Reflections on the Mondragon Cooperative Model: An Approach to Human Values and Workers Owned Businesses

By Juan Leyton

Editor’s Note: In July 2013, Juan worked with the MIT Community Innovators Lab to lead a delegation of U.S. community and labor leaders to visit the Mondragon cooperatives in the Basque region of Spain. This was his second trip. In this article, Juan describes Mondragon’s model and history and his reflections on what we can learn.

The quintessential problem for workers everywhere is that in most cases they have no control over the business they are working for.  Most of the big businesses are controlled by their shareholders and a hierarchical management structure. Thus workers have no say on the direction of the business, and even less in the uses or investments of its profit; at worst, their fate is in the hands of their bosses. There are some socially responsible businesses, and others that base their managerial success on workers participation. However in the end, many of these businesses still face tough questions regarding their profit loss or gains, or when they need to relocate, expand or close down, and for the most part, the workers are left out of any decision-making process. In rare cases, the workers can help to decide what to do with the future of a company; in some cases, they can purchase shares from the company to convert it into an employee stock ownership plan (ESOP) –which mainly helps the owners and shareholders.

Mondragon creates a different paradigm based on workers’ cooperatives.  To some extent, the Mondragon cooperatives have tried to tackle the issue of the lack of worker control over a business, and they have done it in the following fashion:  (1) by creating workers ownership over a business, thus transforming the historical relationship of antagonism between the workers and management by creating a joint decision-making process. This has been put into practice through the one worker, one vote policy and by establishing workers representation at all decision-making levels.  (2) They have created wealth in their community by creating and keeping local jobs. (3) They have created a local economy that is unavoidably connected to international competition, but based on a deeper commitment to their values, and their way of being in the world as workers’ owned businesses.

There is a big buzz and interest about cooperatives in the USA today.  In the aftermath of the financial crisis, many people started looking for alternative approaches to business, and worker owned businesses seemed to be the solution for many. However I see two problematic tendencies. First there is still cynicism and skepticism about the community owned business approach via workers cooperatives. Second, there is the tendency to romanticize cooperatives.   Being back in Mondragon for the second time, I realized that there is nothing idealistic or romantic about them, and I also realized that they had overcome very concrete obstacles like financing and education, among others, to make the development of cooperatives a sustainable reality.  However, I think none of Mondragon’s success would have been possible without the infusion and the inspiration of a world view where human values are the foundation for building a different economic dynamic and relationship among people, which has to be reflected in a better quality of life, not necessarily based on material gains only.

The cooperatives of Mondragon are located in the town of Arrasate/Mondragon in the province of Guipuzcoa in the Basque Country in Northern Spain.  The town of Mondragon with no more than 25,000 inhabitants is the home to one of the largest concentrations of cooperatives in the world.  Over 120 cooperatives are based here, and together they employ around 80,000 workers under the holding of Mondragon Corporacion Cooperativa (MCC), which is the tenth largest business of Spain.  Once you get to Mondragon, you realize that despite it being such a big and complex business enterprise, you are not in a typical industrial city.  A couple of lasting impressions for me were the fact that although Mondragon is a small town, its housing is very densely constructed as people like to use the space efficiently.  I also realized that people like to have a good quality of life. They are not working extra hours or always at work; they enjoy their life.  Lastly, Mondragon is located in a valley surrounded by green mountains and forests, making life relaxing and enjoyable.  I asked myself, how did they achieve such an impressive enterprise?  I realized that their foundation was deeper than just the material achievement.  This trip was a discovery of deeper human values for building communities and new human relations.

The cooperatives are pragmatically immersed in the world of business, where they have to produce and compete like any other business for survival.  If anything I realized that the co-ops from Mondragon still are operating in the world of Capitalism; and they acknowledge that, since they have to strategize for new business deals and innovate all the time.  However, they have found a way for reconciling the traditional business approach with a paradigm shift to workers ownership, profit sharing and cooperation among cooperative businesses, which in my view is a very challenging undertaking.  As I heard the workers and presenters from Mondragon speaking, and observed how the co-ops work, I realized that this trip was not just for learning about the mechanics, successes and challenges of a coop, but a self-reflection about what is driving some people to develop co-ops at this scale.  I realized that I was looking for a better understanding of what are the values driving some people to build such an approach, where democracy plays a deeper role without losing efficiency as the workers are deeply involved in decision-making and ownership of a business.

