Introduction

A Participatory Economy1 is usually summarised by a list of five canonical features, namely:

  1. Social ownership;
  2. Democratic councils and confederations (worker and consumer);
  3. Participatory planning (annual planning and long-term development planning);
  4. Equitable remuneration for work (according to effort/sacrifice);
  5. Balanced division of labour (balanced jobs).

However, hidden within item 4 (“equitable remuneration for work”) is another feature of the Participatory Economy (PE) system which is so important that it should appear explicitly on that core list. I believe it is one of the most powerful aspects of the PE. This feature is almost never discussed by the Left, and seldom even by the tiny minority which attends seriously to the details of postcapitalism. Indeed, this feature is scarcely perceived as a choice at all. That is unfortunate because, in this author’s view, it is not only a defining feature of PE but of socialism itself. That feature is what I call “Communal Income”.

Communal Income refers to the governance and accounting of income received by individuals for formal work. Namely, Communal Income means that (1) income to work is decided politically through democratic processes wider than the individual enterprise, and that (2) worker income is not allocated from the Income Statement of the enterprise but from the accounts of the Commune2. This article will introduce Communal Income in the context of a PE and explain why it matters so crucially to a postcapitalist society. We will focus on contrasting Communal Income and Private Income, explaining how the former is a basic requirement of postcapitalism and the latter is constitutive of capitalism itself. Specifically, we will see how Private Income acts to assimilate workers into the cycle of capital, with intra-enterprise competition for jobs and higher pay, inter-enterprise competition for market power, society-wide income disparities, and disruption of autonomous motivation for work.

The “Market Socialist” Status Quo

When the Left discusses income for work, it is usually about its quantity. For example, should taxes and wages be higher? That discussion is important but superficial because we are not examining who should make those decisions. Unfortunately, it is typical for the Left to advocate for a desirable end result without attending to the appropriate dynamic to achieve and sustain it. Thus, we habitually take for granted existing institutions and power relations. However, the most important question in all of political economy is “who decides?”. This is the primary structuring factor which will determine the evolution of society.

The failure of the centrally-planned command economies under Communist Party dictatorship, and especially the collapse of the USSR in 1991, has led to the victory of market ideology planet-wide since at least the 1980s. Even the Communist Party of China lauds “the market” as the epitomé of dynamism, innovation, and efficiency, dedicating itself to the management of an industrial capitalist economy with a large state sector via a police state. In the West and elsewhere, the Left tends to reject oppressive one-party states but is nonetheless convinced that market society is the only viable and desirable future for humanity because “the market” is equated with both efficiency and autonomy. Hence, the Left has settled on a market economy in which, to different degrees, a state provides support and compensates for market failures.

On the rare occasion that alternatives to capitalism are seriously considered, the commonest proposed arrangements for income-to-work are: (1) state-determined wages in “nationalized” enterprises, and (2) profit-sharing in worker co-operative enterprises. Here the decision-making actors are made clear: the state in the first case, and some particular worker-owners in the second. In this article, we will focus on the latter, which I will call “the half-capitalism of labour-managed firms”. But it should be noted in passing that Communal Income centres on the commune which – drawing on Murray Bookchin’s distinction between politics and statecraft3 – constitutes a non-state polity or formal community of citizens. It implies a democratic and confederal organisation of society according to the principle of subsidiarity – that decisions are made at the most decentral/local level which is still compatible with the viability of the whole system. Worker income is decided and allocated through these democratic organs rather than through the over-centralised and class-stratified state apparatus. Communal Income is a way between the pitfalls of statisation of enterprises and private-worker-ownership of capitalist enterprises.

The Cycle of Capital

Postcapitalism is a society beyond capital. By capital, I mean a process whereby societal evolution is driven by the competition for profit and growth between enterprises operating within a “grow or die” environment. Capital is an automatic cycle blind to human and ecological needs, in which the structure of human activity is determined by narrow economic performance, price competition, the commodification of labour power, and a positive feedback loop of profit-investment-profit.

For a diagram illustrating the cycle of capital in a single capitalist enterprise, see Figure 14. The enterprise is described schematically and dynamically in accounting terms, going counter-clockwise. In Figure 1, we see that Retained Earnings and Credit are Invested into the Production Process in order to generate Sales and make Revenue. This requires Purchases, recorded as Cost. Costs include Non-Labour Costs (such as raw materials and fixed inputs) and Labour Costs, where the Worker Income for an individual is equal to their recorded Labour Cost. The difference between Revenue and Cost makes Profit, which is split between (i) Dividends as Capitalist Income (e.g. shareholders) and (ii) Re-Investment into the Production Process, aiming to increase Sales while reducing Purchases and hence make greater Profit and take greater Market Share. This cycle continues inexorably.

