… I am bound to suppose that the realisation of Socialism will tend to make men happy. What is it then that makes people happy? Free and full life and the consciousness of life.
William Morris
In spain, there are those who speak of three moments, in the country´s modern history, of “self-managed economies”: the period of the civil war, during which, in Republican zones, millions of people were involved in the collectivisation of social relations; after the death of Franco, in the transition, during which time land and factories were occupied and the first expressions of the post-fascist labour movement were often of syndicalist inspiration; the wave of cooperative and self-management initiatives that emerged in the wake of the 2007-8 crisis and the 15th of May movement. (Periódico Diagonal 08/15/2014)
These moments do not represent radically distinct and disconnected periods of contestation/rebellion. They resonate across the time and space of spain´s radical social movements. If the last movement inaugurates anything new, it is the shift, sometimes radical, away from the factory as the centre of social conflict to the urban spaces and relations of the city. Economic or labour concerns are not of course absent, but they have been lived as embedded in equally significant and more far reaching concerns: housing, food, energy, education, health, sexuality, “cultural” expressions, the “media”, and the like.
The variety of self-managed collectives is impressive: apartment blocks, social centres for pensioners, okupied social centres, financial organisations (crowd funding, alternative currencies, time banks, credit unions, etc.), popular kitchens, libraries and book exchanges, networks of “friendly” stores, alternative forms of exchange and sharing (e.g., free shops), urban gardens, okupied cinemas, alternative media, and so on. (Periódico Diagonal 08/15/2014)
Some would contend that however radical these gestures may be, that they leave the fabric of production (the supposedly essential space where capital is generated) aside and therefore fail as anti-capitalist movements. But the criticism is too simple and simplistic, and this for two reasons. First, it ignores the mutual dependence of (“economic”) production and broader (“social”) reproduction. The social relations of capitalism are created and sustained across this divide; production would be impossible without the reproduction of social relations. And it is against this broader context that the movements must be read. Secondly, the profit necessary for capitalism’s reproduction is equally generated, if not more so, outside factory walls. Challenging the oppression of exploitation inherent to the system’s social relations therefore necessarily calls for a much more generous understanding of anti-capitalism.
No factory occupation movement has appeared in spain during the years of “crisis”, and this even in the face of mass unemployment. But what have proliferated are cooperatives, or the “cooperativisation” of industrial activities. If the exact number of cooperatives created since 2008 is not known, what is known is that hundreds have been created each year since. In 2012 alone, the last year for which any statistics are available, 150 companies became workers’ cooperatives in Europe, half of those being in spain. Many of the cooperatives are the consequence of the use of unemployment benefits and severance pay for the acquisition of the company from which workers have been laid off. In other cases, it has been the owner(s) who participate in the creation of the cooperatives, to avoid the closing of factories. And in other instances, the newly unemployed workers create altogether new industrial cooperatives. (Periódico Diagonal 08/14/2014)
The contrast in this instance with the factory occupation movement in Argentina, after the country´s economic collapse of 2001, is striking, but it may have as much to do with the legal framework and existing public social services in spain, as with any supposed lack of radicalness on the part of spain’s workers.
If the cooperatives in spain have had little impact on the overall unemployment in the country, for those directly involved in them, they have provided a measure of economic security that is greater than that faced by workers in “capitalist” companies. However, “economic security”, always relative at best, can hardly be judged, in and of itself, as anti-capitalist. And the criticisms of cooperatives as an alternative to capitalist economic relations are well known: that as islands in a capitalist sea, they are forced to abide by the norms of capital and thus in no way challenge it; without economic “success”, they become spaces for self-managed self-exploitation and poverty; what the cooperatives produce and how they produce perpetuate the ecological violence of exploitation and the violence of labour.
