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The Mondragon Experience

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Abstract

The Basque town of Mondragón is home to one of the largest and most significant experiences of co-operative organization and workers’ self-management anywhere in the world. The Mondragón co-operative movement, born in the 1950s around the local technical training college and a handful of small industrial firms, encompasses today more than one hundred co-operative firms operating in ninety-seven countries and generating an aggregate revenue of €12bn. In this chapter we review the historical origins of the Mondragón experience and the goals that guided the first co-operative projects. After describing the organizational principles and governance mechanisms of individual co-operatives and of the Mondragón group as a whole, we examine the rapid expansion and internationalization of some of the most emblematic Mondragón firms – a process that has led to a difficult balance between the maintenance of the original co-operative principles at home and an increasing reliance on capitalist forms of ownership and production abroad. We conclude by discussing the impact of the recent economic crisis on the Mondragón group and its system of inter-co-operative solidarity, and reflect on the future prospects for this far-reaching experiment in collective ownership and democratic governance.

NATIONAL CASE
STUDIES
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
The Mondragón
Experience
   
19.1 Introduction
T Basque town of Mondragón has given its name to one of the most signicant expe-
riences in co- operative organization and workers’ self- management anywhere in the
world. Founded in the s, the Mondragón co- operative movement began with the
establishment of a vocational training program and quickly expanded through the crea-
tion of a handful of industrial rms. Since then, the Mondragón network of co- operatives
has continuously expanded, in terms of the number of rms it includes and of the range
and scope of the economic activities it encompasses. Today, the co- operative group
comprises over  rms employing more than , workers and generating .
billion in annual revenue (Mondragón ). It includes a wide variety of co- operative
rms— from tiny enterprises with a handful of members to large industrial companies
employing thousands of workers around the world— alongside a series of supporting and
auxiliary organizations. Incarnating a tenacious commitment to the dignity of the indi-
vidual worker and the sovereignty of labour, Mondragón represents an object lesson in
the potential and predicament of a co- operative experience in constant adaptation to the
conditions and constraints of an increasingly globalized market economy.
We begin the chapter by describing the local historical context in which the rst
Mondragón co- operatives were launched, as well as the values that animated their found-
ing. Next we will describe the organizational architecture of the Mondragón system at
the level of the individual co- operative rm and of the co- ordinating corporation or
group. We will then analyse the rapid expansion and internationalization experienced
by some of the largest Mondragón co- operatives since the s, and the impact of this
process on the equilibrium between co- operative and capitalist principles in the organi-
zation of production. Finally, we will discuss the impact of the current economic crisis on
the Mondragón group, and on the operation of its unique system of inter- co- operative
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    
solidarity. We will conclude by reecting on the future prospects for this long- lasting and
far- reaching experiment in workers’ ownership and democratic self- governance.
19.2 Context and FoundingValues
In the s, Spain was a country traumatized by the sequels of a terrible civil war, liv-
ing in poverty under a harsh dictatorship, and forcibly isolated from the rest of the
world. Political associations and trade unions were banned (with the exception of the
state- sanctioned ‘vertical syndicate’), and civil society was subjected to extensive police
surveillance. In the Basque provinces, General Franco’s regime adopted an even more
coercive prole, with an active policy of repression against any expression of Basque
identity and autonomous social organization.
It was in this context that the seeds of the Mondragón co- operative movement were
planted. e driving force was a young priest, José María Arizmendiarrieta, who arrived
in the town in  aer completing his studies at the diocesan seminary of Vitoria, at
the time a leading centre of social Catholic thought in Spain (Lannon ; Molina and
Miguez). Like other nearby towns in the valleys of Gipuzkoa, Mondragón combined
an industrial tradition— centered since the turn of the twentieth century around the
company Unión Cerrajera and its Apprentice School— with deep cultural ties to its
rural hinterland. Arizmendiarrieta would draw on this particular blend of communi-
tarian values and economic entrepreneurialism to instigate the creation of a series of
co- operative ventures to provide the youth of the region with improved education and
employment (Molina).
Intellectually, Arizmendiarrieta borrowed his philosophical and organizational prin-
ciples from a series of ideological currents of the time. Paramount among them was
the social doctrine of the Catholic Church, which, since Pope Leo XIII’s  encyclical
Rerum Novarum, had asserted the dignity of labour and the right of workers to organize.
To this doctrinal bedrock Arizmendiarrieta added the inuence of French ‘personalist
thinkers (Jacques Maritain and Emmanuel Munier in particular), and his own familiar-
ity with Basque traditions of communal organization, especially those that had our-
ished around the town of Eibar, a signicant manufacturing centre and hub of socialist
activism throughout the period leading up to the Civil War, and the preference for co-
operative forms of organisation that had characterized Basque nationalist unions in the
s and s (Azurmendi ; Olabarri ; Zelaia).
