No one should be surprised these days when yet another company goes belly-up in these difficult financial times, especially in devastated economies such as Spain. Yet the bankruptcy of Fagor, the flagship cooperative in the Mondragon Cooperative Corporation (MCC) has shaken many anti-capitalists around the world as akin to witnessing the ending of Camelot. The fact that at least two of the other largest cooperatives in the Mondragon network, Caja Laboral (the bank and financial center of the corporation) and Eroski (a chain of retail stores throughout Europe) are in dire financial straits has only added to the ominous threat.

Fagor, with its 5,600 workers, is a relatively small part of the whole. Even so, Trevino (Fagor’s CEO) warns that its fall “will have an uncontrollable domino effect on the rest of the group with major social implications.” He believes Fagor’s liquidation would create a €480m hole at Mondragon, including inter-group loans and payments the group’s insurance arm would have to make on Fagor workers’ unemployment policies.
 photo f1828d0d-7d8a-4ee8-882a-cd3c9eabd515_zps29568c4d.jpg
Mondragon has promised to find new jobs or offer early-retirement terms for as many as it can of Fagor’s Spanish workers, but this is a tall order in a country with 27% unemployment. Besides their jobs, workers stand to lose the money they had invested in the co-op if it is liquidated.

Demystifying the Mondragon Myth

For the last 50 some years, the growth of what is now the Mondragon Cooperative Corporation has given many anarchists, socialists and other progressives in the cooperative movement the hope that yes, Virginia, there really is a viable alternative to Capitalism or, at the very least, an economic system that could provide a transition to socialism. Moreover, although many socialists won’t easily admit it, there is often the underlying hope that somehow this transition could occur “peacefully”, without a real class struggle ending in state ownership; that somehow, within the belly of the beast of capitalism, the cooperative model could “out compete” the capitalist multinationals at their own game and become the dominant economic paradigm.

Yet, as one blogger commented in Alternatives to Capitalism,

“There is no escaping the need to challenge Wall Street and the other big financial centers across the world for political and economic power which requires a well-organized and intense class struggle [...] something the promoters of these cooperative schemes try to evade as they try to convince workers there are ways around bringing mines, mills and factories under public ownership which is going to require the nationalization of entire industries.”

Unfortunately, many of Mondragon’s supporters (of which I am one) tend to promote the Mondragon model in a very schizophrenic way. On one hand we talk about the ideology of cooperation over competition in an almost mythological way. We talk about how Mondragon was started in 1956 by Father José María Arizmendiarrieta, a priest who, in the shadow of the fascist dictator Franco, began a cooperative with five workers in the isolated, impoverished Basque region in northern Spain.

We talk about how it is the Father’s vision of worker-owned and worker managed cooperative enterprises, based on democratic control, equality and cooperation among the workers, that makes Mondragon different than other capitalist enterprises.

All the workers in a cooperative would be owners. All workers would have one share and one vote. All workers would have an equal voice in decision-making and setting the company’s policies. Workers would elect their own managers who could not make more than twice the highest paid worker. Cooperatives would remain small (no more than 500 people) and educate all incoming workers so that the cooperative way of life, focusing on the workers and the needs of the community they lived in, would not be replaced by the competitive greed of capitalism. The cooperatives would form a network of manufactured goods and service cooperatives that would support each other.

Yet, when we promote the Mondragon model to others, we tend to evaluate the success of the “Father’s vision” based on capitalist measurements of success–how much money do the coops pull in and how big are the enterprises(the capitalists’ bottom line). After all, if we are going to create a cooperative economy, we have to be able to compete with “the big boys” on their own terms. We seem to have forgotten measurements such as workers stability, democratic decision making, and making products which will enhance our communities, instead of for profit maximization.

So we point to the fact that Mondragon developed into a world-wide network of cooperatives that boasts $14 billion in total revenues, distributed among 110 cooperatives, 147 subsidiary companies, eight foundations and a benefit society with total assets of 35.8 billion euros. The MCC currently employs over 80,000 people, 32,000 of which are coop members, and include in their products manufactured goods as diverse as washing machines and high end bicycles as well as financial products such as hedge funds and a network of retail stores that span Europe. Fagor alone, has over 5,600 employees in 5 factories in Spain and eight other non-cooperative factories in China, France, Poland and Morocco, and the ratio of the CEO’s salary is limited to 10 times that of the highest paid worker.