Inštitut za ekonomsko demokracijo

The Mondragon co-operative miracle

Author: Elena Galevska

The Mondragon co-operative miracle

The fact that an ordinary group of blue-collar workers has been able to establish the socio-economic empire that is Mondragon, in the hostile environment of a post-war capitalist world is truly a miracle. Politicians, managers, and students come from all over the world to visit the Spanish valley that makes headlines even in times of crisis.

The first co-operative was established by Jose Maria Arizmendiarrieta, a priest who came to Mondragon just after the Spanish Civil War, in 1941. At the time, everything was gone, there were no companies, and poverty ruled with the region. There, he unfolded his ideas of a just and fair society. Of course, changing society created conflicts. Jose Maria was a hot-tempered man who got in trouble with various people and the establishment in his day. But he was also a man of great moral authority, who inspired the mass’ way of thinking in a subliminal way, without anyone noticing. Being such an influential person, he managed to set the foundations of today’s complex co-operative world.

The Mondragon group consists of 120 cooperatives, 87 of which are industrial co-operatives, 14 centers for innovative research and development, 8 educational co-operatives (among which the primary school in the region as well as a university), then 4 small agricultural co-operatives, 5 services co-operatives (engineers, advisers, caterers, etc.) and there are also a credit co-operative and a consumption co-operative. Over the years, co-operatives have been established for just about everything the locals need: from wooden spoons, railroad bridges, airbags, night-glasses, Olympic racing bikes… you name it, they produce it. All of these companies are owned by their employees and there are no other investors.

The co-operative ways are taught in schools, and everyone is familiar with the way they work. The university supports the co-operatives and is often creating new ones because it serves as an R&D department for all co-operatives, where students come up with new ideas, new products, and even new businesses.

I don’t want to own a big company with a lot of employees. Participating in one is better than establishing one. I want to work in a group and focus on a project that we all vouch for. I don’t want to be a businessman. I work with like-minded people. We believe that when we turn our passion into our work, any profit is a kind of compensation. Money is a tool for further growth, not a goal in itself.

The credit co-operative, i.e., the bank Caja Laboral, was established as financial support to build new co-operatives and improve existing ones. All the new co-operatives had the solidarity principle in their DNA. Some co-operatives work in industries that do well, while others are not doing so great, but the money is managed collectively. They help each other with money and it is due to this mutual support that they are much more resilient and able to compete. That’s why they expect to have no money problems in the 21st century, provided there is no natural disaster. The fact that 90% of the profit is reinvested in the company guarantees a secure future. The bank, too, goes for security, not for profit.

However, the 2008 crisis didn’t spare the co-operatives. Although the financial decisions at the bank weren’t risky hence things didn’t go as bad as they could, some co-operatives were hit hard. Representatives of each department are informed on the co-operative performance every month so that they can learn fast and think about what should be done. Nonetheless, the 2008 crisis was a major one, and sacrifices needed to be made. Drastic measures such as abolishing extra dividends and lowering wages were taken but laying off is never an option. Since people cannot be fired, some must be moved to other co-operatives that are doing well. This is called co-operative solidarity.

The company is its workers, after all. When things look bad, solidarity and hard work can make the difference when coping with a crisis. You just tackle the crisis differently. It’s different from a capitalist system, where the owner controls everything and leaves when things are bad. In co-operatives, when business is good, you can reap the benefits and share in the profit. But when it’s bad, everyone has to contribute. That’s how co-operatives work.

Some regard co-operative system as the third way – a way between neoliberalism and the totalitarian communism of the olden times. Neoliberalism, with workers having no say and the big money in control of the few is not a solution.

So, what is? Having everyone participate.

Everyone who works in Mondragon is also a member of the cooperative and so a co-owner of the company. Everyone is an equal partner, and they all have invested their personal capital in it to become partners. The way it works is rather simple: new members buy themselves into the company. The rate in 2012 was 15,000 EUR in installments, which members get back, with interest, when they retire.

A job with the co-operative is a job for life. You always work for the benefit of the people of Mondragon. The co-operative movement of Mondragon makes people committed to their work. Mondragon has a population of 24,000 people but they are all acquainted.

For a long time, the Basque Country was synonymous with bomb attacks, and it was a place to be avoided. Since the second half of the 20th century, the Basque people have been very focused on their desire to take their destiny into their own hands. This explains the urge for freedom and for economic independence, hence the growth of the co-operative system. Today, the Basque region is admired for its social model. None of the co-operative members want to be passive objects of the destiny – instead, they want to be self-governing and be in command of their own life.

The co-operatives have proven to generate a more sustainable development than any other business. They remember what the pioneering priest often said It’s a sign of vitality not to stand still but to be reborn and to know how to adapt to new circumstances.

The UN declared 2012 the International Year of the Cooperatives and the governments went to work to promote them. After being helped by the American government to avoid bankruptcy, General Motors is also considering the idea of maybe turning their company into a co-operative.

So, is Mondragon’s miracle really a miracle? Or can this socio-economic model be suitable for our future too?

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