Dr. Michael Towsey
Queensland University
and Assoc. Director, Prout Researhc Institute, Australia
December 2009

The cooperative system is fundamental to the organisation and structure of a Proutist conomy. It is an expression of economic democracy in action - cooperative enterprises give workers the right of capital ownership, collective management and all the associated benefits, such as profit sharing.1 Sarkar, i e propounder of Prout, goes further and argues that an galitarian society is actually not possible without a commitment to the cooperative system.2 The commitment is not just to an economic order but also to a cooperative ethic and culture. This essay explores cooperation from the ethical, social and cultural perspective. The business enterprise perspective is the subject of another essay in this volume.3

Background
Cooperation as a cultural, social and economic movement arose early in the 19th century, and with particular success in Britain. The term movement is used here to indicate that what caught the popular imagination of the day was much more than the consumer/worker cooperative, which at the time was a novel form of business enterprise. The cooperative movement was a social and cultural movement because it advocated better conditions for the working class and better education for their self-improvement. It was also an economic movement in that it "sought to transform the balance of economic power from capital ownership to democratic control by members of an economic enterprise".4 The cooperative business model enjoyed early success in the capable hands of one of the movement's founders, Robert Owen. The philosophy of the movement was promoted by a group of thinkers who were later characterised by Marx and Engels as utopian socialists.5 Indeed the word socialist was first used in 1827 to describe Owen and his followers.6 During the second half of the 19th century, both the theory and the practice of cooperation were ultimately rejected by all the other major strands of social and economic thought of the day. In particular, Engels made a stinging critique of utopian socialism in 1880 which caused those seeking radical social change to turn their attention to Marx and the emerging socialist Left. It could be argued that Marx and Engels effectively killed, for more than a century, any capacity the cooperative movement had to effect radical social change. In addition, the British government made no attempt to encourage cooperatives as a business model. This left the way open for the other currents of 19th century political thought to mature into the three great isms of the 20th century: communism, fascism and liberal capitalism. However, out of the turmoil of the 20th century it has become clear that none of the three contenders was able to
produce a stable social order, that is, one which is environmentally, socially and economically sustainable. These three characteristics are considered today quite reasonably, to be the minimum requirements for a successful social order. After more than a century of neglect, the cooperative movement is beginning to enjoy a renaissance. In fact, it comes as something of a surprise to learn that today worldwide, the cooperative movement has a membership of over 800 million and provides over 100 million jobs. That is 20 percent more than provided by all multinational corporations combined7 and has been achieved despite vigorous efforts by privately owned corporations to demutualise profitable cooperatives.8 But it has to be admitted that cooperation as a social and economic ideal is not part of today's popular consciousness. In an era mesmerised by the sparkle of globalisation and consumer goods, cooperatives appear somehow old fashioned, like the friendly societies to which one's grand-parents or great grandparents belonged.9

Four factors have helped to breathe new life into the cooperative movement: First, the collapse of communism10 has discredited the Marxist brand of 'scientific' socialism and those looking for serious social change are once again evaluating the cooperative movement. Second, the economic woes besetting western capitalist democracies have starkly exposed the defects of the dominant social order to emerge out of the titanic struggles of the 20th century. Third, the British Labour government from 1997 gave much support to what they heralded as the third sector and social enterprise. In many respects it was cooperation rebadged11 but it did help to broaden our appreciation of cooperation by encompassing not-for-profits and self-help organisations and it also made alternative economic models more visible in the English speaking world.12 Fourth, much economic and scientific evidence is emerging, some of it from surprising quarters, to suggest that cooperation is not a utopian concept but entirely achievable given any reasonable effort to put it into practice. The rejection of the cooperative business model by 19th century British capitalists was motivated by a desire to preserve class privilege. And of course the British government was obliged to maintain an increasingly expensive and restless empire - cooperatives are not a good business model for empire builders. The essential criticism made by Marx and Engels, that utopian socialists failed to understand the importance of class struggle and did not have a theoretical analysis to underpin it, was correct. But the argument is no longer compelling because the 20th century has taught us that accepting one (class struggle) does not require rejecting the other (cooperative economics). Prout, for example, embraces both the cooperative economy and a theory of class and class struggle. New evidence is emerging to suggest that, not only is cooperation, as a social and economic ideal, possible in the 21st century, but that it is necessary. One of the objectives of this essay is to present some of that evidence.

The evidence is better appreciated by making comparisons with the other social orders that dominated the 20th century, in particular communism and neoliberal capitalism. The failings of both these systems highlight the importance of cooperation, both as a social ideal and as a business model.

Structure of the Essay
This essay is in four parts. Part one, The Cooperative Movement in the 19th Century, briefly reviews the early history of the cooperative movement up to the point of Engels' famous 1880 pamphlet and the emergence of the Fabian socialists. The second part, The Matter-centred Philosophy, reviews the communist attempt to build a social order on the foundation of Marxist theory. The ideal, classless, worker-ruled society was sought by the imposition of material equality. Part three, The Self-centred Philosophy, examines neoliberalism as the most recent development of capitalism. Neoliberalism rejects cooperation in favour of individualism, competition and survival of the fittest. Finally part four, The Renaissance of Cooperation, as the title suggests, turns to the renewed interest in cooperation evident in the first years of the 21st century. We review the theory, the science and the ethics of cooperation. The scientific evidence, most of it obtained in the last few years, suggests that cooperation is an extremely important component of human social and economic behaviour.

On the way we find that a number of themes keep recurring. Five of them will be flagged here to help the reader maintain continuity as our story weaves through the 19th and 20th centuries into the 21st. The first concerns human nature. To what extent do humans have a propensity for altruistic as opposed to selfish behaviour? A cooperative economy would certainly draw on the human capacity for altruism and empathy.

A second theme is the frequently controversial nature-nurture debate. What is the relative importance of genetic inheritance versus environment in determining the trajectory of a person's life? Or are both of these subservient to the expression of free will? These themes are intertwined. Selfish behaviour is observed in all humans at various times and could thus be considered 'natural'. Is altruistic behaviour likewise natural or must it be learned, even imposed?

