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The Mondragon diaries: `If labour has the power, then capital ... becomes our tool'

Carl Davidson, national co-chair of the Committees of Correspondence for Democracy and Socialism, recently spent five days learning about the renowned Mondragon workers' cooperatives in the Basque Country. Here is his diary of the tour, posted at Links International Journal of Socialist Renewal with his permission.

Day 1 -- Why humanity comes first at work: learning about bridges to 21st century socialism

“This is not paradise and we are not angels”. --  Mikel Lezamiz, director of cooperative dissemination, Mondragon Cooperative Corporation

After a short bus ride through the stone cobbled streets of Arrasate-Mondragon and up the winding roads of this humanly scaled industrial town in Spain's Basque Country on a sunny autumn morning, taking in the birch- and pine-covered mountains, and the higher ones with magnificent stony peaks, I raised an eyebrow at the first part of Mikel's statement.

The area was breathtakingly beautiful, and if it wasn't paradise, it came close enough.

I'm with a group of 25 social activists on a study tour organised by the Praxis Peace Project. Our focus is the Mondragon Cooperative Corporation (MCC), a 50-year-old network of nearly 120 factories and agencies, involving nearly 100,000 workers in one way or another, and centred in the the Basque Country but now spanning the globe. We're here to study the history of these unique worker-owned factories, how they work, why they have been successful, and how they might be expanded in various ways as instruments of social change. Georgia Kelly of the Praxis Peace Project is our cheerful and helpful tour leader, but Mikel is our MCC host in charge of teaching us what he knows.

The MCC reception centre is part way up on a slope of a much larger mountain, but it offers a magnificent view of the town and the dozens of industrial and commercial cooperatives in and around it in the valley below. After watching a short film on the current scope of MCC, we move to a lecture room for Mikel's talk. The signs on the wall say "Mondragon: Humanity at Work: Finance Industry Retail Knowledge", in Basque, Spanish and English.

“Humanity at Work”, Mikel starts off, reading the slogan. “This means we are the owners of our enterprises, and we are the participants in their management. Our humanity comes first. We want to have successful and profitable businesses and see them grow, but they are subordinate to us, not the other way around.”

The other part of the slogan -- finance, industry, retail, knowledge -- refers to the scope of the cooperatives. Of the 120 workplaces, 87 are industrial factories, making everything from kitchen appliances and housewares, to auto parts, computers and machine tools. One of the co-ops is a large bank, Caja Laboral. One is the Mondragon University, with some 3600 students; seven others are research and development centres. One is the huge network of hundreds of Eroski supermarkets and convenience stores, four are agricultural, and six are social service agencies managing health care, pensions and other insurance matters.

All are worker owned. All have management selected by the workers and the co-op governing boards. All have yearly assemblies where the workers set strategies, make or change policies, and elect their governing boards -- on the basis of one worker-owner, one vote.

Mikel also introduces this by telling us a little about where we are. The Basques are among the oldest people in Europe, with a unique language, unrelated to any others. They have a strong sense of culture and solidarity, and an ongoing quest for autonomy, even independence, from Spain. The region is made up of four political divisions within Spain and two just across the Pyrenees in France, with 3 million Basque inhabitants and another 3 million living abroad. They were a centre of resistance to Franco's fascist regime, and have won a good deal of autonomy today in some of the districts.

After World War II, the area was poor and devastated, and the Franco regime was in no mood to give it much help. But one who did rise to the challenge was Father Jose Maria Arizmendiarrieta, a priest who had fought Franco, ended up in prison, but managed to get released instead of executed. Father Arizmendi, as he is popularly called, was assigned by the church to the valley in the Basque Country containing the small town of Arrasate-Mondragon. He set to work trying to solve the massive war-created problems at hand. He began building a small technical school, and then a credit union in which the region's peasants and workers pooled meagre funds. After a few years, with just five of the best students of the school, he started a small factory making one product: a small kerosene-burning stove so people could cook and heat water. It was a good stove, and sold well.

Most important, he gave the project a set of 10 carefully thought-out principles to serve as guidelines for the current and any future endeavours:

1. Open admission, meaning no worker is to discriminated against because of nationality, gender, political party or religion and such;

2. Democratic organisation, meaning one worker, one vote;

3. Sovereignty of labour;

4. Instrumental and subordinate nature of capital;

5. Participatory management;

6. Wage solidarity;

7. Cooperation between co-ops;

8. Social transformation;

9. Universality;

10. Education.

How each of these are implemented, and with what success, will be spelled out in this series of diaries -- at least I'll give it a good shot. But following this introduction and a barrage of questions -- Mikel answered a good many -- he  soon had us all get back on the bus. The best way to learn was to see for ourselves. So he took us off to FAGOR, the relatively large industrial coop that had grown for the first tiny shop that built that first small kerosene stove.

FAGOR today is several connected co-ops with about 6000 workers overall, both here in the Assante-Mondragon area and in China. All the employees in the Basque areas are worker-owners; those elsewhere are in varying stages of becoming so.

We got off the bus, at a large modern structure that could easily enclose several football fields. We were given headsets so we could hear our young woman guide over the din of the assembly lines. Once inside, we saw a very modern and computer-assisted assembly line that was putting together household washing machines, from beginning to end. It wasn't completely automated; workers were required at many points, especially at those checking quality.

Quality is a hallmark of MCC products generally. MCC competes by selling very high-quality goods at reasonable prices and good service. They have very few supervisors. I didn't see a single one during whole process of making washing machines, and later convection ovens, from one end of the line to the other. Self-supervision was thus a competitive advantage. Not having a lot of supervisors to pay means lower prices.

Before the global financial crisis hit two years ago, 15 per cent of FAGOR's workers were temporary "trial period" new hires, meaning they couldn't become worker-owners for six months to a year. All these were laid off due to the fall in demand, but all the regular worker-owners remained on the job or were shifted to other related co-ops.

At the moment, the workers were on two shifts. "One group starts at 6am and ends at 2pm”, our guide explained. “The other goes from 2pm until 10pm. There are breaks every two hours, after which each worker can take a different position on their section of the line. The workers decide this rotation among themselves. It helps with safety and spreads skill sets around.”

We noticed that some of the components were in boxes, shipped from other countries, and asked Mikel about it. “Our policy for purchasing is set by three things -- quality, price and service. If an outside firm does better, we use them.” He picked up a wiring harness from a box. “Here is a good example. We used to have this made by one of our student -- run co-ops. They had two products, this wiring set and another computer component. The quality and service was good, but the price was poor. This piece, made in Turkey was just as good, the Turkish firm had good service, but at a much lower price. Our students only worked a four-hour day, and paid themselves 550 euros a month, but the Turkish workers put in 60 hours at 200 euros. In that situation, we encouraged the students to shift to improving the product where they were better, and to design new products."

Some in our group groaned at the concept, but others felt that, given a market economy, it was the best way to handle the problem -- although improving the conditions of the Turkish workers would be a good idea, even if beyond the reach of MCC at the moment.

One thing that stood out of the FAGOR line was a concern for both safety and quality. One-hundred per cent of the machines were tested on the line for safe operation, and another 3% tested again at random just before final packaging. There were numerous station stops where workers kept daily records of any accidents -- a green smiley face sticker was a good day, a red frowny face was a problem day. I only saw one red face on a chart on the entire line.

FAGOR is producing 850,000 units a year, shipped mainly throughout Europe. Their pressure cookers are very popular in US department stores.

After a delicious and leisurely lunch, Mikel gave us another talk, stressing two topics -- the spread of the MCC to other countries, and its ongoing and often difficult efforts to transform their factories in areas outside of the Basque Country into full worker-owned cooperatives.

Of the 100,000 people who work for the MCC, of the 39,000 in the Basque Country, some 99 per cent are worker-owners. Of the 40,000-to-50,000 recently brought into MCC in the rest of Spain, Portugal and parts of France, many are in various stages of becoming worker-owners, although some are discouraged by the low or negative earnings in the last two crisis years. The remaining 17 per cent in countries like China and Brazil remain wage labour in firms owned by the MCC. The MCC, however, is still trying to find ways to deal with local laws and customs in these countries to make a full transformation.

This discussion ran overtime, so the last part of day one, a visit to an Eroski supermarket, was limited to 30 minutes. This one, a full-sized supermarket, was an excellent facility, owned both by all the workers and many consumers as well. Think of it as a high-quality worker-owned Walmart combined with a Whole Foods with much lower prices, and you'll get a reasonably good idea on what one is like. But all I can vouch for at this point is that the fair trade 70 per cent chocolate bars come very close to being a small piece of paradise.

Day 2 -- It starts with a school… knowledge and the path to workers' power

This bright and sunny morning in the Basque Country mountain air again begins with our bus slowly winding up the mountain slopes. But this time it's a short ride. We stop at ALECOP, a unique worker-student cooperative that is at once part of Mondragon's production units and its educational system. Think of it as a small worker-owned community college, but with technology shops that actually produce items for sale in industrial markets, and you won't be far off.

Once we get settled in a classroom, our MCC mentor, Mikel Lezamiz, introduces us to a young 30-something worker-technician who is going to explain ALECOP to us, and a good deal more.

“First of all, we are a mixed cooperative”, he states. “This means we are made up of both worker-owners and students. There are 59 worker members and about 300 student members. Some of our students also work in other co-ops part time, but our students are mainly working as part of their studies, and to earn a little money to support themselves as students.”

