Enabling Ethical Economies: Cooperativism and Class

Enabling Ethical EconomiesCooperativism and Class

JK GIBSON-GRAHAM

ABSTRACT

This paper situates contemporary evaluations of the lsquosuc-cessrsquo of Spainrsquos Mondragon cooperative complex within a tra-dition of debate about the politics of economic transformationIt traces the long-standing suspicion of worker cooperativesamong political and social analysts on the left revisiting boththe revolutionary and gradualist socialist critiques of coopera-tivism Taking the set of problems identi ed by Beatrice andSidney Webb as leading to the inevitable failure of producercooperatives the paper examines Mondragon for evidence oflsquodegenerationrsquo The ethical decisions made by Mondragon co-operators with respect to product pay pro t innovation man-agement disputes and membership are discussed with a partic-ular focus on the management of surplus production appropri-ation and distribution The paper calls for more sophisticatedanalyses of the economics of surplus distribution and the cen-trality of ethical debate to the construction of diverse economiesand non-capitalist economic subjects

Keywords producer cooperatives communalism ethics eco-nomic politics Mondragon class processes

Introduction

The economic imaginary has traditionally played a powerful role inleft politics certainly among those interested in constructing alternativefutures Fuelled by the emancipatory commitments of enlightenment

In memory of Don Shakow

Critical Sociology Volume 29 issue 2 also available onlineOacute 2003 Koninklijke Brill NV Leiden wwwbrillnl

124 sup2 Gibson-Graham

thinking various ideals of another state of economic being have motivatedpolitical movements and policy interventions throughout the twentiethcentury It is in the economic imaginary that economies devoid ofexploitation economies of self-suf ciency and sustainability economiesof smallholders and owner-operators economies of cyborgs and so onhave been constructed in opposition to the apparent economic realitiesof capitalist industrialization Within this imagined terrain certain alreadyexisting alternative economies have gured as guides to the possibilitiesand constraints of lsquoreal worldrsquo experimentation Once it was the vision ofsocialism or communism and the experiments of the soviets in the EasternBloc and the communes in East Asia that con gured the foreground ofthe leftrsquos economic imaginary Today at least for some it is the originallsquothird wayrsquo ndash communitarianism or a revitalized social democracy ndash thatoccupies this otherwise vacated space

For many the story of the Mondragon cooperatives in the Basqueregion of Spain has occupied a special niche in this space of speculationenvisioning and possibility From a social base in the late 1940s that wasdivided by ideological differences with physical infrastructure destroyedor depleted by civil war the Mondragon community under the guidingphilosophy of Catholic priest Father Arizmendiarrieta built perhaps themost successful complex of employee-owned industrial retail serviceand support cooperatives in the world The Mondragon CooperativeCorporation (MCC) is famed for its more than 30000 worker owners its exibility and longevity cutting-edge technology and innovations in workerparticipation The publication of a chapter by Robert Oakeshott in 1975and the documentary lm made by the BBC about Mondragon in thelate 1970s enabled the message of this cooperativist movement to spreadthroughout the English-speaking world at a time when the increasinginternationalization of capitalist production appeared to be heralding thelatest lsquostagersquo of capitalist economic dominance 1

One of the dif culties of discussing any alternative economic projectas with any new or emancipated identity is how to name and describe

1 Early studies in English provided histories of the establishment of the cooperatives anddescriptions of the changing organizational structure and activities of the group (Oakeshott1978 Gutieacuterrez-Johnson and Whyte 1977) More recent research has explicitly comparedthe performance and practices of the Mondragon cooperatives with similar sized enterprisesin the capitalist sector (Thomas and Logan 1982 Bradley and Gelb 1983 Hacker 1989Kasmir 1996) Others have focused upon the way in which the cooperatives negotiated thedif cult period of recession and rationalization during the late 1970s and 1980s when theSpanish economy was becoming more open to international market forces via admission tothe European Economic Community and the effects of globalization in the 1990s (Weinerand Oakeshott 1987 Whyte and Whyte 1988 Morrison 1991 Cheney 1999 Clamp 2000)

Enabling Ethical Economies sup2 125

it without recourse to what is already known Though one might want toposit a radical discontinuity between the emancipatory alternative and theoppressive and exploitative norm since the alternative is de ned in termsof the norm (albeit as its opposite or reversal) the existing malign system isfully implicated in the alternative liberatory one (Laclau 1996) This is clearin much of the discussion and evaluation of Mondragon Representationsof Mondragon are driven by the desire to highlight the uniqueness andutopian otherness of the alternative but they are also haunted by thefear of uncovering failures that undermine these differences rendering thealternative no more than the lsquosamersquo Much of the Mondragon story hasthus been told within a capitalocentric framing (Gibson-Graham 199640-41)the gures of the capitalist enterprise and the capitalist economy shadowthe representations of its cooperative businesses and work practices andthey are positioned with respect to capitalism as either different from thesame as beholden to or dominated by its forces and relations

Not all commentators have succumbed to the comparisons implicitlyenforced by a capitalocentric discourse Recently a number of authorshave taken up discussion of Mondragon as an inspiration for communityand regional economic development in their respective contexts (Morrison1991 MacLeod 1997 Mathews 1999) They suggest a way of readingMondragon as a guide to local practices of economic experimentation notas an lsquoalternativersquo to capitalism which cannot help but disappoint Buildingupon the work of Morrison MacLeod and Mathews my interest is incontributing to a practical politics of strengthening the sustainability ofcommunity economies 2 A crucial rst step is to revitalize the economicimaginary by freeing it from the leaden grip of capitalocentrism

Rethinking Economy and Economic Politics

As part of an ongoing project committed to exploring the potentialitiesand possibilities of building sustainable community economies I have beenconcerned to challenge the way lsquoeconomyrsquo is thought and to identify whatwe are up against when attempting to think differently (especially ethically)about the economic realm One problem is that in contrast to previousperiods the economy is no longer seen as a sphere of decision (Lemke

2 Sustainability is referred to here in terms of the inter-generational durability of localcultures practices of sociality and emplaced livelihood strategies that support communityeconomies I have coined the term community economies to refer to those economicpractices that are in ected with ethical principles to do with family community culture andenvironment (often loosely de ned but strongly adhered to) that acknowledge the relationalinterdependence of all activities that constitute a society (Gibson 2002 CommunityEconomies Collective 2001)


2001 Gibson-Graham 2003) With the resurgence of neo-liberalism inthe second half of the 20th century we have seen renewed faith in thehidden (almost mystical) hand of the free market and the active aspect ofmanagement associated with the term lsquoeconomyrsquo has been subordinatedto a notion of systemic self-regulation Naturalization of the view that wehave no (longer a) role in making and managing the economy by whichwe live has had limiting effects on economic imaginaries A reluctance toengage in economic experimentation because of its perceived futility orfor fear of repression by the all powerful economy has become a form ofunfreedom a discursive enslavement a refusal to explore economic poweras unstable and uid as potentially reversible ldquostrategic games betweenlibertiesrdquo that are always available (Foucault 198819 Hindess 199797-8)It is this depoliticization of the economic terrain that must be challengedif any space for enabling ethical economic practices is to be opened up

Another problem is the representation of the economy as lsquocapitalistrsquoDeconstructing the hegemony of capitalocentrism involves representingthe diversity of the lsquocomplex unityrsquo we know as lsquoeconomyrsquo that ishighlighting the multiple registers of value and modes of transaction thatmake up our heterogeneous economic world sustaining livelihoods incommunities around the world 3 The diverse modes of remunerating laborappropriating and distributing surplus and establishing commensurabilityin exchange for example all allow for speci c enactments of economicfreedom some more circumscribed than others (Community EconomiesCollective 2001) As is increasingly apparent competitive individualism isnot the only ethical principle involved In a growing number of intentionaland unintentional economies variously enacted ethics of social culturaland environmental sustainability are actively shaping transactions andperformances I have been particularly interested in community economiesin which the material well-being of people and the sustainability of thecommunity are priority objectives Indeed it is through articulating theseethical and political stances that lsquocommunityrsquo is called into being

I would like to argue that this project of deconstructing the hegemonyof capitalism and elaborating multiple axes of economic diversity is anemancipatory project of repoliticizing the economy It refuses to poseeconomic power as already distributed to capitalist interests and opens upthe possibility for non-capitalist practices to be the focus for an invigoratedeconomic politics It reinstates the importance of making and managing

3 It also involves exposing the limited view of what constitutes lsquothe economyrsquo thatcurrently prevails in popular and academic discourse that is the narrow focus uponcommodity markets wage labor capitalist enterprise and the singular ethic of competitiveindividualism


economy ndash aspects of the meaning of the word that have been increasinglywashed away ndash by placing the politico-ethical decisions that make oureconomies at the center of analysis Ernesto Laclau notes that

The role of deconstruction is to reactivate the moment of decision thatunderlies any sedimented set of social relations The political and ethicalsigni cance of this rst moment is that by enlarging the area of structuralindeterminacy [eg of the economy] it enlarges also the area of responsibility ndashthat is of the decision (Laclau 199593 bracketed comment added)

A vision of the economy as diverse multiply identi ed and complexlyoverdetermined and economic power as diffuse segmented and in motionopens up the possibility for local non-capitalist practices to be the focus foran invigorated economic politics

The project of mapping diverse economies as a way of imagining andenacting non-capitalist futures has taken encouragement from Father JoseMaria Arizmendiarrietarsquos vision of a pluralistic society and economy 4

In the mind of the co-operators is the idea that future society probably mustbe pluralistic in all its organisations including the economic There will beaction and interaction of publicly owned rms and private rms the marketand planning entities of paternalistic style capitalist or social Every juncturethe nature of every activity the level of evolution and the development ofevery community will require a special treatment but not limited to oneform of organisation if we believe in and love man his liberty and justiceand democracy (Arizmendiarrieta cited in Mathews 1999186 quoting fromWhyte and Whyte 1991255)

This vision of plurality can be likened to Laclaursquos vision of structuralindeterminacy which has the effect of opening up the eld of responsibilityand decision It is the issue of decision that provides a focus for the discussionof this paper Writing and living as he did with daily involvement in theMondragon cooperatives economic diversity was for Arizmendi a visible

4 Usually referred to as Father Arizmendi (or Don Jose Maria) this Basque priest wasposted to Mondragon in 1941 straight after his ordination having had his request to studysociology in Belgium turned down by his Monsignor (Whyte and Whyte 198828) He wasinterested in seeking ldquodemocratic economic and social arrangements that might bene t allin the community and give a strong footing for postwar societyrdquo (Cheney 199939) andwas well read in the social and political economic theorists of the 19th and early 20th

centuries He admired the experiments of Robert Owen and the Rochdale Pioneers andwas familiar with the agricultural co-ops and anarchist producer co-ops that ourishedin Spain prior to and during the Civil War His readings and observations led him tovalue ldquoinstitutional autonomy and identity as two of the most important characteristics ofalternative organizationsrdquo (39)


presence not a utopian dream or smashed hope but also something thathad to be built and given lsquospecial treatmentrsquo

The title of Roy Morrisonrsquos book We Build the Road as We Travel (1991)reminds us that when building sustainable socially equitable and culturallydistinctive community economies there are no pre-given pathways tofollow no economic models that can be pulled down from the shelf andset in place to ensure success 5 The process of enabling such economies todevelop involves continual debate over economic and ethical considerationsat every step of the way and the making of dif cult decisions that willdirect future pathways and crystallize community values It is through thisprocess that economic imaginaries are made into concrete actually existingpractices and institutions 6

