Local living economies are fascinating and now Alan Greig writes to us about a Spanish example that has operated in and around the town of Mondragon in northern Spain since the 1960s – one of the largest enterprise conglomerates in the European Union, owned entirely by its 75,000 employees in the 200+ enterprises involved, and all controlled on a one member one vote basis.
The local bank and the supermarkets are owned by the community, the TAFE system by the teachers and students, and much of the housing is owned by housing cooperatives. Mondragon is also now one of the wealthiest regions in Spain, with the wealth almost entirely evenly distributed.
One of the MCC (Mondragon Cooperative Consortium) ‘rules’ is that no employee can get paid more than six times the lowest paid employee – and it works ! Check this against the outrageous sums that CEOs get paid in even the non performing public companies in Australia – dozens of times more than their lowest paid employees.
Alan says there was always a feeling that it wouldn’t last. However, not only has it lasted, it has got bigger and better and – this is the key point for ‘local economy’ change management – it has actually managed to ‘transition the generations’, with the new generation of owners now coming through being just as committed as the founders.
Many will say that Australia is ‘too culturally different’ for the business model to succeed here but Alan says this is nonsense as the business model is replicable here under existing laws, and several companies have adopted ‘common ownership’ constitutions along Mondragon lines in the past.
The regionally based support system that Mondragon has adopted for its local economy, including locally owned and directed finance systems and system wide business consultancy, R&D, skills training and employment rules seems to be the key.
Australia’s foremost researcher on the Mondragon phenomenon is former Victorian Parliamentarian (ALP), Race Mathews. He says:
“The Reasons For Success Are:
- Every permanent worker is an equal co-owner of the co-operative where he is employed, with an equal say on a one-member-one-vote basis in the governance of the co-operative and an equal proportionate share in its profits or, on occasion, losses.
- The key distributist objective of a well-judged distribution of property has been achieved in Mondragon. Members of the co-operatives have property of four kinds:
(i) ownership of their jobs
(ii) direct personal ownership of the balances held for them in individual capital accounts, which earn additional income for them through interest to which they have regular access
(iii) a shared ownership of the assets of their co–operatives, such as buildings, equipment and reserves, for whose governance and management they are directly responsible
(iv) a further shared ownership — albeit less direct — of the secondary support co–operatives in which the primary co–operatives are major stakeholders.”
Nowhere else in the world has ownership of property been established on so well–distributed, diverse and entrenched a basis. In the words of a recent CEO of the MCC, Javier Mongelos,
“The workers who own these co-operatives know their future depends on making profits”.”
Mondragon started in 1956 with its first small worker cooperative making cookers and heaters providing work for the local unemployed. The big growth period was in the 60s, after the setting up of the Mondragon Community Bank (The Caja Laboral) in 1959.
Wikipedia says in the 1980s the various companies responded to pressures of globalisation by joining together as the MCC which is now the Basque Country’s largest corporation, the seventh largest in Spain. It is considered the world’s largest worker co-operative. In 2006 the MCC contributed 3.8% towards the total GDP of the Basque Country.
MCC now has important manufacturing and engineering interests, as well as retail, financial and educational arms. Its supermarket arm, Eroski, is the largest Spanish-owned retail food chain and the third largest retail group in Spain.
The Basque government and the tax authorities of the Basque provinces have special measures to help co-operatives. The Deba county around Mondragón has kept a very high employment rate even during Basque industrial crisis.
The sovereign body is the 650-member Co-operative Congress, its delegates elected from across the individual co-operatives. The annual general assembly elects a governing council which has day-to-day management responsibility and appoints senior staff. For each individual business, there is also a workplace council, the elected President of which assists the manager with the running of the business on behalf of the workers.