Michael Fry: History has been unduly kind to the founder of New Lanark

It has been decided, by whoever decides these things, that 2012 is to be the International Year of the Co-operative. Those, like Butler, who belong to the Co-operative movement count Owen as a founder of it.

And what could be wrong with that? Owen came from Wales but he married in Glasgow and spent much of his life in Scotland. He left his monument at New Lanark, which he launched his career by managing. It was in his time the biggest factory on the planet and is today a World Heritage Site, a living memorial of the Industrial Revolution.

To object that the Scottish Parliament and Scottish banks should be able to find enough great Scots to commemorate without bothering about a Welshman would surely be churlish, if not racist. We cannot have that kind of talk in politically correct Scotland now, can we?

The argument might carry more force if Owen had not himself been an explicit and unashamed racist. He saw no place for black people in white society. He told them Africa was where they belonged and Africa was where they should return to.

This aspect of Owen remained latent while he was still in Scotland – though a few black people lived here too, usually faithful servants of Scots who had returned with their fortunes made from the slave plantations of the West Indies. Jamaica Street in Glasgow reminds us of the importance of their ill-gotten gains to the economy at the time, something we are all supposed to feel guilty about still.

Yet, by setting foot on Scottish soil, the black men and women became free. Slavery had been outlawed in Scotland in 1778. The Old Statistical Account, which describes the nation parish by parish about the turn of the 19th century, from time to time remarks on the presence of non-Scots in odd corners of the country, noticeable because unusual: English people, Europeans, and then "East Indians and West Indians". But ordinary Scots seem to have shown no prejudice. In time, these exotic elements married, bred and blended into the population.

So, wherever Owen learned his racism, it cannot have been in Scotland. It came out in him after 1825 when, sated with making easy money at New Lanark, he went to the United States. He travelled around and eventually settled at a place he called New Harmony, on the banks of the River Wabash, in southern Indiana.

There, Owen embarked on a social experiment even more radical than New Lanark. At New Harmony, people were to have no property and no money: their lives would be entirely co-operative. Yet after four years the venture collapsed, with the settlers blaming Owen's despotic, overbearing manner.

New Harmony had actually been erected over an earlier settlement called simply Harmony, and peopled by an evangelical community of Rappites – so called not because they sang rap but because they followed a German mystic, Georg Rapp. And, while this community devoted itself to its mysticism, it had black servants to do its dirty work. Indiana was a free state but a few miles to the south, across from where the Wabash flowed into the Ohio River, lay Kentucky, a slave state. Probably most of the black servants were fugitives from there.

Owen did not want the black servants, let alone any black citizens, in his own ideal community. The provisional constitution he drew up said the "persons of colour" already at New Harmony might be allowed to stay on "as helpers, if necessary". But what he really wanted now was to get them ready to go, to "prepare and enable them to become associates in communities in Africa or in some other country". This bright idea he openly published in the New Harmony Gazette of 1 October, 1825. It made Robert Owen the champion of repatriation, the Enoch Powell of his day.

These facts may not fit into the angelic reputation Owen has been endowed with in Scotland, but that is because Scotland cherry-picks what it wants to like about him. True, he took scruffy, drunken Scots, many of them cleared Highlanders, or else orphans with nobody else to look after them, and put them to work in a well-regulated factory town where they would be fed and clothed and encouraged to take up self-improving social or educational activities.

But Bill Butler is dead wrong in describing Owen as "responsive to the needs of people rather than being driven by the reckless pursuit of profit". On the contrary, pursuit of profit was just what Owen had in mind, not recklessly, indeed, but with a kind of creepy calculation. And the needs of people were to be defined by that, not by them.

Owen advised fellow capitalists in Scotland to look on their workers as unusually animated robots: "Now, if the care which you bestow upon machinery can give you such excellent results, may you not expect equally good results from care spent upon human beings, with their infinitely superior structure?"

The trouble was that (being human, and Scots to boot) they could not be controlled by shifting a lever or opening a valve. On the contrary, Owen groused, "the great majority of them were idle, intemperate, dishonest, devoid of truth and pretenders to religion which they supposed would excuse their shortcomings and immoral proceedings."

Incentives for good behaviour had therefore to be matched by punishments for bad behaviour. A boy at New Lanark, Duncan McKinlay, would later give evidence to a parliamentary committee that "a constant system of beatings took place, not a day without someone suffering".

No doubt that was concealed from the stream of tourists to New Lanark, often politicians or industrialists from home and abroad coming to view its blend of philanthropy and profitability. Still, not all were fooled. One, the poet Robert Southey, found the Scots workers were "under the same absolute management as so many negro slaves".

"Owen in reality deceives himself," Southey decided, because he "keeps out of sight from others, and perhaps from himself, that his system, instead of aiming at perfect freedom, can only be kept in play by absolute power".

So, he combined the qualities not only of Enoch Powell but also of Tony Blair and Gordon Brown too. And like them all, he failed in the end. I think we should leave it to the Welsh, if ever they get banknotes of their own, to commemorate Robert Owen.