C. George Benello

Anarchism has a long tradition of counterinstitutional development. !n Spain in particular anarchists developed a whole system of governance that included industry and agriculture as well as transportation during the Spanish Civil War. Remnants of this still exist ? a Barcelona bus cooperative for example. It is of interest, therefore, that the Basque region has, in recent years, seen the rise of a system of cooperatives that is unparalleled in its dynamism, growth, and economic impact on a region. The system, which spreads throughout the surrounding Basque region, is named after Mondragon, a town in the mountains of Guipuzkoa Province near Bilbao, the place where the first cooperatives started. It has, since its start thirty years ago, gained an international reputation, with similar models now being developed in England, Wales, and the United States.

it is not possible to trace any direct anarchist influence in the development of Mondragon; it was the the UCT, the socialist union, that has predominated in its factories, rather than the anarchist CNT. But the town of Mondragon was the first in the Basque region to send soldiers to fight on the Republican side in the Spanish Civil War. Thus while its explicit connections to the anarchist tradition are unclear, the Mondragon system is an example oF liberatory organization which, like its predecessors in the Spanish Civil War, has acheived success on a scale unequaled in any other part of the world.

Mondragon was founded some thirty years ago by a Catholic priest, Don jose Maria Arizmendi, a man who had narrowly missed being put to death by Franco as a result of his participation in the Spanish Civil War on the Republican side. With the help of collections from citizens of Mondragon, he founded an elementary technical school in 1943. The first graduates numbered among them five men who then went on, after an unsuccessful attempt to democratize a local steel factory, to found in 1956

a small factory named Ulgor, numbering initially 24 members, and given to the manufacture of a copied paraffin stove.

This venture proved successful and developed into the "flagship enterprise" of the whole system which later was to come into being. At one point Ulgor numbered over 3,000 members, although this was later recognized as too large and was reduced. The structure of this enterprise served as the model for the latter enterprises forming the system. Following the Rochedale principles, it had one member-one vote, open membership, equity held by members and hence external capitalization by debt, not equity, and permanent education. However it adapted and added to these principles in a fashion that made it differ significantly from industrial cooperatives developed hitherto. It is these additional principles which are responsible for its dynamism and success, in contradistinction to almost all industrial cooperatives which preceded it. The additions can be summarized as follows:

1. It developed a system of individual internal accounts into which 70X of the profits {a more accurate term is "surplus") of the cooperative were placed. Each member had such an internal account. 30% were put in a collective account for operating capital and expansion, with a portion of that being earmarked for the community. The individual internal accounts noted receipt of the portion of the surplus earmarked for it, but this was then automatically loaned back to the cooperative, with interest paid. Upon leaving, members receive 75% of the accumulated funds credited to their internal account, while 25X is retained as the capitalization which made the job possible. This system essentially allows the cooperative to capitalize close to 100% of its yearly profit, and gives it a capacity for internal capital accumulation unequaled by any capitalist enterprise. It also establishes an ongoing flow-through relation between the individual and collective portions of the surplus.

2. A membership fee was determined, now about $3,000, which represents a substantial investment in the cooperative, and which could be deducted from initial earnings. This too is credited to the internal account. Both the membership fee and the share of the surplus represent methods of ensuring commitment through financial incentives. Unlike older cooperatives, which often determined the membership fee on the basis of dividing the net worth into the number of shares, hence making the membership fee prohibitive {in one Oregon plywood cooperative the

membership fee grew to $40,000, resulting in the cooperative hiring wage labor) the fee is arbitrary and fixed at an affordable amount.

Unlike traditional cooperatives, members are considered to be worker-entrepreneurs, whose job is both to assure the efficiency of the enterprise but also to help develop new enterprises. They do this in their deliberative assemblies and also by depositing their surplus in the system's bank, described below, which is then able to use it to capitalize new enterprises- There is a strong commitment on the part of the membership to this expansive principle, and it is recognized that the economic security of each cooperative is dependent on their being part of a larger system, in ways that will become clear as we proceed.