He goes into some history, reminding us that the MCC started back in the 1940s, with the polytechnical school started by Father Arizmendi, the innovative priest who envisioned the MCC, as his very first effort to help the war-torn Basque workers find a path out of the devastation of World War II. The first school's students helped form the first factory, but the school also continued, and over the decades, it evolved into what is now ALECOP, several more co-op high schools, and what is now the Mondragon University.

“To democratise the power, we have to share the knowledge”, interjected Mikel, summarising Arizmendi's theories. “Thus continual study throughout life must not only be for the rich, but also for the workers.”

What kind of jobs do the ALECOP students have? Our young guide shows us a list: research and development assistant, storekeeper, publisher, process technician, electronic assembler and several others.

What kind of products do they make? “Most important, we design educational tools, to help in teaching electricity, electronics, automation, telecommunications and other subjects needed in high schools and in factory training. But we are also a non-profit. We make money, but our hope is mainly to cover our expenses."

He goes on to describe a list of "competencies" that they hope to instill in the students, so they can go to work in FAGOR or other MCC factories with a good degree of skill.

It all becomes much clearer once he takes the 25 of us out into the shop area. As someone who taught computer repair to inner city youth and ex-offenders by recycling old computers, I step away from the group and examine some of the teaching stations. They are large panels with, for example, critical automotive parts on one side, connected with various testers and gauges. I examine the back side and find the motherboards and circuitry connecting them all. A student who wanted to become an auto mechanic, for example, could test and work through the key components of dozens of vehicles on the front side, while the programming embedded in the back side would give him or her the proper positive or negative training responses. Very cool, I thought. Even cooler was the fact that the students not only used these machines for their own learning, they also made the circuit boards and wrote the software to make these instructional learning tools in quantity, ready to be sold and used anywhere.

After ALECOOP, our bus makes a quick stop at Mondragon University's top-line coffee bar. We're in a hurry, so Mikel gets busy: How many with milk? How many black espresso? He turns in the bulk order, and with our caffeine fixes, we're back on the road in 20 minutes.

The late morning session is at Mondragon Assembly, a mind-blowing and thought-bending state-of-the art high-tech and high-design worker cooperative competing on a world scale. Its products are the software and hardware of room-sized automatic assembly machines making solar photovoltaics and many varieties of electronic components for robotics.

“It's rather easy to design a machine that can make a switch or solar cell every 1.8 seconds”, explains a young co-op member. “But it's very hard to make the same switch or cell in 1.2 seconds. Yet that is what our clients are demanding of us, and it changes every six months, with higher and faster standards. We either do very well, and make lots of money for the cooperative, or we fail and we lose a lot.

“But this is what we want to be doing”, he adds. “We don't have too many workers in this coop in the 40 to 55 age range. We're all younger. Some say we try to make up in attitude and spirit what we lack in experience!” This brings a round of laughter, but we all know exactly what he means. He goes on to describe the global market for these advanced means of production, with China leading the way in many of them.

“We can't just produce for the Basque Country, or even Spain and Europe. We have clients everywhere, and we are setting up factories everywhere -- Germany, Mexico and China, too”. While owned by the MCC, none of these abroad are yet full worker-owned co-ops. But neither are they sweatshops; they are very advanced production units with skilled workers. Still, it is a contradiction and the MCC's aim is to eventually convert them all to cooperatives. But they have to move in accordance with the host country's laws and customs on the matter. Or simply make the decision to abandon proposed start-up projects in that region to other regular capitalist firms.

How are his clients spread around? “Right now, we have 85 here in Spain, 30 in Mexico, 25 in France, six in China and 20 in Germany. For this kind of equipment, you don't get a large number of orders. Maybe 10 a year. But each one is worth millions, but only if we are successful! But keep in mind that for every two jobs we create globally on the outside, we also create one new job here inside MCC”.

As we left, many in our group were debating the pros and cons of global economic justice. I shared their concerns, but I also saw something else. Here was the beginnings of some of the most advanced productive forces in the world, the means of both economies of abundance and the means of clean and safe renewable energies and far lighter ecological footprints. In any dynamic socialism of the 21st century, these young people and their creative efforts would be invaluable. I would want to shape their boundaries, but I would not want to stifle them or just send them off to work for the neoliberal globalists. We needed them with us.

As is the custom in this part of the world, our main meal was a long midday "lunch", really a dinner. We were driven higher up into the mountains on a winding road to an immense building that looked like a blockhouse or small fortress of stone. When was it built?, someone asked. We checked the carvings, and translated. Around 1400 to 1500, before the time of Columbus. But now it was updated into long stone-walled dining rooms, with a conference centre on the upper floors. Needless to say, lunch was exquisite and Basque cuisine deserves its reputation.

In our last session for the afternoon, Mikel gives us all a detailed technical talk about cooperative structures, how they can vary, and especially, how they are financed and governed.

“People are the core, not the capital. This is the main point”, he starts off. “If capital has the power, then labour is simply its tool. But if labour has the power, then capital is subordinate. It becomes our tool.”

This is part of Father Arizmendi's 10 principles, which Mikel presented yesterday. “Labour is sovereign" is one of them. “This means one worker, one vote -- whether you have more money or less or anything else, it doesn't matter. You have an equal voice and the access to knowledge and transparent information. One journalist once said back in the 1970s that Father Arizmendi had created a progressive economic movement that was anchored in an educational institutions. When Arizmendi heard it, he said, 'No, its just the reverse. We are creating an educational movement for social change, but with anchors in economic institutions'.”

It's the whole of humanity that matters most.

Day 3 -- Visions of the future, ties to the past: tools for shaping the organisations of the next generations

This morning our bus again takes us far up the winding mountain road to the 15th century blockhouse fortress now transformed into a conference centre. I've since found out it's called Otalora, after an old noble family who owned the whole area reaching back 600 years. In those days, in was an armed way station on a trade route between the centre of Spain and the sea, and the Otalora family extracted heavy taxes on the traffic going both ways.

This led to wars among the noble families over these spoils, and at one point the tall armed tower on one end of the building was destroyed by a rival. In the years that followed, to bring a degree of stability, all the armed towers were lopped off on other castles in the area. This imagery brought smiles to the faces of the women in our group, who caught the symbolic significance immediately, even if the men took a moment or two to catch up with the laughter.

In any case, Otalora is now owned by Caja Laboral, the worker-owned credit union of the Mondragon Cooperative Corporation, which operates on the scale of a major bank, with outlets across the country, in addition to serving as a source of finance to all the MCC co-ops, whose members dominate its governing council. The other voice on the council is a bloc of representatives from the Caja Laboral staff workers. A few farmers use the land for dairy cows and sheep, but otherwise, the whole area looks like a well-tended national park.

After the Otalora story, our more serious topic this morning is the wider range of the cooperative movement, both in the Basque Country and Spain. Mikel introduces Lorea Soldevilla, a young worker-owner from KONFEKOOP, the Basque Cooperative Confederation. The MCC is part of this, but it turns out that there are many more cooperatives in the region that are not from the MCC. From the group's acronym, I also learn that the Basque language does not use the letter "C".

There are currently 755 cooperatives in the Basque Country, she explains, and only 80 of them are the worker-owned MCC co-ops. There are a total of 537,000 members of all the co-ops, but only 54,919 are worker members, and 37,860 of these are the MCC worker-owners.

Where did these other nearly 500,000 come from? Lorea brings up a spreadsheet on a screen to show us that there are all kinds of cooperatives and members. Eroski, the supermarket chain, for instance, has consumer members as well as worker members, and there are other consumer co-ops. There are also producer co-ops, such a diary farmers, in which the farm owners are members, but not necessarily the farm workers. There are also marketing co-ops, transport co-ops of independent truckers, cooperative schools, food co-ops and housing co-ops.

At the centre of KONFEKOOP's work as a confederation is the concept of "inter-cooperation", the idea that co-ops should help each other. "Inter-Coop", as it's called, has several organised components. ELKAR-LAN helps people with the legal and organisational consulting needed to form new co-ops. Elkar-Ikertigia is a volunteer policy and research centre. PromoKoop helps find new markets and helps co-ops enter new markets. Oinarri helps to link co-ops to the wider social economy.

But there is another vital function as well. MCC is non-partisan; it's not tied to any political party, and the same is true of many of the others. Still, they need to influence and work with the Basque and Spanish governments, especially on matters of law and regulations that can help or hinder them. KONFEKOOP enables them to do this, both as a lobbying arm and by directly having its people serve on government bodies and study groups. It's a way of working with favourable politicians of all parties without directly being members of any of them. The Basque government, for its part, is largely favourable to MCC and the other co-ops, since they have helped to bring a higher-than-average degree of prosperity to the region.

We all gave Lorea a round of applause for expanding our horizons. It was now time for our caffeine break, and we all headed downstairs to a room in the old castle that was now a coffee bar. There were three workers getting us expressos and cafe con leches, so I asked, "Are you guys worker-owners of this fancy Caja Cabral enterprise too?". “Of course”, was the answer, as if it was the most natural thing in the world.

As we returned for the next round, I heard a few groans about the title: "The Corporate Management Model". Some gritted their teeth for a technical lecture; a few asked, “Can't they find a better word than 'corporate'?”. “Give it a chance”, I replied. “'Corporation' doesn't always translate with the same meaning we put on it.”

