Robert Owen, Worker Cooperatives, and Democratic Socialism

Democratic Socialists of America (DSA) - and its two predecessor organizations, the Democratic Socialist Organizing Committee (DSOC) and the New American Movement (NAM) - had their origins in the early 1970s, at the beginning of a long-term rightward shift of United States and global politics. This shift to the right - from the 1980s of Ronald Reagan and Margaret Thatcher – to the 2016 Donald Trump charade - overshadowed the central role these organizations played in the movements of resistance to corporate domination, as well as in today’s ongoing project: organizing an ideological and organizational socialist presence among trade union, community, feminist and people of color and other activists.

DSA made an ethical contribution to the broader American Left by being one of the few radical organizations born out of a merger rather than a split. DSA also helped popularize the vision of a democratic, ecumenical, multi-tendency socialist organization, an ethos that enabled it to incorporate many thousands of new members, mostly out of the Bernie Sanders presidential campaign. Nevertheless, it was under the leadership of DSA Michael Harrington and his groundbreaking The Other America (1963) that catalyzed the civil rights movement, its leaders and the Kennedy Administrations to prioritize not only issues of race but equal attention to domestic poverty and inequality. This set the stage for Martin Luther King’s “Poor People’s Campaign.”

The foundations of democratic socialism have its origins in the eighteenth century and the breakdown of feudal Europe, specifically England, where the medieval guilds and the protection of workers’ rights was subsequently replaced as a commodity. The emergence of capitalism during this period further reinforced the subordination of labor under the domain of capital and the nightmarish results of this priority in the Industrial Revolution. Confronting this crisis were religious leaders, philosophers, and economic reformers arguing that labor creates profit, not capital which is the hallmark of democratic socialism and today the DSA. The origins of this position can be traced to such reformers as Robert Owen. I argue that Owen’s model represents the initial development of what today has become known as “democratic socialism.”

Robert Owen and the Industrial Revolution
The negative externalities of the Industrial Revolution provided the context for a democratic socialist economy movement. Led by Robert Owen (1771–1858) and the utopian socialists, private property understood as the exclusive right of industrialists, was identified as the source of existing exploitation and inequality. While the Industrial Revolution brought about unprecedented wealth, only capitalists received the lion’s share. Though labor created massive profits (surplus value) for the capitalist class, labor received a subsistence wage. Owen and the utopian socialists sought to counter this injustice by opting for labor’s democratic ownership of capital and the surplus value they produced.

The Industrial Revolution that gathered momentum in eighteenth century Europe and the United States created the historical context for democratic socialism. Utopians argued that private property (capital) was the source of existing inequalities, but the framework of their thought, based on conceptions of a preindustrial society, is today remote. The extensive development of factory production and the social conditions that ensued - and the laissez-faire interpretation of these events favored by conventional economists - created the conditions in which modern socialism was born. Nonetheless, the Industrial Revolution brought about unprecedented increases in productivity based on the development of factories and the widespread use of machinery.

The major cost of these innovations was borne by society’s least powerful - the working class - or, for all intents and purposes, the vast majority of poor. In 1750 the working class in Europe, specifically England and the United States, lived near subsistence levels, and the purchasing power of wages deteriorated considerably during the second half of the eighteenth century. National income grew over this period, so that workers’ relative living standards fell and the potential consumption they involuntarily sacrificed financed the investment required for industrialization. Had working-class incomes kept in step with national income, the average worker would have been approximately 50 percent richer in 1840 than thirty years earlier.

The Industrial Revolution replaced traditional occupations - typically rural farming or guild status as an artisan in various crafts. This change resulted from the breakdown of the old feudal societies of Europe and the industrialization of those same economies due to mechanistic innovations in the means of production. Mechanization facilitated the division of labor, creating tasks that women and children could perform. Entire families often worked to achieve subsistence. The conditions under which labor was performed were unregulated and dangerous and involved long hours in dehumanizing conditions. Moreover, the growth of factory production stimulated urbanization in Europe and the United States. As a result, roads, water, sewage, waste management, public health, and provisions for open spaces failed to keep pace with urban migration, while housing was concentrated in crowded slums. The inevitable result manifested itself in air and water pollution, epidemics of typhoid and cholera, and widespread respiratory and intestinal disease, with a consequent low expectation of life.

Successive administrations in England, specifically during the nineteenth-century Industrial Revolution, were slow to intervene and remedy social problems and maintain the price of bread and impeded, or subverted, the development of trade unions. Within this context it can be asserted that the period of Napoleonic war and the subsequent economic crisis constituted the bleakest chapter in British labor history, precisely because the foundations of modern industry were erected on the suffering of workers denied access to the fruits of an expanding economy. By contrast, capitalists enjoyed absolute power over their labor force. Thus the Industrial Revolution created the modern working class, nominally free but able to live only by selling their labor power. Suffice it to say, Britain witnessed a considerable development of radical economic doctrines in the first half of the nineteenth century.