And yet again, we fail to see far enough in limiting ourselves to these critical observations. If no cooperative, or even network of cooperatives, can “survive” alone, that holds for any supposedly alternative social reality (e.g., okupied social spaces, rural communes, urban/guerrilla gardens, etc.). Such movements become anti-capitalist (no movement is intrinsically so). And they do so to the extent that they are able to generate ways of life that move us away from the kinds of oppression that characterise State-Capital, towards ever greater freedoms and equalities. And perhaps this is nowhere more evident than in the self-managed nature of cooperatives. The “success” of these latter should never be judged exclusively or even principally in economic terms (revolution is not to be judged by accountants), but to the degree that autonomous, collective, self-management inscribes the ways in which productive activities (in the broadest sense possible) are carried through. Capitalist production is inherently hierarchical, oppressive and violent. Horizontal, open and egalitarian self-management does in this sense serve to “educate”, to “be”, in anti-capitalist ways.
Of course, nothing is assured along the path of generalised self-management. The practise, both past and present, is there; a practise that is in principle always susceptible to correction, expansion and intensification.
Revolution is thus conceived of as permanent and precarious creativity.
____________________
The Mondragón cooperative group of the basque region of spain remains an exemplary case in our time of worker controlled industrial labour. Created in 1956, it is today the world´s largest industrial workers cooperative. Yet the difficulties of cooperatives within a capitalist framework are perhaps, due to Mondragón’s scale, that much more evident and acute. And the group’s most recent difficulties augur ill for the project, unless it is able recentres its overall political ideal.
What follows is a translation of an article by Benoît Borrits, originally published in Multitudes 55, Spring 2014. Borrits’ overall evaluation of Mondragón may be questioned, but what he points to is of fundamental importance not only to the understanding of Mondragón, but also to the potential of cooperatives as anti-capitalist agencies.
Mondragón
A Spanish cooperative with European subsidiaries
On the 6th of November, the household electrical appliance company FagorBrandt filed for bankruptcy, opening a period of uncertainty for its 2000 French employees. This company has a particularity: it is a subsidiary company Fagor Electrodomésticos, a workers cooperative located on the other side of the Pyrenees. Its parent company was itself obliged to initiate bankruptcy proceedings on the 16th of October last. This cooperative is a member of the cooperative group Mondragón, a group founded in the 1950s, in the Basque country. Today, it is the first industrial and financial group of the Basque country and 5th in the Spanish state, comprised of 110 cooperatives and 80,000 workers. Presented as an exceptional success, does Fagor Electrodomésticos’ insolvency, the oldest cooperative of the group, mark the end of the “myth” of Mondragón [Kasmir, 1996]?
Mondragón, a unique group in the world
Inspired by Don José Maria Arizmendiarrieta, a republican priest who barely escaped a firing squad during the Civil War, five young people from the town of Mondragón-Arrasate decided in 1956 to found a company making domestic heaters, Ulgor. The company was organised as a workers’ cooperative: it was owned and managed exclusively by its workers, with a single executive management nominated and revocable by the General Assembly. Since 1958, other cooperatives were created in its wake, either ex-nihilo (Arrasate, Copreci, etc) or by the separation of activities from already existing cooperatives (e.g., Ederlan).
Because the development of these cooperatives was to require financial means far greater than what was available in the startup funds, a bank was created, the Caja Laboral, a second level cooperative that collected local savings. The relationship between the Caja Laboral and the financed cooperative was based on an equilibrium between the independence of the bank as regarded each project and the control of these activities by the cooperative members. All cooperatives that contract a loan with the bank accept to abide by the judicial structure of the first cooperatives and adopt a pay scale parallel to those of the other cooperatives. Excluded from the general Spanish social security regime, cooperative members created in 1967 Lagun-Aro, a mutual insurance company guaranteeing to all members of the cooperative unemployment insurance, health insurance, disability insurance, as well as the creation of a retirement fund. Other cooperatives would join the original ensemble of cooperatives: training (Alecop), research (Ikerlan), consumer (Eroski) and agricultural (Lana). Certain cooperatives are second level cooperatives, others are user cooperatives, but all possess an assembly which allow for the representation of the workers of any specific cooperative.