Mikel introduced Jose Luis Lafuente, whose title, accordingly, was "director of corporate management model". Jose started of by explaining that their model was developed over decades, going back to Father Arizmendi's 10 principles, but in a 1990s update, was also deeply rooted in the TQM outlook, or total quality management. Again a few eyes were rolled, because a version of TQM was used against US trade unions back in those days, and a few around the table remembered it.

But as Jose continued expanding on MCC's approach, which put the core values of worker ownership and democracy at the centre of an ever-widening set of values and organisational principles, the mood in the room began to change. He then took each component, and in a wonderful set of interlinked graphic images, unfolded a number of powerful tools that could be adapted to any progressive organisation to build its strength, grow its size and achieve its goals.

He posted "people in cooperation" as the first starting circle, then went on to connect that concept to the necessity of participatory organisation, wage solidarity, social transformation and many others. By the time he was done, everyone was wide eyed. “So what do you think?”, he asked. “I love it”, I blurted out. “But I'm going to adapt it to building my socialist and other political organisations.” He laughed, but in the front of my mind was the conclusion that I had a powerful, modernised framework to update and supplement Lenin's What Is To Be Done and an number of other classics on organisation.

It was time for lunch, and all the tables were buzzing with excitement over the presentation. Jose sat across from me, but he immediately asked about other matters. “We made an agreement with the US Steelworkers Union about a year ago to form some worker co-ops in the US. How's it going?” “From what I know”, I replied, “they want to proceed with caution, finding a few profitable firms to buy up and then transform into co-ops. Plus a lot of their members had bad experiences in the past with employee stock ownership plans or ESOPs, and they have an educational task show how the MCC model is not at all the same as ESOPs."

Jose countered that it was often easier to form a worker co-op as a new start-up, but he understood my points. He went on to speak highly of GAMESA, the Spanish wind turbine outfit that had opened up three new plants in Pennsylvania in cooperation with the US Steelworkers Union. GAMESA got along fairly well with the MCC, even though it wasn't a co-op, but simply a high-road green capitalist firm.

After lunch, we boarded our bus and headed back down the mountainside to the town of Assarte-Mondragon. We were next visiting IKERLAN, one of the MCC's 13 research and development cooperatives. It was the first and the largest, and had a number of research lines. It included 209 full-time research scientists as worker-owners, and another 54 trainees. “Effective innovation at the service of our company clients” was how Maria, our presenter, summed up its mission. She went on to describe energy-saving power stations, micro-needles for bio-tech medicine, new computer components for smart electrical grids, touch screen control panels for home automation, and so on. “Less energy, with lighter materials at lower costs” is a common thread, she added.

Again I was impressed by seeing the advanced productive forces, created by high design, that would be critical to solving problems like the climate change crisis. One of our team, however, asked an interesting question: “Does serving your clients mean working on nuclear weapons or other military instruments?” No, she said firmly, we turn these down. “Is that written down somewhere?” She wasn't sure, but added that with their values, “we would simply not think of doing things like that”.

The comment served as a transition to the last part of our day, a 40-minute bus ride even higher into the mountains. We were headed to a Franciscan monastery with a new secular institution, BAKETIK, the Basque Peace Centre of Aranzazu, far above the small town of Onati. The ride itself was a joy, with forest broken up by high mountain meadows with dairy cattle and, once you got higher, the sheep the Basques are known for raising. The cathedral at the top was a powerful piece of modern architecture, one you had to walk down through cut stone to enter.

The peace centre itself had taken on a tough task. There were hundreds of undocumented refugee children, mainly from bloody civil conflicts in Africa, who had wound up on the streets of Spain, homeless. Many were brought here, and paired with volunteer "big brothers" and "big sisters" to help them regain trust and their own physical and mental health. It took patience, but it served the children well.

On the way back we stopped for an hour in Onati, known for good chocolate stores. It was true, as I picked up a large bar of truffle-flavoured 80% cacao dark for only 2 euros. But as I strolled through the town square at evening, I noticed something of far greater value. The town's working-class families were sitting in the town square, drinking beer and coffee, engaged in conversation. Children had the run of the streets, playing games and riding bikes -- and there wasn't a bevy of police cars to be seen. It was a place of community and solidarity, where people still enjoyed the simple company of one another and the smaller pleasures of life.

Day 4 -- Workers' co-ops, workers' banks, workers' skills: Mondragon’s ‘second degree’ co-ops help weather today’s crises

Most new small businesses fail. That's a fact, whether they are in the Basque Country or in the US. Or anywhere else. Yet the Mondragon co-ops, which all started as small worker-owned businesses, have hardly ever failed. Why? The key is in Father Jose Maria Arizmendi's original founding conception of cooperatives as the interlocking of school, factory and credit union.

This was the thought I was rolling over in my mind as our bus again climbed the slopes on the Arrasate-Mondragon valley, this morning with grey skies and a light drizzle. We were headed for an administrative office of Caja Laboral, the worker-owned banking network of the MCC co-ops. The ride wasn't far, and we were soon whisked into a small auditorium. Our mentor, Mikel, introduced the staff member who would introduce us to the world of banking, and Mondragon's modification of one corner of that reality.

Some people might question why workers for social change would want to be involved with banks at all. But certain kinds of credit and finance are important components of any society -- capitalist, socialist or somewhere in between. Father's Arizmendi's conclusion that two of the many reasons cooperative movements failed in the past was the lack of reliable credit and the lack of innovation and new ideas. Hence the reason he started with a school, but soon added a small credit union from the small deposits of his parishioners and their neighbours. To start a factory, you had to borrow some money, and borrowing money from people close to you at low cost was the best way to go.

By 1959, the small credit union had grown and transformed into Caja Laboral. Today it is one of the major banks in Spain, with assets of 21 billion euros and 1.5 billion in equity. It has 18.6 billion in customer deposits, offset by 16.4 billion in credit loans. It has 1.2 million clients, only 120 of which are the MCC co-ops. It has 2000 people working for it, who are worker-owners. Actually, the bank is owned 55% by the MCC co-ops and 45% by the staff workers. But the rule they have adopted is that the factory co-ops pick eight of the board members, while the staff workers elect four. Since Caja Laboral, is a coop of co-ops, it is what MCC calls a "second degree" co-op. Other second degree co-ops are schools, medical clinics and insurance agencies.

“We are rated the best bank in Spain in customer satisfaction”, says our presenter, Angel Maria Garcia Olabarrianter. “One reason is that we are worker-owners ourselves, and not socially distant from them. We work closely with our clients. We are prudent and conservative."

Mikel gave a wry laugh from the back of the room, and interjected: “Except for the Lehman Brothers fiasco.” It turns out Caja Laboral had taken a hit of 160 million euros it had tied up in Lehman Brothers securities when the Wall Street investment bank collapsed at the beginning of the financial crisis two years back. Not only had the MCC's bank had been hurt, every bank and government in Europe felt the pain, and some were still struggling.

“Yes”, said our presenter. “But we followed our rule of transparency. You and everyone else knew it the same day, and we announced it to the press the next morning.”

This opened up a discussion among all of us on the proper role of banking and credit unions, including cooperative ones. It's not a subject progressive activists are all that familiar with, but we had it anyway. First it was clear that Caja Laboral's big sin in the Lehman Brothers case was believing in the validity of the AAA ratings of its securities, set by US government agencies, which turned out to be a sham. Second, it was also clear from the numbers presented that Caja Laboral was really something on the order of a strong and relatively cash-rich savings and loan operation and consumer services bank. Its managers didn't get rich, but had incomes within the same narrow and modest salary spread as all MCC coop members. Its profits were plowed back in to building new co-ops. It was not in the same league as the giant Wall Street speculators in derivatives, with their billion-dollar bonuses, who were trying to gain wealth not by creating new wealth, but by pure gambling with other people's money.

Most of us concluded that Caja Laboral was a sound and necessary part of the MCC and its growth, but the arguments continued out the door and on the bus ride further up the mountainside to our next talk at the Otalora conference centre.

Here we had a new topic, the training of governing boards of the co-ops. It did no good to elect workers to co-op governing boards, and then just let them sink or swim. A skills transfer and training program was in order.

Our presenter was Juan Ignacio Aitpunea. He was a well-seasoned and tough-minded older Basque worker with strong cooperative values.

“We use a Basque word, ORDEZKARI, for our program”, he started off. “It means 'representative', because that's the task of the boards, to represent the workers. Our boards are elected to four-year terms, but we stagger them. Every two years, only 50% change, but with 120 co-ops, that means we have about 1000 new board members to train every two years.

“We do it in steps. In the first six months, we get the new people to do self-evaluations, to find out their competencies, or the lack of them, so we know what to stress over the next year or so."

What were the skills needed? “First”, Juan continued, “you have to know the basics, the laws on cooperatives and the functions of co-op leaders. Second, you need common skills—teamwork, how to communicate, how to lead, how to make timely decisions. Third, you have to know how to design and work through a follow-up plan." All this was crucial because the governing board not only shapes policy, it hires and fires managers. Worker-owners, by their nature, cannot be fired. Over 50 years, there was only one case, where a small group got caught embezzling.

Juan went into more detail on this, but our crew had other questions: how were people nominated, and what was involved in running?

