe them to be, then why not organize international economic cooperation according to the same procedures? Indeed, this was our first inclination. And we suspected that anything short of participatory planning on a world scale meant a failure to take advantage of all the potential benefits from international specialization, and/or a failure to secure full economic democracy and justice while doing so. But conducting international economic relations according to the procedures of participatory planning means that separate participatory economies would cease to exist. If participatory planning were implemented world-wide, there would be no distinction between democratic workers and consumers councils and federations in different countries, or on different continents, as they proposed and revised their interconnected activities in a single, world wide planning process.
...varying the terms of trade between the limits of the true social opportunity costs of different goods in different countries, the benefits from specialization and trade could be distributed between two economies in any way desired.
We hasten to point out that a world-wide participatory economy would not undermine diversity. One of the advantages of participatory planning is that it promotes variety. Different ways of making things, different choices of what to consume, and different choices between consumption and leisure are all encouraged by its procedures. Participatory planning replaces impersonal competitive market pressures with conscious, socially responsible cooperation, and leaves individuals and collectives free to pursue their own conceptions of the good life subject only to the constraint that others have equal opportunity to do so. Certainly compared to a world economy integrated by international markets for goods and capital, a world-wide system of participatory planning would yield more diverse local outcomes. The only differences it would eliminate are those due to economic exploitation and domination.
While this may be the best way to take advantage of the potential benefits of international specialization while making world economic affairs democratic and equitable, there would still have to be a transition from a world of historically distinct participatory economies to a world-wide participatory economy. And during this transition international cooperation among participatory economies would be something different than participatory planning. What kind of relations between distinct participatory economies would be democratic, equitable, and ecologically sound while permitting those economies to enjoy the benefits of international specialization?
Different economies can exchange goods and services, productive resources, or productive knowledge. Suppose our distinct participatory economies began by only wanting to trade goods, but wanted to do this consistent with their principles of economic democracy, equity, and ecological sustainability. Particularly if productive knowledge and resources were immobile, there would be benefits from international specialization of production according to comparative advantage. Moreover, there would be a range of terms of trade that gave each economy net positive benefits, and by varying the terms of trade between the limits of the true social opportunity costs of different goods in different countries, the benefits from specialization and trade could be distributed between two economies in any way desired. If the terms of trade were determined by market forces, a number of problems would arise.
- Market decision making is undemocratic. This could be ameliorated by having the Ministry of Foreign Commerce of each participatory economy meet to discuss and plan the terms of trade consciously, with access to all relevant information.
- Market decision making is inefficient because more disperse, social effects are undervalued compared to more direct, individual effects leading to a systematic misestimation of true social costs and benefits. This could be ameliorated by inviting the Ministries of Environmental and Social Affairs from each economy to jointly estimate costs and benefits more accurately.
- Market decision making drives each participant to try and benefit at the expense of others, thereby undermining solidarity. This could be ameliorated only if negotiations over where within the limits of mutual benefit the actual terms of trade would be set were based exclusively on moral considerations such as comparative sacrifice and need rather than comparative productivity and bargaining power.
But even if all this were done, even if a decision were reached to distribute the benefits of specialization and trade, say two thirds to the country with the lower level of GNP per unit of human effort and one third to the country with the higher level of GNP per unit of human effort, international economic relations would not be equitable. As long as productive knowledge and resources were unequal and immobile, the citizens of some economies would enjoy less economic well being than those of other economies for equivalent sacrifices because they did not have access to as much productive knowledge or resources. Some of us have not hesitated to call this exploitation.
