Amidst widening inequality, stagnating living standards, and a fossil-fuel-driven climate crisis, a vital question has reemerged: can we establish a better economic system? In recent years, the idea of economic planning has seen a remarkable revival as a serious alternative to capitalist markets. This renewed interest isn’t a return to the past—it is fueled by the promise of modern information technology to coordinate economies far more efficiently than the bureaucratic apparatus of 20th-century socialist states like the USSR. Crucially, today’s advocates of planning agree on one fundamental point: any future planned economy must be radically more democratic than both historical socialism and contemporary capitalism. The term ‘Democratic Economic Planning’ has become somewhat of a buzzword, with several books and special issues dedicated to the subject. However, simply appending the word “democratic” to economic planning does not sufficiently engage with the value and role of democracy. The new planning debate has engaged very little with democratic theory, and there is thus still significant room for political philosophers to contribute to the discussion of the normative value and role of democracy in planned economies. In the following, I will differentiate between two roles that democratic decision-making can play in a planned economy: plan choice and rule choice. Democratically choosing the rules of the planning system elevates the demos to the role of lawmaker, the most important political function in any free society. Due to the need for a separation of powers, I argue that this precludes the demos from also choosing concrete plans.
The plan-choice approach is most clearly formulated by Otto Neurath, an influential participant in debates on planning in the early 20th century. Socialist society would, according to Neurath, have to specify a number of plans which each specify in physical quantities the number of homes built, the quantity and kind of food and clothing provided, how much time people have to spend working, and how many resources are allocated to education and healthcare. Each plan will differ in terms of the conditions of life facilitated for the population, as well as the ecological impact of economic activity. Once a number of economically feasible plans have been developed based on statistics about available resources and production methods, an appointed political institution will have to decide which of the plans should be put into operation. Neurath states that the decision-maker could be ‘a parliament, a body with dictatorial powers or some other body.’ While Neurath thus remains neutral with regard to the political system, we could in the spirit of Neurath understand a democratically planned economy to be a planned economy in which the choice between different plan options is either made by the people themselves (in a direct democracy) or their elected representatives or delegates (in a representative or council democracy). This is what I call the plan-choice approach to democratic economic planning, though the precise mechanisms by which the demos chooses the plan could vary from Neurath’s conception. While Neurath seems to leave it to technocrats to develop feasible plan options, democratic economic planning under the plan-choice approach could also assign a greater role to the demos in formulating these options in the first place.
The rule-choice approach to democratic economic planning would instead have the demos decide not on the concrete plan to be implemented, but on the general rules and procedures that determine the plan. The demos would assume the role of the legislature, passing general laws governing the economy and the planning process. This approach is particularly suitable for algorithmic planning of the economy in which the plan is calculated by a computer. Rather than voting on the outcome of planning, the public votes on the principles of the algorithm that determines the outcome. This could also include setting parameters, such as the degree of climate protection the plan must maintain or the minimum guaranteed provision of certain public goods. However, the decisions made by the legislature are more general in character than a specific production plan and would not specify exactly what is to be produced or how. Unlike in the plan-choice model, the democratic decision-making organ would, for example, not specify that so-and-so many tons of steel are to be produced using electric arc furnaces. It would instead specify the rules or planning methods by which the output of steel and the chosen production methods are to be determined.
Philosophers from J.J. Rousseau to John Rawls have long argued that deliberating over general rules, rather than concrete cases, encourages more abstract and impartial thinking. When we are asked to choose between two plans, I might consider whether plan A benefits me more than plan B. But if I must vote on the general procedure which will determine a plan, not knowing how the outcomes of that procedure might affect me in the future, I must consider the merits of general principles independently of my immediate self-interest. Moreover, I will have to settle on principles that are likely to also be supported by other constituents. The principle that the plan which best benefits me should always be preferred, even if it disregards the interests of others, would be unlikely to find widespread agreement. By abstracting the decision-making process from individual cases, we stand a better chance of arriving at economic plans which do not merely represent the interest of a temporary majority but reflect more reasonable principles according to which a plan ought to be chosen.
Furthermore, general rules serve as a vital check on arbitrary power. If any political body, even a democratic one, could plan the entire economy at will without legal limits, it would exert total control over the economic lives of all citizens. Historically, even absolute monarchs lacked such granular control. To prevent economic planning from descending into despotism, the law must constrain it, just as it must constrain any other government activity. Ideally, such laws would leave little room for anyone to wield arbitrary power over others and the economy, instead specifying exactly what steps must be followed to arrive at a plan. However, there are bound to be some decisions in the planning process which cannot or have not been specified by the law. Should the demos then not decide in such cases? There is a clear argument why this should not be so. For the law to serve as an effective limitation on arbitrary power, it must be an externally imposed constraint. If the people were to be both the lawgiver and the planner that is meant to be constrained by the law, then they would effectively be unconstrained. Whenever the democratic majority felt too limited by a law, they could just get rid of it. But this would be no different than having no laws at all, allowing the majority to rule the economy at will. What is required to protect against such despotism is a separation of powers in which the legislature passes laws that constrain the power of a separate executive branch tasked with planning the economy within the confines of those laws. The legislature has the more important role, since its laws will always trump the will of the executive. If the demos is going to be empowered, it is thus the legislative process that must be controlled by the people.
As we navigate economic and ecological crises, economic planning offers an alternative to standard capitalist markets. However, such an economy must be more democratic than past experiments with planning. If a planned economy is to serve as a genuine, emancipatory alternative to both capitalist markets and historical socialism, we must carefully consider how that democracy ought to be structured. Moving the debate away from a plan-choice model and toward a rule-choice framework provides a robust foundation for a free society. Ultimately, the democratic promise of a planned economy does not lie in asking the public to select their favorite inventory list from a menu of options. It lies in elevating the demos to its rightful place as the fundamental lawmaker.
Jan Philipp Dapprich
Jan Philipp Dapprich is a research fellow at the Centre for the Study of Democracy of the University of Westminster. He was the guest editor for a special issue on Democratic Economic Planning and currently researches republicanism and alternatives to capitalism. His research, including the research this article is based on, is funded by the Leverhulme Trust.