First, if there are two vacancies, there must be at least three candidates, he explained. Any worker can volunteer to run, but he or she has to get signatures of 10% of the workforce. Next, the workplace's social council, which serves some of the functions of a trade union, can suggest a candidate. Finally, the old board can name one new candidate itself. But an initial vote is taken so that each of the final minimum of three candidates gets a 50% minimum, then the vote is held to determine the final two.

“We need this to make sure board members have wide respect throughout the workplace”, Juan added. “This is especially important in hard times, like now, when hard decisions often have to made." He meant firing temporary workers or cutting salaries to deal with the downturns. "Leading is not just about friendship, or making friends. This is not mainly a place for that. But it is a great school where you can learn what it means to be responsible. You may also make a few new friends. In fact, in tough times, that's when you can make the best and truest friends.”

Juan also stressed the need for diversity and the need to bring forward younger leaders. “When you get old like me, you get too used to having your own way. A time comes when you need to let new people in, but still find other ways to make a contribution.”

Our last stop of the day was the Mondragon University. It was formed as a second degree co-op by joining the engineering school, the business studies program, and the humanities and pedagogy teaching co-op. It currently has about 3600 full-time students. Tuition is about 5000 euros a year, considered moderate for a European university. Most of the students are from middle-income families in the area or from the workers in the co-ops.

Fred Freundlich was our faculty presenter, an American who had been in the co-op movement in the US in the 1980s, but had lived in the Basque Country for a good number of years. He gave frank and critical answers to our questions.

I raised my hand, and asked: “Suppose I'm a young worker in one of the local industrial co-ops, and I decide I want to become part of the management. How does Mondragon University help me? Do they?”

The short answer was "Yes". But Fred added that management usually required a college degree, and you didn't necessarily need to get it from the Mondragon University. If you had a good resume and CV from elsewhere, you'd still be considered. On the other hand, if your co-op saw that you were eager to gain new skills, it would give you a good deal of support, including financial, and going through the Mondragon University for your degree would be a plus.”

Others raised the general question of activism among youth. “Frankly, Basque youth aren't all that active inside the co-ops. They're into Third World global justice issues, environmentalism in general, and Basque nationalism. About the co-op managers, I'd say a strong minority, maybe 30 per cent, have solid cooperative values at heart, another minority pays lip service to them, and the rest are somewhere in between. We clearly need a new surge of activism to spread cooperativism beyond the factories, but my guess is only about 30 per cent of the workers today are activists on the matter. You really need to talk more with Mikel, who's really a leader on this topic.”

Mikel went up front and drew us a wave-like graph, showing an initial surge in the early MCC decades, then a levelling off, then a dip at the beginning of the crisis, and now a small upward turn.

“This is the beginning of a rich discussion, how we need to redefine and reinvent ourselves for the 21st century? But the bus is waiting to take us to dinner in San Sebastian. We can return to it tomorrow.”

Day 5 -- Need, trust realism and well-chosen allies: Mondragon and the transition to a third-wave future

“The world has not been given to us simply to contemplate it, but to transform it. And this transformation is accomplished not only with our manual work, but first with ideas and action plans”. -- Father Jose Maria Arizmendiarrieta, founder of the Mondragon Cooperative Corporation

Today the Mondragon valley is misty and grey, with small clouds drifting close to the valley floor between the mountain peaks. It's somewhat otherworldly, I think to myself on the bus ride up the slopes, almost like a scene from The Lord of the Rings.

Today is also our last day, and we're full of mixed feelings. Melancholy that our week-long seminar is coming to a close and that the new friends we've made will scatter. But there's also excitement that we'll soon be back home and able to share it all with our communities.

Our first stop is another component allied with the Mongragon University called SAIOLAN. It's an incubator project for helping to launch new co-ops and high-tech businesses.

We're greeted in a classroom by a young woman from Mexico, Isabel Uriberen Tesia, who is also our presenter. She wastes no time bringing up her PowerPoint on the screen and getting into the topic.

“Our aim is generating employment, creating new jobs”, she says. “Our purpose is to do this by developing new business projects and training new entrepreneurs.”

A few years back, as the economic crisis was developing, nearly 60 per cent of the students graduating in the Basque Country were having a hard time finding employment. The government, the MCC co-ops and other businesses, as well as the students themselves, all turned to SAIOLAN to help launch new enterprises that could put young people to work.

“There are five levels in the training of entrepreneurs”,  Isabel explained. “First is motivation. Second is finding opportunities. Third is defining a suitable project for the student, in tune with his or her interests and ideas. Once you get past these three, the next two, planning the start-up and launching what you have developed, also involves finding resources, such as grants and loans, that can get the new businesses operating.”

What kind of businesses were being started? One involved processing plants for cleaning waste water in a new and better way, another was called "micro-manufacturing", producing very small components accurately, quite a few were new software products. One from FAGOR, the large home-appliance worker-cooperative, involved finding new uses for stainless steel, including exterior products, like one-piece transit stop structures.

Some of our group were concerned that many of the new start-ups were simply new businesses rather than co-ops. This was 80 per cent, or 138 out of 172 new small enterprises over the last few years, with 2281 new employees. SAIOLAN didn't seem worried. “It's their choice”, was the explanation. “Some of them will later transform into co-ops, and in any case, it's good to create new employment for our entire Basque community, not just the minority in cooperatives.”

We got deeper into the subject in our next session. It was further up the mountainside at Otlalora, and we had as our resource person, Jesus Herrasti, one of the senior MCC leaders, the head of the “Innovation Group", who had been with Mondragon for 48 years.

After laying out some of the basic features of innovation -- infrastructure, science, technology, strategic planning -- Herrasti made it much more real by talking about a fundamental conflict facing all manufacturing businesses, not just the MCC. “Take FAGOR, our home-appliance manufacturing co-op. It's a mature business. We can continue to compete by making some additional improvements in quality, or cutting our profit margins. But in the end, it's going to be very hard to compete with similar products produced in Asia. We should keep at it as long as we can operate in the black and our worker-owners can maintain their standards, but where, really, is our new growth potential?"

He named three broad areas -- renewable energy, health and eldercare, and information technology. It got even more interesting to me as he became more specific about new product lines -- fuel cells, wind turbines, photovoltaics, embedded software, wireless, ambient intelligence, and bioprocessing in supercomputers. He was presenting the shift from "second-wave" manufacturing to the high-design and high-tech products of a "third-wave" future in a knowledge economy, and he had 200 people working full time on coming up with new ideas and plans.

I asked, “Have you had any inquiries from those countries trying to define a new 21st century socialism, in whatever way, such as Venezuela, Cuba, China, Vietnam or even South Africa, on how they might use Mondragon's ideas and services? Do you think you have something to offer here?”

“Yes and No”, was the cautious answer. “We get queries from all of them. We've been to China and other places, and there is some genuine interest, to a point. But since spreading knowledge and workers' power at the workplace also often runs against the clinging to control by bureaucrats, socialist or otherwise, the interest often comes to a dead end. But it's not always the case, and we keep working on doing what we can.”

He went on to discuss the problems of cultural differences. “We Basques are often risk-averse when it comes to business, unlike Americans. We often avoid risks when we shouldn't. On another hand, when we talk with Mexican workers about taking over and owning the firms we start there, electing the leadership themselves, they simply don't believe us. They want to know where the 'trick' is hidden, since businesses, in their culture, are always owned by bosses, never by workers. There is no trust, at least trust with us, that it can be otherwise.”

"So what are the basic things need to start worker cooperatives in our countries", asked one of our group?

“First, the workers themselves must feel the need. Without that, it's hard to get anywhere. Second, there must be a culture of trust, since you are sharing money, sharing risks and supporting new leaders. Third, is to be realistic. You need successes, especially in the beginning. Too many early mistakes, and you are finished. Finally, you need friends and collaborators -- but pick them carefully!”

This had us inspired and buzzing all through lunch, another amazing sampling of Basque cuisine. I had steamed artichokes with a delicious sauce and braised pork, finished off with dark strong coffee and ice cream with slivers of dark chocolate.

The afternoon session featured a presentation of one of the students in MUNDUKIDE, a small overseas assistance program with the people of Mozambique, Brazil, Cuba and a few other countries. One discussion was largely about micro-loans, which weren't working very well, and another about road building, which was rather successful.

Our final session was with Fred Freundlich, the American professor, who was a veteran of the movements against plant closures in the US a few decades back, who now was a faculty member at the Mondragon University. Since he understood both our realities and those at the MCC, he could handle any outstanding questions.

There were a lot of them. The first was how much was the MCC's success a result of factors unique to the Basque Country. “It's somewhat important, but not decisive”, Fred answered. “One very important factor was it started at just the right time. If it had started 10 years earlier, conditions may have been too harsh. But the first co-ops were launched at a time when people really needed a lot of things, and finally had a little savings to spend. Many businesses grew in this period. If it started 10 years later, MCC may have had much stronger competition, and may not have gotten off the ground so well.”

I asked what was the response of the socialist and communist groups in the Basque County and Spain to MCC? “Mixed and confused”, was the answer. Some thought it utopian. Others dismissed it as a diversion, as making workers into capitalists. "But they still keep sending delegations for visits, and going away impressed", Fred noted. The Basque left also fragmented over violence, when ETA, the Basque armed resistance group, assassinated a former leader of one of the MCC co-ops who was also a socialist official.