The history of leftist politics can be seen as a series of debates aboutstrategic interventions by which a lsquobetterrsquo society is to come into beingPolitico-ethical discussion has focused on questions of economic controlownership and organization of industry and the bene ts of cooperativism orstate socialism as well as on mechanisms of income and wealth distributionIn the rst half of the paper I revisit the historical debate about thelimits of the cooperativist lsquowayrsquo in an attempt to understand the basisof the longstanding antagonism between working class politics and workercooperativism In the second half of the paper I focus on the politico-ethical decisions around markets wages technology surplus appropriationand distribution that have been inscribed in the Mondragon economicexperiment 7 This discussion is structured around the criticisms that havelargely been accepted as undermining the potential for longevity andsuccess of worker cooperativism My aim here is to promote debate abouteconomic ethics and the realms of freedom that are open to us in theoryand in practice

5 In his insightful book Cheney reports one of the founders of the original Mondragoncooperative demonstrating the experimental nature of the road traveled and saying to himldquoAlthough there was much talk about the lsquothird wayrsquo we werenrsquot entirely sure of whatexactly we were embarking on From the perspective of the 1990s of course everythingthat came to pass in the past forty-some years all looks much clearerrdquo (199940)

6 A similar point is made by Mutersbaugh (2002) in his ne-grained analysis of productioncooperatives in highland Mexico

7 This paper draws upon the rich literature on Mondragon and our own interactionswith Mondragon personnel during a brief eld trip in April 1997 This visit was madepossible thanks to the invaluable assistance of Fred Freundlich and Race Mathews with nancial support supplied by Australian Research Council Large Grant A79703183


Left Labor Politics versus Cooperativism

In light of the vacuities and possibilities opened up by lsquopost-socialismrsquolsquopost-marxismrsquo and lsquopost-social democracyrsquo current interest in an economicpolitics of the lsquothird wayrsquo albeit it a neutered version of its late 19th

early 20th century original invites critical re ection on the demise of thisoriginal in the left economic imaginary and the legacy of this demise 8 Iwould like to argue that the early denunciation of worker cooperativismby both the trade union and the revolutionary socialist movements hashad a dampening effect on ethical debates concerning the economics ofexperimentation within leftist communities most engaged in a critiqueof capitalism For this reason it is salutary to take a look back at thesome of the historical debates that have raged among those interested incooperative economic experiments either as an antidote or replacement tocapitalism

Against the clearly de ned politics of the lsquo rst wayrsquo that is capitalistconsolidation and development during the 19th century there arose multi-ple resistances and critical currents The prominent economic theorists andactivists Karl Marx and Robert Owen stand out among others as inspi-rations for two divergent streams of thought and practice ndash revolutionarysocialism as a route to communism (the lsquosecond wayrsquo) and worker cooper-ativism and community distributism (the original lsquothird wayrsquo) 9 Both Marxand Owen believed that the rights of the productive and useful persons ina society should be recognized over the inherited and assumed rights of

8 Giddens claims that the phrase lsquothird wayrsquo ldquoseems to have originated as early as the turnof the century and was popular among right-wing groups by the 1920s Mostly howeverit has been used by social democrats and socialistsrdquo (199825) As a major inspirationfor Tony Blairrsquos embrace of a contemporary lsquothird wayrsquo politics that navigates a middlepath between a rapidly dismantling lsquowelfare state economyrsquo and a rapidly consolidatinglsquofree market economyrsquo Giddens offers a sleek rendition of ldquothird way valuesrdquo The thirdway for him looks ldquofor a new relationship between the individual and the community arede nition of rights and responsibilitiesrdquo that has well and truly ldquoabandoned collectivismrdquo(65) In the war of words that makes up political debate reference to what we mightconsider the original lsquothird wayrsquo has been lost or blurred Deploying terms like lsquotrustrsquolsquomutual obligationrsquo and lsquoreciprocityrsquo that hail from the cooperative support systems of theearly 19th century contemporary third way politics offers a language that softens the impactof a neo-liberal economic agenda obscuring even rendering desirable the withdrawal ofstate bene ts

9 The basis of distributism was ldquothe belief that a just social order can only be achievedthrough a much more widespread distribution of property Distributism favors a lsquosocietyof ownersrsquo where property belongs to the many rather than the few and correspondinglyopposes the concentration of property in the hands of either the rich as under capitalismor of the state as advocated by some socialists In particular ownership of the means ofproduction distribution and exchange must be widespreadrdquo (Mathews 19992)


the unproductive and useless aristocracy And both were exercised by theinjustices of lsquosocial theftrsquo whereby the surplus labor generated by the lsquoin-dustriousrsquo or working class was appropriated by the non-working or lsquoidlersquoclass (De Martino 20017 Geras 1985) 10

In the emerging working class movement the two political aims ofchallenging the distribution of lsquorightsrsquo and redressing lsquosocial theftrsquo wereinterwoven in the struggles of working people As Sidney and BeatriceWebb the in uential Fabian socialists and historians of trade unionism inthe UK point out the origins of the British trade union movement in theearly 19th century were closely tied up with demands not only for politicaldemocracy and the rights of working men to vote but also industrialdemocracy and the rights of working people to cooperative ownership andcontrol of industry and its product

The chief political organisation of the working classes during the ReformBill agitation began as a trade club In 1831 a few carpenters met at theirhouse of call in Argyle Street Oxford Street to form a ldquoMetropolitan TradesUnionrdquo which was to include all trades and to undertake besides its TradeUnion functions a vague scheme of co-operative production and a politicalagitation for the franchise But under the in uence of William Lovett thelast object soon thrust aside all the rest The purely Trade Union aims weredropped the Owenite aspirations sank into the background and under the titleof the ldquoNational Union of Working Classesrdquo the humble carpentersrsquo societyexpanded into a national organization for obtaining Manhood Suffrage (Webband Webb 1907140)

The Reform Bill was defeated and the failure to deliver manhood suffragefuelled support for trade union formation in the mid 19th century Theorganization of the rst Grand National Consolidated Trades Unionbetween 1833-34 was inspired by Robert Owenrsquos vision of nationalmanufacturing companies owned by their workers all of whom wouldvoluntarily belong to a nationally associated federation of lodges Eachlodge was to

10 The terminology of lsquoclassrsquo took on multiple meanings in this context lsquoClassrsquo denoteda place in a social ranking or hierarchy of upper middle and lower classes ndash and as a setof cultural markers that designated membership of one lsquogrouprsquo and distinguished it fromothers But it also came to refer to an economic relation of exploitation between producersand non-producers the industrious and idle or working and non-working classes (Gibson-Graham Resnick and Wolff 20003 Williams 198365) This latter meaning emerged fromthe political movements of the 18th and 19th centuries that defended the rights of workingpeople and was picked up and developed into a forceful rhetoric by Marx and Engels inthe Communist Manifesto


provide sick funeral and super-annuation bene ts for its own workers andproposals were adopted to lease land on which to employ ldquoturnoutsrdquo and toset up cooperative workshops (Webb and Webb 1907119)

As the labor movement grew antagonism increased between pragmaticldquoTrade Union aimsrdquo (defense of workersrsquo standards of living by wagesetting and factory legislation to limit working hours) and utopian socialistldquoOwenite aspirationsrdquo (cooperative ownership of industry) (1907140)While admiring of the ability of Robert Owen to inspire a surge ofsolidarity for the Grand National Consolidated Trades Union (even amongldquoregiments of agricultural laborers and womenrdquo) the Webbs were extremelyscornful of the ldquoUtopian siderdquo of his labor policy Marx expressed similarscorn for the lsquoutopiarsquo of the cooperativist social democratic aspirationsin uencing the European working class movement (1972)

Their criticisms were of four kinds First there was the lack of a planfor how to replace the system of competitive capitalist industry with asystem of socialized ownership cooperation and voluntary associations ofproducers The Webbs asked

How was the transfer of the industries from the capitalists to the Unions tobe effected in the teeth of a hostile and well-armed Government It iscertain that during the Owenite intoxication the impracticable expectations ofnational domination on the part of the wage-earners were met with an equallyunreasonable determination by the governing classes to keep the working menin a state not merely of subjection but of abject submission (Webb and Webb1907147-8)

Even the philanthropic mill owners they note were utterly resistant togiving up their despotic control over workers and factories (1907147)

The Webbsrsquo critique of Robert Owenrsquos economic politics ultimatelyrested upon their acceptance that the economy was already (and perhapsalways to be) capitalist

In short the Socialism of Owen led him to propose a practical scheme whichwas not even socialistic and which if it could have been carried out wouldhave simply arbitrarily redistributed the capital of the country without alteringor superseding the capitalist system in the least

All this will be so obvious to those who comprehend our capitalist system thatthey will have some dif culty in believing that it could have escaped so clevera man and so experienced and successful a capitalist as Owen (Webb andWebb 1907146 emphasis added)

In a somewhat similar vein Marx takes the German social democraticmovement to task in 1875 for their terminology writing that what theycall ldquopresent-day societyrdquo


is capitalist society which exists in all civilized countries more or less freefrom medieval admixture more or less modi ed by the special historicaldevelopment of each country more or less developed (Marx 1972394emphasis added)

Marxrsquos lsquoscienti crsquo analysis of capitalismrsquos tendencies toward expansionled him to see what was coming as what was already lsquotherersquo ndash theidentity of the economy was unquestionably capitalist But he was alsoacutely aware that capitalism was not yet securely consolidated in a socialand demographic sense 11 In response to the Lassallian-inspired socialdemocratic call for ldquoestablishment of producer cooperative societies withstate aid under the democratic control of the toiling peoplerdquo (emphasis in original1972394) Marx rather scornfully notes ldquoIn the rst place the majority ofldquotoiling peoplerdquo in Germany consists of peasants and not of proletariansrdquo(393) Rejecting the proposal that all classes other than the working classare ldquoonly one reactionary massrdquo (emphasis in original 1972389) he points tothe potential for support from the ldquoartisans small manufacturers etc andpeasantsrdquo (1972389) There is an interesting disjuncture between Marxrsquosempirical understanding of the diversity and magnitude of non-capitalisteconomic relations coexisting alongside capitalist relations and his belief insystemic capitalist dominance

Restricted to dwar sh forms into which individual wage slaves canelaborate it by their private efforts the co-operative system will never transformcapitalist societies (Marx 19852 quoted in Mellor Hannah and Stirling198822)

For both Fabian socialists and revolutionary socialists alike the systemwas unambiguously capitalist (even if yet to fully come into being)and the power of industrial capitalists was already entrenched To betoppled it would require the superhuman efforts of a centralized stateor a revolutionary movement 12 Only then might there be a conducive

11 It is interesting to note that Marx saw ldquocooperative factories run by workers themselvesrdquoboth as evidence of the emergence of a new mode of production ldquowithin the old formrdquothat was made possible by the historic innovations (the factory system and credit system)associated with capitalist production and as bound up in the reproduction of ldquoall the defectsof the existing systemrdquo ie capitalism (Marx 1981571) His theoretical and political projectled him to foreground capitalist dominance in almost every instance

12 Or given the inherent progressivism of much socialist thinking the full-blowndevelopment of capitalism to the point where transition would be inevitable Potter writesin 1891

Robert Owenrsquos Co-operative ideal was an ideal which required for its realization ascience which had not arisen a character which had not been formed economic and legalconditions existing nowhere in the purely aristocratic societies of Europe Above all unless


environment for new economic relations Certainly in the face of thelsquorealitiesrsquo of capitalist power Owenrsquos belief in the transformative effects ofpedagogy seemed weak and myopic 13