Arizmendiarrietas initial eorts were focused on the establishment or renewal of
local educational institutions. In  he led the creation of a technical training school
(Escuela Profesional), and in  he inspired the establishment of a local cultural and
educational association (Liga de Educación y Cultura). ese activities culminated in
 with the opening of a new and expanded technical training school. Educational
initiatives soon spilled over into industrial enterprises. In , a group of employees of
Unión Cerrajera and former students of the Escuela Profesional created the rst industrial
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co- operative:Talleres Ulgor (later Fagor Electrodomésticos), dedicated to the fabrication
of heaters and gas stoves. Over the following decade, a growing number of co- operatives
began to be established around Mondragón and nearby towns:Arrasate (), Urssa
(), Lana (), and Ederlan () were some of these initial ventures, oen the result
of spinning o product lines from already existing co- operatives (Ormaetxea).
e movement soon diversied beyond its manufacturing origins. Critical stepping
stones in the growth of what would eventually become the Mondragón Co- operative
Group were the creation in  of a system of social provision (now known as Lagun-
Aro), the founding in  of a co- operative savings bank and credit institution (Caja
Laboral Popular), and the establishment in  of the ULARCO group, a rst attempt to
co- ordinate the activities of individual rms and create mechanisms of inter- co- operative
solidarity (Altuna and Urteaga ). e consumer co- operative Eroski was established
in , and would eventually become the largest rm of the group by number of employ-
ees. Beginning in , co- operatives dedicated to applied research, such as Ikerlan, or
professional services, such as LKS, were created to assist with the R&D needs of the indus-
trial rms. e educational and training infrastructure continued to grow alongside the
rest of the Group. Anew polytechnic school was founded in , and in  the dierent
initiatives in higher education were merged to create the University of Mondragón.
While deeply imbued with the ethical and organizational vision of Arizmendiarrieta,
the early experiences in co- operative life did not follow a preordained plan, not even a
specic managerial philosophy. ey expressed, rst and foremost, a form of practice
the practice of establishing and sustaining entrepreneurial activities that sought to do jus-
tice to a holistic view of the worker as person, and relied on a robust model of collective
self- governance. One of Arizmendiarrietas best- known maxims was that ‘the only good
idea or word is that which can be turned into action, and the Mondragón experience is
best understood as an ongoing experiment in co- operative work and management,
rather than the result of any pre- existent programmatic formulation (cf. Gupta).
In fact, it was only in , aer several decades of co- operative experience and long
aer Arizmendiarrietas death in , that the Mondragón movement began to codify
its own philosophy. at year the rst Co- operative Congress adopted the ten ‘basic
principles’ guiding the Mondragón co- operative experience. ese were (based on
Ormaechea  and):
. Free Membership (Libre Adhesión):there are no barriers to membership for those
who want to be part of the Mondragón experience, provided they respect its basic
principles;
. Democratic organization:equality of worker– members (socios cooperativistas)
expressed in the election of the co- operative’s representative bodies (one socio,
onevote);
. Sovereignty of labour:labour (trabajo) is the transformative factor in society and
in human beings and is therefore the basis for the distribution of wealth;
. e instrumental and subordinated character of capital:capital is an instrument,
and should be subordinated to labour;
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    
. Self- management:worker– members should be provided with opportunities and
mechanisms to participate in the management of therm;
. Pay solidarity:a fair and equitable return for labour;
. Inter- co- operation:a commitment to co- operation among dierent co- operative
rms;
. Social transformation:a commitment to transform society by pursuing a future
of liberty, justice, and solidarity;
. Universalism:the Mondragón experience is part of the broader search for peace,
justice, and development of the international co- operative movement;
. Education: a commitment to dedicate the necessary human and economic
resources to co- operative education.
ese ten principles have been enshrined as the movement’s founding values, a distil-
lation of Arizmendiarrieta’s original vision. eir value as a description of the actual
ethos of the tens of thousands of socios that compose the Mondragón co- operatives is,
of course, a more complicated matter. In a recent study of how grass- roots worker
members interpret these principles, Heras- Saizarbitoria () found a signicant
gap between the ideals expressed in this declaration and the day- to- day reality of co-
operative life. Worker– members, Heras- Saizarbitoria argues, ‘predominantly view
[the principles] as part of the organizations rhetoric, as a representation of the formal
macro- organization that is Mondragón— mainly of the Corporation, rather than their
original co- operative. is is talk that is detached from daily decision- making and
actions’ (Heras- Saizarbitoria :; emphasis in original; see also Taylor () for
an account of how the rhetoric of ‘eciency’ has impacted democratic decision- making
in the Mondragón cooperatives).
is cleavage between ideals and everyday organizational life has a strong genera-
tional dimension:while the founding generation saw these ten principles as the enun-
ciation of a lived experience of co- operative life, younger cohorts of workermembers
increasingly treat them as part of Mondragón’s corporate self- presentation. ‘Worker-
owners’ commitment to the cooperatives and to cooperativism is still fairly strong,
Cheney wrote in , ‘but it appears to be declining, especially for new socios and for
some segments of the veteran work force as well’ (Cheney :– ). Before we get
ahead of ourselves, however, let us take a closer look at the organizational architecture
of Mondragón, and at some of the co- operative groups most signicant transformations
over the last three decades.
19.3 Organizational Structure
As we mentioned earlier, the evolution of the Mondragón co- operative movement
has not followed a preordained plan and does not reect a xed managerial phi-
losophy. Organizational structures have evolved and adapted to changing economic
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   
circumstances as the number of co- operatives grew and the range of their activities
expanded. By the late s, however, a distinctive organizational architecture was
in place, a set of standard governance mechanisms that applied to all the existing co-
operatives and served as a template for the creation of newones.
