Mondragón Cooperative Corporation

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MONDRAGÓN COOPERATIVE CORPORATION

The Mondragón Cooperative Corporation (MCC) is composed of a group of industrial, retail, service, and support cooperatives primarily in the Arrasate-Mondragón valley in the Basque country in Spain. Many scholars have studied Mondragón as a strong example of an industrial cooperative with a longstanding and successful history. From the beginning the MCC has, in its own words, strived for: (1) openness to all; (2) democratic organization; (3) recognition of the importance of work;
(4) making capital instrumental and subordinate (people over capital); (5) participatory management; (6) minimal salary differentiation; (7) cooperation with other cooperatives; (8) transformation of society; (9) nondiscrimination in terms of gender, religion, and political affiliation; and (10) education and training for all.

It is a widespread belief among sociologists and economists that an association of producers that tries to develop an alternative to the capitalist model is destined to abandon democratic principles or fail economically. The success of Mondragón challenges this view. Since the first Mondragón cooperative was founded in 1956, the group has grown and continuously increased its profits. In the process it has maintained its cooperative structure almost unchanged. In 2002 the MCC was the seventh largest business group in Spain with a net worth of more than 15 billion euros. In 2003 it employed more than 66,000 people in 120 firms of three types: financial, industrial, and distribution. The financial group includes the banking activities of Caja Laboral and a social welfare entity, Lagun Aro. The industrial group includes seven divisions: automotive, components, construction, industrial equipment, household appliances, machine tools, and engineering capital goods. The distribution and sales group consists of consumer cooperatives such as Eroski.

History

The project started in 1943 when a newcomer to the area, a young and unorthodox Catholic priest, José María Arizmendiarreta, decided to create a technical school in Mondragón in order to offer new opportunities to young people who had no access to that type of education. Arizmendiarreta never became a member of a cooperative but took part in most of the crucial decisions regarding the MCC project. The technical training school was registered legally in 1948. Eleven of the students in the first class went to the University of Zaragoza to study industrial technical engineering. In 1955 five of them bought a bankrupt firm that had produced heaters and stoves in Vitoria and moved that firm to Mondragón a year later. The firm eventually became Fagor, which was converted to a cooperative in 1958 and in the early twenty-first century is the largest producer of household appliances in Spain.

In 1959 the Caja Laboral Bank was formed with a double aim: to promote savings and to channel funds into other developing cooperatives. In the same year the social welfare entity Lagun Aro was set up to solve the problem of pensions. Because the government considers them owners, not workers, members of cooperatives cannot be covered by Spain's social security system.

In 1969 the technical school officially became an industrial technical engineering school. The distribution cooperative Eroski was formed in that year. Ikerlan, the first technological research center of the MCC, was started in 1974.

In the late 1970s the organization became more complex, setting up so-called local groups, which bring together sets of cooperatives to do combined activities and optimize results. Beginning in the 1980s, the group increased exports and formed trade missions, and by 2003 it had constructed factories in sixteen other countries. The Caja Laboral has expanded throughout Spain, and Eroski commercial centers and megastores compete successfully with those of multinational firms. In 1990 the group officially became a corporation, and the businesses were organized by sectors rather than geographically.

Throughout its history an important value for Mondragón has been education, both technical and cooperative. In 1997 the University of Mondragón was established, combining all the cooperatives devoted to education: the three industrial technical engineering schools (Mondragón, Txorrieri and Lea-Artibai); Eteo, which is dedicated to business management and administration; and the University College for Teaching.

Another goal of the MCC is to produce its own technological knowledge. In addition to the university the MCC has formed several research centers: Ikerlan, Ideko, Maier Technology Center, Ahotec, Orona EIC, the Business and Organizational Management Research Center (MIK), Modutek, Koniker, and Lortek. In 2002 the Garaia Project developed a research network linking the university, the research centers, and the firms. The objective was to foster the kind of technological knowledge that the cooperatives consider key to their success.

Critical Reactions

Many scholars have tried to explain the extraordinary success of the Mondragón project from different perspectives. Some have seen Arizmendiarreta as a farsighted leader whose decision-making ability was crucial. Others have pointed to a prior industrial and cooperative tradition in the area. As a result of these and other specific aspects Mondragón often has been presented as a unique experience that would be impossible to reproduce in other places.

A controversial aspect of Mondragón is its supposed relationship with the Basque nationalist movement. The Mondragón area is, along with many others in the Basque country, markedly nationalist, and for this reason it often has been suspected that the MCC has received favorable, protectionist treatment from the regional Basque government, which has always been in the hands of the nationalists. These suspicions have never been substantiated, and it is important to remember that the MCC first developed and achieved economic success during the earlier Spanish dictatorship.

An important problem has resulted from the growth of the cooperatives: Some of them, especially Eroski, require an increasing number of hired employees who are not members of the cooperative. This clearly contravenes the original ideals of the MCC and could be interpreted as leading to a transformation of the cooperatives into firms with a less democratic structure. However, MCC researchers are studying ways to incorporate those workers into the cooperative system.

ANA CUEVAS BADALLO

SEE ALSO Affluence;Business Ethics;Work.

BIBLIOGRAPHY

Bradley, Keith, and Alan Gelb. (1983). Cooperation at Work: The Mondragón Experience. London: Heinemann Educational Books. Economic analysis.

Kasmir, S. Sharryn. (1996). The Myth of Mondragón: Cooperatives, Politics, and Working-Class Life in a Basque Town. Albany: State University of New York Press. Argues that democratic government is not as ideal as claimed.

Whyte, William Foote, and Katheleen King Whyte. (1991). Making Mondragón: The Growth and Dynamics of the Mondragón Cooperative Complex, rev. edition. Ithaca, NY: ILR Press. Best source, by a well-known sociologist and his wife.