The Radical Response
Owen’s prestige was based on his reputation as a businessman, an economic theorist, and a social reformer. From the age of ten he served as a draper’s apprentice, but at twenty he was the manager of a large cotton factory at New Lanark, which became renowned throughout Britain for its conditions of work. Owen was a benevolent autocrat who insisted on strict industrial discipline, but in combination with living wages, a decent work environment, abolition of child labor and compulsory education for workers’ children. The profitability of New Lanark demonstrated the shortsightedness of other capitalists’ notion that profit maximization is best achieved through the alienation and exploitation of labor. New Lanark provided a viable moral counterstrategy to neoliberal market rationality.

Late eighteenth- and early nineteenth-century industrialization rested on three sets of institutional principles: (1) the absolute nature of private property, (2) a self-regulating laissez-faire market economy, and (3) the transformation of labor into a commodity. While Owen accepted industrial innovations he did not agree with the unrestrained rule of private capital, self-regulating markets, and the exploitation of human labor. He argued these three economic “truths” were the ultimate causes of contemporary inequalities and social injustice and thus urged their elimination. Owen believed that an industrial economy, if it is to be moral, must be created based on the principles that every person must be treated with dignity and the proceeds of production were divided equitably. The operation of any economy was then to be criticized and evaluated according to such principles. Owen believed that a more just and efficient economy should be focused on his experimental model at New Lanark. Thus Owen’s political economy was based on three important “radical” tenants.

The first tenant is based on what Owen described as an “Economy of High Wages.” Owen held the view that a wage increase - or higher labor costs - leads to: (1) an improvement in the living standards of workers, (2) which then leads to greater efficiency and production by workers. In other words, increased wages generate additional revenue for both company and workers. Yet Owen’s theory conflicted with the prevailing orthodoxy, which argued that any wage increase occurred at the expense of profits and hence led to a diminution in employment and economic activity. Nevertheless, by extending the “Economy of High Wages” from an individual firm to the nation, Owen embraced an embryonic under-consumption theory of depressions. He advocated a high-wage policy that maintained purchasing power as a cure for unemployment and promotion of economic growth.

The second tenant on which Owen based his political economy was a belief that an individualistic economy is inequitable, irrational, and antisocial. Moreover private ownership is an institution whereby one class gains power over the rest in order to maximize profits. In contrast, Owen did not attack industry or new technology as it manifested itself in the burgeoning Industrial Revolution. Rather, he denounced private ownership of the means of production, the spread of unfettered and unregulated economic competition, and elements of narcissistic individualism propagated through Enlightenment liberalism. Owen argued to the contrary that private ownership and unrestrained competition destroys social cohesion. Furthermore, he argued that individuals by themselves cannot simply improve their own lot in life. Rather it was within the context of a community and its many support networks that the betterment of individuals was realized.

The third tenant is based on Owen’s labor theory of value premised upon the priority of labor. He viewed human labor as “the natural standard of value” and that this concept required capital and machinery to become the servant of labor. Owen believed that capital and profit are designed to serve the human person and community as its first moral priority. Public policy and not the “market” should determine the amount of labor expended on commodities, and workers ought to be compensated based on both human needs and effort. Owen argued for economic cooperation, rather than competition, through a network of self-governing communes, where private ownership of the means of production was transformed into a democratic alliance eliminating any labor-ownership conflict. Owen argued that capital and profit should never come at the expense of labor.

Owen as Social Reformer
Owen’s career as a national reformer can be understood in different stages. Between the publication of Towards a New View of Society in 1813 and A Report to the County of Lanark in 1821, he concentrated on ameliorating existing social problems such as poverty, child labor, inhumane work hours and unemployment. He thought that these social injustices could be avoided if other manufacturers replicated New Lanark on grounds of “enlightened self-interest.” Indeed, his arguments applied to capitalists more concerned with long-term profitability than with immediate gains, but he found that his appeals met with little response. He then attempted to persuade government to alleviate poverty and inequality and was popular in official circles after 1815, only by virtue of the fact that he focused on the importance of environmental improvements more than his personal brand of socialism. As he advanced beyond the role of wealthy philanthropist to structural reforms that threatened the establishment power centers, he became decreasingly influential in elite circles.