Some philosophers have claimed that humans are essentially brutish and rise to cooperative behaviour only in response to reward and punishment.13 Others, such as the utopian socialists, have leaned to the view that humans are essentially good but spoiled by a brutish environment and still others claim that one's life depends entirely on the choices one makes.

A third theme is egalitarianism. Many societies like to claim the virtue of equality, but what does it mean in practice? In particular, must a society be equal in some sense to be cooperative?

A fourth theme is ethics. What kind of ethical principles are required to sustain a cooperative society? And a fifth theme is social progress. How do we know whether our circumstances are getting better or worse as the years pass by? These last two themes are also intertwined since progress is likely to be defined in terms of an increasing quantum of the good compared to the bad.

The Cooperative Movement in the 19th Century
The 19th century was the first in which, at least in Europe, the pace of scientific discovery and technological change threatened the stability of society at large. Today we accept rapid technological change as a fact of life, despite its often disruptive social and cultural impacts, and we attempt to gain the initiative by anticipating future possibilities. However, with respect to technological change, we might say that the 19th century was caught by surprise. Social dislocation created many new opportunities for exploitation and the unscrupulous were not slow to take advantage of them. By contrast, the intellectual world was full of optimistic expectation that science and technology would lift humanity above its age-old struggle with nature. The concept of progress formed an important backdrop to 19th century debates. New discoveries in the physical and natural sciences and the ever increasing productivity of machines suggested that material progress could continue indefinitely. Furthermore the publication of Darwin's theory of evolution in 1859 encouraged a view that progress was somehow a universal truth, applicable to both the natural and the human worlds. The concept of progress is not made explicit in our following review of the 19th century debates but it was certainly part of the intellectual background to those debates.

This section reviews the initial successes of the cooperative movement in the 19th century and its subsequent decline. We review only the key strands of ideological and political thought to emerge in Europe and particularly in Britain. A more detailed account can be found in the books of historian George Cole.14 The various ideological splits that took place in the 19th century set the stage for the major political struggles of the 20th century.

Early Success
The cooperative movement arose as a response to the appalling conditions of the working class during the industrial revolution.15 Although the first consumer cooperatives were formed in the 18th century,16 it was not until the early 19th century that a school of thought emerged to promote cooperation as a social and economic ideal. The movement was represented on the European continent by the philosophers Henri de Saint-Simon (France, 1760-1825), François Fourier (France, 1772-1837) and Wilhelm Weitling (Germany, 1808- 1871) but the greatest practical success was achieved in Britain due to the efforts of Robert Owen (1771-1858).

Owen was born in a small market town in Wales. At the age of 17, he moved to Manchester where he subsequently enjoyed much success managing a cotton mill. In 1799, he moved to New Lanark, on the Clyde upriver of Glasgow, and finally realised his ambition to manage a cotton mill that achieved commercial success yet also satisfied his cooperative and ethical ideals. The New Lanark project generated considerable interest both in Britain and in Europe. Inspired by what they saw, others set up worker and consumer cooperatives, so that by 1830 there were several hundred cooperatives in Britain. Many of these eventually failed but some continue even today.17 In 1844 the Rochdale Society of Equitable Pioneers established the Rochdale cooperative principles which became the basis for the development of the modern cooperative movement and is considered by Cole18 to be its formal beginning. For more on the birth of the cooperative movement see also Bihari.19 For his philanthropy, Robert Owen enjoyed much fame and the support of a wide circle of social reformers, including the influential Benthamites.20 New Lanark itself became a much frequented place of pilgrimage for social reformers, statesmen and royal personages, including Nicholas, later to become
emperor of Russia.

But Owen was not satisfied. He recognised that the wellbeing of his workers in New Lanark was entirely dependent on his personal approach to business. There was a need to embed new principles of worker and social welfare in legislation. In 1817 he lobbied strongly for the Poor Laws and was a zealous supporter of the Factory Act of 1819, although the final result greatly disappointed him. Engels is lavish in his praise of Owen's pioneering work for the working class:

As long as he was simply a philanthropist, he was rewarded with nothing but wealth, applause, honor, and glory. He was the most popular man in Europe. Not only men of his own class, but statesmen and princes listened to him approvingly. But when he came out with his Communist21 theories that was quite another thing. Three great obstacles seemed to him especially to block the path to social reform: private property, religion,
the present form of marriage.

He knew what confronted him if he attacked these - outlawry, excommunication from official society, the loss of his whole social position. But nothing of this prevented him from attacking them without fear of consequences, and what he had foreseen happened. Banished from official society, with a conspiracy of silence against him in the press, ruined by his unsuccessful Communist experiments in America, in which he sacrificed all his fortune, he turned directly to the working class and continued working in their midst for 30 years. Every social movement, every real advance in England on behalf of the workers links itself on to the name of Robert Owen. He forced through in 1819, after five years fighting, the first law limiting the hours of labour of women and children in factories. He was president of the first Congress at which all the Trade Unions of England united in a single great trade association.22 As Engels acknowledges in this passage, the birth of the cooperative movement was also the birth of socialism, the word itself being coined by Henri de Saint- Simon23 in 1827. By the mid 19th century, many of the basic tenets of socialism had been articulated, in particular those concerned with egalitarianism. We may distinguish four egalitarian principles:24

All human beings regardless of birth or class have a right to selfimprovement. This right is granted either by God or by virtue of being human.

There are no relevant differences between humans that justify one to claim a greater inherent right to self-improvement.

All human beings regardless of birth or class have the ability to improve themselves, if placed in beneficial circumstances.

Creating those beneficial circumstances is always within political control, and so is always, by design or neglect, the result of political activity.

Egalitarianism is the foundation of Owen's philosophy. For example, in Revolution in the Mind and Practice of the Human Race, he asserts that character is formed by a combination of Nature or God and the circumstances of one's experience. But given Nature cannot easily be changed, social circumstances become all important in shaping the human character. Cruel living conditions and the lack of educational opportunities will inevitably warp the development of moral sensibilities.