The first thing you read when you enter in the Mondragon Corporation Cooperativa (MCC) headquarters is “humanity at work.”  This already anticipates what I will find throughout this journey: the Mondragon co-ops are in the world of business, but they are value driven too. This is something rare; how can a business and human values mix together?  However, I also realized this is something we are not used to hearing or even considering, and we have a hard time understanding: how do human values and a profitable business can get along?  Today we are immersed in a paradigm of individualism and competition for profit making which does not take into account human values, since it always put profits first.  How does one stay true to one’s values while trying to stay afloat in the world of business production and competition?

In order to respond to that question, I needed to immerse myself in the thinking of Father Jose Maria Arizmendiarrieta –the founder of the Mondragon cooperatives.  He dedicated his life to social justice, community wealth creation and self-determination.  His believed that workers have the capacity for self-managing business; for him individualism was destructive for communities, and the future was in the idea of cooperation.  He also inspired and started the whole movement of workers cooperatives in the Mondragon valley.  I learned that he was supposed to have been killed by the Franco’s regime; he was a political prisoner after the civil war and was on the list of anti-Franco activists to be executed.  Somehow he was liberated.  At age 26, he relocated to the Mondragon area, where he spent the rest of his life helping to develop the cooperatives.  He was key in developing the base of values for the development of the co-ops with a very pragmatic approach about what do in practice.  Father Arizmendiarrieta says in his Reflections[1], “first come human being then come the cooperatives.”  He emphasized that business should not go before people.  He understood human needs deeply and the idiosyncracy of the Basque people, which helped to gain the confidence of the people in the Mondragon valley.

In the mid-1930s, the Spanish civil war was ending; and Franco took political control of the country.  There was hunger and poverty throughout Spain, and this was also the case for the Mondragon valley.  The Basque people, whose origins are not Indo-European and their language cannot be traced from any contemporary European language, were politically repressed and forbidden to speak their language under the Franco’s dictatorship.  However they are very resilient people –perhaps an important human ingredient for success and survival, as they had to struggle to maintain their cultural identity during a long dictatorship.  Another important aspect is their aspiration to be politically independent and the rejection of any form of paternalism.  Father Arizmendiarrieta says, “knowing if we can live with dignity is what it is all about. Living with dignity means being able to take care of ourselves.  In this aspect, we can not be satisfied with any paternalism.”  The Basque country was economically depressed, yet they had to find a way out for hope and survival by developing economic strategies without losing sight of their identity.  They came up with the formation of the workers industrial cooperatives built on the foundation of deeper human values.  Under the inspiration of Father Arizmendiarrieta, they saw the cooperative business as a mean to a better life, not as end in itself.

The first cooperative (ULGOR) didn’t get started until 1956, which is about 15 years after Father Arizmendiarrieta arrived in Mondragon in 1941.  He spent a great deal of time focused on building educational strategies, starting with a vocational school he founded, which later became the Professional Polytechnic School, and finally became the University of Mondragon.  Contrary to what we tend to do or believe, there was a long period where their only focus was the professional education of the people of Mondragon.  Still today education is at the core of their basic cooperative principles –similar to the idea of a “learning organization.”  During the same period the ideas for co-op development started to ferment, and the education strategies were key for such development.

It wasn’t until the 1960s that Mondragon saw the development of their cooperative achieve a higher level.  They developed several other co-ops, with the most important one being Caja Laboral Kuxta (Coop Bank).  The Caja Laboral was the financial institution which was one of the two pillars in the early development of the Mondragon co-ops, with the other being their Polytechnic School. These two pillars formed the base from which the cooperative launched its industrial development, retail and innovation via social entrepreneurship.  In the 1960s their cooperatives mushroomed in the Mondragon valley.

Despite their success, Mondragon had to reinvent itself many times.  Thus in the eighties, they created the MCC which operates as a holding company for the cooperatives.  MCC organizes the congress for all the workers, it develops workforce training for the members, it helps with business development plans, it negotiates new deals and so on and so forth.  Every cooperative has a representative in the MCC governing body, and as a rule, MCC can only make recommendations to the individuals coops on what to do with their business, it can’t mandate.   That way the coops can have both a great deal of autonomy and interaction with each other.  One example of how this is beneficial is when a co-op is not doing well or decides to shut-down their business, their workers can go to work for another cooperative; they are not let go.  A critique is that MCC is concentrating a great deal of information for decision-making, and it might influence how decisions get to be made in the future.