A probationary period of one year was fixed upon, to ensure that new members were not only appropriately skilled, but possessed the necessasry capacity for cooperative work. Whereas in a capitalist enterprise workers are considered "factors of production" in a cooperative they are members of an organization with both the rights and duties of membership, sharing also in the ownership of the organization. Thus while there Is open membership, members must be able to participate not simply as hired hands but must be able to discharge their membership duties by sharing in the management of the enterprise. This requires a capacity for responsibility and group participation that in turn implies a certain level of maturity.

5. The "anticipo" or percentage of earnings that would in a conventional enterprise be considered as wages, was fixed at prevailing wage levels, minimizing conflict with other local enterprises. Also, the wage differential ? the difference between the lowest and highest wage ? was set at 1 to 3. This ensures an egalitarianism between workers and the management ? selected by the General Assembly of workers ? that makes for high morale. Wage levels are determined by a formula which takes into account the difficulty of the job, personal performance, experience, and 'relational skills'. Relational skills have been given greater weight recently out of a recognition that in cooperative work they signficantly affect group performance.

6. Above all, Mondragon represents a "systems approach" to cooperative development. In addition to the base level industrial cooperatives there are a set of so called second degree cooperatives which variously engage in research, financing, technical training and education, technical assistance, and social services. In addition there are

housing and consumer cooperatives which collectively are able to create a cooperative culture in which the basic activities of life take place. Members can operate within a context of interdependent and cooperating institutions which follow the same principles; this prevents 'cognitive dissonance' and makes for enhanced efficiency.

To continue the story: three years after Ulgor was founded, Don Arizmendi suggested the need for a financial institution to help fund and also give technical assistance to other start-up cooperatives. As a result, the Caja Laboral Popular, a credit union cum technical assistance agency was founded, the CLP contains an Empressarial Division, witb^>ver a 100 member staff, which works intensively with a group desiring to start up a cooperative, or in rare cases convert an existing enterprise. It does location studies, market analysis, product development, plans the buildings, and then worfcs continuously for a number of years with the start-up group until it is clear that it is thoroughly developed and financially and organizationally sound, in return the CLP requires that the cooperative be part of the Mondragon system, via a "Contract of Association," which specifies the already proven organizational and financial structure, and entails a continuing supervisory relation on the part of the CLP which has loaned it start-up funds. As indicated, the surplus of the industrial cooperatives is held by the CLP as a loan and reinvested in further cooperatives. This close and continuing relationship with the financial and technical expertise of the CLP is both unique and largely responsible for the 100X success rate within the system.

The CLP is considered a second degree cooperative, and its board is made up of a mix of first level or industrial cooperative members and members from within the CLP itself. In addition to the CLP there are a number of other second degree cooperatives: a social service cooperative which assures 100% pension, 1002 disability benefits, a health care clinic, and a women's cooperative which allows for both flex-time and part-time workwomen can move freely from this to the industrial cooperatives. Also there is a system of educational cooperatives, including a technical college which includes a production cooperative in which students both train and earn money as part-time workers. This too is operated as a second degree cooperative, with a mixed board made up of permanent staff and students.

Mondragon also features a large system of consumer cooperatives throughout the province, housing cooperatives, and a number of agricultural cooperatives and building cooperatives. Today the total

systenVs net worth is in the billions and consists of 93 production cooperatives averaging several hundred members, 44 educational institutions, 7 agricultural cooperatives, 14 building cooperatives, along with the 3 service cooperatives mentioned, and a network of consumer cooperatives with 75,000 members. The Caja Laboral has 132 branches in the Basque region, and has recently opened an office in Madrid. This is significant, since it indicates a willingness to expand beyond the Basque region. The CLP's assets are over a billion dollars.