In 1965, so as to be able to share profits, a first cooperative group was created: Ularco. This organisation allowed the cooperatives to resist the crisis of the early 1980s: the losses of some entities were compensated for by the profits of others, the members of cooperatives obliged to reduce their work force were proposed jobs in those which were growing. With this re-structuring, a veritable Professional Social Security was created [Boccara, 2002][Guigou, 2005], thereby guaranteeing a job for life for all of its members. In 1987, ten cooperative groups were constituted on the basis of this model and a constituent congress organised their fusion into a single group that called itself Mondragón, after the name of the town where the experience originated [Whyte and Whyte, 1991].
This group organisation is original compared to the structure of capitalist organisations. With these last, the shareholders are the owners of a central, vertical entity – the holding – that possesses an ensemble of subsidiary companies. In Mondragón, it is the cooperatives that constitute the group and which remain sovereign: a pre-existing cooperative may very well request integration in the group, and inversely, any cooperative may decide to leave. Far from being a handicap, this parallel structure of workers’ cooperatives and a federated group will permit the meteoric progress of the group. In 1989, it employed 22,000. In 2009, that number reached 85,000.
An internationalisation by forced march
The entry of Spain into the European Common Market signified the progressive abandonment of customs barriers and generalised competition for all companies. As a consequence, the cooperative Ulgor, which subsequently became Fagor Electrodomésticos, specialised in home electrical appliances, was to confront the arrival of competition, from the likes of the Swedish Electrolux and the American Whirlpool. The shock was brutal for the cooperative, which had to simultaneously reduce costs of production and improve quality.
In 2005, Fagor Electrodomésticos acquired Brandt in France. An immediate change in dimension, with 2,000 additional salaried employees and the addition of a portfolio of prestigious brands: Brandt, De Dietrich, Vedette, Océan, San Giorgio. Curiously enough, Fagor Electrodomésticos never proposed to its French employees to join the cooperative of the company. Brandt, rebaptised FagorBrandt, remained a subsidiary of Fagor Electrodomésticos. Worse, the acquisition was carried through with a reorganisation and dozens of layoffs, as would have done any capitalist group [Argouse and Peyret, 2007].
This organisation in subsidiaries was generalised in the last years to the ensemble of the cooperatives of the group. Federated Mondragón was now 110 cooperatives and these controlled 147 subsidiaries [Mondragón, 2013]. At a given moment, less than one in every two workers was a cooperative member. The group put things to right in extremis in integrating massively into the cooperative the employees of Eroski, the large retail cooperative of the group, thus increasing the level of cooperative membership. Nevertheless, subjection to salary becomes common currency in the group of workers’ cooperatives.
The divorce Fagor Mondragón
The external strategy of growth of Fagor Electrodomésticos today reveals its limits. The company suffers from the double handicap of working within the domain of domestic electrical appliances and of being based in Spain, two particularly stricken markets. Its principle competition, the Swedish Electrolux experienced a brutal drop in sales and plans to suppress 2,000 jobs and close its Italian factory, consequence of the purchase of Zanussi in 1984. If Fagor Electrodomésticos significantly internationalised itself these last years, it still remains strongly attached to its market of origin, with 30% of its sales realised in Spain, a country in full recession.
The company employs some 5,000 persons, subsidiaries included, for only 2,000 cooperative members. It has 13 factories in 5 countries: Spain, France, Poland, Morocco and China. In May of 2012, the cooperative members decided to reduce their revenue by 7.5% and accepted the principle of mobility. This was not enough. In the first semester of 2013, the group suffered a loss of 60 million Euros, three times greater than that of the first semester of 2012, and its sales dropped 19%, at 491 million.
Its situation became catastrophic. Its debt sits at more than 830 million, that is, 145,000 per worker and 415,000 per cooperative member. For some months now, suppliers have been reticent to deliver to the company and its subsidiaries, which accordingly frequently halts production. In France, the four locations of Fagor Brandt – two in the Vendée, one in Orléans and the other in the Vendôme – have all stopped production since the 14th of October, consequence of their inability to pay suppliers. It was in this context that the company initiated in Spain a procedure for the renegotiation of its debt.