Figure 1 – The cycle of capital in a single enterprise.

To achieve postcapitalism, we must transcend capital. That means ending the cycle of capital and organising society on a different basis. We can disrupt the cycle of capital by “cutting the loop”, so that the cycle cannot complete itself. Since, as we can see in Figure 1, capital is a process with many branches, we can cut the loop in several places. To fully overcome capital, it has to be cut in three places, as indicated in Figure 2. The first cut relates to investment, the second cut relates to capitalist income, and the third cut relates to worker income.

Figure 2 – Cutting the loop: how to disrupt the cycle of capital within an enterprise.

However, as shown in Figure 3, in the half-capitalism of labour-managed firms, the cycle is really only cut in one place, namely in the Dividends to the Capitalist. Profits are still retained by the enterprise, Investment is still made on the basis of narrow economic performance (profitability and growth), the Production Process still aims to make the greatest Revenue for the least Cost. But instead of Dividends going to a traditional capitalist such as a board of directors, senior executives, or non-working shareholders, they go to all the workers in the enterprise. Effectively, the traditional capitalist has been replaced by a worker-collective capitalist.

This is indeed one important step away from capitalism and towards postcapitalism. But it is only one step and, therefore, the half-capitalism of labour-managed firms is riddled with most of the same innate problems of full-capitalism which will lead it either to press forward to postcapitalism or to relapse into full-capitalism.

Figure 3 – The half-capitalism of the labour-managed firm, single-enterprise view.

Exploring Figure 1 fully is beyond the scope of this article, but it will help us gain insight into the issue of worker income. The problem is that worker income is paid by the individual enterprise, either as a cost of production or as a residual in the form of dividends. For our purposes, these are functionally equivalent. Firstly, the worker’s income is dependent on the success or failure of that particular enterprise. If the enterprise is more (less) profitable, their income will be higher (lower). This means that the very livelihood of the worker is tied to the economic performance of the enterprise they happen to work in. As such, the cycle of capital is internalized psychologically by the worker, so that the distinctive interests of the enterprise become their interests. In the context of market society, that means beating the competition and gaining market power by expanding revenues while driving down costs. It also means that substantial income inequalities are entrenched in the social operating system. Since worker income is tied to the income statement of the enterprise, workers at enterprises with big profits will have big salaries and workers at enterprises with small profits will have small salaries. Think about a law firm versus a cleaning cooperative. It also means that inequality within the enterprise will be structurally incentivized, since the long-term dominant strategy to maintain intra-enterprise incomes overall will be to prioritise inter-enterprise competition by implementing a profit-focused hierarchical division of labour and attracting talent and skills through monetary incentives. While there is no minority non-working capital-owning class, the half-capitalism of labour-managed firms functions very similarly to capitalism because it shares so many key characteristics.

Communal Income

So, what is the socialist alternative? In Figure 4, we see a sketch of a cycle of production beyond capital. Looking at worker income in particular, we see that worker income is not paid out of profits as dividends nor does it appear on the income statement as a cost (namely, labour cost). Rather, the income workers receive is determined by an independent process. In terms of governance, incomes are decided politically by the commune (giving the name “Communal Income”); in accounting terms, worker income appears on the books of the commune rather than the enterprise. This reflects the fact that each enterprise is communal property and that citizen-workers are stewarding them as agents of the commune and “society as a whole”. Therefore, the livelihood of each worker is decoupled from the economic performance of their particular enterprise. Rather, for those able to work it is guaranteed as acknowledgement of their participation in the social labour process5. In socialism, nobody receives income for owning property. Instead, people only receive income according to need or for working.

Figure 4 – The communal cycle of reproduction within a single enterprise in socialism.

The enterprise will record labour costs along with non-labour costs, but these labour costs will be distinct from worker income. So strong is our assumption that labour cost is the same as worker income that we struggle to understand that they are different things. This assumption is due to our indoctrination into capitalism. The confusion arises because labour is the only factor of production which is alive and self-conscious, in contrast to raw materials and machines. Thus, in capitalism, the payment by the capitalist of the cost of this factor of production also happens to be payment to a conscious, living, creature in the form of income6. But there is no law of nature which stipulates that the income a worker receives must equal the cost of their labour recorded by the enterprise. Rather, it is a historically specific arrangement which is definitive of capitalism and which we can change by design. In a market system, workers must market themselves as factors of production. In a socialist system, workers need only act as citizens.