Second there was faulty economic analysis in the view that workerscould ldquoraise wages and shorten the hours of labourrdquo to the point wherethey would get back the ldquowhole proceeds of their labourrdquo (Webb and Webb1907144) This stemmed according to the Webbs from the ldquoerroneoustheory that labour is by itself the creator of valuerdquo that prices could be xed by labor input alone and the mistake of overlooking ldquothe moredif cult law of economic rent which is the corner-stone of collectivisteconomyrdquo (147) Here they are referring to the necessary payments toland transportation non-labor inputs managerial labor and so on thatin uence the pricevalue of the industrial product Despite their dismissalof Karl Marx and his labor theory of value at this point in the text(147) they inadvertently repeat the exact criticism that Marx made of theGerman social democrats when he questions their assertion that workershave rights to the ldquoundiminished proceeds of labourrdquo (1972384) Marx iskeen to outline the necessary deductions from total social product that willalways diminish the portion of surplus product that could be returned tolabor ndash the proportion set aside for expansion of production the reservefund for insurance against accidents the general costs of administrationof production the social fund to support schools and health services thefunds to support those unable to work In the view of both the Fabian andrevolutionary socialists cooperative ownership of the means and outputof production did not resolve many of the thorny issues associated withthe operations of the economy speci cally distribution of the proceeds oflabor

it were to be subjected to an iron-bound tyranny such a community would necessitatethe development of an administrative system of the nature of which even Owen himselfhad formed no conception and which could only originate in a pure and enlightened[capitalist] democracy (189129 emphasis and insertion added)

Thanks to Dipesh Chakrabarty (2001) for helping me see the historicist lsquonot yetrsquo argumentin this formulation of defeat

13 Engelsrsquo wonderful description of Owen as ldquo a man of almost sublime childlikesimplicity of character and at the same time one of the few born leaders of menrdquo (1972613) was matched with genuine admiration for his achievements but did not diminisha harsh dismissal of the ldquomish-mashrdquo of his and other Utopiansrsquo mode of thought (616)Write the Webbs ldquoHe [Owen] had a boundless belief in the power of education to formcharacter and if any scheme promised just suf cient respite from poverty and degradationto enable him and his disciples to educate one generation of the countryrsquos children he wasready to leave all economic consequences to be dealt with by the ldquoNew Moral Worldrdquowhich that generationrsquos Owenite schooling would have createdrdquo (1907146)


Third ownership of the instruments of production by the workerswho use them (democracies of producers) brought with it the dangersand temptations of group individualism The Webbs saw a con ict ofinterest between the workers in a producer cooperative who could actas a ldquopeculiarly lsquointerestedrsquo oligarchyrdquo at odds with the community atlarge whom they serve (Webb and Webb 1921462-8) If the agriculturalunion took possession of the land and the miners union the minesthere was danger of sectarian interests becoming transcendent Withoutadequate governance of the interdependencies of the economy eachtrade which was ldquobut a fragment of the communityrdquo (1907465) woulddeteriorate into a Joint Stock Union no different from a Joint StockCompany in competition with each other to raise prices and increasepro ts They mistrusted producers as such and advocated handing thedirection of the economy over to the state (as representing the community)and to democracies of consumers and citizens (organized into consumercooperatives) who would keep prices down advocate ever more ef cientproduction technologies and be much more successful in ensuring theldquodistribution of the inevitable surpluses that we know of as rent and pro tequitably among all consumersrdquo (1907462) 14

This set of criticisms has been less developed within the revolutionarysocialist movement in which a privileged productionism allows the workingclass to take precedence over community in directing the economy AsMellor Hannah and Stirling note Marx ldquoclearly saw cooperatives asshining examples of the organization of life under socialismrdquo and had aldquopreference for producer rather than consumer cooperativesrdquo (198822)He was keen to assert the value of the ldquocooperative factories raised bythe unassisted efforts of a few bold lsquohandsrdquorsquo as ldquogreat social experimentsrdquothat concretely demonstrated that slave serf and hired labor were butldquotransitory and inferior form[s] destined to disappear before associatedlabor plying its toil with a willing hand a ready mind and a joyousheartrdquo (Marx 1985 quoted in Mellor et al 198823 emphasis added)Issues of individualism and collectivism were traditionally seen through the

14 In favoring the ldquocommunity of consumers and citizensrdquo as lsquodirectorsrsquo of the economy(Webb and Webb 1921482) rather than the working class the role of consumption wasdifferently con gured and valued by the Webbs in a way that distinguishes them fromthe mainstream socialist tradition In their view ldquoWe are in fact habitually misled byour too narrow view of the social function of consumption It is necessarily the consumerwho according to his tastes and desires determines the demand and lsquosets the fashionrsquoand thereby decides the kinds and qualities of the commodities and services high or lowmaterial or spiritual that shall be produced lsquoConsuming goods is the creation of a typeof lifersquo In the social organization of the world the act of consumption lsquois directive it isconstructiverdquorsquo (1921482-3)


lens of class struggle and the collectivism of the workers while privilegedover the individualism of the capitalists is only ever ambiguously relatedto that of lsquothe communityrsquo 15 The reluctance to deal with the complexpolitics of class versus community has led to many problems for thelabor movement in its relations with other issues-based and community-based social movements It is in this realm of economic politics that theMondragon case is particularly instructive as is demonstrated in the secondpart of this paper

Fourth there were the empirical facts about worker cooperatives ndashmost notably that in comparison to consumer cooperatives they seemednot to last Between the heady days of the 1830s when trade unionistsldquoaimed at nothing less than the supersession of the capitalist employerrdquo(Webb and Webb 1907322) and the institutionalization of trade unionsin the latter half of the 19th century a number of cooperative workshopswere set up by trade unions ldquoas a means of affording to a certain numberof its members a chance of escape from the conditions of wage-labourrdquo(320) These ventures largely ended in failure and the Webbsrsquo analysisof their lack of success contributed to what became generally knownas the lsquodegeneration thesisrsquo ndash the claim that ldquoover time a democraticworker-owned rm will tend to fall into decay chie y because of decliningeconomic ef ciency but also because of a loss of social dynamismrdquo (Cheney199917) The diagnosis implied an inherent systemic weakness of thecooperative and human weakness of the cooperator in the face of theldquologic of the market and the motivations of capitalrdquo (Mellor et al 198867)Marxrsquos comments to the effect that cooperative factories reproduced thedefects of the capitalist system (1981571) imply that he similarly shared theview that while indicative of a new mode of production they could notstand alone and independently lsquoreproducersquo themselves (see footnote 11)

The taint of utopianism damned worker cooperativism on all sides ndashboth from the Fabian socialist gradualists who were happy to advocate

15 This ambiguity can be seen in Marxrsquos exchanges with anarchists such as Bakuninand Proudhon who were concerned that in a post-revolutionary state lsquogovernment bythe working peoplersquo would reproduce structures of domination with ldquohuman naturerdquoleading the representatives of the workers to look down on ldquoordinary workers from theheights of the staterdquo (1978546) Marxrsquos somewhat weak response (which contradicts otherpronouncements) is that once the economic foundations of the existence of classes havebeen destroyed wage workers will have abolished the speci city of their class characterand the functions of administration would be different With a reference to actually existingcooperatives Marx asks for it to be taken on trust that the threat of individualism overridingcollectivism will be avoided asserting that ldquoIf Herr Bakunin knew one thing about thesituation of the manager of a workersrsquo cooperative factory all his hallucinations aboutdomination would go to the devilrdquo (1978546)


consumer cooperatives (but not producer cooperatives) and heavy stateinvolvement in the distribution of social goods and also from thecommunist revolutionaries who advocated state socialism and the transitionto communism lsquoafter the revolutionrsquo The historical antagonism betweenleft labor politics and worker cooperatives continues to have resonance inthe present as do the still prominent views that the cooperative sector isinsigni cant and unthreatening to the dominant economic order 16 thatcooperatives are unable to build sustainable interdependencies that theyare economically awed and not really distinguishable from capitalism thatcooperators are prone to the individualistic self-interest of the cooperativethat cooperatives are short-lived as well as politically conservative anddisinterested in solidarity with the more political struggles of the left 17

This antagonistic stance has contributed to a hyper-critical because over-invested attitude to the evaluation of existing economic experiments withcooperatives 18

Given my interest in recouping an economic politics of cooperativism ina post-socialist and post-social democratic era it is worth reexamining theseobjections in more analytical detail In The Consumer Co-operative MovementBeatrice and Sidney Webb set out speci c reasons for ldquowhy democracies of

16 Cooperatives for example have been represented as limited ldquoto the role of isolatedundercapitalized and marginal lsquodwarf shrsquo in the capitalist sea of major corporationsrdquo(Ellerman 19845 quoted in Morrison 199148) that is as having no power with respect tothe dominant structure of capitalism

17 Of course there is a counter-story to be told of the waxing and waning of supportthe labor movement has given to cooperative development This has changed over timefrom the building of trade union consumer cooperatives in the early part of the 20th

century to experiments with worker-owned production in the 1970s to worker buyoutsand ESOPS in the 1980s This point only highlights the rhetorical violence of referring tosomething called the lsquolabor movementrsquo when its internal differences have historically andgeographically been so great

18 For example despite the desire of many to represent Mondragon as a living breathingalternative to capitalism Mondragon discourse is haunted by the fear of (and in some casesalmost perverse pleasure in) defeat From an avowedly left perspective Kasmir (1996 1999)for example uncovers the lsquomythrsquo of Mondragon arguing that the Mondragon model is partof a ldquoglobal capitalist discourserdquo (1999395) aimed at legitimating post-Fordist managementpractices She insists that it ldquoreinscribes capitalism by eviscerating class as a social andpolitical categoryrdquo and that it appears to be an alternative to capitalism but really onlycontributes to the assertion ldquothat no other system is possiblerdquo (396) Kasmir admits that sheis ldquoputting contemporary capitalism at the center of [her] inquiryrdquo (382) for her the bodyof capitalism is more real than the ghostly presence of cooperativism ndash capitalism is presentin the market in the process of producing commodities in the technology employed inthe pressures to develop one way and not another


Table 1

Extracts from Sidney and Beatrice Webbrsquos ldquowhy Democracies of ProducersFail in Organising Productionrdquo

(Webb and Webb 1921462-68 emphasis added)

sup2 the self-governing workshop is inevitably ldquoled to regard its own product or its particularfunction as of more than average importance to the communityrdquo (465)

sup2 ldquothe con ict of interest between each self-governing industry or vocation and betweenthe community as a whole may appear in the exaction of pay above the average orhours and conditions of work less onerous than those of othersrdquo (465)

sup2 it is ldquoperpetually tempted to exact like the capitalist employer a pro t on cost that isto say to secure for its own members whatever surplus value is embodied in the price forwhich it can dispose of its product or service or to put it in another way to retain forits own members the equivalent of the advantage of all differential factors in production(such as superiority of soil or site of machinery or administrative skill) that it controlsrdquo(465)

sup2 ldquoevery democracy of producers [is] perpetually tempted to seek to maintainexisting processes unchanged to discourage innovations that would introduce newkinds of labour and to develop vested interests against sections of workersrdquo (466)

sup2 the ldquoinvidiousrdquo problems with ldquodisciplinerdquo and the hierarchy of managers andproducers ldquoNo self-governing workshop no Trade Union no Professional Associationno Co-operative Society and no Local Authority ndash and no of ce or industrial enterprisebelonging to any of these ndash has yet made its administration successful on the lines ofletting the subordinate employees elect or dismiss the executive of cers whose directionsthese particular groups of employees have in their work to obeyrdquo (467) ldquoit is a matterof psychologyrdquo (468)

sup2 ldquodisputes among different vocations and sections of vocations (whether brain workersor manual workers) as to which of them were ldquoentitledrdquo to particular jobs have beenspecially characteristic of every form of association of producersrdquo (466)

sup2 ldquothe tendency to exclusiveness is inherent in any association based on vocation inproduction [and] just because they are necessarily producing almost entirelynot for their own use but for exchange [they] can normally increase their own incomesapart from any increase in ef ciency in production by restricting their membershipand limiting their output in relation to demand in such a way as to enable them to raisethe aggregate exchange-value of their productrdquo (466)

producers fail in organizing productionrdquo (1921462-468) 19 Their criticismsstem from a view that the cooperative ideal as propounded by Owenfor example called for a ldquocharacter which had not been formedrdquo (Potter