Mondragon produces everything from home appliances ? it is the second largest refrigerator manufacturer in Spain ? to machine tool factories and ferry boats, both of which it exports abroad. It represents over 1X of the total Spanish export product. With its 18,000 workers, it produces about 15X of all the jobs in Gipuzkoa Province and 51 in the Basque country. Although a major part of its products are in middle level technologies, it also produces high technology products. Its research institute, ikerian, regularly accesses U.S. data bases including that of MIT., and has developed its own industrial robots, for external sale and for use in its own factories. This is typical of its approach to technology, which is to assimilate new technologies and make them its own. Mondragon has spent considerable time studying and implementing alternatives to the production line; its self-managed organizational system is now being complemented with the technology of group production.

The internal organization of a Mondragon cooperative features a Genera! Assembly which ordinarily meets annually and selects management. In addition there is a Social Council which deals specifically with working members' concerns. There is also a Directive Council, made up of managers and members of the General Assembly, in which managers have a voice but no vote. This system of parallel organization ensures extensive representation of members' concerns, and serves as a system of checks and balances. Mondragon enterprises are not large; a deliberate policy now limits them to around 400 members. Ulgor, their first grew too large, and at one point in its early history had a strike, organized by dissidents. The General Assembly voted to throw the ringleaders out. But they learned their lesson: size oF its own accord can breed discontent

in order to obtain the benefits of large scale along with the benefits of small individual units, Mondragon has evolved a system of cooperative development wherein a number of cooperatives constitute themselves as a sort of mini-conglomerate, coordinated by a management group elected

from the member enterprises. These units are either vertically or horizontally integrated and can send members from one enterprise to the other as the requirements of the market and the production system change. They are able to use a common marketing apparatus and have the production capacity to retain a significant portion of a given market. This started initially by a set of enterprises in the same market banding together for intra-enterprise cooperatioa Now Mondragon develops such systems from the start having learned its benefits.

If one enters a Mondragon factory, one of the more obvious features is a European style coffee bar, occupied by members taking a break. It is emblematic of the work style, which is serious but relaxed. Mondragon productivity is very high ? higher than in its capitalist counterparts. Efficiency, measured as the ratio of use of resources ? capital and labor ? to output, is in particular far higher than in comparable capitalist factories. These are the obvious indicators; it is less easy to measure members' sense of commitment. One indication perhaps is that a couple of years ago the membership of the system voted on a proposition to deduct a further 17X from their internal accounts in order to create more jobs. This was during a bad recession in which in the Basque area as a whole there was 18X unemployment during which time Mondragon not only had no unemployment {it has never laid a member off) but continued to expand. The measure narrowly missed passing but it was to come up for a second vote. I do not know the final result.

One of the most striking indications of the effectiveness of the Mondragon system is that the Empressarial Division of Mondragon has continued to develop an average of four cooperatives a year, each with about 400 members. None of these have ever failed. This amazing record can be compared with business start-ups in this country 94X of which fail within the first five years. I have seen a feasibility study for a new enterprise. It is an impressive book-length document, containing demographics, sociological analysis of the target population, market analysis, product information ? just about everything relevant When a new prospective cooperative comes to Mondragon seeking help, they are told to elect a leadership. This leadership studies at the Empressarial Division for two years before they are allowed to start the cooperative, learning every aspect of their business, and of the operation of the cooperative.

Mondragon is not Utopia. While it does not produce weapons, useless iuxury goods, or things that pollute the environment, it does produce standard industrial products using a recognizable technology of production. It does not practise job rotation, and management is not directly elected from the floor ? for good reason, since experiments that have tried this have not worked. Members vary in the nature of their commitment. In fact there is something of a split in Mondragon between those who see Mondragon as a model for the world and those who prefer to keep a low profile and have no interest in proseletyzing beyond their confines. Mondragon still remembers the heritage of Franco, when the low profile was essential to survival.