Relations between the Mondragón group and the cooperative have reached an all-time low. On the 30th of October, the management of the group settled the matter. Mondragón estimated that the resources asked for by the company “would not guarantee its viability”. The path was opened for an exit of Fagor Electrodomésticos from the Mondragón group. The message is strong: Fagor Electrodomésticos is both the oldest cooperative of the group, as well as its largest industrial structure.
Beyond the accidental
The failure of Fagor Electrodomésticos was the consequence of the conjunction of unfavourable factors. The organisation of the group had been thought out to facilitate changes from one economic area to another. Mondragón revealed itself to be particularly innovative in the organisation of its second level cooperatives, which assured financing, social security, training and innovation. Paradoxically, in its internationalisation, the group showed itself to be terribly traditional, doing little more than reproducing what capitalist companies do in the same area. Various explanations have been given – Basque nationalism, the difficulty of creating European cooperatives – which however remain debatable. But the essential factor is the very limit that the cooperative form represents, as an intermediary between private property and a fully realised social appropriation.
To join a Mondragón unit as a cooperative member, one needs today around 14,000 Euros. If one does have the sum, loans from the bank of the group, Caja Laboral are available, with the reimbursement being made through salary deductions. Beyond the cooperative activities, units of the group have accumulated reserves which, in a cooperative regime, are not shareable: that is, they belong to no one in particular, but are collectively available to the members of the cooperative. The sums accumulated are today considerable. The social capital stands at 2.5 billion Euros and the reserves at 1.9 billion. In effect, the workers of the Mondragón group have become, against their will, “little capitalists” who will do anything to maintain their capital. To resist foreign competition, they purchase companies to attain greater economies of scale and to position themselves on the market; thus the decision to lay off workers with the acquisition of Brandt in France.
We touch here a limit of the cooperative, a kind of entity that is managed collectively, but which remains private. The cooperatives’ activities are private and, in the Spanish case, have gained in value. The unshareable reserves are of course collective, but they are private property for those outside the cooperative. This is inherent to any cooperative and only an activity entirely financed by a socialised banking centre could avoid this pitfall. If there is any path worth pursuing in this direction, the fact of purchasing companies as cooperatives by the employees with as little as possible of one´s own monies is more than encouraging. In the case of Fagor Electrodomésticos, this would have meant a much larger cooperative membership, an extension of the Mondragón group beyond the borders of Spain, and thus a stronger capacity of resilience of the group in the face of the double recession in domestic electrical appliances and in Spain. In the end, it is clear that Fagor Electrodomésticos suffered not from cooperation, but on the contrary, from a lack of cooperation.
The Mondragón experience remains a motive of hope, as there is no rational reason to justify the supposed superior efficiency of capitalist companies in contrast to companies managed by their workers. Job security as a modest protection of the employees never slowed the expansion of the group, which almost doubled the number of its employees every five years, over the last twenty years.
What was realized – labour democracy, coordination, professional social security – at an effectively modest scale – 80,000 workers – could also function at the level of a country or a region. It is probable that at such a scale, the desires of cooperative members could be expressed short circuiting the detour through the “market”, in this way reconciling a work cooperative and consumer cooperatives, as Charles Gide envisaged in his own day [Pénin, 1998]. Such an evolution, centred on needs and not the profit of capital, is of such a nature that it would transform the very nature of production.
Bibliography
Argouse Anne & Peyret Hugues, Les Fagor et les Brandt, DVD, Antoine Martin Productions, Paris, 2007.
Boccara Paul, Une sécurité d’emploi et de formation, Le Temps des cerises, 2002.
Guigou Élisabeth, Crise de l’emploi, malaise au travail, Pour une sécurité des parcours professionnels, Les Notes de la Fondation Jean-Jaurès, Paris, 2005.
Kasmir Sharryn, The Myth of Mondragon?: Cooperatives, Politics, and Working?Class Life in a Basque Town,State University of New York Press, 1996.
Mondragón, Annual Report 2012, Mondragón Corporation, 2013.
Penin Marc, Charles Gide 1847-1932, l’esprit critique, Éditions L’Harmattan, 1998.
Whyte William Foote & Whyte Kathleen King, Making Mondragon, The Growth and Dynamics of The Worker Cooperative Complex, Cornell University Press, 1991.
