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Robert Owen was an exceptional man of his time. During the late 18th and early 19th centuries, when technology was transforming business and trade was shrinking the globe, he was a hugely successful innovator, but it is his vision for integrating business goals with a social purpose that still speaks to us today.
Owen was a self-made man. The sixth son of a Welsh saddler, he apprenticed in drapery. This was an era of great technological innovation in cotton spinning, and Owen started by manufacturing spinning machines. By the age of 20, he was managing a mill employing 500 people; at 28, he was included in a partnership that bought the New Lanark cotton mills, near Glasgow, which employed roughly 2,000 people.
His early years in retail had taught him many lessons that remain crucial for business today. These included a deep knowledge of what the customer wanted, which led Owen in a continuous search, through innovation, for higher quality and lower cost. As a manager and a leader he had a critical understanding of how society worked; he had what his biographer, Ian Donnachie, describes in Robert Owen: Owen of New Lanark and New Harmony as a “virtually indefinable quality of successful human relationships”.
New Lanark in 1799 had some of the characteristics of our worst developing-world sweatshops today. Among its employees were 500 children as young as five, removed from workhouses for this purpose. Even for adult workers, conditions were appalling. The standard working day lasted from 6am to 7pm with 40 minutes for lunch, wages were low and the mills were dark and poorly ventilated. Owners noted widespread drunkenness and “low moral standards”.
The age was one of economic expansion and social disruption. Adam Smith had recently completed The Wealth of Nations, while the wealthy stockbroker David Ricardo was explaining how global exchange could, because of comparative advantage, bring benefits to both sides of the trade. The Reverend Thomas Robert Malthus, however, viewed the rise in population, urbanisation and poverty that accompanied industrialisation more darkly. For him, overpopulation and poverty would soon bring to a halt the industrial boom. Owen also saw the social deprivation that seemed to be the other side of the coin to rapid economic growth – and he proposed to act on it.
Entrepreneurs have often maintained a sharp distinction between the processes generating their wealth and what they give back to society. Owen offered an alternative vision of the relationship between business and society. He used his ownership of the New Lanark mills to implement social changes that became a model for society. He gradually forced through recognisably modern labour practices – a shorter working day (down from 13 hours to 10), a minimum working age and improvements in housing and other conditions. His innovations were gradually adopted by others, and ultimately codified in national legislation and labour standards conventions.
He also broke the mould in primary education. Although he had left school at the age of nine, he joined the Manchester Literary and Philosophical Society at 22, debating Malthusian themes and learning about new technologies in textiles. He wrote that: “Human nature is radically good, and is capable of being trained, educated and placed from birth in such a manner that all … must become united, good, wise, wealthy and happy … I felt that to attain this glorious result, the sacrifice of the … life of an individual was not deserving a moment’s consideration.”
In pursuit of such noble ambitions, Owen opened his Institute for the Formation of Character at New Lanark in 1816, to serve as a school for infants as well as to provide adult education. With his profits and his labour force, he was putting into practice his idea that “the best-governed state will be that which shall possess the best national system of education”. The school was the first in the world for children as young as two, educated until 12. It provided a surprisingly modern liberal education, with drawing, dancing and music on the curriculum. Corporal punishment and even scolding were not permitted. The staff was told to “create an atmosphere of happiness”.
Despite the great attention paid globally to his reforms, including a visit by Grand Duke Nicholas, later the Tsar of Russia, Owen remained dissatisfied with “our most irrational system for creating wealth, forming character and conducting human affairs”. He sold New Lanark in 1824 and plunged his fortune into creating New Harmony Indiana, US, a community of homes, schools, factories and fields based on co-operative principles. Although this utopian model ultimately failed, Owen remained a powerful advocate of industrial reform.
Several aspects of this story still have resonance today. Owen saw that business performance was based on human skill, education and empowerment. He believed that business should not be run as if independent from the rest of society, but had to be integrated within it because its success depended on both the endeavours of individuals and the social environment from which they sprang. Owen was a social entrepreneur, who showed that business and moral or social purpose need not be separated. Indeed, the two can be mutually reinforcing.
Saul Estrin is the dean of the department of management at the London School of Economics