So, labour cost and worker income might end up being the same number (e.g. €50,000) but the point is that in principle they can differ and that worker income is decided and paid by the commune. Therefore, in principle, labour costs can vary significantly while worker incomes are equal. For example, the worker could receive the standard income of €30/hour while society charges the enterprise €60/hour for their labour7. Equality of incomes is vastly easier to achieve when workers are paid by the commune rather than a variety of individual enterprises. That is, replacing Private Income with Communal Income is a necessary precondition to replace Inequitable Income with Equitable Income. Institutional support for Equitable Income is crucial because highly – if not perfectly – equal incomes are crucial to the stability of socialism as a classless, fair, and autonomously motivated society.

Communal Income is what is proposed in the classical formulation of PE, namely that worker income is allocated per head by democratic organs outside the enterprise, and then allocated internally to each enterprise worker, while the labour costs recorded by that enterprise are determined by the Annual Planning process according to the supply and demand of different categories of labour. Returning to the list of PE’s canonical features, I would include Communal Income within item 4 as follows:

  1. Social ownership;
  2. Democratic councils and confederations;
  3. Participatory planning;
  4. Communal Income & Equitable Remuneration
  5. Balanced division of labour.

This acknowledges that PE includes more than a norm of pay equity but the deep institutional structure which enables it.

Because a worker’s livelihood is not tied to a single enterprise competing with others, workers do not need to internalize capitalist motives of competition and profit-seeking and can instead bring their authentic selves and a holistic assessment of social and ecological wellbeing. Indeed, this provides environmental conditions to support optimal motivation, contrary to conventional belief that people will only work diligently and be responsive to customers if their livelihood is tied to the economic fortune of their particular enterprise. Self-Determination Theory8, the leading psychological theory of human motivation and wellbeing, shows us that optimal motivation is “autonomous motivation” (a combination of intrinsic motivation and well-internalized extrinsic motivation) which is supported when our three basic psychological needs of autonomy, competence, and relatedness are satisfied9. By making people instruments of capital, so that the salient motive for action is the competitive pressure of profitability and market share, we will most likely gravely undermine the autonomous motivation which socialism requires and entrench a regime of controlled motivation by which people act mainly for narrow egoistic reasons and demonstrate less initiative, persistence, and creativity.

This criticism also applies to proposals in PE to link worker income to the “SB/SC ratio”10, or the ratio of sales revenues to money costs (effectively the “profit” margin). The viewpoint of this author is that the linkage between worker income and the narrow economic performance of the enterprise is a mistake for motivational reasons and that socialists should be wary of incorporating market logic into democratically planned economies.

The contraction, maintenance, or growth of the enterprise will be determined by the social regulation of investment, which is beyond the scope of this article. However, I note that this process should be organised through the commune, involving the appropriate stakeholders and using Multi-Criteria Decision Analysis (MCDA)11. That MCDA process can include economic metrics such as sales revenues, monetary costs, and “profits”, along with many other social and ecological indicators. In this way, if an enterprise consistently underperforms without sufficient extenuating circumstances, it can be shrunk and even closed down so that social resources can be better used elsewhere. However, that will be a conscious choice made by citizens of the commune according to the specific circumstances of the enterprise assessed using holistic criteria. In this way, workers do not need to be psycho-socially locked to the cycle of capital to ensure a healthy reproduction and evolution of the economy. The performance of the enterprise and the livelihood of the worker can be decoupled.

Conclusion

Contrary to the Market Socialist status quo, Communal Income is fundamental to achieving a genuinely socialist society. By decoupling worker income from the economic performance of individual enterprises and ensuring it is determined through democratic, communal processes, we can disrupt the cycle of capital and overcome problems endemic to market society. Unlike Private Income, which ties worker livelihood directly to the economic success of individual enterprises, Communal Income ensures that remuneration is determined through democratic processes at the communal level. This approach not only enables a more equitable distribution of income but also fosters a psychological sense of collective responsibility and ownership among workers, positioning them as stewards of communal property rather than competitors in a market-driven environment. This shift can lead to a more cooperative and less hierarchical workplace, where the focus is on fulfilling social needs and ecological regeneration rather than maximising profits. By decoupling income from enterprise performance, we can stop the psychological internalisation of capitalistic motives, such as competition and profit maximisation.

Whether one endorses the Participatory Economy as the correct vision for postcapitalism, the Left should give greater attention to the issues highlighted in this article. We should closely examine the governance and accounting of income received for formal work and recognise that Communal Income is an option and indeed an alternative to both Private Income and State Income.