[Since the publication of Borrits’ report, the saga of Fagor Electrodomésticos has continued. Burdened by debts, bankrupt, the cooperative was separated from the Mondragón group and sold. Fagor Brandt was purchased by an algerian company, Cevital, while Fagor Electrodomésticos was bought by the Cata company, of catalonia. Mondragón’s originalindustrial jewel is no longer and what remains of the cooperative group is a house divided, weakened and uncertain of its future. And while many of the cooperative´s workers jobs were saved, the price paid was high. One is thus tempted to conclude that it is perhaps time for the Mondragón workers to take the cooperative’s factories]. (For more detailed information on Mondragón’s crisis, see El Pais)
Anti-capitalist economies in post-15M spain: Mondragón, Cooperatives and Okupations
… I am bound to suppose that the realisation of Socialism will tend to make men happy. What is it then that makes people happy? Free and full life and the consciousness of life.
William Morris
In spain, there are those who speak of three moments, in the country´s modern history, of “self-managed economies”: the period of the civil war, during which, in Republican zones, millions of people were involved in the collectivisation of social relations; after the death of Franco, in the transition, during which time land and factories were occupied and the first expressions of the post-fascist labour movement were often of syndicalist inspiration; the wave of cooperative and self-management initiatives that emerged in the wake of the 2007-8 crisis and the 15th of May movement. (Periódico Diagonal 08/15/2014)
These moments do not represent radically distinct and disconnected periods of contestation/rebellion. They resonate across the time and space of spain´s radical social movements. If the last movement inaugurates anything new, it is the shift, sometimes radical, away from the factory as the centre of social conflict to the urban spaces and relations of the city. Economic or labour concerns are not of course absent, but they have been lived as embedded in equally significant and more far reaching concerns: housing, food, energy, education, health, sexuality, “cultural” expressions, the “media”, and the like.
The variety of self-managed collectives is impressive: apartment blocks, social centres for pensioners, okupied social centres, financial organisations (crowd funding, alternative currencies, time banks, credit unions, etc.), popular kitchens, libraries and book exchanges, networks of “friendly” stores, alternative forms of exchange and sharing (e.g., free shops), urban gardens, okupied cinemas, alternative media, and so on. (Periódico Diagonal 08/15/2014)
Some would contend that however radical these gestures may be, that they leave the fabric of production (the supposedly essential space where capital is generated) aside and therefore fail as anti-capitalist movements. But the criticism is too simple and simplistic, and this for two reasons. First, it ignores the mutual dependence of (“economic”) production and broader (“social”) reproduction. The social relations of capitalism are created and sustained across this divide; production would be impossible without the reproduction of social relations. And it is against this broader context that the movements must be read. Secondly, the profit necessary for capitalism’s reproduction is equally generated, if not more so, outside factory walls. Challenging the oppression of exploitation inherent to the system’s social relations therefore necessarily calls for a much more generous understanding of anti-capitalism.
No factory occupation movement has appeared in spain during the years of “crisis”, and this even in the face of mass unemployment. But what have proliferated are cooperatives, or the “cooperativisation” of industrial activities. If the exact number of cooperatives created since 2008 is not known, what is known is that hundreds have been created each year since. In 2012 alone, the last year for which any statistics are available, 150 companies became workers’ cooperatives in Europe, half of those being in spain. Many of the cooperatives are the consequence of the use of unemployment benefits and severance pay for the acquisition of the company from which workers have been laid off. In other cases, it has been the owner(s) who participate in the creation of the cooperatives, to avoid the closing of factories. And in other instances, the newly unemployed workers create altogether new industrial cooperatives. (Periódico Diagonal 08/14/2014)
The contrast in this instance with the factory occupation movement in Argentina, after the country´s economic collapse of 2001, is striking, but it may have as much to do with the legal framework and existing public social services in spain, as with any supposed lack of radicalness on the part of spain’s workers.
