Mondragon Miracle Part 3 of 3: Lessons Learned

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“Nothing differentiates people as much as their respective attitudes to the circumstances in which they live. Those who opt to make history and change the course of events themselves have an advantage over those who decide to wait passively for the results of the change.”

SisyphusOver and over, I see commentary asserting we are stuck with our current cultural norms. The “rational” people of the world patiently explain to me how I am too idealistic. I am naïve and believe too deeply in the good nature of most people. Yet, the rational people only have their assertions to stand on. History is fraught with examples of people who fought for and won real change. People like the Basques in Mondragon. They created lasting change under deplorable conditions. Even a cursory review of history shows change occurs when and where people decide to change. You don’t live in a feudal monarchy rife with slaves and infanticide-all well ingrained institutions the Ancient Greeks considered necessary evils of civilization-because people decided to change.

In the first part of this series, I described how a Jesuit priest named Don Jose created a Basque cooperative–Mondragon. He could hardly have started from a more impossible position. Basque was severely oppressed, poor and under a harsh dictatorship. His Church considered him a pariah, and he was a poor speaker and sermon writer. Yet, he refused to dwell on his disadvantages, concentrating on finding Basque strengths, instead.

In part two, we examined Don Jose’s unique genius in organizing his local society. He felt it was never necessary for someone to win while someone else lost. That scenario showed a lack of ingenuity. He examined problems until he saw a solution allowing the common good for everyone.

Some argue Mondragon arose from Basque because a specific set of non-reproducible circumstances existed. To me, that sounds like rationalization to let ourselves off the hook for not seeking to better our world. While I agree Mondragon originated in Basque due to a specific set of circumstances, clearly those factors are not needed to reproduce cooperative society.

What may be necessary is a certain environment in order to affect positive change. This post will look at some of the factors influencing people’s willingness to change during the creation of Mondragon and how to use those factors to enable change in our own culture.

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In the beginning, Don Jose, himself, was Mondragon’s biggest asset. He easily could have preached the value of a sterling soul and ignore the material state of the people as an impossible secular problem, but that was not his style. Soft-spoken native of Basque, known for his pragmatic outlook, and self-effacing nature, he had tremendous presence and charisma. He led by example, not just by words. The respect he garnered allowed him to persuaded people to do remarkable things. He continued to push for excellence and to keep Mondragon on the cutting edge. He was also visionary in his scope-suggesting the creation of the self-capitalizing bank and constantly trying to anticipate what the cooperative would need to survive in the future.

A proactive, charismatic leader, who is seen as one of the people, may be a requirement for change-a face to the revolution. That is the wave that swept Obama into the White House before “Yes we can,” became “Oh no you don’t.”

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Basque has a cohesive culture absent in the US, if not the world. Shared farming practices, never entirely wiped out at the dawn of capitalism by enclosure of the commons, formed the basis of their heritage. Village life was consensually democratic. These anarchist traditions included views on ownership and shared work allowing them to accept the teachings of Don Jose.

Their strong sense of identity and community were only made stronger by Franco’s harsh treatment. It unified the people against him. Joining the cooperative was seen as a rebellious act. They taught in the forbidden Basque language and formed covert Basque folk dances and music groups through the cooperative. The coop was associated with illegal underground political parties. The oppression they shared in common allowed the Basques to put their own self-interests aside and make decisions for the common good of their community.

Racism in America would have completely faded away if it were not so useful to the powerful. It divides the masses into easily controlled factions. When the powerful tried to divide teachers and police in Wisconsin, look what happened. No previous division existed for the powerful to exploit and solidarity was the result.

To affect real change in North America, an overriding self-identity encompassing all workers needs to develop. This identity must transcend race, religion, party, geography or other superficial divisions. Wisconsin showed us the way, when demonstrators held up signs saying “We are Tahrir Square” and Egyptian rioters sent them pizza as an act of international solidarity.

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The Spanish government inadvertently provided a great deal of support to the budding Mondragon cooperative. Don Jose took advantage of laws to help local corporations and farming cooperatives recover from the war. The initial capital loans came from the government and economic protectionism excluded foreign corporations, giving Mondragon room to grow.

Today, many laws protect banks and multi-national corporations. With creative thinking, cooperatives could take advantage of those laws. Which state is the best state to incorporate in if you are a cooperative? Which state has the most favorable laws? Can you get loans and aid from the Small Business Association? Can we take advantage of tax loopholes?

Mondragon has taken on ventures in foreign countries with different laws that prohibit cooperatives. Cooperatives should seek to change the laws and the landscape of the world from a corporate friendly landscape to a cooperative friendly landscape.

We should seek to change the laws in the US and Europe to protect businesses that protect workers. Mondragon would not have flourished in the beginning, if it had faced free trade with countries who have no worker protections and paid their workers less than it costs to live.

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“Education is the natural and indispensable cornerstone for the promotion of a new humane and just social order.”

The power of having a shared vision, goals and adopted culture cannot be overestimated.

