How Mondragon became the largest cooperative in the world
Jorge Vega Hernández, a mechanical engineer working in northwestern Spain, returned from a business trip and began feeling ill. It was March 2020 – the start of the pandemic – so he called a government helpline. He was told he might have coronavirus and should stay home. But, without leaving home for a test, Hernández couldn’t get proof of his illness – and, without that proof, he had no excuse not to come to work. A week after he fell ill, he said, his company fired him. (The company cited “insufficient” job performance as the reason.)
Alone and newly unemployed during the lockdown, Hernández, then thirty-two, reflected on his life. He was an engineer with expertise in the automotive industry, so finding a new position wouldn’t be difficult. But he didn’t want just any new job. He wanted to work for a company that treated workers decently. His girlfriend, who lived in the Basque region of northern Spain, suggested he consider a position with a worker-owned cooperative group called Mondragon.
The Mondragon Corporation, as it is called, is a voluntary association of ninety-five autonomous cooperatives that differs radically from a conventional enterprise. The highest paid leader of each cooperative earns at most six times the salary of its lowest paid employee. There are no outside shareholders; instead, after a temporary contract, proven new workers can become member-owners of their cooperatives. A managing director acts as a sort of CEO within each co-op, but the members themselves vote on many vital decisions about strategy, salaries and policy, and the votes of all members, whether executives superiors or blue-collar workers, count. also.
When individual cooperatives succeed, their members share in the profits. When times are tough, co-ops support each other collectively, share funds and distribute workers among themselves to preserve jobs. During the pandemic, workers at many Mondragon co-ops voted to temporarily cut their own wages or hours until markets recover; people who felt sick were trusted and encouraged to stay home. The treatment Hernández said he received when he was fired would be nearly impossible within Mondragon, since worker-owners must vote to be fired, and that can only happen with very serious misconduct.
Worker-owned cooperatives are often seen as both idealistic and inefficient; the model is considered suitable primarily for high-end grocery stores or boutique bakeries in progressive cities. At a 2019 conference, economist Larry Summers called co-ops inherently sleepy and myopic. “When you put workers in charge of companies and give them substantial control over the companies,” he said, “the one thing you don’t get is expansion. You get more for people who are already there. And yet, Mondragon is not a sleepy grocery store. Its set of cooperatives employs about eighty thousand people, and seventy-six percent of those working in manufacturing cooperatives are owners. One manufactures bicycles on an industrial scale; others manufacture elevators or produce huge industrial machines used in the production of jet engines, rockets and wind turbines. Mondragon’s businesses include schools, a major grocery chain, a restaurant business, fourteen technology R&D centers, and a McKinsey-like consulting firm. In 2021, the network reported more than eleven billion euros in turnover. The collective applies five hundred and five types of patents and employs approximately two thousand four hundred full-time researchers. It also has subsidiaries in countries such as China, Germany and Mexico, and competes effectively in international markets, winning contracts from companies such as General Electric and Blue Origin. Chances are good that the key components of something within a hundred feet of you – an espresso machine, a gas grill, a car – were made in Mondragon.
“We are a kind of mirror for conventional companies, and they don’t see a very good picture in it,” Ander Etxeberria, Mondragon’s director of cooperative dissemination, told me as we rode between cooperatives in the Basque Country. . A slender, affable man who speaks several languages, Etxeberria is essentially a professional explainer of Mondragon to its approximately two thousand annual visitors. It was a warm spring afternoon, and he rolled down the windows and waved at the passing countryside as we drove. A herd of sheep huddled on a hill above the squat, rectangular headquarters of a precision tool co-op. We passed a bank, a language school, a grocery store, a factory, each owned by its workers.
Mondragon’s network of cooperatives, many of which are clustered along the Deba River in Spain, have managed to survive nearly seventy years of creative capitalism’s destruction. Its persistence suggests that there are fairer and more sustainable ways to do business. But whether any version of his model could be replicated outside of a beautiful region of northern Spain is an open question, being debated in Mondragon and beyond. The collective has a unique history, and its density fuels a rare feedback loop in which cooperative values shape institutions, which then reinforce the same values, spiraling outward to define an entire way of life. Mondragon is an inspiring and successful experience. Will this be repeated one day?
The town of Mondragón, in a green river valley surrounded by the Cantabrian Mountains, is home to some twenty-two thousand people. A medieval city occupies the town centre, with stone arcades towering over cobbled streets and a medieval Gothic church in a central square. The remains of José María Arizmendiarrieta, the Catholic priest who founded the Mondragon cooperatives, are interred inside.
Born in 1915, Arizmendiarrieta lost an eye in a childhood accident; mobilized during the Spanish Civil War but unable to take part in the fighting, he still served as a Basque-language journalist for an anti-Nationalist publication run by Franco. He was arrested by Franco’s forces and spent a month in prison before being released. After the war he became a priest and was assigned by the Church to the town of Mondragón in 1941, when he was twenty-five years old.
He found that the region’s economy was deeply impoverished, with virtually no middle class, and that its society had been fractured by civil war. He mobilized citizens to launch civic and cultural initiatives, including a soccer field, a medical clinic and a housing complex for workers. Since the turn of the 20th century, a locksmith’s factory in Mondragón had employed local boys, who sometimes started at the age of fourteen, worked fifty hours a week and had few prospects without further training. Upon his arrival, Arizmendiarrieta began using the local Catholic Action center to educate young workers through study circles, which met in a converted 17th-century palace. In 1943, Arizmendiarrieta created a technical school; the students worked at the factory in the morning and attended classes in the afternoon. Finally, he selected a group of promising workers who, in the evening, began to pursue distance studies in engineering. In 1956, five members who had completed their studies left their factory jobs to start a co-operative business that produced kerosene heaters. More and more industrial cooperatives began to appear throughout the valley, attracting workers from the technical school and collaborating with each other to share their expertise. Thus was born the Mondragon experience.
The growth of cooperatives has followed a pattern. An obstacle would present itself to the local workers and a new cooperative would be created to overcome it. When, in 1958, the Spanish Ministry of Labor excluded new worker-owners from the national social security system, arguing that they were not eligible for workers’ benefits because they were also co-owners, Arizmendiarrieta created an internal pension and health insurance. healthcare system itself organized as a cooperative; it still exists today, providing sick leave, parental leave, a generous pension, unemployment benefits, and medical insurance to Mondragon worker-owners. (The Spanish government has long since revised its position and offers coverage to cooperative members, in addition to that offered by Mondragon.) To meet the need for affordable financing, Arizmendiarrieta organized a cooperative bank.
On my first afternoon in Mondragón, Etxeberria and I entered the dark interior of the church next to the central plaza. I could hear a choir rehearsing a hymn. Etxeberria pointed to Arizmendiarrieta’s grave, on one side of the central aisle. A stack of pamphlets lay beside it, and I took one; this was part of a campaign to canonize the priest, whom he described as “the apostle of cooperation”.
I stood for a moment soaking up the atmosphere. (The Mondragon Corporation has no official position on the canonization campaign, but Arizmendiarrieta is revered even among the laity.) I saw that the pamphlet included a suggested prayer to Arizmendiarrieta and information on who to contact if she was granted. I went back to the sun.