19 These criticisms were rst propounded by Beatrice Potter in her 1891 book on TheCooperative Movement in Great Britain and then incorporated into her 1921 book with SidneyWebb


189129) They had a rm belief that ldquono man can be trusted to be judgein his own caserdquo (Webb and Webb 1921465) and thus predicted thatan inevitable con ict of interest would arise between the workers in acooperative and the community they serve 20 Their arguments as laid outin Table 1 still stand as classic oppositions to worker cooperatives In thesecond part of this paper I take these weaknesses as a way of organizingdiscussion of the distinctive elements of the Mondragon ethical economy

Ethical Stances and the Mondragon Way

The Mondragon Cooperative Corporation (MCC) stands in direct con-tradiction to many of the claims of limitation set out above and as suchhighlights the possibility of lsquomakingrsquo viable and sustainable economies thatare built around cooperativism I am particularly interested in how a neweconomy might be built by marshalling the potentiating force of surpluslabor In the realm of economic practice important decisions must be madeabout questions of individual and collective right to the fruits and rewardsof labor power over the performance of onersquos labor exchange principlesand distributive policies (to name but some) Eradication of distinctionsaround ownership of property in a cooperative does not resolve the di-visions between producers of surplus and non-producers of surplus Howthese divisions are negotiated how surplus is distributed and allocated be-tween workers and the community all occupy the space of a form of classpolitics 21 Each new way of producing appropriating and distributing orallocating social surplus allows for new becomings new ways of being

20 Potter asked the question in her 1891 book on the cooperative movement ldquoForwhere in the wide world could Robert Owen discover a body of associates whohad inherited or acquired characters t for the dif culties of associated life and self-governmentrdquo (189129) She displays a certain elitism in the observation that those whowere attracted to cooperativism were the unemployed ldquoworkers already degraded bystarvation or idleness or restless or discontented spiritsrdquo who were in her estimationldquoincapable of the most elementary duties of citizenshiprdquo (29) With such a low opinion ofthe masses it is not surprising to see PotterWebb and her husband enshrine a form ofmistrust of the workerrsquos capacity for ideals other than greed at the center of their evaluationof producer cooperatives

21 Resnick and Wolffrsquos (1987) symptomatic reading of Marxrsquos economic and class analysisreinstates surplus labor distribution (the distribution of extracted surplus to various ends bythe appropriator) as just as important a moment of the class process as those of surpluslabor production and surplus labor appropriation All three moments can be seen as focii ofclass struggle What is more they argue that diverse class processes can be seen to be presentin all societies in which surplus is used to build and support a social system including thosethat claim to have lsquoabolished the class systemrsquo See for example their analysis of the SovietUnion (Resnick and Wolff 2002)


Crucial to the longevity and success of the Mondragon cooperativeshas been a commitment to constant debate and reevaluation of howa particular set of ethical principles will guide their economic choicesand resultant paths of action At base the most powerful constituentof the Mondragon intentional economy has been its Basque ethnic andcommunity identity During the 1950s Father Arizmendi set himself thegoal of promoting unity in a society fractured by civil war and politicaldivision In his view the economic strategy of setting up cooperatives was astep towards building a cohesive community and enabling Basque culturalsurvival and regeneration 22 Under the repressive Franco regime Basquelanguage had been outlawed and ownership of production facilities deniedBasque communities Working within and against these constraints theMondragon cooperatives began to grow and foster an economic basis forrenewed expression of Basque cultural identity Community coherence andpreservation has remained an underlying commitment guiding many of thestrategic economic decisions taken by cooperators

The ten cooperative principles that have guided the Mondragonexperiment are as follows 23

1 Open admission Membership of the Mondragon cooperatives isopen to all who agree with the basic cooperative principles2 Democratic organization All owner-workers (socio-trabajadores) areequal members of the cooperative Each has one vote in the democraticallycontrolled general assembly of the enterprise and in the election ofmembers to other governing structures3 Sovereignty of labor Control of the cooperatives is in the handsof the owner-workers and they have a primary role in the distributionof surpluses There is no distinction made between so-called lsquoproductiversquoworkers (direct producers of surplus) and lsquounproductiversquo workers (of ce andsales personnel who do not produce surplus but enable its realization andare paid out of distributed surplus) All are ensured the right to determine

22 Interview with Jose Ramon Elorza Human Resources Director IKERLAN April 221997 The initial cooperative was established in 1956 but prior to this Father Arizmendihad spent the years since his arrival in the community in 1941 setting up youth groupsa medical clinic athletics and soccer clubs teaching in the apprenticeship program of thelargest company in town Union Cerrajera setting up an independent technical schoolEscuela Politecnica Profesional and conducting more than 2000 study circles on socialhumanist and religious topics (Whyte and Whyte 198829-32) The school was to providethe technical and organizational base from which the producer cooperatives grew (30)

23 The principles as they currently stand were based on those set out originally bythe Rochdale cooperators in 1844 but have been in uenced by the contemporaryInternational Cooperative Alliance and their own experiences (Morrison 199111-12Ormaechea 1993139-86)


how surplus will be distributed within and without the cooperativeenterprise 24

4 Instrumental and subordinate character of capital (peopleover capital) In all instances people are valued over capital which isseen as ldquobasically accumulated labor and a necessary factor in businessdevelopment and savingsrdquo (Morrison 199111) For example while thecooperatives require a substantial personal investment by new membersthis need for capital does not stand in the way of open admission 25 Thisprinciple ensures that capital does not have an independent existenceimperative or logic For example returns paid out on capital saved orreinvested in the cooperative system are ldquojust but limitedrdquo ldquonot directlytied to the losses or surpluses of the co-opsrdquo (11)5 Self-management The collective enterprise is managed throughdemocratic participation of all members based on free ow of informationaccess to training internal promotion for management consultation andnegotiation about all decisions that affect owner-workers6 Pay solidarity Wages are set according to principles of solidaritybetween workers within each cooperative between cooperatives and withworkers in conventional capitalist enterprises in the region Collectivedecisions about what proportion of the workerrsquos labor is to be consideredlsquonecessary laborrsquo (to be used for meeting subsistence costs and remuneratedto the cooperator as a wage) are particularly informed by the ethic ofequilibrio that is a commitment to seeking balance between con ictinginterests and forces7 Group cooperation Cooperation is fostered among individualcooperatives within the same group among cooperative groups within theMCC and between the Mondragon cooperatives and other cooperativemovements throughout the world8 Social transformation The ever greater economic and socialreconstruction of a Basque society ldquowhich is more free just and solidaryrdquo(Ormaechea 1993175) through for example expansion of employment inthe cooperative system

24 In the terms proposed by DeMartino this constitutes an example of ldquoweak appropriativejusticerdquo in that those who ldquodirectly produce the surplus (Marxrsquos productive workers) are notexcluded from fair and meaningful participation in its appropriationrdquo but are joined byother members of the cooperative and in a less direct way by other members of the widercommunity (200318)

25 Mathews notes that the entry fee ldquocurrently stands at about $12500rdquo which representsldquoroughly 10 of the estimated average capital requirement for the creation of a new jobrdquoand that ldquo(p)ayment can be made on the basis of a 25 initial contribution followed bymonthly installmentsrdquo (199711)


9 Universality Promoting solidarity with ldquoall those working foreconomic democracy in the sphere of the lsquoSocial Economyrsquo championingthe objectives of Peace Justice and Development which are the essentialfeatures of International Cooperativismrdquo (Ormaechea 1993180)10 Education Commitment to education about cooperative principlesand their dissemination to members especially among those elected toof ce in the social and management bodies of the organization andcrucially to young people the cooperators of the future (Ormaechea1993183)

The process by which these principles have been deliberately debatedand frequently reinterpreted over the past 40 years provides a model ofa uid and iterative process of de ning and rede ning ethical positionswith speci c political and economic outcomes In all instances a com-mitment to seeking balance between con icting interests and forces tothe principle of equilibrio has come into play in adjudicating differencesand determining how to proceed In the discussion to follow we see howthese principled ethical stances have been acted out in the speci c cir-cumstances identi ed by the Webbs as moments of producer cooperativeweaknesslimitationtemptation

Product

The self-governing workshop is inevitably ldquoled to regard its own product or its particularfunction as of more than average importance to the communityrdquo (Webb and Webb1921465)

When the rst enterprises were established the cooperators sought toset up the production of commodities not being manufactured in theregion (or in Spain) Commitment to an ethic of regional businesssolidarity in uenced the decision not to replicate (and therefore createheightened competition for) businesses already established in the regionThey began with one cooperative business manufacturing paraf n stovesand progressively established new enterprises producing space heaters andelectrical appliances targeting local and national markets This strategyworked very well in the consumer-deprived days following the war whenthe Spanish economy was both depressed and politically isolated Priceswere protected by the high tariffs on industrial imports that stayed in placeuntil Spainrsquos entry into the European Economic Community beginning in1986 (Whyte and Whyte 1988132)

The commitment to social transformation of Basque society throughincreased employment has led to the proliferation of cooperatives Duringthe establishment phase the Mondragon cooperatives developed theirown internal markets building backward and forward linkages between


their own cooperatives As some enterprises became larger sectionsof production were spun off as independent entities The componentsproduced by a new cooperative had an assured market with the old parent rm and the cooperative had the opportunity for expansion by developingnew markets selling to buyers outside the cooperative system

Strength in the manufacture of domestic white goods thus translatedinto strength in other product markets such as machine tools Mostrecently movement into retailing and services is ful lling the goal ofincreasing employment Committed to the principles of open membershipuniversality and education the hyper and supermarkets Eroski andConsum are run as both worker and consumer cooperatives Consumermembers are represented on the governing councils of the cooperativebut are not paid a consumer cooperative dividend Eroski concentratesinstead on ldquolow prices healthy and environmentally-friendly products andconsumer education and advocacyrdquo (Mathews 199712) These enterpriseshave managed to carve out a signi cant market niche by offeringcooperative membership to all consumers who shop with them utilizingtheir internal market links to agricultural and commodity producers Eroskinow employs over 12000 workers and the chain extends beyond Spain

The Mondragon cooperators have not sought to establish any oneproduct or function as more than of average importance to the community Theextent of product diversi cation is remarkable from agricultural productsto capital goods domestic appliances and retail services and has led to thestrengthening of the regional economy as a complexly differentiated andnetworked whole

Pay

ldquo(T)he conict of interest between each self-governing industry or vocation and the communityas a whole may appear in the exaction of pay above the average or hours and conditionsof work less onerous than those of othersrdquo (Webb and Webb 1921465)

The setting of wages (called anticipos or an advance) is one of the spacesof freedom open to Mondragon that has been seriously debated andmodi ed in line with changes in the economic environment 26 Whileall members of any one cooperative are democratically involved in thedecisions regarding the operations of the cooperative enterprise decisionsabout wages are made by the cooperative community as a whole at theCooperative Congress the democratically elected governing body of all thecooperatives This signi es the import placed by the cooperative system

26 The issue of hours and working conditions will be taken up under lsquomanagementrsquo


upon the setting of the necessary labor payments that in uence rates ofappropriation27 and thus production of cooperative surplus

