Magazine article Canadian Dimension

Is Industrial Democracy Feasible? Lessons from Mondragon: An Almost Unqualified Success

Magazine article Canadian Dimension

Is Industrial Democracy Feasible? Lessons from Mondragon: An Almost Unqualified Success

Article excerpt

In 1956, five young Spanish workers under the guidance of a social-activist Catholic priest, Don Jose Maria Arizmendiarrieta, began ULGOR, a small heating appliance manufacturing co-operative. It was located in the town of Mondragon in the mountainous Basque province of Guipuzera in the north-west of Spain. What began in such a humble way has now grown into a network of producer, consumer, educational, social welfare, housing and financial co-ops spread across the three Basque provinces that in 1989 employed 22,000 workers/owners, had sales in excess of $2.5 billion, ran 46 schools and polytechnical institutes, all supported by a co-operative bank, the Caja Laboral Popular, with 189 branches and assets of over $3 billion.

The heart of the network is in manufacturing. In the consumer goods area there are co-ops producing major appliances (stoves, refrigerators, washing and dishwashing machines), kitchen cabinets, cookware, water heaters, and commercial food and laundry equipment.

In the industrial components sector they produce parts for electric appliances, iron and aluminum castings, electronic components for telephones and televisions, and, most recently, lasers; and in the engineering sector, machine tools, numerical controls as well as computer software and engineering services.

In 1960, Mondragon expanded into agribusiness though the major expansion did not occur until more recently. The system also has its own social insurance, retail supermarket, housing and construction co-ops in addition to its own research and development, design, education and financial institutions.

How it works

Any person living in the region can shop at and be a member of the consumer co-op (Eroski) or bank at the Caja Laboral Popular (CLP). A person becomes a member of one of the producer co-ops by getting a job at one of them and paying a membership fee equal to one year's salary at the entry level wage. This fee can be paid-off by a salary reduction over 2 1/2 years or can be borrowed from the CLP and 75 per cent of it is credited to the worker's personal account and therefore repayable to the worker on retirement or leaving the co-op.

The average payout to retiring workers, which includes entry fee and annual share of profits, is around $100,000 or ten times the entry fee. The other 25 per cent of the membership fee becomes part of the social (collective) capital of the co-op. All workers, with the exception of temporary consultants, must be members.

All members are entitled to vote in elections of delegates to workers' councils which are the effective decision making body of the constituent co-ops and have the final say in policy and the selection of managers. Wages are set comparable to the private sector in the region which means that, because of the rule in the Mondragon system that the wage differentials must not exceed 4.5 to 1, the lowest paid workers make more than their private counterparts while top managers make less. The co-ops are now discussing whether to increase this limit to 6 to 1 because of the difficulty in hiring and retaining top technical, professional and managerial workers.

The Mondragon complex is perhaps the most important example of worker self-management in operation today, particularly with the decline of the Kibbutz movement in Israel and the current plan to abandon the system of self-management in Yugoslavia. Its importance lies in the fact that it has been an almost unqualified economic success which belies the conventional wisdom that producer co-ops were destined to a short and no growth existence. The success of the Mondragon model has also led to its being copied by a similar, but still very much smaller, complex in Valencia in Spain.

The history of Mondragon and an analysis of its growth and development is well told in the recently published study by William and Kathleen Whyte, Making Mondragon. What is perhaps the most important attribute in the Mondragon story is that, contrary to the predictions of economic theory and the actions of capitalist employers in Spain and the Basque region, Mondragon has maintained a record of employment growth while paying wages equal to, or better than private employers in the region. …

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