... any character from the best to the worst, from the most ignorant to the most enlightened, may be given to any community, even to the world at large, by applying certain means; which are to a great extent at the command and under the control, or easily made so, of those who possess the government of nations.25

In effect, Owen is asserting the malleability of the human character. By manipulating social conditions it is possible to create the best and the worst of persons. Consequently the impoverished are not to be blamed for vice and defects of character. Rather the fault is with those who govern and who permit the most treacherous of circumstances to "inevitably form... such characters".26

Opposition to the Cooperative Movement
The British cooperative movement in the early years of the 19th century drew its inspiration from the Benthamites, a highly influential group whose primary philosophical concern was to place free market capitalism on a rational and ethical footing. Bentham himself was initially a supporter of Owen's endeavours to reform working-class conditions. However, whereas the cooperative movement was primarily concerned with the ethical defects of capitalism and promoted socialist solutions, the Benthamites became increasingly preoccupied with its rational defects. When the consequences of the socialist program became apparent, James Mill,27 a prominent Benthamite, was horrified. He wrote,

Their notions of property look ugly...they seem to think that it should not exist, and that the existence of it is an evil to them. Rascals, I have no doubt, are at work among them.28

Bertrand Russell cites these words (written in 1831) as "the beginning of the long war between Capitalism and Socialism".29

The economic debates at this time are interesting, if for no other reason than that the arguments appear not to have changed much in 150 years. Bentham believed that free labour markets would enable workers to move from one place of employment to another and so choose their employers, thereby curbing the excess power of capitalists. Owen, on the other hand, recognised that in an age of machines, those few who owned machines could control the labour market and thereby bend the workers to their will. He understood what so few understand even today, that in free markets the question of who has market power is all important. Owen's solution was the cooperative one, that machines should be owned collectively so that the benefits of machine automation might
be shared by those who worked them. Note that a cooperative economy does not imply the abolition of private property but rather introduces another mode of ownership in addition to public and private.

In pursuit of his vision, Owen and many of his followers set up intentional communities as experiments in cooperative living. The reasoning was simple - if the human character is moulded by life experience, in particular early childhood experience, then the way to a better world cannot be purely concerned with the factory floor. The entire social order itself must be changed to ensure that good life experience can shape people of good character. These experiments in community living were a failure and it is important to
understand why. At least three factors suggest themselves.

First, many of the persons involved in the early cooperative communities appeared to have had little aptitude for what they were attempting. New Harmony, Owen's own attempt to set up a model cooperative community in Indiana, USA, 1826, collapsed when one of his business partners ran off with the money.30 Another attempt in Glasgow also failed. In the words of Owen's son, the persons who joined these experimental communities were "a heterogeneous collection of radicals... honest latitudinarians, and lazy theorists, with a sprinkling of unprincipled sharpers thrown in".31

Second, the community life style required participants to accept a uniformity of purpose and circumstances. It was too much to ask. Contemplating the failure of New Harmony, Josiah Warren wrote:

We had a world in miniature - we had enacted the French revolution over again with despairing hearts instead of corpses as a result... It appeared that it was nature's own inherent law of diversity that had conquered us... our "united interests" were directly at war with the individualities of persons and circumstances and the instinct of self-preservation...32

Warren went on to become an advocate for individualist anarchism, which in itself says something about the diversity of minds Owen had to contend with. But there is no doubt that the requirement for uniformity of mind and purpose contributed to the failure of the early utopian communities.

Third, the British government of the day rejected the cooperative agenda, both the business model to improve working conditions and the social model to address deficiencies in public education, health and welfare. Instead they chose the laissez-faire doctrine of minimum government intervention.33 The Australian economist and academic, Hugh Stretton, believes that laissez-faire cost Britain dearly. The French, Germans and Americans were subsequently to become greater industrial powers because their governments became economically involved by promoting public education, public science, public investment and "abler public services".34

Owen devoted much of his life to lobbying politicians. He fought the commonly held view of his day that the poor were sub-human, the "savages at home"35, for whom education would add cunning to vice. Articles appeared in The Economist magazine (which was then, as now, a proponent of laissezfaire) providing the theoretical justification for such views.36 Owen's failure to overturn prejudice by moral argument disillusioned him with politics and he sought, instead, to create the ideal society by establishing working examples of it. But in a society which rejects cooperation, it is not easy to create a shining example of it. Owen's success at New Lanark is, therefore, all the more
remarkable.

In conclusion, we must be careful to assess the cooperative movement of the first half of the 19th century with a view to its achievements as well as its failures. On the positive side, the movement changed forever the conditions considered acceptable for working-class people. It promoted child care, public education, public health and equal rights for women, all of which today are considered the norm in a democratic society. The other part of the cooperative legacy was the elaboration of a new business model, the consumer and worker cooperative. The Rochedale pioneers established the principles of cooperation which survive to this day. On the negative side, the early experiments in intentional communities appear naive in hindsight. The failure of some of the early consumer and worker cooperatives are best judged as experiments in a new business model.37

While the cooperative movement was struggling with its failures, Marx and Engels appeared on the stage with a new ingredient to add to the socialist mix, class struggle. Owen of course recognised class antagonisms, but he attempted to establish his ideal within the established social order. In the Communist Manifesto, Marx and Engels disparaged this approach and drew a distinction between themselves as scientific socialists and the cooperative movement as utopian socialists. The term utopian socialists has stuck. Utopian socialists, declared Marx and Engels:

consider themselves far superior to all class antagonisms. They want to improve the condition of every member of society, even that of the most favoured. Hence, they habitually appeal to society at large, without distinction of class; nay, by preference, to the ruling class. For how can people, when once they understand their system, fail to see in it the best possible plan of the best possible state of society? Hence, they reject all political, and especially all revolutionary, action; they wish to attain their ends by peaceful means, and endeavour, by small experiments, necessarily doomed to failure, and by the force of example, to pave the way for the new social Gospel.38

In 1880, Engels published a simpler and shorter account of the new scientific socialism, under the title Socialism - Utopian and Scientific.39 Its grand visions captured the imagination of a younger generation. Historical materialism could explain the past and the future. The liberation of the working class was an historical inevitability.