A number of principles come to bear here The identi cation rst andforemost of the cooperatives as a Basque survival strategy meant that theywere very conscious of not recreating or instigating divisions within theBasque region 28 This imperative became institutionalized in the ethic ofregional pay solidarity Wages are pegged to a base wage which is ldquoroughlycomparable to that of suitable workers in neighboring Basque industryrdquo(Morrison 199150) This decision re ects a community commitment toequilibrio and solidarity ensuring that the Mondragon cooperators do notbecome a new wealthy lsquosocial classrsquo within the region A similarly informeddecision to minimize wage differentials within any cooperative to a ratio of13 between the bottom worker and the top manager was instituted by allthe cooperatives (Whyte and Whyte 198844) This ratio has been modi eda number of times throughout the history of Mondragon and is currently16 29

The decision to debate wage levels at the level of the community andnot the individual cooperative ensures equilibrio by establishing safeguardsagainst any one group increasing the production of surplus labor in theircooperative by driving the wage level down below the community widelevel or jeopardizing the production of surplus by raising wages abovethis level The decision to limit the necessary labor payment (therebymaximizing the surplus labor produced) enhances the economic abilityto proliferate cooperatives It also indicates a commitment to valuingcommunity sustainability over and above immediate personal consumptiona commitment evident in many of the aspects of the Mondragon economicexperiment

27 In that this act of appropriation is sanctioned by the workers themselves it seems morerealistic to use this terminology rather than the more well known ldquorate of exploitationrdquo

28 During the Civil War the Basque community had been split by Republican socialistand anarchist loyalties as well as having been decimated by outmigration and the targetedbombing of Guernica the spiritual and governmental center of Basquedom

29 It must be noted that in many of the technologically advanced enterprises there areno workers receiving the base grade pay The move to the greater ratio was instigated bythe need to permit salaries of the top managers to rise to 70 of established marketequivalents (Cheney 199949) The wages issue has been complicated in recent timeswith the employment of non worker-owner labor (eventuales) who will be included as fullcooperative members when new full time jobs are generated and non worker-owners (sociostemporales) with xed-term contracts Cheney notes that these non-socios make around 80of the wages of the socios and receive no dividends in the enterprise (86) At present some10000 of the total MCC workforce of around 40000 are non worker-owners


Pro t

(I)t is ldquoperpetually tempted to exact like the capitalist employer a pro t on cost that isto say to secure for its own members whatever surplus value is embodied in the price forwhich it can dispose of its product or service or to put it in another way to retain for itsown members the equivalent of the advantage of all differential factors in production (suchas superiority of soil or site of machinery or administrative skill) that it controlsrdquo (Webband Webb 1921465)

True to the sovereignty of labor principle the cooperative members areowners and rst distributors of their pro ts or disposable surplus thatis what is left of their appropriated surplus labor after meeting all theenterprise expenses (cost of inputs including raw materials machinery andthe wages anticipos as well as deductions from surplus for insurance taxesetc) The members of the general assembly of the individual cooperativeare not however at liberty to retain the remainder for themselves butare in charge of major decisions about how to distribute their pro tsCertain distributions are determined by the cooperative system as a wholeand one distribution is enforced by Spanish law ndash the allocation of10 per cent of annual pro ts to social or charitable institutions Thesefunds are spent on educational programs conducted in Basque languagecommunity and public health projects providing important support forcultural maintenance (Cheney 199987)

In principle the cooperativists have the strategic power to determinehow 90 per cent of the pro t is allocated and it is in this arena ofdecision making that the strong commitment to people over capital andcommunity over individual has increasingly come to the fore Early onthe cooperatives distributed 20 per cent of their disposable surplus to apermanent reserve fund of retained earnings to be used for machineryreplacement and upgrade The remaining 70 per cent of the pro t wasdistributed on a yearly basis directly as dividends to the cooperators ldquowhocould spend or save it as they choserdquo (Morrison 1991159) It soon becameevident that this arrangement would not allow for long-term expansionof the individual enterprise or the wider cooperative system The decisionwas thus made to establish internal capital accounts whereby 70 per cent(or less) ldquois distributed to the owner-workersrsquo personal internal capitalaccounts apportioned according to number of hours worked and salarygraderdquo (Morrison 199150) 30 The individual workerrsquos capital account

30 Cheney notes that in recent times it has been reported that some socios have voted toreduce the reinvestment of their dividends into the collective capital fund to 30 that isto what is required by statute His informant attributes this shift to a demise of the lsquocultureof sacri cersquo (or giving) that characterized the rst 40 years of cooperative development and


earns interest at an agreed upon rate and ldquo(m)embers may draw on theinterest accumulated in their accounts or use the accounts as collateral forpersonal loans but the principal cannot normally be touched until theyresign or retirerdquo (Mathews 199711) This means that effectively 90 percent of the pro t or disposable surplus generated is saved to be reinvestedin enterprise development

In effect this allocation of funds to lsquoforced savingsrsquo has been a crucialenactment of strategic power on the part of the cooperators that hassubordinated personal economic gain to the goal of strengthening anddiversifying the cooperative system The individual producers cede theirright to directly determine many of the distributions out of appropriatedsurplus by depositing their individual capital accounts with the Caja LaboralPopular (the Working Peoplersquos Bank) This institution is a second degreecooperative (a cooperative of cooperatives) that is controlled by its owner-workers and its members (other cooperative enterprises) The foundationof the Caja Laboral 31 was a key intervention that enabled the economicpower of cooperatively produced surplus to be marshalled within thecooperative system as a whole and dispersed in a manner that proliferatedthe intentional economy of Mondragon

The slogan used by the Caja in the early stages of its development was ldquosavingsor suitcasesrdquo indicating that local savings were necessary in order for there tobe local jobs The Caja also provided a means for the cooperatives to managethe capital held in their permanent reserves and individual capital accountsso enabling them to retain within the group all of their surpluses other thanthe 10 allocated by law to community projects (Mathews 199713)

The Caja operates as both a bank and a business development agency ItsEmpresarial Division engages in a second order redistribution of the worker-ownersrsquo surplus deciding where and how to allocate its investments so asto protect and advance the cooperativist vision It still offers low interestloans to cooperatives and provides business and nancial support to newstartup cooperatives (Cheney 199956) The surpluses deposited with theCaja Laboral have also been used to establish a network of other seconddegree cooperatives and groups that have provided ongoing support to thelsquoprimaryrsquo producer cooperatives Lagun-Aro the social insurance cooperative

the rise of consumerism in Basque society (199980) It is also possible that with the growthand consolidation of the MCC there is less pressure within the organization to rely on thisfund for business expansion

31 In setting up this bank the cooperatives took advantage of a clause in Spanish lawthat allowed a cooperative credit union to offer 1 higher interest than other nancialinstitutions (Mathews 1999206) It was able to quickly attract the savings of local peopleand channel them into nancing further development of the cooperative system


that provides health care life insurance and social security to cooperativemembers and their families 32 Hezibide Elkartea the education and trainingcooperative providing education from day-care to university level andIkerlan and Ideko the research and development cooperatives that undertakescienti c and technical research both for the cooperative businesses and oncontract for the private sector 33

The generation of cooperative pro t and its deployment into job growthin additional rst degree and second degree cooperatives and the provisionof social services has in Mondragon become a way of sharing thedividends connecting cooperative members to the wider community andexpanding and strengthening the cooperative community economy

Innovations

ldquo(E)very democracy of producers [is] perpetually tempted to seek to maintain existingprocesses unchanged to discourage innovations that would introduce new kinds of labourand to develop vested interests against sections of workersrdquo (Webb and Webb 1921466)

The Mondragon cooperatives began with modest production processesthat were appropriate to the local demand for domestic appliances Buttechnical education and innovation has always been a keystone of theMondragon cooperatives since the early days when the rst graduates ofthe Escuela Politecnica Profesional formed the rst cooperative enterpriseMacLeod notes that ldquothe theory as well as the practice [of the Mondragonmodel] is infused with an almost erce attachment to the necessity ofbeing on the cutting edge of the most advanced technology availablerdquo(199792 insertion added) He speculates that this commitment to the latesttechnology might have been in uenced by Don Jose Mariarsquos impressions ofthe Spanish Civil War in which the idealism of those who came together

32 Under Spanish law the cooperatives were excluded from normal social security taxesand bene ts and so the cooperators formed their own system to provide social bene ts tothemselves and their families (Whyte and Whyte 198819)

33 Mathews summarizes the implications of this economy of surplus distribution for thediverse forms of property ownership that coexist

members of the co-operative have property of four kinds rstly ownership of theirjobs secondly direct personal ownership of the balances held for them in their capitalaccounts which earn additional income for them through interest to which they haveregular access thirdly a shared ownership of the assets of their co-operatives such asbuildings equipment and reserves the governance and management of which they aredirectly responsible for and nally a further shared ownership ndash albeit less direct ndashof the secondary support co-operatives in which the primary co-operatives are majorstakeholders (1999232)


to support the Republican cause ldquowas no match for the precision andef ciency of Hitlerrsquos technologyrdquo when the German Air Force came into help Franco by bombing the Basquesrsquo most ancient and sacred city ofGuernica (199794)

Signi cant investment has been allocated to keeping at the developingedge of production technology and methods and this has allowed theMondragon Cooperative Corporation to become

Spainrsquos largest exporter of machine tools and the largest manufacturer ofwhite goods such as refrigerators stoves washing-machines and dishwashersIt is also the third largest supplier of automotive components in Europe ndashdesignated by General Motors in 1992 as ldquoEuropean Corporation of theYearrdquo ndash and a European leader in the supply of components for householdappliances (Mathews 19972)

Mainstream technology and production processes have for many yearsserved the primary agenda of building community sustainability butthere is now a commitment to developing environmentally responsibleproduction techniques

Adherence to the principle of the instrumental and subordinatecharacter of capital has meant that technical change is not posed as a threatto the individual owner-workersrsquo job or existing skill base While there isno question that innovation must take place to remain competitive thecooperatives were designed primarily to gainfully employ people and notonly to make pro table returns With the introduction of new lsquolabor savingrsquomachinery workers are deployed to other existing cooperatives or retrainedto work in new production processes and paid a maintenance wage Thecost of upholding this principle is met by reallocations of distributed surplusat the level of the individual cooperative and supported by allocations ofsecond order surplus distributions by the Caja Laboral During the recessionof the 1980s for example certain cooperatives increased to 45 per centthe distribution to retained earnings to allow for the cost of retoolingand upgrading machinery and paying unemployment bene ts to laid-offworkers thereby reducing the allocation to individual cooperator accountsThe commitment to keeping enterprises going or changing their purposeso that they can continue to generate a disposable surplus that can buildand extend community has led to an emphasis upon ef ciency highproductivity market expansion and new business growth and productdevelopment

Management

(T)he ldquoinvidiousrdquo problems with ldquodisciplinerdquo and the hierarchy of managers andproducers ldquoNo self-governing workshop no Trade Union no Professional Association


no Co-operative Society and no Local Authority ndash and no ofce or industrial enterprisebelonging to any of these ndash has yet made its administration successful on the lines of lettingthe subordinate employees elect or dismiss the executive ofcers whose directions these particulargroups of employees have in their work to obeyrdquo (Webb and Webb 1921467)

Given that the Mondragon operations adhere to the principle of self-management many issues to do with the direction of work and com-pliance with shop oor discipline are side-stepped Indeed this is one oftheir competitive advantages over conventional capitalist corporations AsMorrison notes the cooperatives are ldquonot burdened by layers of super-visors and managers who act as enforcers [and who must be paid outof appropriated surplus] instead [they have] a talented committed forceof owner-workers who can successfully use the new exible technologiesrdquo(bracketed comments added 1991214) Workplace behavior must abideby an agreed upon disciplinary code that addresses issues of punctualityabsences and violation of co-op rules specifying lsquolight serious and graversquooffences and appropriate punishments (from nes to suspension or expul-sion) In a largely self-managed work environment enforcement of thesecodes is mainly up to the individual and the immediate work group 34

