Robert Owen
and the Equitable
Labour Exchange

by Gregoire Presseau,

April 2002


At the core of Robert Owens philosophy was that a man is made into a criminal and not born a criminal. Therefore, he stressed the importance of early education in children. His style of education included a strong influence provided by the bible. One physician, Dr. Macnab, described his visit to the “elderly school” at New Lanark as if it had taken place on a Sunday. (Sagant, pp.203) With his schools and “society,” Owen’s factory at New Lanark was successful even though workers had 3.5 to 2.5 hours shorter per day. Dr. Macnab, the physician for the Duke of York, concluded that this was because of the happiness of the workers. Owen’s workers posted better morals compared to other British workers (Sargant, pp.216-219.) His success was measured by high profits with shorter hours; this success however was short lived.

Following his experiment with New Lanark, Owen took a voyage to the United States. While in the United States, Owen observed a group of roughly 800 German’s who lived in their own commune. The Harmonian’s as they were referred to, relied on themselves and were lead by a man named Frederick Rapp. Under his guidance, the Harmonian’s followed the Lutheran faith. Owen was intrigued with this sort of commune and wanted to purchase their land. It was during this time that Owen had publicly announced his beliefs to the United States government. In summary, he said that the United States government allowed more freedom but trivialized small matters. (Sagant, pp.228-232)


With his views made public Owen went on to provide his remedy to the American people. He proposed a society called New Harmony. This society would consist of two parties: people with capital, and people with none. Members were allowed to exit the commune at free will and they had a constitution written up. This society however, saw many problems, as did Owen. The first issue was over religion. The initial group set to stay in New Harmony had different views and therefore moved elsewhere to form their own society. There were many other steps that contributed to the deterioration. The most notable problem was the eventual allowance of private property rights and the lack of interest in the commune. New Harmony could hold up to 1,000 thousand residents but had nearly a third. The allowance of private property, made New Harmony no different than any other town. The members in the commune no longer felt a sense of sharing or doing what is best for the group. The lack of interest and membership force the commune to be smaller than estimated thus lowering the expectations. This was the start of a series of failures that Owen saw.

Most interesting, was Owen’s idea of the Equitable Labor Exchange (ELE). The idea first struck upon him while he was back home where he turned his focus back on the English people. His friend, Bromley, offered his building to Owen. Owen thought that this could be “for a place in which there might be effected an equitable exchange of productions, on the principle of labour for labour.” (Sagant 301-302) With improvements in technology, the ELE was on the brink of collapsing. Many argued that the productivity of machinery would drive down prices for commodities. To solve this problem, it was proposed to have an Equitable Banks of Exchange. (Sagant, pp.306) The bank issued labour notes that initially were not accepted at ordinary shops, rather the ELE’s only. It was for this reason that the Equitable Banks of Exchange was introduced. These notes were then proposed to be the currency for the country. This project was clearly a failure. 


One of the tasks of the ELE was to estimate the value of a product by taking into account how long the craftsmen worked on it. Obviously, it is nearly impossible to value one job over another…how exactly can one do that? In summary “First a man’s labour is to be valued, as it is among us the profane: then he is to receive, not money, but a labour note; which document he may,…take to the Bank and exchange for money.” (Sagant 309) It is inefficiency’s like these that contributed to the failure of the ELE. There seems to be added steps that are not needed to the current system. The craftsmen, could have simply made his product and charged the price he felt acceptable. The second failure of the ELE was that workers started to bring everything in that they made. There were accounts of craftsmen bringing in products they had produced last year and nobody wanted them. However, they were still able to collect a labour note for them. It was Owen’s faith in other men that lead to this disaster. He had put all who had come to the ELE on the honor system. This was clearly impossible especially, when bakers tried to pass off stale bread as biscuits. (Sagant pp. 310) Because of these two problems, the ELE was put to rest.

It was yet another failure by Robert Owen. His idealistic goals were not well thought out and failed to take economics into account. He assumed that people could be trusted on the honor system when in fact; he was giving out easy money. For many people, it is hard to refrain from cashing in. It is also impossible to put a value on a product and compare it to another man’s product. This is very time consuming and as we have seen, pointless. The men still ultimately, get paid by the hour. From our understanding of economics, we know that the most efficient firms or people will be profitable. Owens ELE seemed to allow even the weak competitors to make an even amount of money. By permitting the weak producers to make money, ELE’s eventual collapse was inevitable.



Bibliography Sargan, William. Robert Owen, and his Social Philosophy, London, Smith, Elder and Co, 1971







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