Between 1824-1835, Owen established what he described as “communist” communities. The cities of Orbiston (near Glasgow), Tytherley (in Hampshire) and New Harmony in Indiana were three of the most prominent. The aim was to settle unemployed laborers on the land in self-governed “Villages of Unity and Cooperation.” Such schemes reflected his conviction that society as then constituted would permit cooperatives to supplant existing institutional structures. Owen did this by attempting to persuade the rich and influential about his ideas for social and economic transformation. Nevertheless the Owenite settlements were challenged partly because of the hostile external environment of the business community and the agricultural depression, which generated an influx of unemployed workers which exceeded capacity. Consequently an excess supply of labor to the villages of cooperation proved counterproductive to the communist communities yet not insurmountable..

Owen persisted in his collectivist experimentations. In 1824 the London Co-operative Society was formed as a store for cooperative trading, designed to supersede competitive distribution and allow craftsmen to exchange goods without capitalist intermediaries. It aimed to sell at trade prices and use the savings accumulated through elimination of retailers’ profits to financially bolster socialist communities. The next envisaged stage of development involved members’ cooperation to produce directly for each other rather than choosing between capitalist goods sold in their stores. For example, the London Society opened an Exchange Bazaar for societies and individuals to engage in mutual exchange. Owen returned from the United States in 1829, after establishing more than three hundred cooperative societies, in the United States and England. This figure rose to almost five hundred by 1832, although many pursued solely educational objectives.

Cooperative stores bought wholesale and sold retail, the commodities demanded by their members, but cooperative producers faced the difficult problem of obtaining a market for all their products. This problem stimulated development of labor exchanges where workmen and producers’ cooperatives could exchange products directly and thus dispense with both employers and merchants. The most important such institution, the National Equitable Labor Exchange, was established by Owen in 1832 and stimulated the formation of similar exchanges in provincial cities. They sought to secure a wider market for cooperative groups and to enable them to exchange their products at an equitable valuation resting on labor time.

Owen appointed trade union “valuers” to price goods on the basis of the cost of raw materials plus the amount of labor time expended on them. A new currency of labor notes was issued for the conduct of transactions. Crucial weaknesses emerged, however. Labor and commercial prices coexisted; goods the exchanges offered more cheaply were soon disposed of, while the more expensive remained unsold. Exchanges would not control their stocks to demand levels and movements in the manner of capitalist retailers, since they had to take what members brought them. Consequently, they became overstocked where there were many cooperative producers and understocked in trades where there were few.

In particular their supplies were concentrated on goods that could be produced by craftsmen possessing little capital. Despite this major weakness, they enjoyed considerable success for a time but collapsed in the general crash of the movement in 1834. Even then some exchanges balanced their books while the National Equitable Labor Exchange incurred a heavy debt, which then fell to Owen. When Owen returned to England in 1829, he found that a trade-union movement had emerged after the repeal of the Combination Acts in 1824, and in 1829 he witnessed the formation of the first modern national union, the Operative Spinners.

While this was happening, the next two years saw much social unrest in the form of agricultural riots and a wave of strike activity in the northern textile towns as a means of achieving the eight-hour workday. Then, by 1832 several distinct but related bodies, such as, the Owenite societies, cooperative stores, cooperative producers, labor exchange, and trade unions, looked to Owen for leadership. Most were growing rapidly as workers, disillusioned by the terms of the 1832 Reform Act, swung away from political mobilization toward organized labor action. Owen sought the fusion of these groups into one national organization, centrally directed and under worker control, which would challenge and transform economic relations through its practice of cooperative production.

By 1833 the Operative Builders’ Union was the largest in the country, with a membership of sixty thousand. The OBU adopted an Owenite agenda to take over the construction industry and reorganize it as a national guild. To implement this program none of its members would work for capitalist builders who refused to join the guild. The owners attempted to destroy the OBU by a lockout by forcing those reemployed to sign a document (i.e., a written pledge not to join a union, which gives the employer the right to fire them if they violate the pledge). The workers lost as the OBU simultaneously fought the lockout and attempted to launch the guild with inadequate financial resources. Its members were then forced back to work by various regions during 1834, and by the end of that year the OBU ceased to exist. It split into craft sections with a greatly reduced membership.

Owen, nevertheless, sought to unite all the associations intended for the improvement of the working class. To this end he inspired the formation of the Grand National Consolidated Trades Union—or GNCTU—which was intended to be a single inclusive union aiming to supersede capitalism by a cooperative system based on workers’ control of production. It sought to implement on an economy-wide basis a plan similar to the OBU guild for construction. Ultimately the GNCTU would control, through its constituent members, all industry, thereby taking over the functions of capitalists, parliament, and local government. It would become the locus of economic, and ultimately political, power. The GNCTU’s formation was followed by feverish organization by discounting cooperative retail and producer societies; unions alone attracted over one million members.