There is still the question of how owner-workers relate to a generalmanager of the whole enterprise In Mondragon each cooperative is setup with a number of elected councils that see to day to day governanceand carry out the decisions made by the annual General Assembly ofall worker-owners 35 The governing or directing council is made up ofgeneral members elected to a four year term and is considered to be themost powerful body in the cooperative It appoints supervises and removesthe co-op manager oversees membership job classi cation accountsdistribution of pro ts or losses nancial commitments and business plans(Whyte and Whyte 198876) The cooperative manager is appointed fora four year period and may attend governing council meetings as an

34 One cooperator explained to me how her job was to plan out the ow of work in thefactory for the week As long as this plan was ready to be operationalized on the shop ooron Monday morning it did not matter when she did her work Sometimes she came inon the weekend to complete it if she had spent her time on other things (she was a localcouncilor) during the preceding week She was appreciative of the considerable freedomto organize her work time at the same time she expressed a strong sense of responsibilityto the cooperative enterprise and had a well developed workservice ethic This accountpoints to the reduced need for managers to police behavior or give out orders As anemployee of the owner-workers the manager is free in turn to look to the smooth runningof the production and commercial side of the business

35 At the General Assembly position papers and business plans are presented debatedand approved The meeting is preceded by smaller ldquopreparatory chatsrdquo for groups of 30-40 socios to review and modify the plans and strategies to be presented (Cheney 199958)


advisor but has no vote The governing council normally meets everyday before the working day begins and at the conclusion of the meetingthe councilors resume their speci c jobs within the enterprise (Mathews1999199) In the larger cooperatives a separate management council madeup by the hired top executives and directors of the cooperative meets toformulate policies and plans to be approved by the governing council(Cheney 199959) In these larger enterprises an audit committee keepswatch over the cooperativersquos nancial operations

Managers earn much less than they would outside the cooperativesystem so they are often drawn from within the cooperatives or areyoung graduates brought in from outside who are keen to participate inthe cooperative vision Some are even hired from traditional capitalist rms They are ldquoaware that they must succeed in order to maintain theirjobsrdquo (Morrison 199174) and that they have to justify their decisions toworker-shareholders who are much more involved in the business than theconventional shareholder (Bradley and Gelb 198362) ldquoCo-op managershowever do not live in terror of losing their jobs It is not a tragedy fora manager to fail those who are replaced are reintegrated into the co-opswith another assignmentrdquo (Morrison 199174)

In addition to the hired general manager each cooperative has anelected president who is an ex-of cio member of the governing council andsocial council (see section on disputes) and is invited to attend the meetingsof the management council when there is one Cheney notes that thisdual governance-management structure imbues vitality in the organizationand a strong democratic awareness In his research he found that the twoleaders often act as partners in management with the elected presidentldquotypically more conscious of his or her constituencies than is the selectedgeneral managerrdquo (199961)

The clear speci cation of the terms and conditions of management andthe individual rights and collective responsibilities of the owner-workers hascontributed to one of the most successful systems of worker managementin the world The MCC is host to many study groups from all over theworld interested in ef cient business and industrial management with astrong emphasis on worker participation

Disputes

ldquo(D)isputes among different vocations and sections of vocations (whether brain workers ormanual workers) as to which of them were ldquoentitledrdquo to particular jobs have been speciallycharacteristic of every form of association of producersrdquo (Webb and Webb 1921466)

The process of determining working conditions wage levels and jobclassi cations in the Mondragon cooperatives has always been pursued


outside of the lsquonormalrsquo operations of the labor market or conventionalcollective bargaining This is partly because when the cooperativeswere rst begun the Franco dictatorship banned membership of tradeunions and political parties though clandestine organizations existed Thecommitment to equilibrio and solidarity could also be seen as contributing toan interest in ways of resolving con icts that do not draw upon the usthemideology of mistrust and suspicion that has traditionally characterizedtrade union struggles over industrial relations Efforts to build a sense ofeconomic community are aimed at transforming the usual class divisionsand antagonistic affective politics that often pertain between managementand workers

Within the cooperatives social councils were organized to allow thevoice of owner-workers as workers to be heard The social council standsalongside the governing council and focuses on monitoring personnelmatters salary grades and advances health and safety issues andadministering the coop social funds It aims to evaluate and possiblycounter decisions made by the governing council that might be morein uenced by business considerations and as such operates like a union

Disputes over job classi cation and reevaluation have indeed occurredin the Mondragon cooperative the most famous being the dispute thaterupted as the 1974 Ulgor strike At this time the Mondragon complexof cooperatives was under attack from elements within ETA the Basquepolitical organization who saw this ldquoentrepreneurial adventurerdquo as ldquoadisguised form of capitalism and therefore an obstacle in the way ofthe proletarian revolutionrdquo (Whyte and Whyte 198892-3) Criticism wasparticularly strong of the social councils which were seen by the militantleft as none other than a ldquobourgeois parliamentrdquo a ldquofaithful servant andlegitimate child of the system which gives rise to itrdquo (Whyte and Whyte198893 quoting Azurmendi) ETA agitation within the cooperatives sawattempts to mount strikes in the early 1970s and the response by thegoverning council at the Ulgor plant was to distinguish between ldquosympathystrikesrdquo in support of labor causes in the wider Basque region and ldquointernalstrikesrdquo focused on issues that could be raised and resolved with the socialcouncil The latter were de ned as attacks on the cooperative and subjectto penalties and discharge (92) 36 The Ulgor cooperative had grown intoa large and bureaucratic organization with 3500 employees and in theheightened climate of attack the attempt by management to implement jobreclassi cations and individual merit ratings for blue-collar workers was metwith misunderstanding resistance and ultimately a strike This experiencecaused major rethinking within the cooperative complex and prompted

36 A move which Father Arizmendi was said not to have supported (Morrison 1991154)


many changes One was the decision to limit the size of future enterpriseswhere possible to around 500 so that high levels of communication couldbe maintained among the workforce

Job classi cation and individual performance goals are important as notonly do they translate into a particular wage level but this in turn affectsthe share of cooperative dividends paid to the owner-worker It is notsurprising therefore that exercising the ethics of solidarity and equilibrio isnot always easy 37 The strength of Mondragon has been its willingness toopenly and democratically discuss these issues to re ect on past mistakesand to constantly change in order to sustain the original vision Opennessto change is a freedom to be exercised in itself

Membership

ldquo(T)he tendency to exclusiveness is inherent in any association based on vocation in production [and] just because they are necessarily producing almost entirely not for their own usebut for exchange [they] can normally increase their own incomes apart from any increasein efciency in production by restricting their membership and limiting their output inrelation to demand in such a way as to enable them to raise the aggregate exchange-value oftheir productrdquo (Webb and Webb 1921466)

As the history of Mondragon shows the cooperatives have not displayedexclusiveness on the basis of production or vocation On the contrary theyhave expanded into multiple production lines and industries building con-nections between workers of all trades and skills across a diversi ed econ-omy within the Basque region of Spain Output has been expanded ratherthan limited in relation to demand and prices of Mondragon producedcommodities have been kept competitive with those of commodities pro-duced within capitalist rms Until recently membership has been availableto all who worked in a cooperative enterprise and wage levels have beenregulated in line with the principles of open membership solidarity andequilibrio Many of the dangers of exclusivism or group individualism havebeen mediated by the principles and ethical practices elaborated above

Today one of the pressing challenges facing the MCC is related tothis question of membership and market competitiveness The increasingopenness of global markets could be seen as restricting the spacesof freedom within which the cooperatives can forge their own pathMondragon watchers have drawn attention to the phenomenal growth ofthe cooperative corporation in the late 1980s when it was initially adapting

37 With reorganization of work into teams there are current moves to reward groupoutput with team-based pay which is producing more controversy within the group (Cheney1999130)


to the international market and during the 1990s when it reorganized thecorporation along sectoral lines and commenced aggressive strategies todefend and increase its market position by establishing production sitesoutside the Basque region and in international locations (Cheney 1999Clamp 2000) 38

The expansionist strategy within Spain has been accompanied by a con-scious program of education and conversion to cooperative membershipBut in the growing number of joint ventures acquired rms and start-ups outside of Spain the workforces are wholly or partly comprised bycontract-based or non-owning employees Foreign plants have been ac-quired or established both to access and cater to overseas markets (eg inMorocco and Argentina to produce and supply domestic appliances) and toaccess cheaper labor and keep competitive in international markets (eg inthe components sector by locating a plant in Thailand) (Clamp 2000566568) The expansion strategy is pursued primarily to protect cooperativeemployment and operations in the Basque country by maintaining marketsand competitiveness Indeed where possible the research and developmentarm of the corporation aims to ldquodevelop substitute technologies that enablethe MCC to return manufacturing operations from overseas to the Basqueregionrdquo thereby sustaining employment locally (Clamp 2000562) 39

What we see in recent times is an attempt to stay true to the guidingvision of people over capital in the Basque region (ie maintainingsustainable employment) while engaging in operations elsewhere alongmainstream business lines (where capital rules over people) As one MCChousehold goods division vice-president is quoted as saying ldquoWe donrsquot goas missionaries we go as a business that has to make money be pro tableand support our principal businessrdquo (Clamp 2000566) Or as another co-op manager puts it ldquoWe do not see our mission to create new jobs inArgentina We want our project to increase more and more and more

The lsquoheadrsquo is here [in Mondragon] and the lsquofeetrsquo are utilized to sustain thelsquobodyrdquorsquo (quoted in Clamp 2000562 insertion added)

38 Cheney argues that the interest in international expansion is somewhat unexamined(199978) and cautions that ldquoIn an effort to engage the market completely on its ownterms they may be unduly sacri cing the long-valued lsquobuffer zonersquo between them andthe turbulence of the international marketrdquo (79) Clamp records that ldquoforeign subsidiariesgenerated 9 percent of the international sales in 1997rdquo (2000564) Currently productionsubsidiaries are located in Argentina China Czech Republic France Germany HollandMexico Morocco Thailand as well as other regions of Spain (Clamp 2000)

39 The components plant acquired in Thailand employed 100 Thai workers Clamp notesthat by 1998 ldquoMCCrsquos engineers were able to redesign the component They can nowmanufacture the same component with 15 workers once again in Mondragon The plantin Thailand will be maintained since they anticipate that there will be other componentswhich will encounter similar labour cost challengesrdquo (568)


The MCC has always operated within an international community ofcooperativist solidarity and a very locally emplaced community of culturalspeci city It maintains a strong role in international education aboutcooperatives and solidarity with international cooperatives as evident insubstantial nancial contributions to the International Cooperative Allianceand its outreach programs But the MCC is not yet involved in educationand conversion in its foreign plants The task of extending cooperativeeducation and membership to workers in the myriad international sitesthat the MCC now operates would be a daunting one indeed and wouldpotentially carry with it all the worst aspects of missionizing that go counterto the grass roots participatory involvement that is so much a part of thecooperative vision 40 Its commitment to sustainability has ultimately beenlocal and has led to a privileging of the Basque community economy andits interests Having a clear sense of which community is being sustainedby what economic practices inevitably involves facing up to exclusions andviolences and debating their acceptability at any one moment