By comparison, the utopian socialists offered only an ethical ideal with no apparent means to realise it. Socialism, said Engels, was not just a new idea discovered by Owen and his followers, but rather the necessary outcome of a historical struggle between two classes, the proletariat and the bourgeoisie. The requirement of the day was not to build model communities but to strike at the source of class enmity, the economic relations between the two classes. Trade Union membership increased rapidly from 1880 to the end of the century and the cooperative movement also enjoyed a resurgence, partly due to rising living standards of workers and partly because, as Cole puts it, every "Trade Unionist was always a potential Co-operator..."40 But over the same period the two movements took different paths. Cole again: "In the eighties Trade Unionism and Consumers' Cooperation went on their several ways, each shedding much of its earlier idealism, and each settling down to consolidate its position within somewhat narrowly delimited fields."41 The cooperative movement expanded more easily into consumer cooperatives which engaged labour "in the ordinary labour market..." and were not therefore seen as offering the same benefits to workers as producer cooperatives. Towards the end of the 19th century, the cooperative movement equipped itself with all the formal apparatus of a large national organisation, holding annual congresses with delegates from regional and local levels. It also began publishing a newspaper, The Cooperative News. And, despite the difficulties, there was also an expansion of producer cooperatives during this period.42

The Cooperative Movement into the 20th Century
Marxism split the socialist movement in two, those supporting the revolutionary approach through the vehicle of Communist parties and those supporting a gradual approach through moderate Labor parties. In Britain, 1884, the gradualists formed the Fabian Society, which continues to this day to be the social conscience of the British Labour Party. It promotes the welfare state but does not challenge the power of the private enterprise sector on which the welfare state depends.

By the late 19th century, the cooperative movement had lost its initial momentum and fervour. Revolutionary socialists had rejected cooperatives in favour of state-owned enterprises43 and liberal capitalism had made only those grudging compromises with the welfare state it deemed politically necessary. The cooperative ideal continued to get political support from Fabian socialists,44 but the focus of the socialist struggle had moved elsewhere. However, it should not be forgotten that the cooperative movement continued to spread around the world in the late 19th century and first half of the 20th
century in the form of agricultural cooperatives and credit unions. They especially found a role in the newly emerging frontiers of the USA and Australia where government administration and infrastructure had not yet penetrated. Farmers had to fend for themselves and found it advantageous to form cooperatives through which they could process and market their produce. Two impressive examples of cooperative economies in the 20th century deserve special mention, that of Yugoslavia (on a national scale) and that of Mondragon, Spain (on a regional scale). Yugoslavia during the 1960s and 70s provides a unique example of a predominantly worker cooperative national economy. In Yugoslav Socialism: Theory and Practice, Harold Lydall45 makes some interesting comparisons between the Yugoslav and Mondragon approaches to worker cooperatives. A critical difference between them concerns income reinvested for capital formation - in Mondragon cooperatives it is owned by the worker/members whilst in the Yugoslav case it was collectively owned by the state. In Lydall's view, worker management in Yugoslav cooperatives was more a public relations exercise than real. As he puts it a "one-party Marxist regime...is fundamentally incompatible with self-management, since it does not really trust the workers to make their own decisions".46 He prefers instead the Mondragon model to which we shall return at various points in this essay.

To sum up the 20th century experience, we may say that although cooperative economics was not highly visible compared to private enterprise capitalism and state enterprise communism, it nevertheless survived in pockets in an otherwise hostile world. This says much about the inherent resiliance of cooperation.

Fascism
Not much will be said of Fascism in this essay, because it is not a sustainable social system. Like a pathogen, it only draws sustenance from societies that are already sick. However it is of interest philosophically because it is the polar opposite of cooperation. 20th century Fascism grew out of 19th century European Romanticism.47 As represented by the German philosopher Nietzsche (1844-1900), it celebrates the will of great men to do great deeds.48 Great deeds require great resources which are gathered through imperial conquest. The suffering of the masses is of no account if it is in the service of great men. Nietzsche alludes habitually to ordinary human beings as the bungled and the botched and as having no independent right to happiness or well being. He regards any sign of empathy or compassion as a weakness:

The object is to attain that enormous energy of greatness which can model the man of the future by means of discipline and also by means of the annihilation of millions of the bungled and the botched, and which can yet avoid going to ruin at the sight of the suffering created thereby, the like of which has never been seen before.49

One glimpses in this passage a terrible premonition - Nazi Germany some 50 years later.

The question arises in Nietzsche's philosophy - how to determine a great man and how to determine a great deed? Great men are those who rise to the top through struggle and war. And these men must be great by birth because if such accomplishments could be achieved by learning, this would suggest an equality that Nietzsche is nowhere prepared to acknowledge. Great deeds are determined by great men for "no morality is possible without good birth" and "every elevation of Man is due to aristocratic society".50 It comes as no surprise that Nietzsche despised women ("we should think of women as property") and Christianity (because it cultivates slave morality). It should be noted that Robert Owen and many other 19th century socialists also argued against religion. But whereas socialists objected to religion because it checked the advancement of the common person, Nietzsche objected to it weakening the resolve of a great man. The common person was of no account. Writing in 1943, while Nazi Germany was still a formidable power, Bertrand Russell remarks on a particular feature of Nietzsche's philosophy - the complete absence of empathy.51 Indeed, Nietzsche explicitly preached against it. Only three years later, a psychologist, Dr. Gustav Gilbert, was assigned by
the U.S. Army to study the minds and motivations of the Nazi defendants at the Nuremberg tribunals. The following year, he published a diary containing transcripts of his conversations with the prisoners. The one characteristic he found all the defendants to have in common was a lack of empathy. In a 2000 TV dramatisation of the Nuremberg trials, the Gilbert character says:

I told you once that I was searching for the nature of evil. I think I've come close to defining it: a lack of empathy. It's the one characteristic that connects all the defendants: a genuine incapacity to feel with their fellow man. Evil, I think, is the absence of empathy.