As with the OBU, owners reacted to the GNCTU by presenting the document to workers, with the threat of a lockout if not signed. This response originated in Derby; it was imitated in other towns, but Derby remained the test struggle. The workers lost, being forced back to work after a lockout lasting four months. Given the repeal of the Combination Acts, the case was pursued under the 1797 Naval Mutinies Act, which was never intended to apply to trade unions. Nonetheless, this opportunity for the government to deter union organization arose because many unions adopted secret initiation ceremonies under the threat of employer retaliation. As a result, the GNCTU encountered severe administrative problems. The recruits it made and the disputes it faced were so abundant that urgent problems of management were inevitably ignored.

Internal dissention developed, and Owen became disillusioned; he hoped to initiate bloodless revolution by providing examples of the benefits derived from cooperation. Accordingly he dissolved the GNCTU in August 1834, arguing for a return to education and the need for an ethical appeal in preference to coercion. The GNCTU faded away, but some of its constituent groups and elements of its cooperative ideology remained. Owen returned to establishing villages of cooperation (e.g., Queenswood in 1839), and in 1844 the Rochdale Pioneers’ Cooperative Society developed from a local Owenite body. However, after 1834 the thrust of working-class agitation moved from industrial to political arenas, focusing on the demands of the Chartists.

The Grand National Consolidated Trades Union was undoubtedly a failure in its implementation, yet it was attempting an impossible task that no leadership could have achieved. This is because trade unions were still learning the art of organizing into a cohesive, effective unit. At the time, workers were only able to accomplish sporadic results from organizing into unions and cooperatives. However, they were unable to achieve any sustained action. By contrast, having just won a significant political victory in the 1832 Reform Act, factory owners and burgeoning industrialists were determined in their resolve to counter any form of organized-labor movement or cooperative-based industry. They also possessed the support of a Whig government determined to show that the Reform Act would not destroy property rights. Against such power, workers were poorly paid, uneducated, and only beginning to understand the importance to organized efforts to seek improved working conditions and living-wage salaries.

Although Owen’s innovations beyond the sphere of New Lanark failed during his lifetime, he left an enduring legacy to the future of radical theory. The influence of Owen’s would be: (1) he established a personal example of one who cast aside his personal wealth in an endeavor to secure a more just future for others, (2) the economic measures at New Lanark illustrated that a policy of high wages and improved conditions need not destroy profitability, (3) many of Owen’s theoretical innovations (e.g., labor value to replace money as an Equitable Labor Exchange) are not inherently impractical, (4) his theories of, and attempts to establish, workers’ cooperatives made Owen the instigator of a significant movement of later times, as developments from the Rochdale Pioneers of 1844 demonstrate, and (5) Owen’s appreciation of the role of trade unions in replacing individual worker motivations by collective policy provided a clue to improving quantitative and qualitative living standards and also pointed to a force that could potentially be harnessed for achieving a future transformation of just and productive economic relations.

Owen’s approach to resolving economic injustice epitomized the Utopian approach to resolving exploitation. He hoped for individual conversion, then government action. Yet this was an unrealistic ambition given the existing power structure at the time. What Owen lacked was a theory of class struggle, believing instead that the transition to socialism, or a more democratic economy, would occur through the influence of reason and persuasion. Nevertheless, Owen’s worker co-operatives represent what is, arguably, the initial stages of democratic socialism, to legacy of FDR, Michael Harrington, and the Democratic Socialists of America, urged the same Owenite plan for a more just economy and society,

Notes
Marx, in Capital, discusses the expropriation of agricultural land from the poor who are dependent on that very land for their basic needs. The historical context of the enclosure movement was based on a policy measure initiated by the aristocracy and wealthy land owners in eighteenth- and nineteenth-century England. The movement was aimed at confiscating land that was owned in common by a village or at least available to the village for grazing animals and growing food. The enclosure movement was designed to expropriate village land and redistribute it to the aristocracy and wealthy for their ownership. In 1845 British Parliament passed the Enclosure Act of 1845, in which the British government started “enclosing” land (walls, fences, or hedges) and awarding this land to the aristocracy and wealthy land owners who, arguably, knew how to make more efficient use of it. The consequence for the people who were using this land was often eviction, sending many of them to slums in the cities in hopes of finding work in low-paying jobs such as factory work spawned by the Industrial Revolution. The most well-known enclosure movements were in the British Isles, but the practice had its roots in the Netherlands and caught on to some degree throughout Northern Europe and elsewhere as industrialization spread.