Clearly Mondragon has reached a juncture where as Cheney observesldquothe cooperatives have now far exceeded their foundersrsquo expectations of nancial success resources geographic reach and powerrdquo (199972) It isimportant to highlight that the success of Mondragon has not been boughtby their lsquodemocracy of producersrsquo at the expense of the community fromwhich they are drawn nor from the citizens and consumers both localand international that they serve But it cannot be denied that today thecooperators are facing new ethical dilemmas to do with the scale and reachof the economic justice they are keen to promulgate 41 While cooperativemembership is restricted at present by the capacity of the productionsystem to generate continuing positions (not for the purpose of limitingoutput and sending prices up as the Webbs predicted) employment aswage workers in the MCC is rising The questions currently being debatedwithin the MCC with respect to internationalization growth membershipand its cooperativist identity are of utmost importance

The speci c dangers of cooperativism as outlined by the Webbs inthe early part of the twentieth century continue to resonate on the leftwhen discussions of economic experimentation and support for cooper-atives arise From the perspective of these historic criticisms of workerowned cooperatives the Mondragon experiment represents an impressive

40 This was one of the points that came out in the discussion I had with a member of theOtalora Institute in 1997

41 Supportive critics like George Cheney (1999) are worried that their success willundermine the values that have provided organizational strength in the past We see thisas a realistic and sympathetic concern


achievement It offers an important empirical counter to the degenerationthesis that has plagued cooperativist experimentation suggesting that thereis no logical imperative toward cooperative degeneration and failure Itdemonstrates various ways to avoid the ldquoperpetual temptationsrdquo of individ-ualism that the Webbs pinned on the lsquoself-governing workshoprsquo suggestingthat any such inevitability is likely to be a function of the absence of de-bate about what it means to act as communal or cooperative subjects TheMondragon case shows that the pitfalls of group individualism can be ad-dressed by an active discussion of ethics values and connection to othersIt seems that long-term success (even an excess of success) of a system ofworker-owned cooperatives is indeed possible if economic practices areconstantly scrutinized and modi ed in the light of evolving commitmentsto community survival over and above individual interest

In Mondragon decisions to do with product pay pro t innovationmanagement disputes and membership have been guided by a set ofvalues established early on in the study circles that Father Arizmendiconducted prior to the commencement of the rst cooperative and thathe continued to run throughout his life And the economic practice ofequilibrio and solidarity has fostered new conceptions of the cooperativistor associative self The overarching desire to preserve Basque culturehas provided the inspiration and motivation to develop a cooperative orcommunal subjectivity This raises the question of what we might takefrom this analysis of the Mondragon cooperatives clearly a unique andvery particular case of lsquosuccessrsquo How might the Mondragon experienceinform models of community economic sustainability

Conclusion

This paper has situated contemporary evaluations of Mondragonrsquos lsquosuccessrsquowithin a tradition of debate about the politics of economic transformationIt has explored the long-standing suspicion of worker cooperatives amongpolitical and social analysts on the left taking issue with both therevolutionary and gradualist socialist camps over the capitalocentriccontours of their arguments and the implicit pessimism particularly ofthe latter with respect to emergence of a communal subjectivity amongworker-owners I have argued that economic experimentation whether inthe 19th or 21st centuries has been sti ed by a poverty of theories ofeconomic difference that can be drawn upon when building alternativenon-capitalist community economies As an antidote to dishearteningassessments and theoretical underdevelopment I have offered an extendeddiscussion of the ethical decisions taken by the Mondragon cooperatorsin their efforts to consolidate what arguably stands as the most successfulcooperativist regional economy in the world


The Mondragon case has indeed provided an inspirational model ofa community that is not averse to ethical discussion and to the dif cultcollective decisions that must be made if a new kind of society incorporatingdifferent economic principles is to emerge Stepping back from the culturaland geopolitical speci cities of the Mondragon case I would like to focusin conclusion on what it might teach us about perhaps the most importantissues raised by gradualist and revolutionary socialists in opposition to thecooperative movement ndash namely the lack of an appropriate economicanalysis for building new cooperative economies and the absence of astrategy for overthrowing and replacing the capitalist system First whileclaims about the faulty economic analysis of the advocates of cooperativesare perhaps not unfounded I would tend to see this as a problem ofomission rather than commission From my perspective it seems thatthe underdevelopment of an economics of surplus labor distribution hashindered all forms of alternative economic experimentation whetherof a cooperativist labor unionist or state socialist form Left analysis(especially among economists) has almost exclusively focused on theownership and control of capital or on the dynamics of exploitation andsurplus appropriation (as measured by the size of compensation packages)while ignoring the dynamics of surplus distribution (most importantlythe distribution of pro ts) In many societies the dominant ethos aroundwage setting has been oriented toward pushing wage levels as high aswill be permitted (a direction that many trade unions have fostered) 42

Social democratic movements have of course focused upon questions ofdistributive justice but the distribution at stake is largely that of personalincome only some of which at the top end of the salary spectrum couldbe seen as distributed surplus labor Governments have attempted to taxcorporate pro ts but in the classic cases of social democracy signi cantstate assistance to industry redistributes funds towards corporations Focuson state taxation of citizens and the generalized distribution of socialconsumption goods completely obscures an economics of surplus laboror a politics of rights to that surplus Thus the potentiating force of surplus

42 TeamX is a new worker-owned and unionized garment factory in Los Angeles thatsignals a new direction for union-based economic politics Supported by the US Union ofNeedletrades Industrial and Textile Employees TeamX produces ldquoSweatX clothes with aconsciencerdquo (Lawrence 20021) and aims to tap into a ldquoniche moral marketrdquo for clothingnot made by sweated labor Inspired by the Mondragon Cooperativersquos ethic of wagessolidarity the ratio between the highest and lowest paid employee is 81 As this is anintervention to ldquoset the highest standard for sweat-free manufacturingrdquo the lowest wage ismuch higher than the industry standard (3)


is allowed to drain away untheorized and untapped and citizens are leftsquabbling over who is supporting whom in society 43

The Mondragon case illustrates the importance of a well thought outeconomics of surplus management and distribution that is linked to thesetting of wage levels and attendant surplus generation 44 The decisionsto peg wages at a socially acceptable but modest level and to keep wagedifferentials to a minimum represent exercises of restraint that constitutethe freedom to construct a very different kind of economy The decision toallow via the operation of the Caja Laboral the community of cooperatorsto oversee the distribution of individual cooperativesrsquo surpluses representsan exercise of communality that enables the sharing and proliferation ofthis different economy and society All these decisions have brought intobeing distinctive spaces of collectivity in which we can see a communal classprocess being enacted 45 They privilege relations of social connection andinterdependence between workers and workers and citizens bringing thesociality of the economy to the fore Supporting these particular decisionsare those to do with the social relations of cooperative work ndash the decisionto develop sophisticated methods of self-management and techniques ofnon-con ictual dispute resolution

Secondly and nally with respect to the lack of a strategy forreplacement of capitalism by cooperativism this is a criticism that only

43 It is easy to see how in this situation social altruism may give way to individual greedand what were once seen as legitimate rights become illegitimate forms of dependencyThe pie is indeed limited

44 In thinking about the lessons that might be learnt for development of communityeconomies two important politics built around ethical economic decisions come to mindndash that of the living wage movement an intervention to pressure city governments via thevoting system to pay minimum wages to their workers in areas of the labor market thathave traditionally remained unorganized by trade unions (Pollin and Luce 1998) and thesimplicity movement a self-conscious interest by communities in voluntarily minimizingconsumption levels particularly in regions where an ethos of environmental stewardshiphas taken root (Pierce 2000) One focuses on ethical principles affecting the lower levelthe other those affecting the upper level of wage payments Unlike in Mondragon thesemovements are separated from a politics that might address the implications of decisionsand choices regarding wage levels for surplus generation and distribution This disjuncturemight well have the effect of undermining the strategic developmental power of these formsof economic politics while not in any way diminishing their moral force

45 In other economic sites the decisions taken might be viewed as more conventionalor undifferentiated from those taken by capitalist enterprises For example with respectto the choice of products produced market development and the introduction of newtechnologies the cooperatives have opted for intense product diversi cation expandingnational and international markets and cutting edge computerized technology Theirdecisions to participate in commodity markets at the top end have ensured market successbut more importantly have supported the continued growth of cooperatives


seems valid if one is blinded by a vision of the economy as singularand capitalist If we see the economy as always and already diverse thenthe project of replacement is transformed into a project of strengtheningalready existing non-capitalist economic processes and building new non-capitalist enterprises Central to these projects is a strategy that Mondragonhas developed so innovatively ndash the construction of communal subjectsvia methods that operate on a range of material social cultural andspiritual levels The very process of marshalling surplus and directing ittowards expansion of a cooperative economy is intricately connected withthe becoming of ethical communal subjects

The reading of Mondragon presented in this paper suggests two linesfor research and theorizing that will further enhance development ofalternative communities and economies The rst is a more technicallysophisticated analysis of the economics of surplus distribution the secondis more understanding of the process by which communal subjectivities arecreated and fostered Clearly examples of innovative economic experimentsabound and while making them more visible is an important task thatcannot be underestimated that is not all there is to do As theorists andpractitioners we can take a constructive role in community conversationsabout the ethical economic decisions and personal political becomingsinvolved in building our own roads as we travel

Acknowledgements

This paper has had a long gestation and many people have contributedto its nal appearance It is dedicated to the memory of our teacherand mentor Don Shakow who having migrated from a worker-ownedcooperative into academia taught JK Gibson-Graham about Marxismand rst inspired our fascination with Mondragon more than 25 yearsago Thanks must go to a number of audiences where versions of thispaper were presented two different meetings of the Institute of AustralianGeographersrsquo Economic Geography Study Group in Manly 1997 and theUniversity of Sydney 2001 the IAG Conference in Canberra 2002 andthe Department of Human Geography Seminar RSPAS ANU Canberra2002 Gratitude and thanks also to Race Mathews and Fred Freundlich forhelping Katherine Gibson organize a visit to Mondragon in 1997 and theAustralian Research Council for nancial assistance for this trip SandraDavenport provided invaluable research assistance in the nal stages ofwriting up


References

BRADLEY K AND A GELB

1983 Cooperation at Work The Mondragon Experience London Heinemann EducationalBooks

CHAKRABARTY D2001 Provincializing Europe Postcolonial Thought and Historical Difference Princeton and

Oxford Princeton University PressCHENEY G1999 Values at Work Employee Participation Meets Market Pressure at Mondragon Ithaca

Cornell University PressCLAMP CA2000 ldquoThe internationalization of Mondragonrdquo Annals of Public and Cooperative

Economics 71(4) 557-577COLE GDH1953 Socialist Thought The Forerunners 1789-1850 London Macmillan and CoCOMMUNITY ECONOMIES COLLE CTIVE

2001 ldquoImagining and enacting noncapitalist futuresrdquo Socialist Review 28(3+4) 93-153

DEMARTINO G2003 ldquoRealizing class justicerdquo Rethinking Marxism 15(1) 1-31ELLERMAN D1984 ldquoThe Mondragon Cooperative Movementrdquo Harvard Business School Case No

1-384-270 Boston Harvard Business SchoolENGELS F1972 ldquoSocialism Utopian and Scienti crdquo reprinted in The Marx-Engels Reader edited

by RC Tucker New York Norton amp Company Inc pp 605-639FOUCAULT M1988 ldquoThe ethic of care for the self as a practice of freedomrdquo in The Final Foucault

edited by J Bernauer and D Rasmussen 1-20 Boston MIT PressGERAS N1985 ldquoThe Controversy about Marx and justicerdquo New Left Review 150

(MarchApril) 47-85GIBSON K2002 ldquoWomen identity and activism in Asian and Paci c community economiesrdquo

Development Journal of the Society for International Development 45(1) 74-79GIBSON-GRAHAM JK2003 ldquoEconomyrdquo in New Keywords edited by T Bennett L Grossberg and M

Morris Oxford Blackwell Publishers (forthcoming)1996 The End of Capitalism (As We Knew It) A Feminist Critique of Political Economy

