A critical analysis of the strengths, weaknesses and potentialities of the model
11 / 2008
Many people are aware of Mondragon, often flaunted as the prototype of a successful industrial co-operative, in a world where the co-operative model is more generally identified with the agricultural or services sectors.
In 1941 Don José Arizmendiarrieta arrived in the small town of Mondragon, situated in the heart of the Spanish Basque country. In 1943 he founded the professional polytechnic school, followed some ten years later (1956) by the first co-op, ULGOR where the FAGOR brand of white goods is manufactured. Three years later, the Caja Laboral, a co-operative bank and Lagun Aro, the in-house welfare system, came into being. The first co-operative group (ULARCO-FAGOR) was born in 1964, followed two years later by one of the more innovative aspects, ALECOP, a plant where part-time jobs are reserved for students in order to enable them to earn a living while studying. It should remembered that Spain, and this region in particular, was still extremely poverty-stricken at the time, and still recovering from the Civil War. In 1974 a research centre was born, and progressively the vast empire of what is now the Mondragon Co-operative Corporation developed. The present form was designated by the Mondragon Congress of Co-ops in 1991.
What is Mondragon today and how does it operate?
Mondragon today is indeed an empire, comprising something over 103,000 people, 120 co-operatives, in the fields of products ranging from industrial, financial, consumer goods, agricultural, educational, research and welfare services. The 69 production plants are situated in many countries around the world, and are not all co-operatives for reasons explained below. In the co-operative Supermarket, EROSKI, the members include consumers. The representation in all the Co-ops also includes a health and safety Committee.
According to the mission statement:
Mondragón Co-operative Corporation (MCC) is an entrepreneurial socioeconomic entity with deep cultural roots in the Basque Country, created by and for the people, inspired by the Basic Principles of our Co-operative Experience, committed to the community, to the improvement of competitiveness and to the satisfaction of customers, to create wealth within society through entrepreneurial development and job creation, preferably membership-jobs in co-operatives.
MCC is based on a commitment to solidarity and uses democratic methods for its organisation and management
MCC encourages the participation and integration of people in management, profits and ownership of their companies, to develop a joint, harmonising project aimed at social, business and personal development.
The 10 Founding principles of co-operation:
1. Open Admission
2. Democratic Organization
3. Sovereignty of Labor
4. Instrumental and Subordinate Nature of Capital
5. Participatory Management
6. Wage Solidarity
7. Inter co-operation
8. Social Transformation
The price of buying into the co-operative system is fixed at 14,000€, which is withheld from salary over a period of time. Being a member of one of the group’s co-ops entitles all members to an equal share in 20% of the corporation’s surplus. Other benefits include the automatic admission to the in-house welfare system (additional health-care and retirement benefits, preferential loan rates…), and relative job security. The level of life-long training and education is also high, following the 10% national requirement. Access to the technical university, management and language training centres is also guaranteed.
The first positive fact is that in spite of being a multi-national corporation, there have been no delocalisations in the various co-operatives in Spain and the Basque country (Industry, supermarkets, research centres, bank branches and provision of services, 90% of the staff are members of co-ops). The remaining staff (often less than 5%) also have some measure of flexicurity. In 2007, 10 co-ops made a loss. In 2008 this is expected to double, so this will be a key issue in the near future. Various for-profit companies are in the process of becoming co-ops.
What are the strengths and also the weaknesses of the model?
I tried to examine the way in which these principles were implemented in terms of the solidarity economy, which aims to create a more collective form of wealth and well-being, and to see how or whether a multinational corporation could serve the interests of local communities and people.
When faced with the tricky question on the sourcing of products, particularly in the EROSKI supermarkets, knowing how intensive agriculture in the south of Spain is often practiced in conditions that are the modern-day equivalent of slavery, I learned that the chain has had SA 8000 certification for the last two years. This technically means that human rights are thoroughly implemented, decent work respected (including by suppliers), and no child labour involved at any level. Not all products have been covered, but the process is on-going. The Fagor co-op, although not certified also works to SA 8000 standards.
Being a member of a co-operative also involves sharing the risks and accepting a cut in wages in periods of recession…And with the global recession, there will certainly be fewer jobs, be it in Spain or elsewhere. The social impacts are bound to be felt as much in co-operatives as elsewhere.
The many production plants world-wide are not however co-ops. Cultural differences in accepting the universal participative management style and co-operative principles would appear more than anything to be the reason. On the plus side however, they combine the Just-In-Time delivery of spare parts to clients with a minimal carbon footprint. Many are hardly beyond the start-up phase, and not yet profitable, but there is the same transparency of information, an attempt at the same management style and 30% worker-ownership (in the form of shares in the companies) as well as a dedicated sum of 5% profits being reinvested in sustainable local development projects. In many cultures where the corporation is present, there is no history of saving money, which also makes simple profit-sharing more difficult. The implementation of welfare or pension schemes have a greater social impact. It is also worth mentioning that the rate of pay is always at least 10% over the national minimum. Nevertheless the cultural limits of the model remain, even if the philosophy remains intact.
All of this means that there is an exceptionally high level of CSR (Corporate Social Responsibility). There is a stated will to ensure that Human Rights be fully respected at all times, as well as regulatory compliance, dignity and respect and transparency. The governance model is of a high standard, based on the principle of inter-co-operation and worker control.
An unanswered question: the non-existence of trade unions
Although the co-operative principle of one man, one vote means that there is clear democratic representation, the role of a union reaches far beyond the simple tenet of representation. Particularly when times are tough. Trade Unions also provide the means for workers to remain connected to those outside their own enterprise and sector.
At the end of the day, in a transnational corporation whose products are based on consumer society’s race to produce ever more, the question of the real intrinsic limits of the system is a fundamental issue. Can the co-operative model prevail, and transform society into a more reasoned approach to human beings use of all things? Or will the fact that the production of goods so intimately linked to the capitalist and neo-liberal model be the downfall of what is certainly a uniquely interesting attempt to provide a wider share of the cake at grass-roots level? As Mikel Lezamiz said “We are not angels”…