Each co- operative is an autonomous and legally independent entity; its membership
in the Mondragón Co- operative Group is always a voluntary choice. Worker– members
(socios cooperativistas) create the rm or join it by contributing their own private capi-
tal. e amount of these contributions varies from rm to rm, and is decided by each
co- operatives General Assembly (Asamblea General). e Assembly is the ultimate
sovereign power in the co- operative. It oers every worker– member the opportunity to
participate on an equal footing (one member, one vote) in the formulation of the rm’s
strategy and in the election of its representative bodies.
e rst and most signicant of these bodies is the Governing Council (Consejo
Rector). Composed of worker– members elected by the General Assembly, this is the
standing governing body of the co- operative, and is in charge of overseeing the ful-
lment of the policies agreed by the Assembly. One of the key responsibilities of the
Governing Council is to select and appoint the co- operative’s general manager (ger-
ente), who in many cases is recruited from an external (sometimes non- co- operative)
rm. In large and medium- size co- operatives, the general manager and key operational
directors make up a Management Council (Consejo de Dirección), which runs the rm
on a day- to- day basis and is expected to work in close alignment with the Governing
Council.
Another important body in the governance of some co- operatives is the Social
Council (Consejo Social). Composed of socios elected by the General Assembly, this is
a consultative body tasked with representing the interests of members as employees of
the rm. e Social Council is expected to counterbalance the managerial focus of the
Governing and Management Councils— a function that is particularly signicant if we
consider that the Mondragón co- operatives do not recognize trade union representa-
tion for their workermembers. e strength of the Social Council, however, and the
forcefulness with which it represents members qua employees, varies greatly from co-
operative to co- operative (see Kasmir () for an analysis of the relationship between
Mondragón and labour militancy in the region).
Finally, a Monitoring Commission (Comisión de Vigilancia) performs an arbitration
and auditing role in some co- operatives, although nowadays the audit function sensu
stricto is typically sourced from specialistrms.
ese bodies constitute the governance architecture in every one of the Mondragón
co- operatives, but, as with any architecture, everyday life inside these structures adopts
in each organization a very particular form. Individual co- operatives oen express
distinct and idiosyncratic cultures. e level of worker– member participation in the
day- to- day management and governance of the rm, for instance, varies greatly across
co- operatives. In many rms, attendance at the General Assembly rarely exceeds  per
cent of the socios, unless a critical strategic decision, such as a plan to create a foreign
subsidiary, is on the agenda. Otherwise, and in the absence of a sudden change in the
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    
fortunes of the rm, strategic decisions are le in the hands of the Governing Council,
which tends to make all important decisions in consultation with the Social Council.
In other words, this is, at its best, a well- functioning system of worker representative
democracy, which is no mean feat when compared to the level of worker participation
and decision- making power in capitalistrms.
In addition to conforming to the standard governance architecture, all the co- operatives
in the Mondragón group share a series of structural features. Perhaps the most striking
one is the commitment to pay equity, expressed nowadays in a maximum salary dier-
ential ratio of  to  (in gross terms:the net value ratio is close to .). e co- operatives
also share the Mondragón Corporate Management Model (MGC or Modelo de Gestión
Corporativo), which lays out in detail the core principles of the Mondragón experience and
sets criteria for designing and evaluating management processes in the dierent organiza-
tions that make up the Group (see Mondragón  for its most recent iteration; see also
Heras- Saizarbitoria and Basterretxea () for an analysis of how managerial discourse
in individual cooperatives diers from that of the supra- cooperative bodies).
Up to the late s, co- operatives were grouped geographically— or, in s ome cases, by
historical or cultural anity (Ormaetxea ). Afundamental, if informal, governing
function was played by the nancial arm of Mondragón, Caja Laboral Popular, which
eectively operated as the co- ordinating entity of the group as a whole. In  the sys-
tem of relations between co- operatives was formalized in a new entity, the Mondragón
Co- operative Corporation (MCC). Membership of MCC was (and remains) a volun-
tary choice of the individual co- operatives. At the time of its founding, more than 
co- operatives joined MCC. ey were grouped in three large divisions:nancial, man-
ufacturing, and distribution— a fourth division, knowledge (research, training, and pro-
fessional services) was added later on. In  the Corporation changed its name from
Mondragón Co- operative Corporation to Mondragón, or Mondragón Corporation.
To co- ordinate the operations of the group, the Mondragón Corporation has created
a series of supra- co- operative governing bodies. e Co- operative Congress (Congreso
Cooperativo) is the ultimate decision- making body for the Mondragón Group as a
whole. It typically meets once every four years, but can be convened extraordinarily by
the Standing Committee, the General Council, or through a petition signed by  per
cent of the workermembers of the Corporation. Delegates to the Congress (a total of
)are chosen by the members of all the co- operatives.
e Standing Committee of the Corporation (Comisión Permanente) oversees the
implementation of the policies agreed by the Congress. Its members are not elected by
the Congress, but by the four Divisional Councils, which are themselves composed of
Governing Council members from rms in the respective sectors. Each of the four divi-
sions has a representation on the Standing Committee proportional to its relative share
of the total membership of the Corporation.
e Corporation’s General Council (Consejo General) is the executive body of the
Group. It is composed of a Council President and four Vice- Presidents, each representing
one divisions of the group. Since the creation of MCC there has been a lively discussion
about the concentration of power in the executive bodies of the Corporation. e General
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   
Council, and particularly its vice- presidents, have a degree of authority— and a level of
access to operational information— that makes it dicult for the Congress, letalone the
General Assemblies of individual co- operatives, to hold their decisions to account. It is
also important to note that at the level of the Corporation there is no equivalent to the
Social Council of the individual co- operative. Many studies have noted a strong manage-
rial focus in the supra- co- operative managerial structures on the Mondragón Group, and
a lack of a counterbalancing power (other than the unwieldy Congress) capable of assert-
ing alternative interpretations of the mission and strategic orientation of the group (see,
for instance, Bakaikoa, Errasti, and Begiristain ; Cheney).