In an essay motivated by the Nuremburg dramatisation, journalist Ernest Partridge says:

Empathy, the capacity to recognise and cherish in other persons, the experience, emotions and aspirations that one is aware of in oneself, is the moral cornerstone of progressive politics. It is a principle recognised and taught in all the great world religions, reiterated by numerous moral philosophers, and validated by the scientific study of human personality.52

In conclusion, it seems relevant to note that Nietzsche, the champion of the superman and the despiser of the bungled and botched, was for most of his life incapacitated by bad health. He retired from a university position, incapable of work, at the age of 35. He went insane aged 44 and remained so to his death twelve years later.

Matter-centred Philosophy
In Socialism - Utopian and Scientific, Engels introduced Marxism as a synthesis of French socialism, German philosophy and English economics. It is not the intention of this section to offer a comprehensive account of Marxist philosophy. Our interest is primarily with Marx's treatment of ethics and the human character. How did Marx hope to create a better society? How did he contend with the question of human nature? What was the practical outcome of his scientific socialism?

The Ethics of Scientific Socialism
Marx rejected a universal morality53 just as he rejected a fixed human nature but it is inaccurate to claim, as many have, that there is no morality to be found in his philosophy. Morality for Marx was rooted in class. Good and bad for working-class people was a function of their class interest and quite different from the good and bad of the bourgeoisie. Moral systems that claimed to be for the universal good, yet ignored class conflict, must be a fraud because class conflict necessarily undermined the possibility of a universal good. Yet some Marxists do make the claim for an absolute socialist morality.

Marx does indeed possess an 'absolute' moral criterion: the unquestionable virtue of the rich, all-round expansion of capacities for each individual. It is from this standpoint that any social formation is to be assessed.54

And how is one to achieve this rich, all-round expansion of capacities? By participation in class struggle. Marx believed that a classless society was not just possible but an inevitable consequence of historical dialectical forces. The play of class dialectics would, stage by stage, propel capitalist society through socialism towards that classless society. The moral imperative was to work towards that end. Furthermore only by participation in class struggle was personal improvement possible.

In the modern world this entails both engagement with, and fanning the flames of, those collective struggles against the dehumanising and alienating effects of capitalism through which our need for solidarity both emerges and is realised.55

Socialist morality is rooted therefore in the particular interests of the working class, but the success of those interests is considered ultimately to be in the universal interest.56 Socialist morality is not an individual code of conduct. Human beings are social beings and therefore socialist morality has meaning only in a social context and only within the discipline of a collective struggle. By forming and being active within trade unions and working class political parties, workers create institutions through which they change themselves. Working together in such institutions becomes a day to day practice that both presupposes the need for solidarity and engenders a spirit of solidarity within the working class. The virtues or character traits that are thus promoted stand in direct opposition to the competitive individualism of the capitalist marketplace.57

Solidarity is an important component of revolutionary socialist morality. It satisfies a personal need and is the basis of relationships. We might say that it is the 'soul' of the great socialist enterprise.

The Classless Society
The promise of a classless society provided class struggle with a moral compass. Without the desirability and inevitability of a classless society, there would be no reason to choose between working-class morality and bourgeois morality. The classless society made moral choice possible. It also gave meaning to the concept of progress because industrialisation would ensure enough material production to satisfy everyone's needs, thereby making equality within a classless society a practical possibility. Given the importance of the classless society in the Marxist view of the world, we are obliged to
explore it further.

Technically speaking, a classless society would lack distinctions of wealth, income, education, culture or social network.58 In the Marxist conception, the abolition of such distinctions would occur quite naturally following the seizure of political power by the proletariat. Furthermore the state would also wither away because its only function is to maintain the exploitation of one class by another.

The proletariat seizes political power and turns the means of production into State property. But, in doing this, it abolishes itself as proletariat, abolishes all class distinction and class antagonisms, abolishes also the State as State. Society, thus far, based upon class antagonisms, had need of the State. That is, of an organization of the particular class which was, pro tempore, the exploiting class, an organization for the purpose of preventing any interference from without with the existing conditions of production, and, therefore, especially, for the purpose of forcibly keeping the exploited classes in the condition of oppression... The proletariat seizes the public power, and... By this act, the proletariat frees the means of production from the character of capital they have thus far borne, and gives their socialized character complete freedom to work itself out.59 Note that the withering of the state would not happen immediately. But it would happen inevitably because socialised production would have, as Engels puts it, "complete freedom to work itself out". He goes on to say:

The development of [socialised] production makes the existence of different classes of society thenceforth an anachronism. In proportion as anarchy in social production vanishes, the political authority of the State dies out. Man, at last the master of his own form of social organisation, becomes at the same time the lord over Nature, his own master - free.60

This last sentence is of much significance. As the state dies out, different forms of social organisation become possible and thereby 'Man' becomes "lord over Nature, his own master". The phrase "lord over Nature" is not to be interpreted in the environmental sense, as mastery over the external world of plants and animals. Rather it suggests that the unnatural, alienated condition imposed on humans by exploitation and state oppression will disappear because its only cause will have disappeared. In such circumstances the free human will have no inclination to maintain class distinctions. Whatever vices or weaknesses of character persist will be of the trifling kind.

Engel's faith in free humans to be lords over their own nature can only be understood in the context of dialectical materialism, according to which human well-being is determined first and foremost by material circumstances. By appropriately adjusting those material circumstances, human beings can in some sense be made equal. This is the justification for the famous slogan "from each according to his ability, to each according to his needs".61 By satisfying material needs, that is, by providing everyone with an equivalence of the basic requirements of food, clothing, housing and so on, not only is the egalitarian objective of socialism achieved, but something more - the seeds of social conflict are eliminated. Is this a reasonable expectation?

The answer to this question depends on how one views the nature-nurture problem. Marxists were firmly on the side of nurture. If material circumstances determine everything, then differences endowed by nature can be 'ironed out' by appropriate material adjustments in the environment.62 If everyone has the same material circumstances then there will be no differences to promote class conflict, because all conflict having a material cause must also have a material solution. Furthermore, diminishing class conflict would promote a more equal distribution of material resources, leading inevitably by positive feedback to the ideal classless society.