So what if the participatory economies considered exchanging productive knowledge and resources. After all, keeping producers in some country from using the most productive knowledge available is patently inefficient. And failing to assign productive resources to where they are most productive is inefficient as well. So while the initial impulse for participatory economies engaged in trade to share productive knowledge and resources might come from equity considerations, there are efficiency reasons for doing so as well. But how much to share, and with what compensation? Anything less than total abolition of "intellectual property rights" is inefficient. Any allocation of productive resources internationally other than to their most efficient use is inefficient. And any outcome that does not reward sacrifice equally, throughout the world, is inequitable. Does this mean "knowledge rich" participatory economies would be honor bound to deliver their patents to less knowledgeable economies, with apologies for not having done so sooner? Does it mean "capital rich" participatory economies should make massive, unilateral transfers, asking only that recipient economies honor their obligation to keep GNP per unit of human effort from dipping below the international average in donor economies? Yes, and no.
"Yes" because it is pointless, and debilitating to deny moral logic. For inhabitants of economies that are internally equitable to refuse to extend the logic of equity to a wider group of human beings with whom they decide to enter into cooperative arrangements can only undermine the moral and social forces that preserve internal equity. If you open economic relations with other human beings, you have to accord them the same rights and privileges you claim for members of your own group. Doing otherwise is to treat them as less human than yourselves.
But "no" for two reasons. The most important is that while moral logic is timeless and demands instantaneous application once it is apparent, we humans are creatures who live and grow over time. Demand immediate justice. Point out that any delay in full compliance is a further injury. But do not be displeased if the response is an enforceable plan that will eliminate the injustice over a period of time. In this vein, splitting the benefits from trade 2/3 to 1/3 might not be bad. Transferring productive knowledge quickly, but with minimal compensation, might be reasonable. And something short of immediate and complete internationalization of all productive stocks of capital might be acceptable.
The second reason the answer might be "no" also has to do with time. Equal benefit for equal sacrifice is the principle that should define equity in economic relations among all humans. But when should we start counting? When we developed the principles and procedures that guide a fully functioning participatory economy we deliberately ignored the problem of transition. But not only are there practical problems of transition -- how can the world move from here to there -- there are ethical problems of transition as well. What if different participatory economies seeking to establish international economic relations had sacrificed consumption and leisure to differing degrees in the recent past in accumulating productive capital or productive knowledge? Wouldn't justice require some compensation for capital or knowledge exporters if those economies had recently undergone greater sacrifice in accumulating capital or productive knowledge?
Lest we get carried away by these hypothetical examples — whose cousins have long been cited to rationalize capitalist exploitation as just compensation for consumption foregone -- we should recognize that in today's world, economies with greater than average productive knowledge and stocks of productive resources have not generally acquired them through greater sacrifice, and seldom by greater sacrifice on the part of the citizens who own them as their private property! If we opt to entertain historical claims, the claims of poorer economies based on slavery, colonial restrictions, unequal terms of trade, repatriated profits, and usurious interest and royalty payments should dominate the docket. But this is no reason to deny a hearing to a deserving group of post World War II citizens from Japan or Germany.
In any case, we should not be too disapproving if a group of historically distinct participatory economies agreed to:
But even so, if this were not arranged through democratic discussion, and planning based on moral argument, informed by serious attempts to reestimate the external costs and benefits of economic activities, it might prove corrosive of whatever levels of economic democracy and equity the economies may have achieved internally, as well as continue to destroy the planet that sustains us at an escalating pace.
- trade goods and services at terms that were beneficial to all participants, but more beneficial to countries with lower levels of reward to effort,
- share productive knowledge as quickly as possible with compensation awarded in some cases, and
- share stocks of productive resources over a reasonable period of time.
Not to be misunderstood, we have discussed the possibility of desirable international economic relations among democratic and equitable economies assuming that environmental and social costs are weighed in the balance. The only implication for NAFTA is that it will be a disaster for everyone except US MNCs. Big surprise.
For more information on Robin Hahnel and Michael Albert's participatory economics ("parecon"), see http://www.parecon.org/
Their vision is spelled out in two books: Looking Forward (South End Press, 1991) and The Political Economy of Participatory Economics (Princeton, 1991). A third book, Thinking Forward (Abeiter Ring, 1997) provides a course of lectures in thinking about economic vision, using parecon as a basis.