Photo: Worker-Owner at MCC Coop
The Mondragon Alliance:
The Goal Is to Create Jobs
By Putting People First
By Rob Witherell
United Steel Workers
Keynote Speech at Western Mass.
Jobs with Justice Conference
March 6, 2010
— An official unemployment rate of 10%
— A real rate of unemployment and underemployment of 17%
— Millions of good paying jobs lost, including 2 million manufacturing jobs in the past year alone
— Stagnating wages
— Frozen pensions and inadequate 401(k) plans
— Sky rocketing health insurance costs
— Millions of people without health insurance
— Millions of people falling into poverty
— Millions of people receiving food stamps to feed their families
— Millions of people homeless and millions more struggling to stay in the homes they have
In the middle of the worst recession we’ve seen in the past 70 years, conservative politicians in Washington, DC are defiantly putting the purity of their ideals before the reality of the painful consequences. Congress is not a high school debate club. People need help, not talking points.
Wall Street executives, who were part of creating this crisis, were the first ones with their hands out, asking for help from Main Street taxpayers. We gave them billions and billions of dollars. As panic began to recede, they gave some of those billions back rather than have to live with the few strings attached. These fat cat executives are trying to avoid accountability and transparency, regardless of the cost. The millions of dollars in bonuses being paid again to executives, while insulting to the rest of us, are less harmful to our economy and our communities than the fact that little has changed in how Wall Street works. Years of increasing deregulation have left us with a Wild West of finance where anything goes.
Corporate executives have not done much better. In response to this crisis, corporations cut pay, laid off workers, and closed operations – too often as the first option rather than the last. Year after year, shedding jobs and shuttering plants has become an all too familiar pattern in what remains of our manufacturing sector, as production, investment, and jobs are shifted to other countries with the fewest amount of labor and environmental protections possible.
The result of years and years of neglect have left us an economy that is rotting from the inside out. Our manufacturing sector has been hollowed out and our standard of living has at best stagnated, or worse, declined. Under the added weight of the financial crisis, our economy nearly collapsed.
Due to decades of decay, we no longer have an economy capable of a quick recovery. The “good” news announced yesterday was that we “only” lost 36,000 jobs last month. If last year’s stimulus bill has been effective as economic triage, and most likely it has been, then there is still a long, uncertain road to rehabilitation and recovery.
So what are we to do?
Maybe we need to rebuild from the ground up. But how? What should our blue print look like? What historical examples might we look to?
Let’s imagine the situation in the Basque region in 1943. Still devastated from the Spanish Civil War, most notoriously the bombing of Guernica in 1937, the Basque region continued to be punished by Franco’s regime, which forbid use of the Basque language and repressed Basque culture. Thousands were murdered for supporting the Republican forces, including the priest that Father Arizmendi replaced two years earlier, and nearly Father Arizmendi himself.
High unemployment. No social safety net. No pensions. Little access to capital and investments.
It is in this context that Father José María Arizmendiarrieta started up a small polytechnic school that was the seed for the phenomenon we know today as the Mondragon cooperatives. In 1956, five graduates of that school, with the assistance of Father Arizmendi, started the first Mondragon cooperative, Ulgor. A little over 50 years later, the Mondragon Cooperative Corporation employs over 100,000 people, with nearly all of them worker owners, and over $20 billion dollars in annual revenue.
Maybe there’s hope for us after all.
So, what can we learn from them?
To start with, let’s always remember that these cooperatives were started and supported not out of some utopian ideal, but rather a very pragmatic means of helping people put a roof over their heads, clothes on their backs and food on their tables. The goal was, and remains, to create jobs that can support their families and their communities.
The success of the Mondragon cooperatives comes from putting people first. Prioritizing people before profits – imagine that. We have become so conditioned to think that companies must prioritize profits above all else, usually for the sake of some group of unnamed, unknown shareholders, that’s is hard for us to imagine any alternative.
Now keep in mind that this is no utopia, this is a highly competitive, for-profit business – just organized differently than most . As the saying goes at Mondragon: “This is not heaven and we are not angels.”
At its best though, Mondragon could be a better way to run a business. A business that is sustainable, supports jobs, supports families, and supports communities.
So how has Mondragon been able to put people first and still be competitive, growing, and profitable?
The first thing we might want to consider are the ten Basic Principles of the Mondragon cooperatives:
— Sovereignty of labor
— Instrumental and subordinate nature of capital
— Democratic organization
— Open admission
— Participation in management
— Wage solidarity
— Social transformation
— Universal nature
How many corporate mission statements are out there where you can find ideals like “sovereignty of labor” and the “instrumental and subordinate nature of capital”? Not many, I’m sure. Yet these principles are why job creation and sustained employment are top priorities. Even during economic downturns, when unemployment is high, as it is now, the amount of layoffs within MCC are few and limited in duration. As noted by Judy Schwartz in a recent article, “During the 1980s, when Spain’s unemployment hit 27 percent, Mondragon’s hovered below 1 percent.”
As a worker owned cooperative, ultimately all profits are kept by the workers. Although some portion of profits are pooled with other coops and used for finance, education and R&D, a significant piece of the pie is distributed directly to workers in the form of profit sharing or put into the workers’ individual capital accounts. Shared risks become shared rewards.