Don Jose understood this. His school provided a pool of like-minded individuals from which to start his endeavor. He used the education system not only to educate people in a trade and to understand the world, as most schools do, but also to instill in his students a sense of community and group cohesion. In order for work place democracy to survive, ethical considerations and fairness must also thrive. Don Jose’s ethics encompassed hard work, personal sacrifice and appreciation of personal competence and learning. But it also emphasized collaboration over competition and the well-being of the worker over the greed of the owner. Those basic ideas form the foundation of the cooperative even today.

The Right, in America, with their rewriting of history textbooks and censorship of classical literature, has been engaging in social engineering via the educational system for decades. The very documents establishing compulsory schooling in America state the reason for such schooling was to garner a large passive and willing work force. The current education system creates a pool of people from which the Right can draw for support.

For the Left to have enough people understand or even listen to our ideas, we must do likewise. We must either open our own schools, or change the existing system as the Right did decades ago. Our schools cannot separate basic skills from ethical lessons. Social justice is the foundation of a cohesive community and must be taught in any nation dependent on democracy.

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“We will build the road as we travel.”

Mondragon not only concentrated on industrial/manufacturing coops, but also did what was necessary to support the labor force running manufacturing. Don Jose understood only human beings add value to capital, never the other way around.

The bank (Caja Laboral Popular) was extensively covered in Part II of this series. Mondragon also has a consumer co-op department store (Eroski) where surplus (profit) is channeled to the consumer/members in lower prices. An insurance coop (Lagun-Aro) provides social security, pensions, health care insurance. Innovation and R&D are provided by Ikerian. Education by 43 schools and a university run by Mondragon.

Mondragon’s education system did not focus on a narrow aspect of being a citizen, becoming a worker, but broadened its perspective to being a citizen. When the student became an adult worker, Mondragon did not focus just on the profits the worker produced. It broadened its focus to include the well-being of the community from which the worker originated. In Mondragon, every act of business reinforces the community and the well-being of the worker. The business itself is the social safety net and an educational system and a health care system and anything else the worker/owners need it to be. They not only created a work environment, but an entire culture in which the community learns, works, shops, and lives in a cooperative environment. Unlike the average grocery coop in the States, Mondragon is its own community.

Any successful movement for change in the US should heal the artificial rifts created by our economy that fracture our communities. Doing so will enable us to work smarter and easier, freeing us for other endeavors.

What does your community need right now? Health care, reliable pensions, disability? Those are a given. Could you capture the spirit of Don Jose and find a way to coop political action so Congress had to pay as much attention to workers as they do to multinational corporations? Can you think of a way to tie in media so the majority had access to reliable information and ideas they could use and not just passively absorb the propaganda of the rich and powerful? What can you create using this economic form? I’d be interested to hear what you come up with in the comments.

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The Middle Way to Work place Democracy:

“Work is the means adopted for attaining a higher level of satisfaction for human aspirations and demonstrating collaboration with the other members of the community to promote the common good. To ensure that it is contributed freely, productively, and in a manner that makes everyone’s collaboration viable, the members shall respect its discipline, namely a hierarchy.”

Studies show Mondragon is more productive, profitable, better at creating jobs, and job security than the top 500 traditional companies in Europe. Forty-three studies show the closer a company gets to Mondragon, the more productive it becomes.

Both the capitalist and the communist assume, where economics is concerned, the average person should not run their own lives. Only elites or government bureaucrats should make important decisions.

Surprisingly, the strict anarchy of the traditional coop is even less effective than the corporation’s rigid hierarchy. Born out of the 70’s communal movement that created the internet, traditional coops required no leadership. They ran by radical democracy instead. But strong personalities emerged as a type of hidden leadership. Prohibited from uniting in groups to defend themselves from strong personalities, the entire group suffered until the cooperatives fell apart.

Both the rigid hierarchy of corporations and the lack of structure in traditional coops are inefficient. The rigid structure of the corporation is unable to bend and flex to changing needs. The structureless anarchy of radical democracy breeds its own tyranny of informal cliques and hidden leaders. Both are breeding ground for resentment.

Don Jose understood the paternalistic work relationship between the capitalist and the laborer would forever work to destroy community and enslave the worker. In this relationship, the chooser (capitalist) always has a parent to child relationship with the doer (labor). He determined the chooser and the doer had to be the same person. This leads to more equitable adult-to-adult relationships with more contentment at work. Decisions in this relationship are not solely based on self-interest, but on the common good-solidarity.

He also understood the dynamics of human nature and strong personalities. He shirked capitalist paternalism making the laborer also the owner. Equally, he snubbed the hard left philosophy of refusing to have managers at all, elected managers from the work floor, or job rotation, avoiding the common problems of other coops. Leadership was hired and granted time to prove itself on the floor lest they suffer replacement.

Of late, globalization pressure has forced Mondragon away from this thinking and made the coop more like a traditional corporation. New endeavors in cooperatives should take heed of the warning this provides, and build resilient power for the worker into their organizations from the start.