After a thoughtful pause, Fred made a point that applied to the US left as well. “There are two trends in the left”, he explained. “Those who think long and hard about business and what to do with it. And those who mainly like to discuss left ideas.” The implication was that the two trends most often didn't overlap, even if it was wise to do so, both tactically and strategically.

Mikel brought the session to an end by asking us for ideas and projects we might implement after what we had learned. There were all sorts of plans in the works on the part of our group, from networking food co-ops, to producing new green products, to making a new film about Mondragon for a US audience. We had clearly all had our imaginations fired up by the experience. Mikel gave us each a certificate for completing a 40-hour study seminar, which was a lovely touch. But the truth was that most of us would need no reminder hanging on our walls. What we had learned here had changed us, in some ways deeply, and we would be looking at people and projects in new ways for some time to come.

[Carl Davidson is a national co-chair of the Committees of Correspondence for Democracy and Socialism, a national board member of the Solidarity Economy Network and a member of his local Steelworkers Associates. This article first appeared at Solidarity Net. It is posted at Links International Journal of Socialist Renewal with Carl Davidson's permission.]


Mondragon as a Bridge to a New Socialism: A review of five books


Worker-owner in Mondragon coop factory

The Mondragon Cooperatives and 21st Century Socialism

A review of five books with radical critiques and new ideas

From Mondragon to America: Experiments in Community Economic Development

By Greg MacLeod

UCCB Press, 1997

The Myth of Mondragon: Cooperatives, Politics and Working-Class Life in a Basque Town

By Sharryn Kasmir

State University of New York Press, 1996

Values at Work: Employee Participation Meets Market Pressure at Mondragon

By George Cheney

Cornell University Press, 1999

Cooperation Works! How People Are Using Cooperative Action to Rebuild Communities and Revitalize the Economy

By E.G. Nadeau & David J. Thompson

Lone Oak Press, 1996

After Capitalism

By David Schweickart

Rowman & Littlefield, 2002

Reviewed by Carl Davidson

Solidarity Economy Network

Something important for both socialist theory and working-class alternatives has been steadily growing in Spain’s Basque country over the past 50 years, and is now spreading slowly across Spain, Europe and the rest of the globe.

It’s an experiment, at once radical and practical, in how the working-class can become the masters of their workplaces and surrounding communities, growing steadily and successfully competing with the capitalism of the old order and laying the foundations of something new—it’s known as the Mondragon Cooperative Corporation (MCC).

Just what that ‘something new’ adds up to is often contested. Some see the experiment as a major new advance in a centuries-old cooperative tradition, while a few go further and see it as a contribution to a new socialism for our time. A few others see it both as clever refinement of capitalism and as a reformist diversion likely to fail. Still others see it as a ‘third way’ full of utopian promise simply to be replicated anywhere in whatever way makes sense to those concerned.

The reality of an experiment on the scale on Mondragon, involving more than 100,000 workers in 120 core industrial, service and educational coops, is necessarily complex. It can contain all these features contending within itself at once.

That’s what makes MCC a fascinating story where the final chapters are still being written. But one thing is clear: it continues to grow and provide a quality of life for a participant that is unique in its moral benefits and above average in its material standards. Hardly any concerned would give up their position in the project today for the options of the society around them, even if they are skeptical or dubious about various aspects of MCC’s current practices or future prospects.

One MCC worker, for example recently expressed some cynicism about the coops. “People once took them seriously, but not anymore,” she remarked. “You mean it doesn’t matter to you whether you work here or at a private company?” she was asked. “Of course it matters,” she replied. “Here I have job security, and here I can vote.”

If I had to single out one of the five books listed above to tell MCC’s story, it would be the first one, From Mondragon to America by Greg MacLeod, even if its title is a little misleading and its facts 15 years out of date. The reason? It goes deeply into the structures and values at the core of MCC, as well as discussing the philosophical thinking of its founder, Father Jose Maria Arizmendiarrieta, or known more simply as Father Arizmendi.

A Priest with a Philosophy

The story of Mondragon begins with Father Arizmendi’s arrival in the Basque country of Spain in 1941 following the defeat of the Republicans in the Spanish Civil War. The Basques has been a center of resistance to Franco and the area was devastated by the conflict. Most widely known was the bombing of the Basque city of Guernica, immortalized in the mural masterpiece painted by Pablo Picasso. Father Arizmendi himself had fought with the Republicans, was imprisoned and barely escaped execution.

As a young priest, he was assigned to the Arrasate-Mondragon region, which was suffering from high unemployment and other destruction in the war’s aftermath. Arrasate is the Basque name for the area, while Mondragon is the Spanish name—in any case, the industrial mountain valley received little or no help from the Franco regime and was the target of ongoing repression against the Basques, with the fascists trying to stamp out their language and culture as well as their political organizations.

In reorganizing his new parish, Arizmendi thus had to find a way for the Basques to help themselves. He started by forming a small technical school, and helped finance his efforts by convincing the local Basques with meager funds to form a small credit union. He also formed sports and other family-related organizations that could still allow people to gather under the legal restrictions of the fascists. In addition to being an organizer, Arizmendi was also a deep-thinking intellectual—all the while he was doing a thorough study of Catholic social theory, Marx’s political economy and the cooperatives theories of Robert Owen, the British utopian socialist.

Armed with these ideas, in a few years he selected five graduating students from his technical school and with donations and borrowed funds from the credit union, his team of young workers formed a small cooperative workshop, ULGOR, named from one initial of each of the five students’ names. It brought in about 20 more workers and started to produce a small but very practical kerosene stove for cooking and heating. The single-burner stove was much in demand and the coop thus thrived and grew. Today it’s called FAGOR, and its 8000 current employee-owners in several divisions produce a wide range of high-quality household appliances sold across the world.

But this small startup in 1956 contained the first secret of MCC’s success—the three-in-one combination of school, credit union and factory, all owned and controlled by the workers and the community. Starting a coop factory or workshop alone wouldn’t work; a startup also required a reliable source of credit and a source of skills and innovation.

Typically, an MCC coop is entirely owned by its workers—one worker, one share, one vote. Worker-owners get a salary that is a draw against their share of the firm’s annual profit, and is adjusted upward or downward at the end of the year. By Spanish cooperative law, a portion of the profits has to be turned over to the local community for schools, parks and other common projects, The remainder is set aside for the repair and depreciation of plant and equipment, health care and pensions, and emergency reserves, as well as the workers’ salaries.

Technically, MCC worker-owners are thus not wage labor, but associated producers. There is an income spread, according to skill and seniority, but this is set and modified by the workers themselves meeting in an annual assembly. The assembly also elects a governing council, which in turn hires a CEO and management team. Managers can be removed from their posts but worker-owners cannot be fired. New hires however, can be fired or laid off during their trial period—about six months. But when their trial period ends, they can buy into the coop. If they don’t have the funds for the value of their share—today about 3000 Euros—it’s lent to them by the coop bank, and they repay in small amounts over a few years. MCC coops typically have relatively flat hierarchies, and a much smaller number of supervisors compared to similar non-coop firms.

The Ten Principles

Father Arizmendi’s most important intellectual contribution to MCC, however, was the wider formulation of this structure into ten governing principles, which are firmly held and practiced throughout MCC. There is some flexibility around the edges, but not much. Here’s a brief description:

  • Open Admission: This means non-discrimination, that all are invited to join the coops—men or women, Basque or non-Basque, religious or non-religious, or from any political party or nonpartisan.
  • Democratic Organization. The principle of ‘one worker, one vote’ is the core here, but it also entails a wider participatory democracy in the workplace and engagement with the management team.
  • Sovereignty of Labor. This is the underlying core belief describing the overall relation between capital and labor, primarily that labor is the dominant power over capital, at least within the coops, if not fully in the wider local community.
  • Capital as Instrument. This is a corollary of the point above. It defines capital as an instrument or tool to be used, deployed and governed by labor, rather than the other way around.
  • Self-Management. This stresses the importance of training worker-owners not only to better manage their work on the assembly line, but also to train those elected to the governing councils or selected for management teams to have the wider educational background to steer the cooperatives strategically in the wider society and its markets.
  • Pay Solidarity. Here is where the worker-owners themselves determine the spread between the lowest-paid new hires and the top managers, with various skill and seniority levels in between. Originally it was set at 3 to 1, but that was adjusted because it was too difficult to retain good managers. Today the average is 4.5 to one, compared to 350 to one as the average for U.S. firms. The highest single coop’s range is 9 to one, and only exists at Caja Laboral, MCC’s worker-owned bank.
  • Inter-Cooperation. This encourages the various coops to cooperate with each other, forming common sectoral strategies, or for transferring members among coops when some firms’ orders are temporarily too low to provide enough work.
  • Social Transformation. The coops are not to look inward and operate in isolation from the community around them. They are to make use of cooperative values to help transform the wider society. In the Basque Country, for many this means seeing MCC’s growth as developing a progressive economy for Basque national autonomy and independence.
  • Universal Solidarity. The coops are not only to practice solidarity within themselves, but also with the entire labor movement—and not only in Spain, but across the globe as well. MCC has several projects abroad providing assistance in remote areas of third world nations.
  • Education. Just as the first coop was preceded by starting with a school and forming a cadre with a cooperative consciousness, MCC continues to hold education as its core value, seeing knowledge as power—and the socialization of knowledge as the key to the democratization of power in both the economy and the society.