It may be reasonable to argue, as socialists do, that a more egalitarian distribution of material benefits contributes to a better society. However during the communist era faith in nurture became a dogma beyond all reason. The consequences were particularly disastrous for Soviet agriculture under the direction of the Russian agronomist, Lysenko.63 Lysenko promoted a form of Lamarckism, the scientifically unsubstantiated belief that an organism's characteristics acquired as a result of a particular environment can be inherited by their offspring. He did not claim that this was also true for human biology, but there can be little doubt that Lysenko rose rapidly in the Soviet bureaucracy because his Lamarckian beliefs were consistent with Marxist ideology as embraced by Stalin.64 No one should enjoy material benefits in excess of those appropriate to the service of the state.

Even in moderate hands, Marxist faith in nurture appears to have been naively utopian - that is, to have depended on a belief that base human desires would simply fall away in the absence of class exploitation. It was possibly an understandable naivety in 19th century Britain when most social strife stemmed from mass poverty. But even in the 1940s and despite recognising the corrupting influence of power, George Orwell continued to believe, according to critic James Wood, in a "mystical revolution",65 a revolution in which English society would somehow keep all its good features and divest itself of all bad features. For Orwell, social privilege was the source of all evil - get rid of privilege and the exploitation of the working class would somehow take care of itself. His reform agenda did not appear to have any means to deal with the deeper origins of class exploitation in human psychology.

At this point, there are two criticisms that we can direct against the socialism of Marx and Engels: first its claim to be scientific and second its naive trust in the consequences of material egalitarianism. Concerning the first, the hallmark of the scientific method is to ask questions, to conduct experiments in the pursuit of answers and then to refine these answers through further questions and experiments. The supposedly scientific part of scientific socialism was that part which asserted the dialectical inevitability of class struggle leading through the stage of socialism to a classless society. This element of Marxism borrowed heavily from Hegel. Concerning this aspect of Marx, Bertrand Russell says, "Broadly speaking, all the elements in Marx's philosophy which are derived from Hegel are unscientific, in the sense that there is no reason whatever to suppose that they are true." The neo-conservative, Joshua Muravchik, in an unsympathetic history of socialism, nevertheless makes a valid point - that the utopian socialists, by establishing experimental communities, were in fact attempting to apply the scientific method to human social organization. "Owen and Fourier and their followers were the real 'scientific socialists.' They hit upon the idea of socialism, and they tested it by attempting to form socialist communities."66 Marx and Engels on the other hand, made untestable predictions about the future, especially when proclaiming the inevitability of a classless society. They were certainly in no position to criticize utopian socialism as unscientific.

The second criticism we can make of scientific socialism is its approach to egalitarianism.

Egalitarianism
Socialists of all persuasions promote egalitarianism. Almost by definition, it is supposed to make for a better society. Marxism promoted a strong form of material egalitarianism. Engels was correct to chastise the utopian socialists for being preoccupied with the vision of egalitarianism without being concerned with the 'how to get there'. It was certainly naive to ignore the significance of class conflict and believe that those responsible for a system of cruel exploitation would give way to moral appeal. But Marx and Engels then replaced one piece of naivety with another - that the imposition of material equality would somehow eradicate the seeds of vice and exploitation. It is interesting that utopian visions often seem to depend on the imposition of material equality. The tendency was already apparent in Sir Thomas More's Utopia published in 1518. In Utopia, everyone wears the same clothes (which they make themselves preserving the natural colours) and everyone eschews fashion. All houses are of the same construction and all streets and villages are laid out according to the same design. No one desires to live in a bigger house or in a better neighbourhood. Everyone works the same number of hours per day. There is no privilege and therefore no resentment fuelled by inequality to disturb the tranquil rhythm of utopian life.

Bertrand Russell acknowledges that More's Utopia was "in many ways astonishingly liberal" for its day but is nevertheless dismayed with the vision:

It must be admitted, however, that life in More's Utopia, as in most others, would be intolerably dull. Diversity is essential to happiness, and in Utopia there is hardly any.67

Russell might well have been talking about the USSR or Communist East Germany. In fact the communist experience tells us that the dogmatic imposition of equality, far from bringing utopia, spawns dystopia.

In an apparent reference to utopian socialism, Sarkar criticizes social theories that sound "somewhat pleasing to the ear" and speak "glibly of human equality" but which on application turn out to be ineffective because "the fundamental principles of these philosophies were contrary to the basic realities of the world". "Diversity, not identity", says Sarkar "is the law of nature".

The world is full of diversities - a panorama of variegated forms and rhythms. One must never forget it. Sometimes the superficial display of these theories [that speak glibly of equality] has dazzled the eyes of the onlooker, but actually they contained no dynamism. And yet, dynamism is indeed the first and last word of human existence. That which has lost its dynamism is just like a stagnant pool. In the absence of flow, a pond invariably becomes overgrown with weeds, and becomes a hazard to health. It is better to fill this sort of pond with earth. Many philosophies in the past have rendered this kind of disservice to humanity.68

In conclusion, the fundamental problem with both the theory of Marxism and its practice, as manifest in the USSR and Eastern Europe, was an inadequate understanding of individual and collective psychology. It is true that later Marxist intellectuals, such as Gramsci and Marcuse, attempted a fusion of western psychology with Marxist materialism, but for the practical implementation of Marxism it was too little and too late.

