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Robin Hahnel Interview on Participatory Economics – Part 6 – Monopoly & Essential Sectors

Editor’s Note: discussion topics include monopoly & oligopoly, how to regulate monopoly in capitalism, how to regulate monopoly in parecon, how to organise strategic & essential sectors (like health) in parecon.

[After The Oligarchy] Hello fellow democrats, futurists, and problem solvers, this is After The Oligarchy. Today I’m speaking with Professor Robin Hahnel.

Robin Hahnel is a professor of economics in the United States, and author of many books, but today I’m interviewing him as co-originator with Michael Albert of the post-capitalist model known as Participatory Economics (or Parecon).

Today’s conversation is in association with meta: the Centre for Post-capitalist Civilization. This is the third in a series of interviews with Professor Hahnel about participatory economics, and in particular his latest book Democratic Economic Planning published in 2021. If you haven’t watched the first two interviews check them out here.

It’s an advanced discussion of the model proposed in that book so I recommend that you familiarize yourself with participatory economics to understand what we’re talking about. You can do that by visiting participatoryeconomy.org. You can also read Of the People, By the People (2012) for a concise introduction to parecon. And Professor Hahnel has a new book coming out in a few months called A Participatory Economy (2022).

Robin Hahnel, thank you for joining me again.

[Robin Hahnel] Great to be with you again.

[ATO] The next question is a bit different, it’s about monopoly and strategic sectors. For example, what about natural monopolies in parecon? These would be things like electricity, [methane] gas, water, sewage, transport, communications, health, mining, etc. These are sectors of the economy, these are production processes, where … electricity production and distribution is a classic example; it doesn’t make sense for there to be three companies with three different electrical grids, for example. And which are also of strategic, vital, importance. That society be provided with a reliable supply of electricity, where there aren’t blackouts, where it has an appropriate cost, and so forth. So, there are sectors like this which are natural monopolies, and either you end up with a situation – where you have a market system – private monopolies, or a situation where the solution is for the state to take control of these and nationalize them.

So, is there any opportunity in parecon to charge monopoly rents? And what if natural monopoly worker councils don’t treat indicative prices parametrically? Let’s deal with the first question then come back to the second. And if you could just explain what a monopoly rent is to people.

[RH] We have an answer. Every economist knows that only if you have competitive market structures could you make any case that you’re going to get efficient outcomes. As soon as you have a market structure that’s not competitive in a capitalist economy, what will happen is in the most extreme cases a monopoly, and a natural monopoly is sort of the most likely real world example to end up with, one company is the only company that’s producing this product.

As soon as you have that, there is a perverse incentive for that company to produce less than the socially optimal outcome, and therefore to drive its price up. So, two things happen. It reduces the amount that it supplies. That also means it reduces the number of units it’s going to sell, so that’s a negative effect on revenues. On the other hand, every unit it does sell is going to sell at a higher price, and that’s a positive effect on revenues. And the problem is the positive effect is larger than the negative effect leading to a predictable sub-optimal level of output.

Now there are two solutions to this in a capitalist economy. One is to nationalize the natural monopoly and not have it maximize profits but to maximize net social benefits, that is produce the amount that actually is the efficient amount. And the other solution is to regulate the monopoly and say well there’s only one of you but we’re going to set up a regulatory agency. And the regulatory agency’s job … Most people think the regulatory agency’s job is to keep them from price gouging but what economists understand is, no, the regulatory agency’s job is not really to keep them from price gouging, it’s to force them to produce more than they would otherwise be willing to produce if they weren’t regulated. And then the price will take care of itself.

That’s how it works, and one of the problems that defenders of modern market capitalist economies are faced with is in theory they know their economy is only efficient if all industries are competitive. But in reality, what has happened over time is the number of non-competitive industries, and it’s usually not a monopoly, a natural monopoly, it’s an oligopoly. But the same logic applies to oligopolies and economists all know this. So, on the one hand in the real world markets become less and less competitive, and yet defenders of market capitalist economies continue to insist that these are the most efficient economies.

We have a solution in a participatory economy. And the solution takes a very simple form, which is any worker council in our economy is supposed to take the indicative prices as givens.

[ATO] Can you just explain to people briefly what the indicative price is?

[RH] Right, so for instance if you have a natural monopoly let’s choose electricity. During the planning procedure that natural monopoly is quoted a price per watt of electricity and then responds with its output proposals.

[Editor’s Note: During annual planning, worker councils and consumer councils make production and consumption proposals for the year. These proposals are aggregated by the Iteration Facilitation Board (IFB) which feeds back new ‘indicative prices’ to producers and consumers according to a rule chosen to encourage the balancing of supply and demand. This continues for a number of rounds (iterations) until a feasible plan is reached.]

Now, the thing that a monopoly does that’s inefficient is it doesn’t look at market price and take it as a given. Instead, what it does is it asks well wait a minute I’m looking at the entire demand curve. I’m not going to take the price I’m quoted as a given because I can see that if I reduced my supply I could drive that price higher. So, in effect what monopolies are doing is they are not taking prices as givens. They are recognizing that their monopoly status permits them to affect what the price is going to end up being.

These are worker councils in a participatory economy, and there just happens to be one that’s producing electricity in a given region. They don’t have stockholders that are telling them to maximize profits, instead they are certainly supposed to be obeying the rules of the system and one of the rules is when you make your proposals you respond to indicative prices as the given price. You do not calculate ‘but I could affect that price by my response in this round’. Aha, what would prevent one from doing it?