  1. While this article centres on a core feature of the Participatory Economy, it will also offer views on capitalism and postcapitalism more broadly which are those of Ferdia O’Driscoll and not necessarily that of the Participatory Economy Project. See https://brightagebeyond.com/ for more of Ferdia’s work. ↩︎
  2. In accounting, the income statement is the record of flows of money as revenues and costs and the net profit or loss. The balance sheet is the record of stocks (real and financial) as assets and liabilities and the net equity (a.k.a. net worth). In a capitalist firm, worker income (e.g. a customer-support agent’s wages) are recorded as identical to the cost of labour on the income statement. In a Participatory Economy, the labour cost is recorded on the income statement. However, the worker’s income is paid by an institution outside the enterprise – e.g. worker confederation or community council – as a cost in the Society Account. See more information on accounting in a Participatory Economy from Anders Sandström here: https://participatoryeconomy.org/project/an-accounting-system-for-a-participatory-economy ↩︎
  3. From Urbanisation to Cities (1995), Murray Bookchin. ↩︎
  4. For brevity I have excluded a key diagram which depicts multiple enterprises competing within a shared market environment. There the key features constitutive of capital are Private Price-Setting and Commercial Secrecy. Private Price-Setting means that the individual enterprise has full discretion in setting the prices of goods/services. In the postcapitalist version, Private Price-Setting is replaced by Communal Price-Setting (e.g. in Participatory Economy’s Annual Planning Procedure) and Enterprise Transparency. ↩︎
  5. I thank Thomas O’Brien and Donal O’Coisdealbha for this wording. See https://theclasslesssocietyinmotion.com/ for their upcoming book. ↩︎
  6. Of course, speciesism reigns and non-human animals are routinely put to work in conditions of slavery (e.g. donkeys), not to mention outright slaughter. ↩︎
  7. However, Communal Income does not necessitate that the worker income and labour cost differ. They could be the same, either in some instances or in general. An example of the latter would be a labour time accounting system where the labour cost of each worker is recorded as 1 hour per hour worked and the income each worker receives is 1 hour per hour worked. The crucial point here is that the determination and distribution of income would occur through a communal process, and not through the private operations of individual enterprises. ↩︎
  8. Self-Determination Theory (2018), Deci & Ryan. See the Center for Self-Determination Theory website: https://selfdeterminationtheory.org/ ↩︎
  9. I will write an introduction to Self-Determination Theory another time. For now the following will suffice. Intrinsic motivation means the person finds the task inherently interesting and enjoyable. Extrinsic motivation means the person is motivated due to consequences separable from the task itself. The quality of extrinsic motivation varies substantially according to how well the person internalises it (external, introjected, identified, integrated), that is how much they truly take it within themselves and enact it autonomously. SDT defines two antagonistic modes of motivation: autonomous motivation and controlled motivation. Autonomous motivation is associated with diverse psychological health outcomes, including life satisfaction and performance. Controlled motivation is associated with psychological ill-health. Satisfaction of all three basic psychological needs of autonomy, competence, and relatedness, is required for healthy development and functioning. Autonomy is willing and authentic endorsement and a sense of self-ownership (not isolation or independence); competence is efficacy and the use and development of abilities; relatedness is giving and receiving volitional care. ↩︎
  10. This is proposed as an option by Robin Hahnel in Democratic Economic Planning (2022), the most comprehensive text written on a Participatory Economy to date. The idea is that workers in each enterprise would receive a base rate of pay (e.g. €50 / hour) which would be modified upwards according to the Revenue/Cost ratio of their particular enterprise. So if the Revenue/Cost ratio were 1.2, workers in that enterprise would receive 20% more than base pay. This is proposed as a putative solution to some motivational problems in the workplace, for example a critic who asked why workers would produce satisfactory goods/services for customers in this system. However, I believe it is unnecessary and counterproductive because it is a salient, task-contigent reward which encourages workers to optimise sales growth and profitability to enhance their own income. At the very least it rests on problematic motivational assumptions which require further examination, assumptions which advocates of market society tend not to question. ↩︎
  11. For an introduction to Multi-Criteria Decision Analysis (MCDA), see the Wikipedia article: https://en.wikipedia.org/wiki/Multiple-criteria_decision_analysis. “Multiple-criteria decision-making (MCDM) or multiple-criteria decision analysis (MCDA) is a sub-discipline of operations research that explicitly evaluates multiple conflicting criteria in decision making (both in daily life and in settings such as business, government and medicine).” For a detailed exposition of various MCDA methods, see Multi-Criteria Decision Analysis (2013) by Alessio Ishizaka and Philippe Nemery. ↩︎


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