Oxford BlackwellGIBSON-GRAHAM JK S RESNICK AND R WOLFF

2000 Class and Its Others Minneapolis University of Minnesota PressGIDDENS A1998 The Third Way The Renewal of Social Democracy Cambridge UK Polity PressGREENWOOD DJ AND JLG SANTOS

1992 Industrial Democracy as Process Participatory Action Research in the Fagor CooperativeGroup of Mondragon Stockholm Arbetslivscentrum


GUTIERREZ-JOHNSON A AND GF WHYTE

1977 ldquoThe Mondragon system of worker production cooperativesrdquo Industrial andLabor Relations Review 31 1

HACKER S1989 Pleasure Power and Technology Some Tales of Gender Engineering and the Cooperative

Workplace Boston Unwin HymanHAR TER LM AND KJ KRONE

2001 ldquoThe boundary-spanning role of a cooperative support organization Man-aging the paradox of stability and change in non-traditional organizationsrdquoJournal of Applied Communication Research 29(3) 248-277

HINDESS B1997 Discourses of Power From Hobbes to Foucault Oxford BlackwellKASMIR S1996 The Myth of Mondragon Cooperatives Politics and Working-Class Life in a Basque

Town Albany NY State University of New York Press1999 ldquoThe Mondragon model as post-fordist discourseconsiderations on the

production of post-fordismrdquo Critique of Anthropology 19(4) 379-400LACLAU E1995 ldquoTime is out of jointrdquo Diacritics 25(2) 86-961996 Emancipation(s) London VersoLAWRENCE J2002 ldquoTeamX A worker co-op joins the ght against the sweatshop apparel

industryrdquo Grassroots Economic Organizing Newsletter httpwwwgeocoopteamxhtmLEMKE T2001 ldquoThe birth of bio-politics Michel Foucaultrsquos lecture at the College de France

on neo-liberal governmentalityrdquo Economy and Society 30(2) 190-207MACLEOD G1997 From Mondragon to America Experiments in Community Economic Development Sydney

Nova Scotia University College of Cape Breton PressMARX K1972 ldquoCritique of the Gotha Programrdquo reprinted in The Marx-Engels Reader edited

by RC Tucker New York Norton amp Company Inc 383-3981978 ldquoAfter the revolution Marx debates Bakuninrdquo reprinted in The Marx-Engels

Reader 2nd edition edited by RC Tucker New York Norton amp CompanyInc 542-548

1981 Capital Volume 3 Introduced by E Mandel translated by D FernbachLondon Penguin Books in association with New Left Review

MATHEWS R1997 ldquoThe Mondragon Cooperative Corporation A Case Studyrdquo paper presented

at the International Communications for Management Conference on Exec-utive Remuneration Sydney April

1999 Jobs of Our Own Building a Stake-holder Society Sydney Pluto Press Australia andWest Kent Comerford and Miller

MELLO R M J HANNAH AND J STIRLING

1988 Worker Cooperatives in Theory and Practice Milton Keynes UK and PhiladelphiaPA Open University Press

MILLER M2002 ldquoMondragon lessons for our timesrdquo Social Policy 32(2) 17-20


MORRISON R1991 We Build the Road As We Travel Philadelphia PA Santa Cruz CA Gabriola

Is BC New Society PublishersMUTERSBAUGH T2002 ldquoBuilding Co-ops Constructing Cooperation Spatial Strategies and Devel-

opment Politics in a Mexican Villagerdquo Annals of the Association of AmericanGeographers 94(4) 756-776

OAKESHOTT R1973 ldquoSpainrsquos oasis of democracyrdquo Observer Supplement 21 January reprinted in

Vanek 1975 290-2961978 The Case for Workersrsquo Coops London Routledge and Kegan PaulORMAECHEA JM1993 The Mondragon Cooperative Experience Mondragon Mondragon Coporacion

CooperativaPIERCE L2000 Choosing Simplicity Real People Finding Peace and Fulllment in a Complex World

Carmel CA Gallagher PressPOLLIN R AND S LUCE

1998 The Living Wage Building a Fair Economy New York The New PressPOTTER B [WEBB]1891 The Cooperative Movement in Great Britain London Swan Sonnenschein and CoRAMON FERNANDEZ J1996 Mondragon Forty Years of Cooperative History Mondragon Mondragon Coopera-

tive CorporationRESNICK S AND R WOLFF

1987 Knowledge and Class A Marxian Critique of Political Economy Chicago Universityof Chicago Press

2002 Class Theory and History Capitalism and Communism in the USSR New York andLondon Routledge

THOMAS H AND C LOGAN

1982 Mondragon An Economic Analysis London George Allen and UnwinTUCKER RC (ED )1978 The Marx-Engels Reader 2nd edition New York Norton amp Company IncVANEK J (ED )1975 Self-Management Economic Liberation of Man Harmondsworth Penguin BooksWEBB S AND B WEBB

1907 The History of the Trade Unionism London New York and Bombay LongmansGreen and Co

1921 The Consumerrsquos Co-operative Movement London Longmans Green and CoWEINER H AND R OAKESHOTT

1987 Worker-Owners Mondragon Revisited A New Report on the Group of Cooperatives in theBasque Provinces of Spain London Algo-German Foundation for the Study ofIndustrial Society

WILLIAMS R1983 Keywords London Fontana PaperbacksWHYTE WF AND KK WHYTE

1988 Making Mondragon The Growth and Dynamics of the Mondragon Cooperative ComplexIthaca NY ILR Cornell University


1991 Making Mondragon The Growth and Dynamics of the Mondragon Cooperative Complex(Revised Edition) Ithaca NY ILR Cornell University


thinking various ideals of another state of economic being have motivatedpolitical movements and policy interventions throughout the twentiethcentury It is in the economic imaginary that economies devoid ofexploitation economies of self-suf ciency and sustainability economiesof smallholders and owner-operators economies of cyborgs and so onhave been constructed in opposition to the apparent economic realitiesof capitalist industrialization Within this imagined terrain certain alreadyexisting alternative economies have gured as guides to the possibilitiesand constraints of lsquoreal worldrsquo experimentation Once it was the vision ofsocialism or communism and the experiments of the soviets in the EasternBloc and the communes in East Asia that con gured the foreground ofthe leftrsquos economic imaginary Today at least for some it is the originallsquothird wayrsquo ndash communitarianism or a revitalized social democracy ndash thatoccupies this otherwise vacated space

For many the story of the Mondragon cooperatives in the Basqueregion of Spain has occupied a special niche in this space of speculationenvisioning and possibility From a social base in the late 1940s that wasdivided by ideological differences with physical infrastructure destroyedor depleted by civil war the Mondragon community under the guidingphilosophy of Catholic priest Father Arizmendiarrieta built perhaps themost successful complex of employee-owned industrial retail serviceand support cooperatives in the world The Mondragon CooperativeCorporation (MCC) is famed for its more than 30000 worker owners its exibility and longevity cutting-edge technology and innovations in workerparticipation The publication of a chapter by Robert Oakeshott in 1975and the documentary lm made by the BBC about Mondragon in thelate 1970s enabled the message of this cooperativist movement to spreadthroughout the English-speaking world at a time when the increasinginternationalization of capitalist production appeared to be heralding thelatest lsquostagersquo of capitalist economic dominance 1

One of the dif culties of discussing any alternative economic projectas with any new or emancipated identity is how to name and describe

1 Early studies in English provided histories of the establishment of the cooperatives anddescriptions of the changing organizational structure and activities of the group (Oakeshott1978 Gutieacuterrez-Johnson and Whyte 1977) More recent research has explicitly comparedthe performance and practices of the Mondragon cooperatives with similar sized enterprisesin the capitalist sector (Thomas and Logan 1982 Bradley and Gelb 1983 Hacker 1989Kasmir 1996) Others have focused upon the way in which the cooperatives negotiated thedif cult period of recession and rationalization during the late 1970s and 1980s when theSpanish economy was becoming more open to international market forces via admission tothe European Economic Community and the effects of globalization in the 1990s (Weinerand Oakeshott 1987 Whyte and Whyte 1988 Morrison 1991 Cheney 1999 Clamp 2000)



















































































Table 1
































Product








Pay












Pro t















Innovations












Management













Disputes











Membership





















Conclusion
















Acknowledgements



References














































































































































Table 1
































Product








Pay












Pro t















Innovations












Management













Disputes











Membership





















Conclusion
















Acknowledgements



References








































































































































Table 1
































Product








Pay












Pro t















Innovations












Management













Disputes











Membership





















Conclusion
















Acknowledgements



References



































































































































Table 1
































Product








Pay












Pro t















Innovations












Management













Disputes











Membership





















Conclusion
















Acknowledgements



References


























































































































Table 1
































Product








Pay












Pro t















Innovations












Management













Disputes











Membership





















Conclusion
















Acknowledgements



References



















































































































Table 1
































Product








Pay












Pro t















Innovations












Management













Disputes











Membership





















Conclusion
















Acknowledgements



References












































































































Table 1
































Product








Pay












Pro t















Innovations












Management













Disputes











Membership





















Conclusion
















Acknowledgements



References






































































































Table 1
































Product








Pay












Pro t















Innovations












Management













Disputes











Membership





















Conclusion
















Acknowledgements



References




























































































Table 1
































Product








Pay












Pro t















Innovations












Management













Disputes











Membership





















Conclusion
















Acknowledgements



References




















































































Table 1
































Product








Pay












Pro t















Innovations












Management













Disputes











Membership





















Conclusion
















Acknowledgements



References














































































Table 1
































Product








Pay












Pro t















Innovations












Management













Disputes











Membership





















Conclusion
















Acknowledgements



References










































































Table 1
































Product








Pay












Pro t















Innovations












Management













Disputes











Membership





















Conclusion
















Acknowledgements



References





































































Table 1
































Product








Pay












Pro t















Innovations












Management













Disputes











Membership





















Conclusion
















Acknowledgements



References





























































Table 1
































Product








Pay












Pro t















Innovations












Management













Disputes











Membership





















Conclusion
















Acknowledgements



References
















































































Product








Pay












Pro t















Innovations












Management













Disputes











Membership





















Conclusion
















Acknowledgements



References










































































Product








Pay












Pro t















Innovations












Management













Disputes











Membership





















Conclusion
















Acknowledgements



References




































































Product








Pay












Pro t















Innovations












Management













Disputes











Membership





















Conclusion
















Acknowledgements



References































































Product








Pay












Pro t















Innovations












Management













Disputes











Membership





















Conclusion
















Acknowledgements



References
































































Pay












Pro t















Innovations












Management













Disputes











Membership





















Conclusion
















Acknowledgements



References




































































Pro t















Innovations












Management













Disputes











Membership





















Conclusion
















Acknowledgements



References





























































Pro t















Innovations












Management













Disputes











Membership





















Conclusion
















Acknowledgements



References






































































Innovations












Management













Disputes











Membership





















Conclusion
















Acknowledgements



References































































Innovations












Management













Disputes











Membership





















Conclusion
















Acknowledgements



References


































































Management













Disputes











Membership





















Conclusion
















Acknowledgements



References







































































Disputes











Membership





















Conclusion
















Acknowledgements



References

































































Disputes











Membership





















Conclusion
















Acknowledgements



References




































































Membership





















Conclusion
















Acknowledgements



References































































Membership





















Conclusion
















Acknowledgements



References












































































Conclusion
















Acknowledgements



References





































































Conclusion
















Acknowledgements



References































































Conclusion
















Acknowledgements



References










































































Acknowledgements



References






































































Acknowledgements



References































































Acknowledgements



References





























































References





























































































































Enabling Ethical Economies: Cooperativism and Class

Documents