A Formula for Reawakening Labor: Capitalism, Communities and Cooperatives

A Formula for Reawakening Labor: Capitalism, Communities and Cooperatives
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Based upon the rhetoric at the quadrennial labor convention held in Los Angeles this week, it appears that the labor movement will be trying new things and working diligently to break out of the daze we described in our most recent blog.

Richard Trumka, president of the AFL-CIO, in his keynote address at the convention declared, "We must begin, here and now, today, the great work of reawakening a movement of working people -- all working people, not just the people in this hall, not just the people we represent today - but everyone who works in this country...". Before the convention, Steven Greenhouse of The New York Times quoted Trumka as saying, "The crisis has deepened. It's at a point where we really must do something differently. We really have to experiment."

The coverage of the convention suggests that the reawakening and experiments will include: embracing "worker centers" -- nonprofit groups that are not unions who organize low-wage workers, and building coalitions with other interest groups to achieve collective bargaining through ballot measures such as increasing the minimum wage and securing health care coverage.

What we haven't seen reported in any great detail, however, is one of the most innovative and highest potential new initiatives to revitalize the labor and workers' movement in the United States that comes to us from -- of all places -- Spain. That's the entry and expansion of Mondragon Corporation (Mondragon), the world's largest industrial, worker-owned and run cooperative, into the American market and workplace.

The Mondragon story is not well known outside of Spain and labor circles. It is one that deserves to be told, however, given the current conditions confronting the American worker and the footprint Mondragon is beginning to build stateside.

In March of this year, the Financial Times (FT) gave Mondragon its Drivers of Change "Boldness in Business" award. FT stated that Mondragon was given this prize "for what it represents in terms of a real proposal for a new type of business model, 'Humanity at Work,' based on cooperation, working together, solidarity, and involving people in the work environment."

The winners of this award in the past three years have been: Fiat in 2009, Apple in 2010, and Amazon in 2011. That's not too shabby company for a cooperative business that was founded with the assistance of a Catholic priest, Jose Maria Arizmendiarrieta, in the Basque region of Spain in 1956.

Arizmendiarrieta and five of his followers set up Ulgor (the predecessor to Mondragon) as a worker cooperative after they were unsuccessful in attempting to get "humanist reforms" in the large company that they were working for in the city of Mondragon. From that humble beginning, Mondragon has grown so that today it has more than 80,000 people employed in an integrated group of over 280 cooperatively owned businesses, subsidiaries and affiliated organizations, sales of more than 14 billion euros, and 100 production centers around the world.

Mondragon is involved in four major areas: finance, industry, retail and knowledge. By far the biggest sector is the industry area, which is composed of 12 divisions such as industrial automation, construction, and machine tools. So, from the outside looking in, Mondragon resembles a large conglomerate that might have been assembled by some acquisitive capitalist or entrepreneur. But, that's where the resemblance ends. As Paul Harvey would have said, "Here's the rest of the story."

That is Mondragon is different by intent and design. Here's a description of the Corporation from "The Mondragon Cooperative Experience: Humanity at Work," one of the 10 winning story entries in the Long Term Capitalism Challenge sponsored by the Harvard Business Review/McKinsey M Prize for Management Innovation: "Broad employee ownership of enterprise is Mondragon's key to long term capitalism... We put it into practice through an innovative, multilevel network of cooperative enterprises, based on a bottom up corporate architecture, in effect an inverted conglomerate."

Space does not permit describing the "inverted pyramid" and how Mondragon is organized and operates, although it is fascinating. What is more fascinating than the structure - the head and the body - however, are Mondragon's heart and soul - the Corporation's mission and its basic principles. Those are its true differentiators and drivers.

Go into most businesses in the United States, and you'll see a mission and core values statement on the wall. Over our careers, we have seen hundreds. But, we have never seen one quite like Mondragon's. Essential elements of that mission follow. Try them on for size:

Mondragon is firmly committed to the environment, competitive improvement and customer satisfaction in order to generate wealth in society through business development and the creation of, preferably co-operative, employment which:

  • Is based on a firm commitment to solidarity and uses democratic methods for organization and management
  • Fosters participation and the involvement of people in the management, profits and ownership of their companies, developing a shared project which unites social, business and personal progress
  • Fosters training and innovation through the development of human and technological skills

Then, there are Mondragon's Basic Cooperative Principles: education, sovereignty of labor, participation in management, wage solidarity, instrumental and subordinated nature of capital, democratic organization, open admission, universal nature, social transformation, and inter-cooperation.

According to the award-winning Mondragon entry for the Harvard Business Review/McKinsey contest, "These principles have a direct impact in how Mondragon is managed." For example: the "education" principle plays out through a heavy investment in improving human capital and diffusing cooperative values across the Mondragon network. The "sovereignty of labor" principle means that people who work in an organization should share in ownership rights and responsibiities. The "worker solidarity" principle is implemented through a low differential between the lowest paid and highest paid persons in a business -- about 1:6 at the individual cooperative level.

That may sound a bit too socialistic and not cutthroat capitalist enough for the United States. We prefer to see it as a form of enlightened capitalism and an alternative business model which is desperately needed here in America at a time when our job creation machine is broken. (We'll have more to say on the critical importance of the worker cooperative alternative in our next and final blog of this three part series.)

The good news is that Mondragon has already begun to make its presence felt here in the United States. In March 2012, the United Steelworkers and Mondragon International agreed to develop a hybrid union co-op model that has been adapted by multiple U.S unions and is currently underway in ten cities with projects ranging from a commercial laundry to an organic sustainable farm. The better news is that on September 4 of this year the National Cooperative Bank in Washington, D.C. announced an agreement with Laboral Kutxa, the cooperative bank of Mondragon, "to partner and build cooperative stakeholder businesses in local living economies throughout America."

Worker cooperatives are an idea whose time has come. Given the toughness of these times, we would add -- and none too soon.

So, in closing, as part of the formula for re-awakening labor, to turn a phrase, we say, "Workers of America unite. Become capitalists. Become worker-owners. Work cooperatively to create sustainable jobs that will empower your communities. You have everything to gain through gain-sharing."

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