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Beyond village size, communication becomes a problem. The strike at Ulgor is very instructive in this regard. Worker coops require a hard core of democracy (one person =one vote) instead of plutocracy (one dollar=one vote). They need decentralized organization and a culture of self-management. They must reinvestment in jobs and in social responsibility. They require creativity, innovation and education. They need to keep reaching outward, beyond the comfortable confines of home to a global perspective. All this requires adequate channels of communication and a balance between management and labor power. Consultation and negotiation have to take precedence over demands and threats.

It does take work and vision to maintain even the smallest of democratic institutions. Workers must be trained in both social and professional realms. Transparency of management and the nuances of business must be maintained. Internal promotion should be the basic means for covering positions with greater responsibility.

High levels of complexity can be obtained, but the basic unit of power must be kept within a realm where real face-to-face communication occurs. This limit is around 300-400 people.

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The Meaning of Wealth Creation:

“After the socialization of culture, inevitably follows the socialization of wealth and even of power. We may say that this is the indispensable and prior condition for the democratization and socioeconomic progress of a people.”

In the US, we have accepted Friedman’s assessment of human nature as inherently lazy and irresponsible, requiring both punitive measures and enticements. Labor is merely rented by the capitalist, who takes all the risk and makes all the decisions, but also reaps all the rewards. Yet, the capitalist could achieve nothing without the worker. Capitalism does deliver needed goods, but it does so by grinding humans to dust with a near constant state of fear. Work need not be oppressive, as both the capitalist and socialist systems seem to demand. Workers do not need to be infantilized, and, in fact, companies that treat their workers as adults do better economically.

Conventional business ranks their priorities capital-production-management-labor. Mondragon reverses this paradigm. People rank the highest, things and money the lowest. Mondragon decided capital should be rented (the loan from the worker/owners) and labor should take the risk, make the decisions and reap the rewards.

Corporate management has vastly increased the amount of material wealth. But the object wealth should serve, the human being, has largely been ignored, creating global misery along with the wealth. It has done this without regard for the needs of the planet. Its conversion of raw resources to capital now threatens our very existence.

Mondragon shows us an alternative route. Instead of putting material wealth over human well-being, it takes as its goal the dignity of the human in his/her labor, social solidarity and the primacy of labor over capital.

Mondragon did not adhere to any economic philosophy. Profit alone was not the driving force, but the welfare of the workers. They put making new jobs ahead of making better return, both for their factories and their bank. Instead of protecting capital over jobs, they protected people over capital, and in so doing preserved the capital as well.

Currently, by law, American companies have only one mission-to maximize the profit for the shareholder. Even if the Board of Directors or the shareholders want another goal, it is their legal responsibility to fulfill the profit goal. This relationship has been a disaster since its inception-for the workers and the capitalists as well. What will a rich capitalist do when there is no water to drink or air to breathe? Clearly, our relationship to corporations and their primary goal must change.

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Mondragon melded traditionally separate institutions like banking and education with manufacturing. Most of their enterprises started the same way Ulgor did, with a group of friends (never an individual). The already established bonds of friendship are the best foundation on which to build. The bank then provides the needed capital and sticks with the new business until it is well established. If the business stumbles, the bank can waive the interest on the initial capital loan, payments might be suspended, or the entire loan might be forgiven. As long as the community remains behind a venture, the Bank supports it.

Each new cooperative is thoroughly researched with a book long feasibility study-location studies, sociological analysis, market analysis, product development, building plans– are all done prior to one cent of investment. Additionally, they consider the impact of any new enterprise on health, safety, environment and social responsibility.

Only three of their ventures have every failed. They invested much more conservatively than traditional corporations. In Western Corporate world, venture capital is invested by people who are paid to watch over other people’s money. The recent catastrophe in the market demonstrates the lack of wisdom in such a system. People of this nature invest for their own benefit, even when the investments are unlikely to pay off for the investors, themselves.

Mondragon’s investment capital belongs to everyone in the company and those directing the investments are elected. New ventures are researched thoroughly and once a venture is started, all the resources of the bank, social institutions and other branches are utilized to stabilize the new venture and make it a success.

The bank provides mentorship for new coops and gives established coops strategic guidance, and up-to-date marketing reports. It works with R&D to suggest new products. Once established, coops become part of a strategically planned network and share in marketing, legal help, human resources, training and finances. All powerful resources, the average small company in the US could ill afford.

Mondragon went to extreme lengths to provide its own social safety net to its workers: Retirement, 85% pay for a year if laid off, healthcare, education, housing, childcare. Nothing was off the table and it created worker loyalty and efficiency. Worker/owners get a job guaranteed for life, the community gets a stable commercial sector, and consumers get high quality goods at a lower price. Everyone wins.

Thank you Don Jose.

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This is the conclusion of the Mondragon series. I hope you enjoyed reading it as much as I enjoyed writing it. I would very much like to see your comments and out of the box suggestions to bring this sort of system to wider world.