If the cooperatives in spain have had little impact on the overall unemployment in the country, for those directly involved in them, they have provided a measure of economic security that is greater than that faced by workers in “capitalist” companies. However, “economic security”, always relative at best, can hardly be judged, in and of itself, as anti-capitalist. And the criticisms of cooperatives as an alternative to capitalist economic relations are well known: that as islands in a capitalist sea, they are forced to abide by the norms of capital and thus in no way challenge it; without economic “success”, they become spaces for self-managed self-exploitation and poverty; what the cooperatives produce and how they produce perpetuate the ecological violence of exploitation and the violence of labour.
And yet again, we fail to see far enough in limiting ourselves to these critical observations. If no cooperative, or even network of cooperatives, can “survive” alone, that holds for any supposedly alternative social reality (e.g., okupied social spaces, rural communes, urban/guerrilla gardens, etc.). Such movements become anti-capitalist (no movement is intrinsically so). And they do so to the extent that they are able to generate ways of life that move us away from the kinds of oppression that characterise State-Capital, towards ever greater freedoms and equalities. And perhaps this is nowhere more evident than in the self-managed nature of cooperatives. The “success” of these latter should never be judged exclusively or even principally in economic terms (revolution is not to be judged by accountants), but to the degree that autonomous, collective, self-management inscribes the ways in which productive activities (in the broadest sense possible) are carried through. Capitalist production is inherently hierarchical, oppressive and violent. Horizontal, open and egalitarian self-management does in this sense serve to “educate”, to “be”, in anti-capitalist ways.
Of course, nothing is assured along the path of generalised self-management. The practise, both past and present, is there; a practise that is in principle always susceptible to correction, expansion and intensification.
Revolution is thus conceived of as permanent and precarious creativity.
____________________
The Mondragón cooperative group of the basque region of spain remains an exemplary case in our time of worker controlled industrial labour. Created in 1956, it is today the world´s largest industrial workers cooperative. Yet the difficulties of cooperatives within a capitalist framework are perhaps, due to Mondragón’s scale, that much more evident and acute. And the group’s most recent difficulties augur ill for the project, unless it is able recentres its overall political ideal.
What follows is a translation of an article by Benoît Borrits, originally published in Multitudes 55, Spring 2014. Borrits’ overall evaluation of Mondragón may be questioned, but what he points to is of fundamental importance not only to the understanding of Mondragón, but also to the potential of cooperatives as anti-capitalist agencies.
Mondragón
A Spanish cooperative with European subsidiaries
On the 6th of November, the household electrical appliance company FagorBrandt filed for bankruptcy, opening a period of uncertainty for its 2000 French employees. This company has a particularity: it is a subsidiary company Fagor Electrodomésticos, a workers cooperative located on the other side of the Pyrenees. Its parent company was itself obliged to initiate bankruptcy proceedings on the 16th of October last. This cooperative is a member of the cooperative group Mondragón, a group founded in the 1950s, in the Basque country. Today, it is the first industrial and financial group of the Basque country and 5th in the Spanish state, comprised of 110 cooperatives and 80,000 workers. Presented as an exceptional success, does Fagor Electrodomésticos’ insolvency, the oldest cooperative of the group, mark the end of the “myth” of Mondragón [Kasmir, 1996]?
Mondragón, a unique group in the world
Inspired by Don José Maria Arizmendiarrieta, a republican priest who barely escaped a firing squad during the Civil War, five young people from the town of Mondragón-Arrasate decided in 1956 to found a company making domestic heaters, Ulgor. The company was organised as a workers’ cooperative: it was owned and managed exclusively by its workers, with a single executive management nominated and revocable by the General Assembly. Since 1958, other cooperatives were created in its wake, either ex-nihilo (Arrasate, Copreci, etc) or by the separation of activities from already existing cooperatives (e.g., Ederlan).