Yanis Varoufakis Interview on Another Now – Part 2 – Housing, Taxation, Inequality, Monopoly, Workplace Democracy

Editor’s note: discussion topics include security in commercial housing in the Another Now model (AN), taxation in AN, income and wealth inequality in AN, inheritance in AN, time-limited or depreciating money, whether divergent incomes combined with compound interest can lead to class divisions in AN, firm size in AN, monopoly in AN, workplace management structures in AN, and the argument for equal decision-making rights within enterprises.

[After the Oligarchy] Hello everybody, this is After the Oligarchy. Today I’m speaking with Professor Yanis Varoufakis.

Yanis Varoufakis is the former Greek Finance Minister, a professor of economics, co-founder of DiEM25 and the Progressive International, leader of MERA25, and a member of Greek parliament. This is the second in a series of interviews with Professor Varoufakis, if you haven’t watched the first check that out.

Today’s conversation is in association with mέta: the Centre for PostCapitalist Civilization. And the topic is Yanis’s latest book Another Now, published in 2020, which presents a vision of a post-capitalist society. It’s an advanced discussion of the model proposed in that book. If you want an introduction, I wrote an essay and made a 40-minute video doing just that. Though I do recommend that you read the book.

Yanis Varoufakis, thank you very much for joining me.

[Yanis Varoufakis] Well thank you very much for having me on After the Oligarchy. We are living under the oligarchy, but anyway let’s imagine, let’s imagine.

[ATO] Exactly.

So again I have a lot of questions for you. We’ll begin with a question about housing, because after I posted the first interview and also the model summary something that kept coming up again and again from commenters was that they were worried about security in the commercial housing sector. The problem raised was basically that you’re saying that every year, or every period of time, I have to keep bidding to retain access to my house. And if somebody comes along who has more money than me then then I get kicked out.

And, of course, I certainly appreciate the ingenuity of the mechanism, to try to constantly reveal the opportunity cost of the land and the housing for society to be able to get that back so that there isn’t a rentier dynamic in housing.

How would you respond to that question of security?

[YV] Well, firstly, remember that this is about the commercial zone. In in my blueprint, every county – think of it as counties – chooses to create a space that’s not … I mean, it’s democratically determined how large this commercial zone will be. The purpose of this commercial zone is for it to be run commercially by the many, for the many, in order to extract rents from those who want to operate in the commercial zone; rents with which to build social housing, social zoning, social entrepreneurial activities, common spaces, the commons. So it is a good feature, a well-designed feature of the commercial zone, that anybody who wants to operate in it has to live in fear. If you wanted to live in a house that that you paid for, not in a social house, not in a unit within social housing, then yeah I mean live in fear.

Remember, it’s not just that once a year you bid for it, but it’s something like a perpetual auction whereby anybody can actually outbid you and throw you out. Which is great because the commercial zone is there to make money for the many, for every citizen who lives in the social zone and whose activities – whether they’re poetry readings, or paintings, or producing social goods – are being funded by the commercial enterprises within the commercial zone. So it’s okay if you if you live in fear. And the whole point of this permanent auction is to ensure that there is complete incentive compatibility. In other words, that when you declare to the authorities what you value that building or piece of land as that you’re truthful. And you will only be truthful if … you can undervalue it if you want, but then somebody can come and outbid you and throw you out. So I have no defence to those who say that ‘oh, the people who live there in commercial zone will live in fear’. We want them to live in fear.

And, you know, it’s a game for them. The crucial point here is that you don’t have to live in the commercial zone. I would live in the social zone. But if you want a fancy house, a much fancier house than you deserve, or you want to create an enterprise in a place that society does not deem that you should have it, then yes you pay for it. And if you make the money for it, yeah good it all goes back to social housing and the social zone.

[ATO] Okay, so it’s really that that the priority is being put on the redistributive function of the commercial housing zone.

To move on to something else, I’ve a series of questions about income and wealth inequality. This is also a concern for some people, it’s a concern for me as well and any kind of market system … so, for example let’s talk about taxation. In Another Now there are two taxes. I mean, maybe there could be a carbon tax but let’s not go into that. There is a corporation tax, which is a tax on the revenue of all firms, and then there’s a land tax and we were talking about that there.

[YV] Land tax only in the commercial zone, only the commercial.

[ATO] Yes exactly, on the commercial zone. One might say ‘well, are you serious? There’s no income tax?’

[YV] Yeah! There’s no income tax.

[ATO] Because there could be seriously divergent incomes, because different firms could have much different rates of profitability or revenue streams, so it’s likely, one might say, that there is a lot of inequality generated. But there’s no progressive income tax.

[YV] I’m not convinced. I don’t believe there will be. If you look at the capitalist system, or techno-feudal system, in which to live today, inequality – mind numbing and soul-crushing inequality – is the result of two things. Firstly, the private ownership of firms, of the means of production, shares, share markets. That’s one, and finance is the second one. That’s where the huge inequality that is destroying our spirit comes from. Not to mention our planet.

In Another Now there would be neither. Because shares are distributed on the basis of one employee, one member, one share, one vote. And there is no financial sector, the financial sector has been taken over by a distributed ledger of the central bank. And therefore this highly problematic toxic duet – duetto in Italian – between the banker and the mogul, the banker creating, printing, money out of thin air, lending to the mogul, who uses the printing presses of the private bank in order to corner the market in the share market and effectively own everything. And then the wealth begets wealth.

Now why is Zuckerberg so much wealthier today than he was at the beginning of the pandemic. Nothing to do with the profitability of Facebook. It’s got to do with the fact that there is this combination of financial capital – the printing presses of the central bank working for Zuckerberg, not for the people, not for the many unlike in Another Now – and ownership of Facebook. And if you break down ownership of Facebook, and Facebook is equally owned by everybody who works in Facebook, and if you end the printing presses both of the state and the private sector banks operating at full throttle on behalf of the very, very, few, then the inequality that you and I are used to goes.