In shaping these principles, Father Arizmendi also discovered what he believed was a fatal flaw in the cooperative theory of Robert Owen, which was the ability of an Owenite worker-owner to sell his or her share to anyone. This permitted external financiers to buy up the shares of the better firms while starving others. Thus in MCC, this is forbidden; a retiring worker may ‘cash out’ on leaving the coop, but he or she is not allowed to sell the share to anyone but a new incoming worker, or to the coop itself to hold until it does. This kept MCC’s capital subordinate to its workers, and is a second secret to its success.

Most of all, these principles have meant that the MCC workers retained control over their own surplus value, using it to provide themselves a modest but above-average standard of living while using their resources for measured and planned growth.

Mondragon has come a long way from ULGOR, the small workshop making the little single-burner kerosene stove. Today MCC unites 122 industrial companies, 6 financial organizations, 14 retailers (including the Eroski chain with over 200 hypermarkets, supermarkets and convenience stores), plus seven research centers, one university and 14 insurance companies and international trade services. Its total sales in 2009 were 13.9 billion Euros and a workforce of nearly 100,000 people.

Less than six of the 120 coops have failed over 50 years. In the most recent economic crisis, MCC weathered the storm fairly well. No coop failed, salary reductions were modest and the only workers laid of were the trial-period new hires. Now things are picking up again. MCC remains a dominant force in the Basque economy, the leading force in Spain overall and is now making waves in high-tech manufacturing worldwide.

Cooperativism and Trade Unionism

What about Mondragon’s wider connections with the Basque and Spanish trade union movement outside the coops? Where do the various parties of the Spanish and Basque left come in?

For some answers to those questions, at least as things were in the mid-1990s, the best treatment is in Sharryn Kasmir’s The Myth of Mondragon. As a sociologist who spent some time in the Basque country, she took great pains to try to discern how workers themselves, inside and outside the coops, viewed MCC. At bottom, she would agree that the MCC workers, whatever criticisms they may have, would not readily trade places with their counterparts outside. She would also agree that the coops have become a powerful and progressive economic force in the Basque country. But in the end, these ‘pragmatic’ concerns are not hers; she wants to view MCC through the more traditional ‘ideological’ lens of the left.

Kasmir place high priority, for example, on trade union militancy and solidarity and examines and celebrates its history in the area in some detail. The Basque are best known for their high-mountain shepherds but they have a long industrial tradition in the valleys and coastal towns, especially in iron and metalworking. The workers in these areas like the Arrasate-Mondragon valley formed trade unions early on and have a tradition of solidarity across industries and trades, often shaped in a lively night life in bars involving entire families.

Kasmir does an excellent job digging out this history and showing how it continues. She also reveals, however, that some of the level of its traditional expression has dropped off in the areas where the Mondragon Coops are prevalent. The MCC worker-owners, she notes, are viewed by other workers as ‘working too hard’ and spending less time in the bars in political discussion. Moreover, when strikes are called and other workers are asked to strike in solidarity, the MCC workers only offer a token presence, or don’t show up at all.

“Ekintza, the Basque concept of ‘taking action,’ is a core cultural value,” Kasmir argues. “Basque towns are centers of political activity. In Mondragon, political discussion takes place in bars, demonstrations are frequent, and town walls are covered with posters, murals and graffiti, making them dynamic arenas for political debate. Far from generating ekintza among workers, however, cooperativism appears to engender apathy.” (p. 195)

Finally, Kasmir gives an example of a small group of young Maoist workers in the ULGOR plant that tried to strike the coop in the 1970s, but failed to win much support. They were expelled from the coop by the other worker-owners, although, after a few years, a good number were brought back in. It was the only strike in all of MCC’s 50 year history although there have been other conflicts over regionalism and inter-cooperation where a few coops split off.

Kasmir seems to hold to a traditional left view that the task of the left is to organize increasing on-the-job militancy while building one’s strength in the political area with socialist political parties, and to work both the arenas of elections and other mass action campaigns. And as she correctly observes, MCC doesn’t fit this mold.

Class: Looking Forward, Looking Back

What Kasmir glosses over or misunderstands, however, is that there is indeed a critical difference between the workers in MCC coops and workers in other firms. The most important, already mentioned, is that MCC worker-owners are not wage-labor, but associated small producers. Most MCC firms are under 500 workers and many quite smaller. Second, the MCC firms are not owned by an external force alien to their production process. The managerial strata and the workers representatives in the governing councils have the same single ownership share and vote as everyone else.

In other words, when workers in a regular firm go on a sympathy strike, they hurt or pressure the interest of external bosses; but when MCC workers go out, they only subtract from their own material interest. They may do so anyway as a matter of solidarity, much as a small store owner may close for the day of a political strike, but the structure of interest is clearly different than the wage-laborer. Likewise when MCC worker-owners spend more time at work, or attending school or training sessions after work, subtracting from time spent in the bars—they are contributing directly to their coop’s growth and their own benefit as well, where on the other hand, forced overtime in a regular firm primarily benefits an external owner.

So the interesting question Kasmir leaves unanswered is whether the class position of the MCC worker-owner is a step backward to a petit-bourgeois past or a step forward to a worker-controlled mode of production of a socialist future. Given the overall picture of MCC’s successful growth since the time of her writing, the latter seems the better answer.

Democracy: Representative and Participatory

But do the MCC firms’ internal practices still stand as well-functioning examples of direct and participatory democracy in the workplace? Kasmir suggests they are not; that they are simply run by the managers and the rest is pro forma. But her ideological presumptions miss a great deal here that is much better treated in George Cheney’s book, Values at Work: Employee Participation Meets Market Pressure at Mondragon.

Cheney is both more in solidarity with the Mondragon project and in some ways, more critical of it at the same time. His criticisms, however, come largely from within. He holds up MCC’s own values as a mirror to its practice, and then examines the realities.

During a recent study tour of MCC, for example, my group had a session with Fred Freundlich, an American who hade been living in the Basque Country for more than a decade and teaching economic theory at MCC’s Mondragon University. We asked for his opinion on how involved the younger MCC workers were with their own governance in the coops.

“Frankly, Basque youth aren't all that active inside the coops. They're into third world global justice issues, environmentalism in general and Basque nationalism. About the coop managers, I'd say a strong minority, maybe 30 percent, have solid cooperative values at heart, another small minority pays lip service to them, and the rest are somewhere in between. We clearly need a new surge of activism to spread cooperativism beyond the factories.”

The highest governing body of each coop, and MCC overall, is its General Assembly or Congress. The average participation is around 70 percent, and attendance is required. (One absence results in a warning; a second results in a fine to be paid.) Issues decided are important, such as overall salary spreads, strategic direction of products and the election of leadership.

“The General Assembly of worker-members is the highest authority in each company,” explains Freundlich in his 1998 paper, MCC: An Introduction.  “It must meet at least once a year to address company-wide concerns (though it often meets twice).  The General Assembly also elects the company's Board of Directors and a President of the Board for four-year terms, based on the principle of one-member one-vote.  The Board appoints the chief executive and must approve his or her choices for division directors. 

“A Social Council,” Freundlich continues, “is elected by departments to represent front line workers' interests and to help promote two-way communication between management and workers.  Pay solidarity and the distribution of profits to all worker-members, as described previously, are other important cooperative policies.

“While the MCC has its share of workforce controversy and apathy,” he concludes, “and perhaps more today than 30 years ago-these structures and policies have contributed to fairly high levels of commitment to the business and to the cooperative idea, which in turn, many believe, have provided Mondragon firms with a difficult to measure, but nonetheless real, competitive advantage over its conventional competitors.”

Other studies of various MCC components, such as Eroski, have placed the average quantifiable advantage self-management has given MCC coops over non-MCC firms in the marketplace at 15%.

“If one enters a Mondragon factory,” writes George Benello in the magazine Reinventing Anarchy Again, “one of the more obvious features is a European-style coffee bar, occupied by members taking a break. It is emblematic of the work style, which is serious but relaxed. Mondragon productivity is very high—higher than in its capitalist counterparts. Efficiency, measured as the ratio of utilized resources (capital and labor) to output, is far higher than in comparable capitalist factories.”

Changes, Large and Small

As for shifting attitudes, Basque society itself has seen major changes over the past 30 years. “Such changes are revealed, for example,” says Cheney, “in the dramatic drop in attendance at Mass in the Basque country, from about 75 percent in 1975 to less than 25 percent today.” (p. 56). What this shows is the Basques were not immune to a weakening of traditional ties and the growing secularism and consumerism prevalent in Europe.