Because the development of these cooperatives was to require financial means far greater than what was available in the startup funds, a bank was created, the Caja Laboral, a second level cooperative that collected local savings. The relationship between the Caja Laboral and the financed cooperative was based on an equilibrium between the independence of the bank as regarded each project and the control of these activities by the cooperative members. All cooperatives that contract a loan with the bank accept to abide by the judicial structure of the first cooperatives and adopt a pay scale parallel to those of the other cooperatives. Excluded from the general Spanish social security regime, cooperative members created in 1967 Lagun-Aro, a mutual insurance company guaranteeing to all members of the cooperative unemployment insurance, health insurance, disability insurance, as well as the creation of a retirement fund. Other cooperatives would join the original ensemble of cooperatives: training (Alecop), research (Ikerlan), consumer (Eroski) and agricultural (Lana). Certain cooperatives are second level cooperatives, others are user cooperatives, but all possess an assembly which allow for the representation of the workers of any specific cooperative.
In 1965, so as to be able to share profits, a first cooperative group was created: Ularco. This organisation allowed the cooperatives to resist the crisis of the early 1980s: the losses of some entities were compensated for by the profits of others, the members of cooperatives obliged to reduce their work force were proposed jobs in those which were growing. With this re-structuring, a veritable Professional Social Security was created [Boccara, 2002][Guigou, 2005], thereby guaranteeing a job for life for all of its members. In 1987, ten cooperative groups were constituted on the basis of this model and a constituent congress organised their fusion into a single group that called itself Mondragón, after the name of the town where the experience originated [Whyte and Whyte, 1991].
This group organisation is original compared to the structure of capitalist organisations. With these last, the shareholders are the owners of a central, vertical entity – the holding – that possesses an ensemble of subsidiary companies. In Mondragón, it is the cooperatives that constitute the group and which remain sovereign: a pre-existing cooperative may very well request integration in the group, and inversely, any cooperative may decide to leave. Far from being a handicap, this parallel structure of workers’ cooperatives and a federated group will permit the meteoric progress of the group. In 1989, it employed 22,000. In 2009, that number reached 85,000.
An internationalisation by forced march
The entry of Spain into the European Common Market signified the progressive abandonment of customs barriers and generalised competition for all companies. As a consequence, the cooperative Ulgor, which subsequently became Fagor Electrodomésticos, specialised in home electrical appliances, was to confront the arrival of competition, from the likes of the Swedish Electrolux and the American Whirlpool. The shock was brutal for the cooperative, which had to simultaneously reduce costs of production and improve quality.
In 2005, Fagor Electrodomésticos acquired Brandt in France. An immediate change in dimension, with 2,000 additional salaried employees and the addition of a portfolio of prestigious brands: Brandt, De Dietrich, Vedette, Océan, San Giorgio. Curiously enough, Fagor Electrodomésticos never proposed to its French employees to join the cooperative of the company. Brandt, rebaptised FagorBrandt, remained a subsidiary of Fagor Electrodomésticos. Worse, the acquisition was carried through with a reorganisation and dozens of layoffs, as would have done any capitalist group [Argouse and Peyret, 2007].
This organisation in subsidiaries was generalised in the last years to the ensemble of the cooperatives of the group. Federated Mondragón was now 110 cooperatives and these controlled 147 subsidiaries [Mondragón, 2013]. At a given moment, less than one in every two workers was a cooperative member. The group put things to right in extremis in integrating massively into the cooperative the employees of Eroski, the large retail cooperative of the group, thus increasing the level of cooperative membership. Nevertheless, subjection to salary becomes common currency in the group of workers’ cooperatives.
The divorce Fagor Mondragón
The external strategy of growth of Fagor Electrodomésticos today reveals its limits. The company suffers from the double handicap of working within the domain of domestic electrical appliances and of being based in Spain, two particularly stricken markets. Its principle competition, the Swedish Electrolux experienced a brutal drop in sales and plans to suppress 2,000 jobs and close its Italian factory, consequence of the purchase of Zanussi in 1984. If Fagor Electrodomésticos significantly internationalised itself these last years, it still remains strongly attached to its market of origin, with 30% of its sales realised in Spain, a country in full recession.
The company employs some 5,000 persons, subsidiaries included, for only 2,000 cooperative members. It has 13 factories in 5 countries: Spain, France, Poland, Morocco and China. In May of 2012, the cooperative members decided to reduce their revenue by 7.5% and accepted the principle of mobility. This was not enough. In the first semester of 2013, the group suffered a loss of 60 million Euros, three times greater than that of the first semester of 2012, and its sales dropped 19%, at 491 million.