Mondragon has also been faulted for failing to produce mainly for local consumption. It is in the manufacturing, not community development business, and while it creates jobs, its products are exported all over the world. It has exported machine tool factories to eastern European countries, to Portugal and to Algiers; a Mondragon furniture factory is now operating in New York State. Mondragon does not export its system with the factories however; they are simply products, bought and run by local owners. In general, it makes little attempt to convert the heathens; at present, it is swamped by visitors from all over the world, and it finds this hard enough to deal with without going out and actively spreading the

word-Nevertheless, Mondragon has awakened worldwide interest. The Mitterand government has a special cabinet post for the development of cooperatives, the result of its contact with Mondragon. In Wales, the Welsh Trade Union Council is engaged in developing a system of cooperatives patterned after Mondragon. in England, the Job Ownership Movement has developed a number of large cooperatives on the Mondragon model. Progressives in the Catholic Church, seeing Mondragon as an alternative to both capitalism and communism, have helped develop industrial cooperatives in Milwaukee, in Detroit and here in Boston this writer worked with the local archdiocese to develop a system of cooperatives based on the same model.

Why does Mondragon work so well? Part of the answer lies in the unique culture of the Basque region. Members of the staff of Mondragon who I have talked with (the staff of Ikerlan, the research institute, and of ULARCO, the first of the mini-conglomerates) have doubts about whether the model can be exported, arguing that the cohesiveness and

communitarian traditions of the Basque culture alone make it possible. But Anna Gutierrez Johnson, a Peruvian sociologist who has studied Mondragon extensively, believes that basically it is the organizational pattern that makes the whole system work, and this is exportable ! share her belief, but also believe that in the United States its culture of individualism and adversary relations is a major impediment. Workers have little ideological consciousness in this country; that is a plus in one way because the secret of Mondragon is above at! organizational, not ideological.- it is 'how to' knowledge that makes it work.

But it is also true that workers have bought into the capitalist system and often see work as a ticket into the middle class, certainly not the basis for creating a revolution. Yet Mondragon is revolutionary, for its structure of democratic governance with worker ownership and control challenges the capitalist system at its very heart. Where capitalism awards profit and control both to capital, and hires labor, Mondragon awards profit and control to labor and in the process has developed a worker-centered culture which rather than infantiiizing, empowers. Mondragon members are citizens of a worker commonwealth, with the full rights that citizenship confers. This can best be seen in the steps that have been taken to make the formal system of participation into a working reality: different systems of leadership have evolved, and with it, a growing sense of teamwork (a furniture factory now operates completely through work teams). Thus the formal system has led to the ongoing evolution of a democratic process which is the real indicator of its success in revolutionizing the relations of production.

Also, Mondragon is Cramscian in its capacity to create a hegemony ? a total system where one can learn, work, shop, and live within a cooperative environment. In such an environment motivation is high because members share an overall organizational culture which integrates material and moral incentives, and which extends into every aspect of life ? the workplace, the community, education, consumption, the family. A member of the Empresserial Division has underlined the uniqueness of Mondragon viewed as a total system, pointing out that this system goes far beyond what can be found in the Basque culture. The proof of this is to be found in the efforts needed to socialize new workers into the system; the simple fact of being Basque is hardly enough to guarantee effective participatioa

Perhaps one of the most brilliant achievement of the Mondragon organizational system is the way in which it has combined collective

ownership with the incentives of individual ownership in a mixed system which recognizes both the individual and the collective side of human motivation. The system of individual accounts with automatic loan-back, along with the partitioning of the surplus into an individual component and a collective component represents a method of giving the worker a sense of individual ownership along with a sense of collective participation in an organization which provides more than simply a meal ticket, even as it expects more than simply job performance.

A strong argument can be made for the importance of creating Mondragons if one is to move toward social liberation. Its systems approach to job creation confronts the problems of economic organization and development head on, managing at once to create freedom in work and also enough jobs to have a powerful impact on a regional economy. Until it happened, it was easy to write off experiments in economic democracy as marginal and unrealistic essays in utopianism, totally irrelevant to the task of affecting any sizeable portion of an existing economy. This can no longer be said, and hence both the state socialist and the capitalist arguments for the economic necessity of oppressive work are given the lie-Moreover, Mondragon contains an important lesson: it demonstrates that to achieve freedom in work a high level of organizational skill is needed, and that when such skills are present, the traditional opposition of democracy and efficiency vanish, and the two reinforce rather than oppose each other. Mondragon is important because it serves as a model of how this can be done. Here, ideological debate gives way to concrete know-how and another false dilemma bites the dust. Formal organization engaged with modern technologies, entirely apart from the further coercions of capitalist ownership, contains pressures toward a machine form of organization which mirrors the mass delivery apparatus, whether it be service or production oriented. This is true because of the large scale and the productivity requirements; these pressures are greatest in the case of mass production.