Egalitarianism remains today the most contentious and polarising political issue in democratic nations. How far should governments go in promoting equality? Should they target equality of opportunity or equality of outcomes? What is an acceptable level of wealth inequality? So polarising are these questions in the body politic that all political identity is defined in terms of them - in terms of the so-called left-right spectrum. Policies are somewhere on the spectrum from extreme left to extreme right. The following passage from Stretton is helpful in clarifying definitions:

Some people favour greater or less equality for its own sake. Others favour greater or less equality as a means to other ends, such as productive efficiency or the reduction of poverty. (There are hard choices for the Left if it is ever true that greater equality may reduce productivity and for the Right if greater equality may increase productivity.) Whatever their reasons, this text generally uses Right for those who want greater inequality than exists in their society, Left for those who want greater equality, and Centre or middle of the road for those who don't want much change in either direction.69

In debates about equality, the theme of selfishness versus altruism obviously plays an important role. But perhaps surprisingly, nature versus nurture is also invoked. Those on the Left, in keeping with the socialist tradition, give much more importance to nurture (the family and social environment) and they frame policy debates in terms of adjusting family and social circumstances using government intervention to create an equality of opportunity or outcomes. Those on the Right, usually identifying themselves as conservatives, are more inclined to favour policies that reward those already endowed with talent and advantage. To the extent that talent is endowed by nature, Conservatives by implication give more importance to nature. (Fascists take$ this dogma to the extreme.) Conservatives also reason that it is wasteful giving resources to those without the talent to use them efficiently and note that inefficiency is a moral issue. When it is pointed out that such people are sually the poor, conservatives reply that rewarding the rich benefits the poor by a trickle-down effect - which elicits from those on the Left the accusation of hypocrisy and selfishness.70

Sarkar on Marx
Sarkar praised Marx as "a good man" with "strong feelings for suffering humanity". Marx's writings, he added, "reflected his concern for the downtrodden humanity".71 He appreciated the dynamism of the communist movement and in an obvious reference to the gradualism of the Fabian socialists whose logo is a tortoise,72 he asks, "what is the use of tortoise-like progress such as this?"73

Sarkar condoned Marx's rejection of religion because how is it possible to break the structure of the capitalist age without freeing people from "the intoxicating effect of the opium of religion".74 He recognised that Marx's rejection of religion was not a rejection of morality.

A group of exploiters loudly object to a remark that was made by the great Karl Marx concerning religion. It should be remembered that Karl Marx never opposed spirituality, morality and proper conduct. What he said was directed against the religion of his time, because he perceived, understood and realized that religion had psychologically paralysed the people and reduced them to impotence by persuading them to surrender to a group of sinners.75

However on the issue of materialistic philosophies, Sarkar is extremely critical and Marx does not escape mention:

There are certain defective philosophies which think that the material world is everything. When matter becomes everything, then matter becomes the goal of life. And consequently, human existence, human consciousness, the subjective portion of the human mind, everything will become like earth and stone. That is why such a philosophy is detrimental to human development. Karl Marx preached that defective philosophy. You should keep your mind free from the bindings and fetters of such a defective philosophy because it is anti-human, morally anti-human. It is most detrimental to human existence and human development.76

The difficulty for those wishing to put Marxism into practice was that it had no adequate theory of human psychology and spirituality. Even before all the basic material requirements are satisfied, the human mind wants to express subtler sensibilities. It might be drawn to the realms of music, sculpture, architecture or indeed the entire universe of ideas. Or it might get the urge to undertake some noble task or to explore the world of spirituality. This is not comfortable territory for those caught in the dogma of materialism. Sarkar notes the frustration experienced by those who attempted to implement the Marxist doctrine.

Leaders like Lenin and Mao took up the task of materializing his [Marx's] ideas in the society. They were not bad people, but as they tried to materialize the theory of Marx they encountered many practical difficulties. Realizing that the theory was defective, they became frustrated and started committing many atrocities. Stalin was a demon who killed millions of people. This all occurred because of the inherent defects of Marxism.77

For Sarkar, the apparently rapid demise of communism in the USSR and Eastern Europe came as no surprise - the Marxist view of the human being was fatally flawed and any attempt to establish a socio-economic system on that view was bound to fail. Sarkar subscribes to a theory of history in which the clash of civilisations plays an important role (although certainly not the only role). The ideologies which underpin civilisations compete with one another for the hearts and minds of people. The struggle for survival exposes the weaknesses of an ideology and stronger ideologies will defeat the weaker. In
order to surv ve, an ideology must provide sustenance to subtler aspirations of human mind and soul. And so it was that capitalism defeated communism, because as Sarkar puts it,

whenever there is clash between self-centred and matter-centred theories, the self-centred philosophy [capitalism] will win. The matter-centred theory [communism] will never win. It comes as it goes after creating enormous devastation, and it dies a black death.78

But the success of capitalism has brought its own defects into stark relief and it is to these that we now turn.

Self-centred Philosophy
The theory and the practice of capitalism have come under attack by socialists, feminists and environmentalists for well over a hundred years. Yet despite the battery of arguments brought against it, the system rolls on79 - a society that promotes self-interest is not easily checked by intellectual argument.

Capitalism offers choice and exciting consumer goods in great abundance. No matter that few of us can afford this abundance without going into debt. It has taken the combination of an impending environmental catastrophe and a global financial crisis to force people to question the wisdom of capitalism. Even Time Magazine, citing eight reasons for the Global Financial Crisis, criticised the "the myth of the rational market" and "under-regulated" financial institutions.80

This section begins with a brief introduction to the theoretical foundations of contemporary capitalism. We then focus on the assumptions that the theory makes about human economic behaviour and we find them to be highly unrealistic. We next consider the emphasis on finance in contemporary capitalism and conclude with a consideration of ethics in capitalism. Here we must make a distinction between theory and practice and note that an unsatisfactory theory of ethics leads to an objectionable practice.

A note on terminology: The terms neoliberalism and economic rationalism are used to describe the modern practice of capitalism. Neoliberalism refers to the policy agenda of deregulation, privatisation and free trade. It is the 20th century manifestation of 19th century laissez-faire. Economic rationalism refers to a policy agenda that places economic efficiency (narrowly measured) above other policy outcomes, such as full employment or environmental protection. Neoclassical economic theory is used as the justification for both policy agendas. This essay preserves the distinction between neoclassical theory and neoliberal practice.