Another key differentiation for Mondragon is the principal of democratic organization with “one person, one vote”. Every worker-owner owns an equal share and has an equal vote through “one class” ownership. All worker-owners can participate in the General Assembly to elect its Board of Directors, which is comprised of fellow worker-owners in the cooperative. The Board appoints management within the cooperative for a limited term. Workers also directly elect a representative, internal Social Council to advise the Board and management on a range of employment issues, including wages and benefits.
Mondragon cooperatives also subscribe to a principle of wage solidarity. In most cases, the highest paid worker in the cooperative makes no more than 5 times the lowest paid worker in the cooperative. In contrast, CEO’s at many multinational corporations take over 400 times the pay of the lowest paid worker. Wage solidarity means there is less disparity among workers and the communities in which they live, reinforcing the equality, and quality, of ownership.
Finally, the principle of social transformation means that a key part of the coops’ mission is to support and invest in their communities by creating jobs, funding development projects, supporting education, and providing opportunity. Their communities, in turn, support the coops.
There is no doubt in my mind that there is plenty we can learn from Mondragon. If we are going to dig ourselves out of this recession, we need every good example we can find. A business model that makes employment a priority and solidarity a principle would certainly reflect some of the key values of our Union.
I had the opportunity to visit Mondragon in September 2008. I was in nearby Bilbao for a different meeting when a good friend, who also happens to be Mondragon’s North American Delegate, suggested I go meet with the President of Mondragon Internacional at that time, Jesus Herrasti. In a good conversation, we found our organizations shared many key principles and ideas.
Over the year that followed, more conversations involving more people began to turn to specific ideas on how we might work together on projects in the U.S. and Canada.
In the context of the severe recession, we ultimately thought this was an idea and a partnership that shouldn’t be kept under wraps until we figured out all the intricacies of launching a specific union co-op project.
The USW and Mondragon announced our alliance on October 27, 2009, with little more than a common set of principles and a general framework of how our alliance would work. Risky? Absolutely. Success is by no means guaranteed.
How do we define success though? Is success only the physical manifestation of a USW/Mondragon affiliated coop?
Despite still being in the preliminary stages of this alliance, I would argue that it has already been a success. Since our October announcement, we’ve gotten interest from people in all corners of the U.S. and Canada, plus the UK, France, Australia, and of course, Spain.
Maybe success is shining a spotlight on a really interesting idea, at a time when it is desperately needed.
But can it work here?
I’ve heard a number of people wonder openly about whether such an idea could really take root in an American culture steeped in individualism. I would reframe such questions in a slightly different way though. In the midst of economic devastation and oppression, the people who originally formed and supported the Mondragon cooperatives did so out of necessity to feed and provide for their families. They started their own schools, created their own jobs, provided their own health care and met their own banking and financing needs. Theirs is a story about self-reliance and pragmatism, not just idealism. Shared values such as self-reliance and ownership have deep roots in our culture and history. In the middle of this economic crisis, people are desperate for answers. Since our announcement, I’ve gotten email and phone calls almost every day from people asking, pleading, for help.
We have a real opportunity to rebuild our economy from the ground up, in a way that is sustainable and creates good jobs. We cannot afford to wait for someone else to do it for us.
So, what is the Union’s role in this?
There are natural and historical alliances between the cooperative and labor union movements. Where those have diverged, we believe now is an important opportunity to bring them back together.
With Mondragon’s assistance, we will seek to closely implement their worker-owner model in combination with our collective bargaining model in a way that makes the workplace more participatory and more accountable to the workers, but also protects the interests of the workers and establishes guidelines to ensure that all workers are treated fairly.
We must ensure that ownership means more than just the value of a share.
A core part of this hybrid will be to transform the role of the Social Council into a Union Bargaining Committee. To sustain this model, we must also ensure a dynamic labor-management relationship rooted in partnership, understanding the needs of both the business and the workers, and respect for the advocacy roles each must take on.
Now some of you may be wondering why the USW is spending this much time and effort trying to develop coops. Well, we are indeed probably working outside of our comfort zone, but to me, that’s one of the aspects of my Union that I’m most proud of.
Leadership means taking risks.
My Union is undertaking this effort, like so many other things we do, because we know we cannot afford to rest on our heels. We cannot afford to insulate ourselves in the ongoing work of negotiating contracts and processing grievances. We must do more. For our members and for all workers.
We fight to protect the jobs we already have and the industries in which we work, but we also believe that our Union can play an important role in creating new jobs, developing better business models, and growing new industries.
We are in this alliance with Mondragon because we believe there’s got to be a better way to run a business that is sustainable and accountable to its workers and its communities.
We know change is hard.
While we must understand and learn from the past, we must not be beholden to it. We cannot simply tell ourselves “that’s just the way it is” or “that’s the way it’s always been”. We must set our own course for the future. Our children, our grandchildren, and everyone else that comes after us depend on it.
I have a small poster hanging above my desk with this quote from Margaret Mead:
“Never doubt that a small group of thoughtful, committed citizens can change the world. Indeed, it is the only thing that ever has.”
Father Arizmendi and five of his former students started a small co-op in the Basque region in 1956.
Imagine what we can do.
We have the power to change the world. The people right here, in this room, have the power to change the world, in ways both big and small.
What are we going to do with it?
We cannot afford to sit on our hands, we must act. We have the power and the responsibility to act. We can create good jobs. We can create jobs with justice. Now let’s go do it!