Since the founding of MCC in , some co- operatives have chosen to leave the
group and chart their own independent paths. In  two large and successful co-
operatives— Irizar, dedicated to the manufacture of coach vehicle bodies, and AMPO,
specialized in the fabrication of stainless steel and high alloy castings— decided to sever
their ties with the Corporation. Departures from (and returns to) the group are not
uncommon. For instance, ULMA, a large co- operative group in its own right, le the
Mondragón Corporation in , only to return in . ese changes in the compo-
sition of the Mondragón co- operative movement are simply the expression of the fact
that individual co- operatives, via their respective General Assemblies, remain, in the
last instance, fully sovereign actors.
e glue that connects the co- operatives, beyond their formal membership in the
Mondragón group, is their commitment to, and reliance on, a series of mechanisms
of inter- rm solidarity. ese include a common system of social security, managed
by the Lagun- Aro co- operative group (socios of co- operative rms are considered self-
employed by Spanish law and are therefore excluded from statutory unemployment
protection and other forms of state support for wage workers), access to the credit facili-
ties of the Caja Laboral co- operative bank, and, most importantly, a series of mecha-
nisms that redistribute prots and obligations within the Group. When they join the
Group, co- operatives agree to dedicate a percentage of their prots (variable depend-
ing on the division) to inter- co- operative funds intended to support rms in times of
crisis and provide professional development opportunities for worker– members. e
co- operatives are also committed to nding employment for worker– members whose
rms are in the process of downsizing, a feature of the Mondragón system that signi-
cantly reduces the impact of economic crises on the aggregate levels of employment.
In sum, it is not easy to characterize the Mondragón system in any straightforward
fashion. e relationship between the individual rm and the co- operative group is
always complex and nely balanced, acquiring specic features for each co- operative
and changing over time. Turnbull has described the Mondragón system as an example
of ‘network governance’ in action (Turnbull ), and this is a good shorthand descrip-
tion for what is essentially an equilibrium in constant evolution. Furthermore, the fact
that a large majority of co- operatives are situated in a close geographic proximity means
that formal networks are always overlaid with a dense web of personal and familiar rela-
tionships that add a particular avour to the organizational life of the co- operatives and
its governance processes.
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    
19.4 Mondragón’s
Internationalization
e Mondragón co- operatives were born within an autarchic Spanish economy that
oered very few opportunities to expand abroad and plenty of protection from foreign
competition. By the mid- s, some industrial co- operatives, particularly those in the
machine tool sector, had begun to make inroads into foreign markets, but the interna-
tionalization of the Mondragón Group did not start in earnest until the opening of the
Spanish economy that followed the country’s admission into the European Union (then
the European Communities) in , and the completion of its full membership in the
European Single Market in.
With the liberalization of the Spanish economy, the Mondragón Corporation made a
strategic choice for the internationalization of production. Mondragóns industrial co-
operatives were among the rst Spanish companies to take full advantage of the oppor-
tunities aorded by the European market. e th Co- operative Congress, held in ,
identied this as one of the Corporation’s priorities, a decision that was reected in
the MCC General Council’s  Co- operative Strategic Plan for Internationalization
(Plan Estratégico Cooperativo de Internacionalización). is was a time when the
Basque Country was littered with the ruins of once powerful industrial rms, and it
was widely understood within Mondragón that co- operatives would suer an identical
fate unless they were able to compete successfully in international markets. e pri-
mary economic raison d’être of the co- operatives— the maintenance of secure, quality
employment in their local communities— required a radical and proactive internation-
alization strategy.
e formula chosen for this internationalization has presented Mondragón with
challenges as well as opportunities. Large rms operating in mature markets— the case
of the home appliance manufacturer Fagor Electrodomésticos, which we will discuss
in more detail later on, is emblematic in this regard— pursued an internationalization
strategy focused on transferring manufacturing capacity to lower- wage markets via
aliate or subsidiary rms in those countries, while keeping higher- value operations
in the home co- operative (Clamp ; Errasti etal. ; Luzuriaga and Irizar ).
