The Mondragon Experience:
by M J Murray
Part One: A stranger comes to town
“….it is necessary to socialize knowledge in order to democratize power because in fact knowledge is power….” Fr Jose Maria Arizmendiarrieta, inspiration for the Mondragon Cooperative.
Mondragon Corporation describes itself in its “Corporate Profile, 2014” as:
‘…a group of autonomous and independent companies based on cooperation and taking people into account. “
Now, that is an understatement that belies one of the most significant developments in worker participation, participative management, or potential radical social change in our time.
Mondragon – for that is how the cooperative is referred to these days – originated in the early 1950s in the then small, run-down, demoralised steel town of Mondragon, less than an hour’s drive from the better known Basque towns of Bilbao , San Sebastian, Santander – and Guernica. It was a town hammered by Franco for its loyal support of the elected Republican government .It had seen most of its natural leaders, shot, exiled , driven underground, or, blacklisted from the little work available.
Against this background, a handful of recently qualified engineering apprentices in Mondragon town’s largest employment, Union Cerrajera, had their manual skills topped up with more advanced technical training and general education.
This was organised by a radical priest, Jose Maria Arizmendiarrieta, who arrived in Mondragon, in the dark of 1941, a stranger from another part of the Basque country.
Now here is a truly remarkable man. Arizmendi, as he was known by his friends, had been active in the Republican army, as a journalist, since a childhood accident to an eye precluded him from active service. He had narrowly escaped execution by Francoists. And, ironically, had been posted by his superiors to Mondragon, where many similarly independent-minded priests had been summarily executed. (Huw Thomas in his work on the Civil War writes about the Francoists-Vatican politicing over the executions of Basque priests including those of Mondragon.)
The Union Cerrajera engineers, motivated by Arizmendi’s social teaching on the rights of labour, approached their employer for a modest degree of control and ownership in the light engineering business. When they were firmly rebuffed they were challenged by Arizmendi to take the next logical step. In 1956 they left to form a company of their own where they could pursue this goal.
Again, under Arizmendi’s influence and direction, they began to work out the practicalities of establishing an industrial cooperative and extrapolate some guiding principles. One was the principle of “One Worker, One Vote.” Another was the principle of maintaining “Pay Solidarity,” based on a 3:1 differential between the highest and lowest paid cooperative member.
By 1959 the former apprentices were ready to commit to a legalised cooperative structure. In the meantime, three other coops had been formed and others were in gestation. A movement was slowly and steadily taking shape and another “rule,” or guiding principle was added. Coops would not seek to compete, but complement each other synergistically, with ideas and practical assistance. Amazingly, this was even extended to the original “capitalist” Union Cerrajera.
A key principle was that Capital was merely a factor of production and subordinate to Labour – not the other way round, as evidenced in all previous industrial organisation, and the perceived cause of why previous attempts at coops had inevitably reverted to capitalist-dominated organisations. It was as if Arizmendi had “reverse engineered” the Webbs’ critique of British coops and the failure to resolve the dichotomy between Labour and Capital in favour of Labour.
Thus, a coop bank was instituted, Caja Laboral, 1959: a competitive open public savings bank which was also a source of capital for cooperative investment.
Of course, to make cash available to coops required the development of a full range of management skills within the bank staff: including, financial costing ; advisory skills relating to product selection, production processes, what would be known as supply and customer chain development, and marketing. All this was being made available to member coops with the benefits of scale and synergy. It led to the launch of the Caja Laboral Business Advisory section, in 1970.
This brought a rapid expansion in the formation of coops, particularly in the electrodomestic sector, stimulated by more consumer demand, initially in the home market, which was beginning to show some signs of life again .
A major source of the material for Arizmendi’s strategising was European Social and Christian democracy – and British Labour history – and no more so than his study of the Post WW2 Welfare State in all its dimensions: Education, Health, Housing, Social Welfare, This led to the establishment of Lagun-Aro, 1966/Lagun-Aro 1974 offering full medical cover and retirement benefits. And more social innovation was to follow, driven in part, ironically perhaps, by the perceived “anomaly” of the worker-owner entitlements to such employee cover as sickness, unemployment and other benefits.
In 1969, the supermarket coop Eroski, was formed from pre-existing retail outlets .
In 1974 Ikerlan Research Centre was opened.
In 1976 Don Jose Maria Arizmendiarrieta died after a two year battle against heart disease – the year following Franco’s death.
It was the end of an era and the beginning of another. But Mondragon did not falter on its path to pre-eminence in cooperative-building: the seed had well and truly fell on good ground.
The work that had begun in the 1956-59 period by a couple of dozen pioneers, including two women, continued and led to the Mondragon we see today, one of the largest coops in the world, with, according to the Mondragon 2013 report:
- * Total assets of Euro 34,000,000,000.
- * 74,000 jobs
- * 103 coops
- * 122 Production Plants
- * 8 Foundations
- * 1 Mutual Society
- *10 Support Entities
- * 13 International Service Companies.
“F I R K”
The highly diversified Mondragon coops are organised in the following four broad sectors:
- LagunAro EPSV:
- Social Security/Health Care/Pensions.
- Management of Equity Funds to finance provision of services to members.
- Laboral Kutxa (= Caja Laboral plus recently amalgamated with Kutxa Laboral.)
- Coop banking insurance services: 1.2 million members.
- Consumer goods,
- Capital goods,
- Industrial components,
- Business services.
- (With French Les Mousquetaires and German Edeka in Alidis Alliance, which is number 3 in European purchasing structures.)
- Eroski Foundation promotes healthy lifestyles, consumer education, environment awareness.
Erkop food group
- Cattle raising.
- Mondragon University (4,000 students: Under-grad/Post-grad Engineering, Communications, Business Management, Entrepreneurialism, Food Science.)
- 3 Technology centres,
- 12 R & D Units,
- 3 Doctorate degree lines,
- 11 University master’s degree programmes,
- 1,679 Full time researchers.
In Part 2: Workers’ Control and Ownership: the Mondragon Experience
* Review of the latest research on the competitive advantage of the Mondragon cooperative model over conventional capitalist companies.