Ch. 17 A Large Scale Cooperative Network

 “What if the residents of communities truly owned

the economic base and infrastructure of their communities?”

– Cornelius Blanding, Federation of Southern Cooperatives.

In the 1950's, in the Basque region of the Pyrenees mountains of Spain, there was a town of about 7,000 people called Mondragon. 

This town was still in the grip of the poverty, hunger and isolation that resulted from the Spanish Civil War. With no jobs available, and no capitalists who were interested in investing in a town with seemingly nothing to offer, a handful of ordinary people chose to take matters into their own hands.  

With the guidance of a Catholic priest named José María Arizmendiarrieta, who possessed a strong sense of social justice and human dignity, a small group of his young students created a worker-owned cooperative in Mondragon whose first product was paraffin heaters. 

The cooperative was founded as a way to invest in and create jobs for the community. Happily, over the ensuing decades, this small collective has grown. A lot. 

Today the Mondragon Cooperative Corporation is a voluntary association of over one hundred different cooperatives which operates in a radically different way than conventional companies. For example, the highest-paid executives at the co-op’s individual companies are not permitted to make more than eight and a half times that of their lowest paid employee.

The company is not publicly traded, so there are no shareholders. Instead, new workers are assigned a temporary contract. If they have done good enough work and fit in with the larger group, they will be invited to become member-owners of the co-ops. While the co-ops do have a managing director in a sort of de facto CEO role, the owner-workers vote on many of the company’s decisions on strategy, salaries, and policies. What’s more, all of the member’s votes are weighed equally, whether they are laborers or management.

When the company does well, the members share in the profits. Conversely, when times are hard, the cooperatives support each other collectively, sharing their funds and re-allocating workers to preserve jobs. 

During the Covid pandemic, many partners at the co-ops voted to temporarily reduce their salaries or hours until the economy recovered. 

But how successful is Mondragon, really? 

Well, they have over 80,000 member-workers and generate over $14 billion USD per year in revenue, with another $37 billion in assets. They are among the Top 10 largest corporations in Spain, so the myth of a cooperative network being unable to operate successfully in a large-scale global market would seem to be just that: A myth.

Mondragon makes everything from auto parts to washing machines, and owns one of the largest grocery chains in that region of Spain. They have their own cooperative bank in the form of a workers credit union, their own university, and cooperative housing and insurance. 

Management is promoted based on a vote in the general assembly. Managers have a vested interest in keeping and paying their workers well, because their jobs literally depend on it. Since the managers are limited in how much more they can make than their lowest paid member, they are motivated to make the company more successful for everyone.

Mondragon doesn’t refer to the income it generates as profits. Remember, profits are something that is hoarded and sequestered away. Instead, they refer to it as net revenue. After expenses, the money left over is divided up. 10% goes back into the Mondragon network and is used for things like research and community development.

What’s even more remarkable is the fact that they’ve virtually done away with unemployment. In 2008, during the great Recession, one of the Mondragon companies had to dramatically downsize. But the member-workers weren’t simply out of a job. Instead, they were moved to a different job, in a different cooperative, within the larger Mondragon network. Exactly where they wound up was determined by an awarded points system based on worker skill, age, family life, and seniority in the Mondragon system.

And in some cases, when no jobs could be found for the displaced workers, they were given early retirement with full benefits. This is possible because the Mondragon collective network supports each other.

The Mondragon collective also puts some of their net revenue into a fund reserved for those who want to start up a new cooperative. This provides much needed seed money that is essential for startups to grow and thrive.

The remaining net revenue goes into a pension plan for the workers, but the money doesn’t sit idle. Instead, it’s reinvested, and when the worker really does retire they have a comfortable pension.

Here is as breakdown of how the net revenue from every individual Mondragon cooperative is utilized:

• 10% of net revenue returns to the larger umbrella of the Mondragon Corporation in the form of dues. This money is used to fund their University (which primarily teaches and promotes cooperative business management) community development etc. 
• 45% goes towards the improvement and expansion of the individual business itself. (Compared to the 14.5% that American capitalist businesses invest in themselves because 80%+ goes to shareholders.)
• 45% goes towards the workers pension fund. This money is reinvested to benefit the larger cooperative network. And each worker receives a yearly dividend which equals 7% of whatever funds they have built up in their own pension fund. 

Instead of distant shareholders who have no connection or investment to the community, Mondragon shares its success with the people who actually do the work to make the companies succeed.

This is the triumphant story of a worker-owned cooperative network that is backed by cooperative essential services.

So what lessons can America learn from Mondragon?

Although our own civil war ended over 150 years ago, the impact of slavery and institutionalized racism are still felt today. And its not only people of color who have been affected. 

The war on drugs, mass incarceration, the hollowing out of the middle class, and the war on organized labor has left us with thousands of poor underprivileged communities across the country. While the upper percenters have siphoned off community wealth to enrich themselves to the tune of hundreds of billions of dollars. 

Who's going to invest in these communities?

Just like post civil war Mondragon, there is no incentive for the profit seeking capitalist to invest in these destitute and isolated communities. The upper percenters have no interest (other than pseudo-philanthropic PR campaigns) in developing these communities and giving them a leg up. 

If anyone is going to transform these communities it has to be us. 

Mondragon started with 5 or 6 young people and a Catholic priest. (And it will become evident throughout this book that our own goals of a better world can only be realized by young people.) 

It took them 60 years to build the largest cooperative network in the world, but keep in mind that most of that time was before the internet or crowdfunding. 

Just as Mondragon did, we can transform our own poor, war-on-the-working-class ravaged communities into thriving hubs of economic activity and societal change. 

Before we get into the nuts and bolts of how to do that, lets first have a little refresher about what we've learned so far and talk about the new economic paradigm that will inform our movement.