Participatory Economics (‘Parecon’) vs. Binary Economics

Judging by Wikipedia’s description of ‘Parecon’, it can be characterized as anarchistic socialism. This is borne out clearly by Wikipedia’s sub-heading under its item on ‘Parecon’, reading ‘Comparison with other Socialist Movements’. Now, we are not saying: ‘Wikipedia says so, therefore it is so’. Far from it, but there is no doubt that the writer of the Wikipedia item understands ‘Parecon’ as a socialist movement. It’s different, however, from socialism as we have come to know it around the globe, in that ‘Parecon’ seeks to avoid the concentration of power in a State Bureaucracy, which manages (and for all practical purposes owns) the means of production.

So Parecon does differ – at least theoretically – in this respect from socialism (in its ordinary sense) and Wikipedia’s sub-heading might therefore be somewhat misleading. And indeed, Wikipedia itself recognizes that Parecon is anarchistic in nature, so that the comparison with ‘other socialist movements’ probably only serves to more clearly explain what Parecon is. One thing is certain, however: Parecon seeks to improve socialism.

Comparison of Binary Economics with other Capitalist Movements

It we want to explain what Binary Economics is, a comparison with Capitalism is much to the point. Indeed, the theory was first launched in a book entitled the ‘Capitalist Manifesto’ (1958, by Louis Kelso and Mortimer Adler), followed by the ‘New Capitalists’ in 1961 (same authors).

Binary Economics (‘BE’) believes in the free market system, privatization and basically everything we know in an ordinary capitalist system. Like ordinary capitalism, BE encourages the private sector to the fullest. It also encourages political democracy to the fullest and believes in ‘smaller government’. There is only one basic difference with capitalism as we know it today: BE proposes to provide incentives to create as many individual capitalists as possible. It seeks to empower the masses by providing various opportunities for them to acquire productive capital. Obviously in this scenario private property must be respected to the fullest.

In short, BE seeks to improve capitalism.

Difference in method

The old socialist method consisted basically in ‘stealing from the rich and giving to the poor’. Now, it is not correct to say that Parecon explicitly promotes this method. But the anarchistic socialist thinking behind Parecon can logically only lead to that. For Parecon (contrary to Binary Economics) insists that everybody is equal in the quite literal sense. The rich would first have to be made poor for there to be a level playing field, so to speak. And, indeed, in Parecon theory the State owns the means of production (which it must first seize from the present owners), making everybody a wage earner afterwards. Only this way is it possible to set up an anarchistic socialist society based on equality, wherein everybody can participate in all decision-making processes (from grass-roots up) and everybody could share in production even to the extent of having to do different kinds of jobs, thus making sure that everybody will do his fair share of dirty work.

Now, apart from the fact that such a society is not really conceivable in practical terms without coercion, this is all quite alien to the Binary Economics (‘BE’) paradigm. In a society which has adopted the BE-paradigm, the only thing that changes as compared to ordinary capitalism, is the democratization of access to capital. It is based on the premise that unless a citizen owns a measure of productive capital, he cannot fully participate in that society and cannot even be a patriot. For he does not own a part of the means of production. So therefore the State provides a few key incentives to make sure the number of individual owners of productive capital (the real capitalists) will increase dramatically, but naturally without any coercion. BE is an evolutionary paradigm, not a revolutionary one.

Private property is essential in BE

BE insists that the ones who possess capital now should in no way be deprived of it. No Robin Hood redistribution in Binary Economics. On the contrary, Robin Hood is seen as a threat, for capital owners don’t like Robin Hood. There is therefore no coerced redistribution of wealth, not even the ‘benign’ coercion of taxation. Private property is essential, both in its present sense, as well as in the BE sense of recognizing individual productive capital ownership as a basic human right. This includes, of course, the right to receive a share of the profits produced wit this capital.

BE has developed the tools (mainly capital creation by the Central Bank and making this capital available to specially created new corporate entities at low interest rates) to enable capital-less citizens to acquire productive capital. In short, BE is the art of capitalizing the poor.

This is thought crucial as in our advanced technological age labor’s part in the production process amounts to no more than 20% of output, whereas capital (in the form of sophisticated machinery) produces the rest (80%). This is disproportional. Consequently capital’s out-take is disproportional as compared to labor’s out-take, disenfranchising the capital-less. This can be remedied, according to BE, by making sure that all or most citizens acquire productive capital.


Now, if we believe that Capitalism is the same as Socialism and Anarchism, then, yes, BE is a form of Parecon. But that’s the same as saying ‘a dog is a cat that barks’.

The video gives some info on Parecon. We can’t see how this could work in practice. As explained in the video, the means of production are in the hands of the State (as in socialism), but there is supposedly no State Bureaucracy running them. A kind of anarchistic socialism. All this is quite different from BE.