At the same time, many of the co- operatives that operate primarily as suppliers of large
multinational companies— those in the automotive sector are the best example— had to
relocate production to maintain their proximity to strategic clients. To give a sense of the
scale of this process:in  Mondragón co- operatives or their aliates owned eighteen
production plants in China, ten in Mexico, nine in the Czech Republic, seven in Brazil
and six in Poland. In some cases, the Mondragón group acted as the broker of new inter-
national ventures, for example, through the creation of Mondragón industrial parks
in Kunshan (China) and Pune (India). Several Mondragón industrial co- operatives
are among the most competitive and export- driven rms in Spain. Companies such
as Orona (li manufacturing), Fagor Ederlan (automotive components), or Danobat
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   
(machine tools), to name just a few, operate successfully in highly competitive interna-
tional markets, proving on a daily basis that co- operative principles of organization and
ownership are compatible with the highest standards of economic performance.
e rapid expansion and internationalization of Mondragón since the s has led to
a diversication of the typology of membership and a greater heterogeneity of employ-
ment contracts within co- operatives— something that has become a burning issue for
the present and the future of the co- operative movement (Errasti, Heras, Bakaikoa, and
Elgoibar ). In addition to the traditional worker– members (socios cooperativistas),
the co- operatives have increasingly employed workers, particularly on short- term con-
tracts, who do not enjoy the rights and obligations of membership. In some cases, co-
operatives also employ limited- period worker– members (socios colaboradores), who
possess the same participation rights as a permanent worker– member but do not enjoy
the same social- security protections. If one considers only the workers employed by the
co- operatives themselves (and not those of aliated companies), workermembers rep-
resent currently about  per cent of the total workforce in Mondragón industrial rms.
Asignicant proportion of workers without member status are concentrated in the dis-
tribution division, particularly in the consumer co- operative Eroski. e rm’s rapid
expansion in the Spanish market has been driven by the acquisition of capitalist food
retailing and distribution rms, whose workers have oen remained mere employees
of Eroski (even when they have been given the option of investing capital and becom-
ing worker– members). Today, less than half of Eroski’s , employees are worker-
members (Mondragón).
It is however a fourth category of employment, that of workers in local and foreign
subsidiaries, that best exemplies the repercussions of Mondragóns breakneck inter-
national expansion. In , foreign subsidiaries accounted for more than , of the
Group’s employees. ese workers are, however, not members, that is, owners of capital
in their respective rms, nor do they have any say in the decisions made by the parent
co- operative. ey remain in eect employees of capitalist rms. Bakaikoa, Errasti, and
Begiristain noted a decade ago that ‘the working conditions and labour relations of these
aliated companies depend not so much on the nature of the parent company, in this
case of the co- operatives, but on the conditions extant in the country where each o-
shoot business is located’ (Bakaikoa, Errasti, and Begiristain :; see also Clamp
). In other words, the expansion of Mondragón co- operatives in China, Brazil, or
the Czech Republic, for instance, has unfolded in conventional capitalist terms. As a
result, ‘[t] he Mondragón system has created a new organizational paradigm based on
a dual employment model wherein, apart from the co- operatives themselves, there are
conventional companies dependent on the former’ (Bakaikoa, Errasti, and Begiristain
:).
Many factors explain the emergence of this dual or ‘coopitalist’ model. For one, the
legal principles that sustain the Mondragón governance and ownership model in the
Basque Country have generally no equivalent in foreign jurisdictions. Furthermore,
there is sometimes little appetite among employees of aliates or subsidiaries to
become co- operative owners— which would require them to invest their own capital
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    
and become responsible for the management of the rm (and liable for its losses)— even
in the rare instances when the possibility is presented to them (see Errasti  for a dis-
cussion focused on Mondragón’s subsidiaries in China).
Individual co- operatives and the Mondragón group as a whole have made eorts
to extend their governance model to their subsidiary rms. Some co- operatives have
encouraged subsidiaries to transform themselves into ‘mixed co- operatives’. is legal
gure, included in the Basque Co- operative Law of , allows co- operative- members
to control a majority of votes in their rm’s General Assembly, while making room for
the representation of external investors in the co- operative’s Assembly and General
Council. is essentially allows a parent co- operative to transform a subsidiary into a
mixed co- ooperative and become a shareholder in it, thus safeguard its original invest-
ment as the new rm become increasingly autonomous and self- governing (see Flecha
and Ngai  for examples). e Mondragón Group has also promoted the adoption by
aliated and subsidiary companies of elements of its Corporate Management Model,
and has in some cases facilitated the dissemination of best governance practices to the
capitalist rms that are part of the Mondragón network. Yet it remains the case that,
while the Mondragón co- operatives have been highly ecient in exporting techno-
logical capacities and operational management skills, they have been less successful in
exporting the values and governance models that give them their distinctive identity
back home (Azkarraga ; Errasti ). Or to put it dierently, the internationaliza-
tion of production has very quickly outpaced the ability of Mondragón co- operatives
to implement their founding principles beyond their communities of origin. e goal
of a ‘democratic multinational enterprise’ (Errasti, Heras, Bakaikoa, and Elgoibar
)remains as elusive asever.
In sum, internationalization has presented the Mondragón movement with a particu-
larly complex set of challenges. On the one hand, it has established new conditions for
the success, or even survival, of individual co- operatives, and many have faced the chal-
lenge head on and become highly adept at navigating multiple production and distribu-
tion markets around the world. At the same time, however, this has brought into sharper
relief the fact that preservation of co- operative employment and ownership at home
oen depends on the intensication of capitalist methods of production and labour uti-
lization abroad. is essential tension is now at the heart of the Mondragón experience.
e way it is tackled will determine the future identity of the Mondragón co- operative
movement, and its relevance for other experiments in co- operative organization around
theworld.
