Mondragon Coop

 Started in the 1950s as a Catholic Action project, a for-profit business that embodies Catholic social thought. Today, the Mondragon group includes 257 financial, industrial, retail, and research and development concerns, employing approximately 74,000 people. The coops manufacture everything from commercial kitchen equipment (under the flagship Fagor brand) to industrial robots; the retail giant Eroski boasts 2,000 outlets throughout Europe, and the bank Caja Laboral and social security coop provide financial services to members and affiliated businesses. 

 The coops are not unionized, and they have no outside stockholders. Instead, each worker or manager invests as a member in the firm and has one vote in its general assembly. Each coop is represented at the Cooperative Congress, where system-wide plans and business decisions are made. The coops have retained members’ jobs in Spain’s Basque country even during economic crises. Manifesting an ethos of solidarity, members accept salary cuts, invest additional funds, and transfer between coops when necessary. Mondragon limits its highest managerial salary to about nine times the pay of its lowest-paid members, a remarkably flat scale compared to Spain’s overall ratio of about 127:1. Mondragon’s core principle, the sovereignty of labor over capital, is visible in the distribution of surplus to members’ capital accounts in the Caja Laboral, where they are held as private savings but made available for investment in the coop group

Despite these virtues, Mondragon is not utopia.

 As with many successful firms, regardless of structure or industry, much of the growth in recent years has come from international markets, which now account for 70 percent of Mondragon sales. Mondragon went global in 1990, and now controls some 100 foreign subsidiaries and joint ventures – mainly in developing and Eastern European countries, with low wages or expanding markets. This has necessitated hiring new workers in those new markets. Few, if any, of these new workers, have been offered membership in the cooperatives. As a consequence, they do not participate in the benefits of worker-ownership.  They do not participate in the governance of Mondragon and are not eligible for many of the other unique benefits of the cooperatives. Only one-third of its employees are members. Instead, they are wage laborers. Even in the Basque country and Spain, industrial and retail coops employ significant numbers of temporary workers on short-term contracts.

 Today, only about one-half of Mondragon’s businesses areIt would be against the economic interest of existing coop members to include more worker-owners in the confederation. In Wroclaw, Poland, a 2008 strike over low pay and anti-union repression raised questions about Fagor’s three-tier labor force, with coop members in the Basque country, temporary workers throughout Spain, and wage laborers in subsidiaries. Do job security, decent pay, and workplace participation in the Basque country rest upon exploitation elsewhere?

  A study of Mondragon subsidiaries in China comparing coop-owned factories with foreign-owned capitalist firms found that pay was low, hours long, and conditions harsh. Just like their capitalist competitors, Mondragon coops invested in China to manufacture labor-intensive goods cheaply and to be near emerging markets – a strategy coop members accepted when they voted to pursue an international strategy. Mondragon’s subsidiaries still operate like standard firms, even though their aim is not to maximize profit for stockholders but to preserve coops and jobs in the Basque country.

 In 2013, Fagor Electrodomésticos (the home appliance division) declared bankruptcy. The affiliated Mondragon coops were no longer willing to save Fagor and bankruptcy threatened 5,600 jobs (down from 11,000 before the bubble.) With a population of 25,000, this hit the city of Mondragón hard. Fagor members in Mondragón and nearby towns took early retirement or transferred to other coops, but local contract workers and 3,500 employees of Fagor subsidiaries were not similarly protected. 

 Shop-floor conditions, rank-and-file participation in decision making, and workers’ identification in a Fagor coop are little better than at a neighbouring capitalist factory with a unionised workforce. Furthermore, coop members showed little solidarity with the broader Basque labour movement. As an institution, Mondragon steers clear of politics.

 So where does control, and thereby ownership, lie in the Mondragón co-operatives? The key question is whether the workers can actually directly gain access to their capital and decide what to do with it. They cannot; in fact, the whole system seems to operate like a pension scheme, as the members have to wait until retirement to realise their earnings and even then they do not get it paid out in one lump sum. Most effective control and decision making are carried out by management, who in this case would be the de facto owners of the co-operatives.

 It must also be remembered that cooperatives are integrated into the market system and subjected to the same economic laws as other firms. The argument is often put that it is possible to establish "little islands of socialism—workers co-operatives — within the framework of capitalism, thus making a revolutionary, world-wide change from capitalism to socialism unnecessary.

 But socialism means common ownership and free access to everything that is produced. 

 Such a social system does not exist in the Mondragón co-operatives or anywhere else in the world. The rigorous economic law of profitability at all costs imposed by the market must be supported by defenders of co-operatives; if. under capitalism, you don’t observe this law you very quickly go out of business.