Neoclassical Economics
In an analysis of capitalism from the perspective of a scientist, mathematician and environmentalist, Geoff Davies targets three defects of contemporary capitalism: 1) its theoretical foundation known as neoclassical economics; 2) its accounting system, in which all value (economic, environmental, social, cultural and ethical) is reduced to dollar figures; and 3) its monetary system, in which privately owned banks create money (an essential public service) as an interest bearing debt to the themselves. Only the first of these concerns us here. Neoclassical economics is essentially a mathematical edifice. It begins with a set of assumptions and builds on these a mathematical description of prices, investment, wages, interest rates and national economies. The following critique draws heavily on Geoff Davies and economist Susan Richardson. The final conclusion is simple - the assumptions of neoclassical theory are profoundly flawed and therefore the conclusions drawn from a mathematical elaboration of them, no matter how elegant, are also flawed. For the purposes of this essay we note four assumptions of neoclassical theory:

That every agent is actuated only by self-interest.

That numerous agents motivated by self-interest produce an outcome which affords the greatest utility for the greatest number.

That free markets are the most efficient means to allocate resources.

That free markets come to a stable equilibrium.

The term agent refers, in neoclassical theory, to an abstract human being, family or firm. An agent is devoid of any behaviour other than to make economic decisions and is devoid of any motivation other than to maximise its self-interest. We identify this agent as Homo economicus and his/her characteristics are explored below. We should note a corollary to this assumption, that Homo economicus is a valid model of human behaviour for the purposes of studying and managing a real economic system.

The second assumption, often referred to as the invisible hand, was made famous by the 18th century father of economics, Adam Smith. We shall return to the concept later, but suffice to note here that, if the concept has any validity at all, then it has been badly abused.

The third assumption requires that prices in a free market adequately reflect productive efficiency for the given level of demand. This assumption is severely compromised, however, because many of the factors which impinge on efficiency (for example, environmental pollution) escape accounting by the free market mechanism. These are referred to as external costs because they are external to the market.

Concerning the last assumption, neoclassical theory is not able to account for real world events, such as the growth and collapse of speculative bubbles, despite these being the apparent cause of the current Global Financial Crisis. According to Davies, a neoclassical economy never strays too far from a stable equilibrium, because its mathematical architecture cons rains it from doing so.81 Consequently government treasuries around the orld found their financial models quite unable to cope with the Global Financial Crisis of 2008- 2009. Their models described an unreal world.

As a result of constant repetition to generations of students, the four assumptions of neoclassical economics have acquired the status of axioms - they have become self-evidently true and therefore beyond question. Again, it is not the purpose of this essay to offer a detailed critique of capitalism, which has been done by many others. Our primary purpose is quite modest - to illustrate the inadequateness of Homo economicus as a model of human economic behaviour so as to shine the spot light on a more appropriate model.

Homo economicus
Neoclassical economic theory makes three assumptions concerning the behaviour of Homo economicus:

That economic agents are well-informed about the markets in which they participate.

That economic agents are rational, that is, they are able to reason accurately with the information available.

That economic agents are self-optimising - that is, their only goal is to optimise their gain or pleasure.

We should be clear about what is, and what is not, being claimed. Neoclassical theory does not claim that human beings are purely economic beings. Nor does it claim that their environment is purely economic. But it does claim that, for the purposes of simplification and in order to get a grasp on matters of particular interest to economists, one is justified in separating human beings and their world into two parts - that part which pertains to economics and that which does not. About the non-economic part, economists are agnostic - it is simply not relevant. Here we find that neoclassical economics is attempting to emulate the physical sciences, such as physics and chemistry, where the accepted methodology is to experiment with isolated systems and to simplify the description of those systems using mathematical models. For the physical
sciences, this has been a successful methodology. Its adoption by economists has proved otherwise.

Feminists were the first to draw attention to the problem of applying 'hard science' methodology to economics. What starts as a set of simplifying assumptions eventually becomes a dysfunctional prescription. Economist Susan Richardson puts it thus:

The deductive character of masculine economics means that a whole elaborate edifice has been constructed on the foundation of a few assumptions about the way people behave in their economic life. Initially the assumptions and the deductions from them were adopted to see whether self-interested behaviour could, under certain conditions, lead to socially desirable results. It was, in effect, a formal logical test of [Adam] Smith's ropositions about the efficacy of the invisible hand. But it became more than that. Masculine economics slipped from the insight that under certain tightly defined conditions, selfish, individual behaviour and egocentric behaviour could produce economically efficient outcomes, to the assumption that people, in their economic behaviour, are indeed, individual and egocentric. These foundation assumptions of economics have rarely been explicitly tested to see whether they have much intersection with the way in which people actually feel and act in their economic lives.82

Richardson finds the principle that every agent is actuated only by self-interest, to be depressing because we know it not to be true and yet its acceptance hides other more noble possibilities.

This proposition can be (and has been) made to be tautological - any action which is taken is preferred by the author to the alternatives which are available to her, so it is self-interested. I find this depressing. It robs humanity of the possibility of noble behaviour. It means that we cannot distinguish morally or in other ways between private and greedy person, the passionate believer in a cause, the person who devotes her life to the well-being of others. All are equally said to be acting in their own selfinterest. The proposition that all economic action is selfish diminishes humanity in a second way. It has been applied by economists, to the effect that if the slightest whiff of self-interest can be detected in an action then that selfinterest is assumed to be the whole of the motivation. In fact, motivations are multiple and complex. Altruism, duty, love, compassion and fellow
feeling are among them.83

In the end, argues Richardson, the assumptions of neoclassical economics become self-fulfilling prophesies.

The assumption that people are entirely selfish in their economic behaviour also rules out systematic inquiry into the extent to which selfish or other motivations are affected by context and the behaviour of others. If a person behaves altruistically and gets selfishness in return, then she will feel not moral but a mug. This issue is important to the crucial question - does a system which runs on and assumes selfishness
increase the total quantum of selfish behaviour, because this is the norm and is rewarded, or does it diminish it because it economises on altruism, saving altruism for circumstances where selfishness is hostile to human well-being? Man-made economics does not explore these questions.84

Let Tim Hazeldine, Professor of economics at Auckland University, have the last word. "Homo economicus is a selfish shit. There is no place for honour, decency, empathy and altruism."85

Continued in Part 2