19.5 Mondragón inCrisis
e current economic crisis has hit Mondragón hard. e most visible symptom
is perhaps the bankruptcy of Fagor Electrodomésticos in . e direct heir to the
original Ulgor co- operative, Fagor Electrodomésticos had been one of the group’s
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   
agship co- operatives, with , employees (, of them workermembers) and
eighteen production plants in six countries. Over the decade that preceded its demise,
and during a period of massive growth in the Spanish construction sector, Fagor
Electrodomésticos more than doubled its production capacity. In  it acquired the
French rm Brandt to become the h largest domestic appliance manufacturer in
Europe (Errasti).
e striking fact about the case of Fagor Electrodomésticos is not only that a co-
operative of such signicance and size could put itself in an unsustainable nancial
position, but that the Mondragón Group, via its General Council, refused to pro-
vide additional nancial support and eectively abandoned one of its largest and
most emblematic co- operatives to the bankruptcy court. At the same time, the col-
lapse of Fagor Electrodomésticos showcases some of the strengths of the co- operative
group. Prior to the ultimate decision to force the rm’s bankruptcy, worker– members
across the Mondragón co- operatives had agreed to signicant pay cuts in a last- ditch
eort to keep the rm aoat. In May , for instance, the Co- operative Congress
approved the establishment of a million Fund (Fondo de Restructuración y Empleo
Societario) to facilitate the re- structuring of the rm— a fund that drew on contri-
butions from all the co- operatives in the group. Once the General Council decided,
a few months later, not to infuse any additional funds into the rm, other mecha-
nisms of inter- co- operative solidarity kicked in, particularly the commitment to nd
employment within the group for workermembers made redundant by the bank-
ruptcy. Today, a majority of the socios of Fagor Electrodomésticos have been relocated
to other Mondragón co- operatives. e situation is wholly dierent, however, for the
thousands of employees of the co- operative and its subsidiaries who were not mem-
bers, and as a result are not protected by the group’s safety net (Errasti, Bretos, and
Etxezarreta).
e crisis of Fagor Electrodomésticos has revived long- standing discussions within
the Mondragón co- operatives and in their immediate social context about managerial
competence and oversight, the pace and goal of internationalization, and the relation-
ship between individual co- operatives and the corporate group (Ortega and Uriarte
). is is, of course, not the rst time Mondragón has faced a harsh economic cli-
mate. In the late s and for much of the s the industrial co- operatives confronted
a very serious recession. At the time, the crisis was mediated primarily through the
exceptionally severe downturn in the Spanish economy (in , little more than  per
cent of the co- operatives’ total output found its way to foreign markets). In their classic
study of the Mondragón co- operatives in the s, William and Kathleen Whyte ()
dealt at length with the challenges that the worldwide recession of the late s posed
to the co- operative movement, and to Fagor Electrodomésticos in particular. e rm
introduced at the time some radical changes in its mode of operation— most signi-
cantly, a new compensation policy for worker– members that linked individual returns
(the Mondragón alternative to a worker’s ‘salary’) to the economic performance of the
rm (up to that point individual returns had been linked exclusively to the evolution of
the Spanish consumer price index). Since then, individual returns in Fagor and other
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    
co- operatives have been calculated through a complex formula that includes as a key
factor the evolution of the co- operative’s cash ow, used as a proxy indicator for the eco-
nomic fortunes of therm.
Economic crises, in other words, have signicantly transformed and transgured
the Mondragón experience, and the current period of adjustment will similarly have
profound implications for the organization and ethos of the co- operative movement.
Economic diculties not only test the competitiveness of individual co- operatives and
the competence of their governing bodies, they also test the moral mettle of worker–
members, and their commitment to the values and principles that have animated this
co- operative experience over the last sixtyyears.
19.6 Re- founding Mondragón
In a recent document, the Mondragón Group identies, among others, the following
strategic goals for its immediate future:
. To achieve a more intense experience of the Co- operative Principles and Values,
on the basis of the centrality of the individual and of labour in co- operation
. To encourage a form of leadership that is visionary and demanding, and coherent
with the Co- operative Principles andValues
. To encourage forms of co- operative solidarity that will allow transformation— not
the perpetuation of unsustainable economic realities;(…)
. To open the Corporation to other initiatives that might share similar values and
objectives;(…)
. To encourage an integrated education of individuals in values and skills;
. To develop a more open and transparent communication policy. (Mondragón
b)
ese commitments reect some of the hard lessons Mondragón has learned from
its recent travails, and suggest some of the changes the group will pursue in the com-
ing years. e reference to ‘the perpetuation of unsustainable economic realities,’ for
instance, is a clear reference to the demise of Fagor Electrodomésticos, and implies that
the core principle of inter- co- operative solidarity will be increasingly complemented
by the determination to restructure, even terminate, co- operative initiatives that prove
unable to compete in their respective markets.
As we have suggested, these recent upheavals should be seen within the long trajec-
tory of continuous transformation that has characterized Mondragón since its incep-
tion. In fact, the challenges that Mondragón faces today are to some extent the result of
its own success— if we measured success by the ability of rms founded on the principles
of workers’ ownership and democratic governance to compete eectively and expand
signicantly within the parameters of an increasingly globalized capitalist economy.
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   
is achievement has in turn transformed the conditions under which the Mondragón
co- operatives must operate, not least the desires and expectations of their worker–
members. Sixty years aer the establishment of Talleres Ulgor there are few traces of
the political and economic context that justied the launch of this radical co- operative
experience. In , per capita gross domestic product in Spain was barely  per cent
of the average for West European countries. Spain was politically and economically
isolated from the rest of the world, suering under a dictatorial regime that repressed
any form of labour militancy and took special aim at any expression of Basque national
identity.