Even so, there is still a considerable degree of participation and debate at the base of the MCC coops, even if it doesn’t take the forms or rise to the level those on the governing councils or management teams would like to see. One ongoing debate is over the salary spread between managers and production workers. According to Wikipedia:

“At Mondragon, there are agreed-upon wage ratios between the worker-owners who do executive work and those who work in the field or factory and earn a minimum wage. These ratios range from 3:1 to 9:1 in different cooperatives and average 5:1. That is, the general manager of an average Mondragon cooperative earns 5 times as much as the theoretical minimum wage paid in his/her cooperative. This ratio is in reality smaller because there are few Mondragon worker-owners that earn minimum wages, their jobs being somewhat specialized and classified at higher wage levels.[10]

“Although the ratio for each cooperative varies, it is worker-owners within that cooperative who decide through a democratic vote what these ratios should be. Thus, if a general manager of a cooperative has a ratio of 9:1, it is because its worker-owners decided it was a fair ratio to maintain.[10]

“In general, wages at Mondragon, as compared to similar jobs in local industries, are 30% or less at the management levels and equivalent at the middle management, technical and professional levels. As a result, Mondragon worker-owners at the lower wage levels earn an average of 13% higher wages than workers in similar businesses. In addition, the ratios are further diminished because Spain uses a progressive tax rate, so those with higher wages pay higher taxes.”[10]

Another key tension and debate arose in the 1990s, when Mondragon transformed itself from a federation of coops loosely connected through their ‘second degree’ coops—the bank, the social insurance agencies, the university and research institutes—into MCC with its ‘sectoral’ structures—industrial, financial, retail distribution and knowledge. The more centralized and unified structure enabled Mondragon’s management teams to develop and pursue common strategies to better compete collectively with their rivals in the marketplace.

While this relatively greater degree of centralization proved very successful, it also increased market pressures on the individual coops in the form of intensity of work and speed of innovation. ‘Finding the balance’, explains Cheney, is the key term used to resolve differences.

Prospects for Coops in the U.S.

Can an experiment like Mondragon find fertile ground in the U.S.? This is a topic addressed in Cooperation Works! How People Are Using Cooperatives to Rebuild Communities and Revitalize the Economy by E.G. Nadeau and David J. Thompson. This work offers a survey of some 50 cooperative ventures in twelve different areas of the U.S. society, both historical and current—including agriculture, housing, business purchasing coops, credit unions, social services and power utilities—as well as worker-owned industrial coops.

The authors reveal two key points. The first is that cooperatives have a long, rich and varied history across the U.S, ranging from wheat farmers banding together to manufacture and market their own pasta products, to home health care providers building their own company to provide decent wages and benefits in an occupation that often suffers from poor conditions. The second is that none of these 50 case studies, successful or unsuccessful, has followed the Mondragon model of a three-in-one combination of school, credit union and factory—even though in a number of areas these three components exist nearby each other. (The book’s appendix lists the top 100 coops in the U.S. which is quite useful.)

That doesn’t mean some of these coop ventures aren’t doing well or breaking new ground. The Cooperative Home Care Associates, based in the Bronx, NY, has grown to include more than 1600 worker-owners, and vastly improved the lives of the mainly Black and Latino women workers involved.

“By transforming part-time home care jobs into full-time positions,” states board member Kim Alleyne, “CHCA differentiates itself from other firms in New York City's home care industry. Specifically, we invest significant capacity in scheduling our home care workers for at least 30 hours each week …. We also allocate 80 percent of our total revenue to the wage and fringe benefits costs of our home care workers - including a comprehensive health and dental insurance benefit that does not require a financial contribution from employees. 

“We also offer our home care continuing education with many opportunities to accumulate assets, including worker-ownership, through which employees can accumulate a $1,000 equity stake in CHCA and receive dividends based on our annual profits, an employer-contribution to their 401(k) account in profitable years; and as an alternative to predatory payday loans, CHCA offers no-interest loans that average $250. We also encourage workers to create savings and checking accounts, instead of relying on expensive check cashing services.”

For another interesting example, one can look to California’s Bay Area. Here Cheeseboard Pizza and five other bakeries have formed a networked cooperative of Arizmendi Bakeries. With some 200 worker-owners, they produce baked goods combined with retail eateries that keep winning prizes for the best foods and best places to eat in the area. Even though the scale is small compared to MCC in Spain, they also include in their network one ‘second degree’ coop that helps them all with financial services.

In North Carolina, however, a project called the Center for Community Self-Help, started by Martin Eakes and Bonnie Wright, highlighted a core problem. They retrained workers displaced by plant shutdowns, and hoped to help them form coops. Cooperation Works!... explains:

“Eakes and Wright discovered that the engine that gave Mondragon its power was missing in North Carolina and was stalling the development of worker coops. That element was access to capital. For the Mondragon Cooperatives, the Caja Laboral (or ‘Workers Bank’) furnished the necessary capital to launch successful ventures. Thus Eakes and Wright concluded their next step was to create a Caja for North Carolina.”

So that’s exactly what the couple did. Starting with a bake sale, within three years they formed the Self-Help Credit Union with several million dollars in deposits from area churches and government grants. In another seven years, this had launched new businesses with some 4000 jobs and 2000 child care spaces.

Cleveland, Ohio has a similar story. The Cleveland Foundation and other nonprofits for years had been repeatedly funding job training programs for the long-term unemployed in low-income neighborhoods, only to find that their newly certified workers still couldn’t find employment. Finally, a core group of funders and allies made the trek to Mondragon, and was inspired on their return to form the Evergreen Cooperatives, with local colleges serving as schools and the foundations serving as sources of startup capital.

Three businesses are now underway: Evergreen Cooperative Laundry, an industrial-scale operation doing laundry for major medical centers nearby; Ohio Cooperative Solar, which leases urban business rooftops and installs solar arrays, providing electric power to the region’s grid; and Green City Growers, and industrial-scale urban agriculture venture producing fresh produce for local markets and restaurants. A dozen more coop businesses are on the drawing boards.

Another project, in Chicago decided to follow Father Arizmendi’s model closely, and started with the design and organization of a new public school in a low-income neighborhood, Austin Polytechnical Academy. With ideas of worker participation and worker ownership built into the school’s mission and curriculum, it will graduate its first class of students with high-tech manufacturing skills in 2011. The school was developed with partners from area trade unions and some 20 high-tech manufacturing firms. A number of the students have gone to Mondragon on study tours.

Agreement with the Steelworkers

What gave a national focus to all these efforts was a recent decision by the United Steel Workers, one of the largest industrial unions in the U.S, to declare a formal partnership with MCC to try to establish worker-owned enterprises in depressed Rust Belt regions. This was soon followed by a similar partnership declaration between MCC and the City of Richmond in the Bay Area to launch a similar effort.

The U.S., of course, continues to face dire economic conditions. Bank credit is difficult to obtain and unemployment is near 10 percent. Government at every level, blocked by a neoliberal budget-cutting resurgence, is slashing funds for community and small business development in favor of tax breaks for the superrich.

This manufactured austerity is a two-edged sword as far as coops are concerned. One edge is that there is little help coming from government which makes new ventures very tough. The other edge is that the solidarity economy, of which MCC is a mother lode of ideas and experience, emerges precisely when government fails and people have only each other to turn to for mutual aid. The harsh conditions become a spur to radical experiments and strategies for structural change.

This is where the last of these five books takes center stage, David Schweickart’s After Capitalism. In this short but lucid book, Schweickart draws on his earlier studies of workers control in Yugoslavia and his own experiences in Mondragon and elsewhere, and raises all of these to a wider working hypothesis for a new socialism for the 21st century. He calls his effort ‘successor-system theory’ and names its project ‘Economic Democracy.’ The core idea is that the workers themselves democratically elect the managers of their firms, which are either leased from the government collectively or owned cooperatively outright. They also share the wealth they create by sharing the profits among themselves. They make their money the old-fashioned way: by finding consumer needs, meeting those needs with decent products, and selling them to satisfied customers at reasonable prices.

We can see the Mondragon model here, but painted on a much wider canvas of an entire nation’s economy. Schweickart’s theory is one of the main variants of what is called ‘worker controlled market socialism,’ and his task in this work is not so much to tell us how to get there, but how it can work once we do get there.

The heart of his argument rests on dividing markets into three—capital markets, labor markets, and markets in goods and services. Capital markets he would abolish or at least severely restrict by government buyouts or takeovers of major banks and corporations in a time of crisis and turning them into public asset funds. Labor markets he would drastically change or restrict by vastly reducing wage labor, turning most workers into owners or leaseholders of their factories. Workers each have one equal vote, and elect their managers. Markets in goods and services, however, would remain, although regulated for ecological sustainability and other matters related to the common good.

Mondragon as a Bridge to Socialism

Even if the Mondragon cooperators themselves don’t speak directly of wider socialist theory, Schweickart does it for them in this work. “The Mondragon complex did not develop as a purely pragmatic response to local conditions,” he explains. “Arizmendiarrieta was deeply concerned about social justice and explicitly critical of capitalism, basing his critique on progressive Catholic social doctrine, the socialist tradition, and the philosophy of ‘personalism’ developed by Monier, Maritain, and other French Catholic philosophers. He was critical of Soviet state socialism and certain elements of the cooperative movement itself. He was particularly sensitive to the danger of a cooperative becoming simply a ‘collective egoist,’ concerned only with the well-being of its membership.”

Schweickart goes on to note the problems of conflict, tension and abstention from participation within the MCC coops mentioned by both Kasmir and Cheney. But he draws this conclusion:

“The presence of worker alienation and of certain practices that cut against the grain of Arizmendiarrieta’s vision should not blind us to two striking lessons that can be drawn from the economic success of Mondragon. First, enterprises, even when highly sophisticated, can be structured democratically without any loss of efficiency. Even a large enterprise, comparable in size to a multinational corporation, can be given a democratic structure.

“Second, an efficient and economically dynamic sector can flourish without capitalists. Capitalists do not manage the Mondragon cooperatives. Capitalists do not provide entrepreneurial talent. Capitalists do not supply the capital for the development of new enterprises or the expansion of existing ones. But these three functions—managing enterprises, engaging in entrepreneurial activities, and supplying capital—are the only functions the capitalist class has ever performed. The Mondragon record strongly suggests that we don’t need capitalists anymore—which, of course, is the central thesis of this book.”