However, there is a question that still is haunting me — can the Mondragon co-ops live up to their original values? It has been 70 years, since Father Arizmendiarrieta first arrived in Mondragon, and about 55 years since they first formed their first co-op.  Today there are around 258 enterprises and entities working on developing some kind of job creation or community enterprise that serves the greater good.  There are around 120 workers owned businesses, and 143 subsidiary companies located in Spain and other countries (they have a presence in 94 countries right now).  They went from having around 25,000 members in 1991 to around 84,000 in 2012. As the number of co-ops increases, membership increases; the question becomes, can they still be a democratic organization? Or what does their decision-making process look like as they keep growing? Keep in mind that for Father Arizmendiarrieta “the key is not the cooperatives but the cooperativists.”  He was warning about not making the cooperative business an end in-itself but a vehicle for a better life in the community.

Yet the question for Mondragon is whether their approach to business and cooperation can survive within the current paradigm of Capitalism; or can they really be an example for economic democracy for the USA.  The Mondragon cooperatives are not exempted from the crisis of European Capitalism; for instance, they had to develop newer strategies for expansion to include non-cooperative business.  On another hand, they had to figure out how to maintain a democratic process, as they expand and experience growth.  Txema Gisola, President of the General Council maintains, “Mondragon considers its core mission to be the production and sale of goods, services and distribution; using democratic methods in its organizational structure and distributing the assets generated for the benefit of its members and the community as a measure of solidarity.”[2] However the question for them is whether Mondragon will be able to remain loyal to their cooperative values, or at least, how they will adjust to the new economic context without losing sight of their purpose.  In fact, some of the new directions for Mondragon like their expansion to other continents is beginning to be a cause for questioning, since it means abandoning the creation of co-ops and creating subsidiaries for Mondragon Corporacion Cooperativa (MCC).  Their rationale for this is that it is helping them to open new markets and maintain their local jobs.

It seems to me that the history of the Mondragon co-ops is about resiliency and survival.  Today they are faced with big challenges, coming from many new fronts: (1) the economic crisis affecting Europe has hit Spain badly, where unemployment has been around 26% and higher; (2) Mondragon has been forced to expand internationally for survival, which has led it to affiliate or create subsidiaries that are not cooperatives; and (3) the question they are facing for the future is whether they can remain loyal to their values in practice, given that they are growing in size and have many non-cooperative affiliates under the MCC.

Can Mondragon be replicated in the USA?  There are several attempts underway right now trying to replicate, or at least partner with Mondragon in the USA.  The United Steelworkers developed a formal agreement with MCC to organize their workers into co-ops. Another is Evergreen in Cleveland which has developed co-ops supported by a local foundation and a hospital. Yet another attempt is the Bronx Cooperative Development Initiative which is trying to develop a model similar to MCC and incubate coops in the Bronx.

I think some aspects of Mondragon can be replicated or serve as an inspiration for coops.  But I don’t think something similar to Mondragon can be done here.  However, what we can learn from Mondragon is the approach to democracy at work.  I do think we need to pay more attention to their approach to human values and business.  This is particularly true when it comes down to being inclusive with people of color and immigrants, and in terms of gender equity, etc.  I see a danger in trying to replicate Mondragon, as it could be used as only a business model, but ignore that it was a values-driven enterprise in the first place that challenged individualism, class structures, language exclusion, etc.  We ought to build community democratic approaches to business that take into account the issue of race, class, gender and others; and develop community owned businesses based on values for tackling those issues affecting this society.  Then we will be closer to the vision of Father Arizmendiarrieta.

Juan Leyton is a Visiting Practitioner this year with Tufts Urban & Environmental Policy and Planning. He serves in a variety of consulting roles with MIT Co-Lab and with Boston-area nonprofits. He is former Executive Director of Massachusetts Neighbor to Neighbor. He has deep experience in community organizing, community development, and policy advocacy.

[1] Reflections by José María Arizmendiarrieta, Cherie Herrera, Joxe Azurmendi. Published 2000 by Aratza.

[2] Mondragon Corporacion Cooperativa “Corporate Profile 2012”.

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2 thoughts on “Reflections on the Mondragon Cooperative Model: An Approach to Human Values and Workers Owned Businesses

  1. Since unemployment in Spain is 26%, It seems to me that this would be a great time to expand the co-operative project and give work to the unemployed. And failing capitalist businesses could be bought out and converted into worker co-ops. Is Mondragon moving in these directions

  2. How about setting up a
    As a non-profit, it would easily be cheaper than the for profit insurance agencies, and by listing itself on the ACA (Obamacare) Exchange, it could avoid a lot of advertising expenses.
    It could even be a “hybrid” co-op in which half the board would be elected by workers, and half by consumer – members.
    Can the NURSES UNIONS consider such a project?

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