Taming this beast thus represents an organizational challenge which must be met if one is to create freedom in work. This type of organization, moreover, is central to advanced industrial societies. It would be nice, Utopian fashion, to simply be able to leap over the problem and go back to small scale craft production, thereby admittedly eliminating piles of semi-useless junk. But the first step in deciding what is to be produced or not produced is to regain control over the system. What should or should not

be produced is after all a relative decision, to be democratically arrived at. If the control is there, people may indeed decide in good time that mass production simply is not worth the effort -- or they may not.

With control of the production process one can then at least begin the process of educating consumers to better products, or less products, or craft products, or whatever one happens to feel is an improvement over the present system. Moreover, one cannot change a whole culture in a day, and if one wishes to wean people from an over-dependence on cars, for example, one way is to build better trains, which is as least a step beyond building more fuel-efficient cars. The fact that one cannot do everything should not be made into an argument for doing nothing.

i recall a debate a few years ago in the pages of "Social Anarchism" where Len Krimerman described his efforts at creating a poultry processing cooperative. In the main his anarchist respondents were horrified: he had borrowed money from the government! {The Small Business Administration). Also, he had foremen and supervisors, rather than pure and total self-government! He trafficked with capitalist distributors! The whole thing was a desecration of anarchist principles, being centrally involved with capitalism, hierarchy and the state. This is of course an old debate, but it is reminiscent of the Marxist's argument that until the "obejctive conditions" for revolution exist, nothing can (and hence need) be done.

One can indeed preach purity, but talk is cheap, and moreover, people know that. The significance of Mondragon is twofold: it represents a positive vision of freedom in work, a community that is democratically controlled by its members. The ideal of democracy, which everyone gives lip service to, here is actually practised. But it also represents something that works, and that in turn constitutes a statement about human nature, establishing beyond controversy that people can manage complex social tasks via democratic organization, if a picture is worth a thousand words, an effective working model is worth at least a thousand pictures.

Probably the most telling criticism of Utopian thinking is that it flies in the face of human nature, which has powerful propensities for evil as well as good. This argument is not one that can be settled in the abstract. The value of Mondragon is that it speaks to it in specific and concrete ways: whereas the Webbs and others have long argued against the viability of worker cooperatives on the basis that they will in the end simply degenerate into capitalist enterprises ? and this is, after all, a statement about the weakness and fallibility of human nature ? Mondragon has

ciearly shown that this is not true. Not only does Mondragon work, but it works a tot better than its capitalist counterparts; it works better and it grows faster. By showing that one can combine democracy with efficiency, it gives the lie to a basic article of capitalist dogma about human nature, to wit that people are naturally lazy and irresponsible and will only work when told to and given the twin incentives of the carrot and the stick.

Another objection has been raised: anarchism has been periodically plagued by what has been called "the tyranny of structurelessness." Structure is brainiessly equated with heirarchy and bureaucracy, and hence the complex organizational structure of a system such as Mondragon is written off out of hand. But structurelessness breeds tyranny: informal cliques develop, hidden leaders emerge who wield power behind the cloak of an espoused equality. This too says something about human nature. Mondragon is worth studying because it works, and the argument can be made that Utopian theory must always confront the practical since the burden of proof is on the theorist. The problem with capitalism and more generally coercive industrial systems of whatever persuasion is not that they don't work; they deliver the goods, and in the process grind up human beings. The only answer to this state of affairs is to prove that a better system also works; theory alone simply will not do. And, if we wish to claim that something better than Mondragon needs to be built, then it is incumbent on us to do it.