In the late s, Spain started a process of economic liberalization that would
eventually lead to greater openness to the ows of the global economy. In the wake of
Franco’s death in  the country underwent an equally profound political transfor-
mation. In , e Basque Country approved its Statute of Autonomy, gaining signi-
cant powers of self- rule, particularly in economic and scal policy. e socio- economic
transformation of the country in the intervening years has been dramatic. Today, GDP
per capita in the province of Gipuzkoa, in which the vast majority of Mondragón co-
operatives are concentrated, is  per cent higher than the Spanish average; even more
signicantly, it is  per cent higher than the average of European Union countries.
e productive structure of the territory diers starkly, moreover, from that of Spain,
with a disproportionate emphasis on high- value manufacturing, engineering services,
and exports. Even during the current economic downturn, the situation in Gipuzkoa
and the rest of the Basque Country is comparatively benign— while still high (over 
per cent at the time of writing), unemployment in Gipuzkoa, for instance, is about half
of the Spanish average. All these facts owe a great deal to the activity and success of
Mondragóns co- operatives.
is is, in other words, a prosperous part of the world, albeit one that has experi-
enced more than its share of political turmoil and violent conict over the last dec-
ades. e challenge for the Mondragón co- operatives has been to adapt to a social
and economic environment that no longer resembles the conditions of penury and
isolation that justied and energized their co- operative experiment. It is undenia-
ble that the relative auence of the region has eroded the co- operative spirit. Socios
in the Mondragón co- operatives are cut from the same cloth as other members of
their communities:they oen value the material returns they obtain from their par-
ticipation in the co- operatives— job security, higher pay, etc.— above and beyond
their commitment to the principles and values that drove the foundation of those
co- operatives in the rst place. Or rather, they are inclined to think of those two
dimensions— personal benet and commitment to a co- operative enterprise— as
discrete and separate aspects of their working life. In the case of the largest and old-
est rms, new worker– members are joining organizations that were founded long
before they were born, and which are now orders of magnitude bigger than the co-
operatives their predecessors created. e worker– members are, furthermore, sub-
ject to the same processes of cultural and ideological change as any other member of
their societies. As Azkarraga etal. note in their examination of the transformation
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    
of the Mondragón movement, ‘[t] he process of de- ideologization has aected the
whole of society and, as members of that society, the cooperative social body as well’
(Azkarraga etal., :).
Mondragón, we have argued, is not a co- operative, not even a supra- co- operative cor-
poration. Members of the rst generation of worker– members oen used a phrase to
describe their eorts:they were participating in a ‘co- operative experience’, una experi-
encia cooperativa. is is perhaps the most useful way of understanding Mondragón:not
as a series of established rms, or a corporation with a particular organizational model
and management philosophy, but as a form of practice that has evolved over time, has
had its accomplishments and failures, and that at its fullest embodies and actualizes a
founding commitment to the emancipatory power of co- operative associationism and
workers’ ownership (Sarasua).
Criticism of the shortcomings of this practice have characterized the Mondragón
co- operatives since their origins, and in this article we have identied some of the most
salient targets of reproach. Yet the fact that these criticisms exist and persist reects the
strengths as much as the weaknesses of the movement. For it means that the practical
realization of the Mondragón experience can still be held up to the standard established
sixty years ago with the creation of the rst co- operatives— that the ideal of a non-
capitalist mode of economic existence founded on a personalist understanding of the
worker is still alive and operative in the workings of the co- operatives, even if sometimes
it resonates with barely audible force. Alongside the economic success of most of the
rms in the Mondragón Group, this is perhaps the most signicant achievement of the
movement:the very longevity of this experiment in co- operative self- management, and
its value as an example of both the potentialities and the dilemmas that will confront any
such endeavour when it operates in a world dominated by a very dierent, oen incom-
patible set of values.
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Azkarraga, J. (), Mondragón ante la globalización:La cultura cooperativa ante el cambio de
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Globalized Market:Reections on and from Mondragón, in M. Atzeni (ed.), Alternative
Work Organizations (Basingstoke:Palgrave Macmillan), – .
Azurmendi, J. (), El hombre cooperativo:Pensamiento de Arizmendiarrieta (Caja Laboral
Popular:Lan Kide Aurrezkia).
Bakaikoa, B., Errasti, A., and Begiristain, A. (), ‘Governance of the Mondragón
Corporacion Cooperativa, Annals of Public and Cooperative Economics, (),– .
Cheney, G. (), Values at Work:Employee Participation Meets Market Pressure at Mondragón
(Ithaca, NY and London:Cornell University Press).
Cheney, G. (), ‘Democracy at Work Within the Market: Reconsidering the Potential’,
Research in the Sociology of Work, , – .
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Chapter
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This chapter makes a case for trade union support for a new wave of cooperative development and charts some of the early instances of collaborative working in this regard framed by the Preston Model. We argue for closer affinities between the trade union and cooperative movements in pursuance of mutual interests of renewal and reinvigoration. We believe this represents both a reconnection with important shared heritage and offers crucial openings for deepening the democratic voice of workers and strengthening the connectedness of trade unions to their communities, links which have been sadly denuded in a recent history of decline. As we write amidst the turmoil of the COVID-19 emergency and ongoing Brexit negotiations, we suggest that trade union and cooperative alliances offer creative imaginings for a progressive future.