What Schweickart is doing, of course, is dispensing with all the usual arguments capitalist apologists circulate among average workers as to why socialism can’t work. In addition to the intellectual arguments, he simply points to Mondragon, which continues to move forward as the living example of another path. In this sense, what the MCC worker-owners have established is a bridge to a small fortress that serves as a foothold in the future, a powerful example of one not-so-small victory in a Gramscian ‘war of position.’

To a certain extent, many of the MCC workers and managers would agree. MCC itself is officially ‘nonpartisan,’ meaning that it’s not tied to any particular Basque or Spanish political party.

But this does not mean ‘anti-partisan.’ MCC works with a number of socialist and Basque nationalist parties and officials to build up the economy and educational planning infrastructure of Euskadi, the Basque name of their ‘Basque Country,’ for which they are working for a high degree of regional autonomy, if not national independence. In the MCC coops, the workers belong to a range of socialist, communist and Basque nationalist groups ranging from left to center. There have been sharp differences between socialists and some of the more militant nationalist groups in the recent past, but today, the trend is for a wider popular unity and a cessation of any violence.

Not all cooperatives are on the left, of course, and not only in Spain, but elsewhere, including in the U.S. Nor are those that do have progressive politics at their core the only examples of strongholds that can be won in the ‘war of position.’ There are many other ‘strong points’ in need of multiplying and growing—progressive trade unions and labor councils, community-driven schools and civic organizations and coalitions, and, naturally, progressive political organizations and parties rooted in working-class communities. These are all organizational instruments for a range of tactics that will be required in different phases and a variety of fronts in class struggle and popular democratic campaigns. What Mondragon has done for us, however, is to make a major breakthrough in both theory and practice and bring it to scale as a powerful example of what can begin to happen when ‘labor is sovereign’ in a new socialism for a new century.

[Carl Davidson is a national co-chair of the Committees of Correspondence for Democracy and Socialism, a national board member of the Solidarity Economy Network, and a member of Steelworker Associates. He is also the co-author, with Jerry Harris, of CyberRadicalism: A New Left for a Global Age, at His email is carld717@gmail, and he is available to speak on Mondragon.]

Can co-operatives humanize our economy?

The Progressive Economics Forum aims to promote the development of a progressive economics community in Canada. The PEF brings together over 125 progressive economists, working in universities, the labour movement and activist research organizations. Visit the blog here:

By Marc Lee

April 14, 2011

The economy is about business, right? Sure, we have a dynamic mixed economy, and most people support decent social programs and government intervention to protect the environment or to improve living conditions for the poorest. In fact, the countries who have the biggest public sectors not only do better on social outcomes but also tend to be the most competitive, when ranked by organizations like the World Economic Forum.

Still, the commonly accepted framework is that any positive things from government can only happen on the back of a successful market (that is, capitalist) economy. So we are often chastened by stern voices representing business that we ought to be careful not to "kill the goose that lays the golden eggs." As much as we seek to make the world a better place, we have to accept runaway CEO salaries, fossil fuel addiction, financialization and tax cuts as preconditions for doing good.

One way out of this is to change the game by not ceding business as purely the sphere of capitalist enterprise. John Restakis reminds us in his book, Humanizing the Economy: Cooperatives in the Age of Capital, that when it comes to business, capitalism isn't the only game in town. Indeed, at a time when inequality has reached alarming proportions (and the looming policy agenda promises to make them even worse) and climate change points to wrenching challenges for human civilization, we need a big break from business-as-usual.

"Co-operatives," says Restakis, "are enduring evidence of another way of living our lives." His thesis is that cooperatives show us an alternative model of economic and social exchange based on co-operation and reciprocity. It is a very different path from the standard polarity between business and government, "a middle path that avoids the extremes of market rejection on the one hand (as in the case of Marxism) and the unbridled power of capital as expressed in neoliberalism on the other."

Humanizing the Economy is a profoundly readable and accessible book in spite of its sweeping scope. Co-operatives read like a forgotten chapter in our economic history. I found the early part of the book, in which Restakis reviews the intellectual and practical history of co-operatives as a reaction to the excesses of early capitalism, particularly fascinating.

In the 20th century, trade unions and public ownership have gotten more attention in Canadian political economy, and their impact is still manifest today as a means by which inequality is reduced and other broader social objectives achieved. That these acts reduce the massive slice of the pie going to the very top earners and owners explains why they have been under attack federally and provincially (and worse, south of the border). The other grand narrative of the 20th century -- revolution -- used to be galvanizing to working classes and compelling to idealists, but seems officially dead in the wake of failures of Soviet Russia.

Restakis points out the quiet and incremental revolution represented by the co-operative movement, which has emerged as a counter-force to capitalism in its own right, claiming 800 million members across 85 countries. By documenting the steps from early history of co-ops to modern examples in different industries and different parts of the world, Humanizing the Economy provides a long list of "yes, we can" case studies of the co-operative form, showing its versatility across different contexts. If we were to include the not-for-profit sector this scope of non-capitalist enterprise is greater still.

The promise of cooperative institutions reaches beyond profits for a shrewd and small minority of investors to democratizing the production system, and in doing so rebuilding the very social capital that capitalism erodes. Agriculture was central to early co-operatives. There is a long history of farmers' co-ops, supply management practices and marketing boards in Canada, and not only that they have been very successful in response to a ruthless free market more inclined to leave farmers bankrupt.

But co-ops can exist in pretty much any sector, from housing to car-sharing to outdoor equipment (MEC) to financial services (credit unions). They are just another way of organizing in order to produce things of value. Co-ops are of the marketplace, but transcend the atomized producer-consumer model we see in economics textbooks by creating new nodes of market power based on the mutual interests of many members. The book covers a diverse range of examples, from major industry to social care services to consumers to sex trade workers to fishers, each with the common element of people joining together to find economic strength in numbers.

Perhaps one area that needed more attention in the book is around finance and banking. Co-operative credit is peppered throughout the book in the context of the various co-ops in different locales, but hammering the point home with a review of credit unions would have been nice. Take Vancity credit union as an example (one conspicuous by its absence since Restakis hails from Vancouver). Serendipitously, I just opened up my member package that gives me a vote in the upcoming board elections. In the package the latest financials show that Vancity has $14.5 billion of assets, more than $12 billion of which are loans, mostly mortgages. The credit union charges competitive interest rates, and the profits go back to members (the total membership equity in the credit union is $770 million), not distant shareholders only concerned about stock value. If Vancity disappeared, the flow of funds to Bay Street would be noticeable.

So now is a great time for the entrepreneurial, socially-minded and environmentally-conscious folks to develop networks to reclaim economic space from global megacorps and put it back in the realm of local people. With any luck, they'll be popping up like mushrooms. Co-ops thus offer us a new chance to reinvent citizenship as mutual co-owners of enterprises that meet our collective needs, "firing the boss" as Naomi Klein and Avi Lewis put it in their movie, The Take.

But how this will all come about is a question I'm left struggling with. It requires precisely the entrepreneurial spirit of small business, but harnessed in a different direction. In addition, there are many co-ops that struggle to make things work. We are part of a consumer co-op, Neighbours Organic Weekly, that connects to local farmers but through bulk purchasing supplies lower cost organics. The co-op is viable, but has not experienced surging growth in membership. How can such co-operative models be scaled up?

The most successful co-operative economy model in advanced economies is Emilia-Romagna in northern Italy. Restakis's review of the region's history is lively and fascinating, but also raises some key challenges for co-ops. First, there is historical inertia as a barrier to change. How easily replicable is a regional economy like Emilia-Romagna to a province like B.C.? Co-ops arose in Italy out of a distinct time and circumstance that cannot be easily replicated in other jurisdictions (just as public auto insurance, ferries and electricity did in B.C.). Secondly, does scaling up change the nature of the exercise. One challenging example Restakis gives is SACMI from Imola, Italy. It is a dominant player among regional co-ops, and with "control of 60 capitalist firms, 37 of them abroad, and sales in 100 countries." This fusion of co-op and capitalist is not what we might normally think of. This co-op provides employment for 5,000 workers, but has only 390 co-op members. It reads almost like a law firm, where some workers eventually can make it to become partners.

Just keeping the idea of co-ops alive is an important contribution of Restakis's book, so that when the circumstances present themselves people can self-organize. It would be fascinating to think about what a legislative agenda supportive of co-ops could look like, especially in areas like food and energy, where we are likely to want greater insulation from climate impacts. Restakis's thoughts on how that could happen, given the urgency of change we need in our economy, would be welcome.

Humanizing the Economy plants some seeds of radical change. If nurtured by enough of us, a co-operative economy could be a new model for how we do business in the 21st century, although non-profits and public enterprises would be part of the world I envision. Small and large businesses will inevitably have a role to play, too, but to the extent that a co-operative model can democratize key parts of the economic system, and remove the absentee shareholders of megacorporations from the picture, it could drive a huge improvement in developing an economic system more aligned with good social and environmental values. Restakis tells us it is possible, and though we still need a strategy and a roadmap, he should be thanked for lifting the veil of narrow economic debates and showing us that "business community" need not be an oxymoron.

This article was first posted on The Progressive Economics Forum.

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