Article
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The Mondragon Cooperative Group reflects the effort to combine the basic objectives of business development in international markets with job creation, the use of democratic methods in the organisation of the business and a commitment to the development of its surrounding community. The multi-nationalisation of Mondragon cooperatives entails new dilemmas, paradoxes and contradictions regarding these objectives. This article analyses the case of the Mondragon cooperative-multinational Fagor Electrodomésticos. Following years of international expansion via foreign direct investment, the recent recession forced Fagor to institute radical job restructuring processes, both in the plants of the parent company in the Basque Country and in its European subsidiaries: the French company Fagor-Brandt and the former communist Polish firm Wrozamet. Finally, the Basque domestic appliance company, Fagor, declared bankruptcy in November 2013. Analysing the economical and organizational problems during the downfall of Fagor, and the measures taken to downsize employment in the Basques factories and in the foreign subsidiaries, helps us further our knowledge about the organisational characteristics of the Mondragon multinationals and reflect on the possibilities of extending the cooperative model to subsidiaries.
Article
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A trend toward conventional managerialism has been identified in cooperative organizations, and it has been suggested that this is a symptom of the phenomenon of degeneration in cooperatives. Although managerial discourse is at the heart of the dominant managerialism, not much attention has been given to this trend. To fill this gap in the literature, the present study analyzes the managerial discourse of the organizations grouped within the Mondragon cooperative experience, based on a content and discourse analysis of the organizational information published by the Corporation and its 70 member-cooperatives. A mainstream popular managerial discourse is identified in the majority of the member-cooperatives, a discourse disconnected from the discourse of the Corporation. In the latter the basic cooperative values and principles are more strongly emphasized. Implications for managers, workers-members-owners and other stakeholders are discussed.
Article
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Competitiveness today requires being able to operate at a global scale. The financial crisis invigorated this requirement, posing new challenges to the economic viability of conventional companies and demanding alternative organizational forms of production. Although a wealth of research has focused on capitalist companies, little attention has been paid to the way these challenges affected worker cooperatives. Drawing from a qualitative case study of the Mondragon Cooperative Group, this article discusses the obstacles to internationalization faced by worker cooperatives, as well as the specific conditions and implications involved. In particular, the article analyzes Mondragon's contradiction between being forced to expand and trying to keep cooperative values during this expansion. Two main actions aimed at responding to this contradiction are analyzed: the creation of mixed cooperatives and the extension of the corporate management model. The analysis of this process will shed light on actions for the global expansion of worker cooperatives.
Chapter
The Mondragon Cooperative Experience (MCE) is a general but recognized term that refers to the totality of contexts surrounding the Mondragon cooperatives in the Basque Country, Spain. The centrepiece of that movement and institution is the Mondragon Corporation (hereafter called simply Mondragon) – a large, diverse conglomerate of cooperatives federated into a cooperative group. There are 120 cooperatives in total, the majority of which are medium sized, representing four sectors: finance (banking and insurance); industry (including automotive, machine tools, appliances and electronics); distribution; and knowledge (including primary, secondary and tertiary education, plus 12 technical schools). Mondragon is currently the largest private firm in the Basque Country, in terms of both employees and sales, and the seventh largest private firm in Spain. The headquarters of the group, and indeed the seat of cooperative movement in the Basque Country, is the small city of Mondragón (in Spanish) or Arrasate in Euskara, the Basque language.
Article
The Mondragon worker-owned and worker-governed cooperatives are an example of the struggle that some alternative work organizations face when dealing with the external pressures of competing in the global economy while at the same time endeavouring to retain their long-held values of workplace democracy. This article analyses the Mondragon cooperative-multinationals with regard to their subsidiaries in China at a time when the cooperatives are undergoing deep internal and external transformations. The study centres on the characteristics of governance and working conditions at the Mondragon subsidiaries in the Kunshan Industrial Park near Shanghai. The article asks whether, from the perspective of China and Chinese workers, there are any substantial differences between the Chinese subsidiaries of Mondragon and those of conventional multinationals. Overall, it concludes that while there are significant challenges inherent in extending the democratic and participative model of the parent cooperatives to their subsidiaries, there are also indications that if the cooperatives can muster the political will to act in accordance with their stated principles, they could potentially become a real if modest force for change in the labour relations of developing economies.
Article
Theories regarding the purposes and justifications of property guide in part the way in which American business enterprises are run today. This raises the question – if purely capitalist corporations are founded upon an understanding of property most in line with the theories of established property scholars Bentham and Locke, is there room for a different kind of concept of property in the realm of U.S. business? In this paper I explore the way in which the workers’ cooperative model infuses a sense of moral responsibility into a group of individuals’ understanding of “property” in order to create a collectively managed enterprise that measures success both in economic and socio-political terms. I first review a large body of literature on the various forms of cooperative ownership and management, focusing on the history of the co-operative model, the rights entailed under the model, and the advantages as well as criticisms associated with co-operatives. I then use this literature to situate a case study example of a co-operative organization – The Cheese Board Collective, a worker-owned artisan cheese and pizza shop in Berkeley, California – and to analyze my findings.