Its situation became catastrophic. Its debt sits at more than 830 million, that is, 145,000 per worker and 415,000 per cooperative member. For some months now, suppliers have been reticent to deliver to the company and its subsidiaries, which accordingly frequently halts production. In France, the four locations of Fagor Brandt – two in the Vendée, one in Orléans and the other in the Vendôme – have all stopped production since the 14th of October, consequence of their inability to pay suppliers. It was in this context that the company initiated in Spain a procedure for the renegotiation of its debt.
Relations between the Mondragón group and the cooperative have reached an all-time low. On the 30th of October, the management of the group settled the matter. Mondragón estimated that the resources asked for by the company “would not guarantee its viability”. The path was opened for an exit of Fagor Electrodomésticos from the Mondragón group. The message is strong: Fagor Electrodomésticos is both the oldest cooperative of the group, as well as its largest industrial structure.
Beyond the accidental
The failure of Fagor Electrodomésticos was the consequence of the conjunction of unfavourable factors. The organisation of the group had been thought out to facilitate changes from one economic area to another. Mondragón revealed itself to be particularly innovative in the organisation of its second level cooperatives, which assured financing, social security, training and innovation. Paradoxically, in its internationalisation, the group showed itself to be terribly traditional, doing little more than reproducing what capitalist companies do in the same area. Various explanations have been given – Basque nationalism, the difficulty of creating European cooperatives – which however remain debatable. But the essential factor is the very limit that the cooperative form represents, as an intermediary between private property and a fully realised social appropriation.
To join a Mondragón unit as a cooperative member, one needs today around 14,000 Euros. If one does have the sum, loans from the bank of the group, Caja Laboral are available, with the reimbursement being made through salary deductions. Beyond the cooperative activities, units of the group have accumulated reserves which, in a cooperative regime, are not shareable: that is, they belong to no one in particular, but are collectively available to the members of the cooperative. The sums accumulated are today considerable. The social capital stands at 2.5 billion Euros and the reserves at 1.9 billion. In effect, the workers of the Mondragón group have become, against their will, “little capitalists” who will do anything to maintain their capital. To resist foreign competition, they purchase companies to attain greater economies of scale and to position themselves on the market; thus the decision to lay off workers with the acquisition of Brandt in France.
We touch here a limit of the cooperative, a kind of entity that is managed collectively, but which remains private. The cooperatives’ activities are private and, in the Spanish case, have gained in value. The unshareable reserves are of course collective, but they are private property for those outside the cooperative. This is inherent to any cooperative and only an activity entirely financed by a socialised banking centre could avoid this pitfall. If there is any path worth pursuing in this direction, the fact of purchasing companies as cooperatives by the employees with as little as possible of one´s own monies is more than encouraging. In the case of Fagor Electrodomésticos, this would have meant a much larger cooperative membership, an extension of the Mondragón group beyond the borders of Spain, and thus a stronger capacity of resilience of the group in the face of the double recession in domestic electrical appliances and in Spain. In the end, it is clear that Fagor Electrodomésticos suffered not from cooperation, but on the contrary, from a lack of cooperation.
The Mondragón experience remains a motive of hope, as there is no rational reason to justify the supposed superior efficiency of capitalist companies in contrast to companies managed by their workers. Job security as a modest protection of the employees never slowed the expansion of the group, which almost doubled the number of its employees every five years, over the last twenty years.
What was realized – labour democracy, coordination, professional social security – at an effectively modest scale – 80,000 workers – could also function at the level of a country or a region. It is probable that at such a scale, the desires of cooperative members could be expressed short circuiting the detour through the “market”, in this way reconciling a work cooperative and consumer cooperatives, as Charles Gide envisaged in his own day [Pénin, 1998]. Such an evolution, centred on needs and not the profit of capital, is of such a nature that it would transform the very nature of production.
Bibliography
Argouse Anne & Peyret Hugues, Les Fagor et les Brandt, DVD, Antoine Martin Productions, Paris, 2007.
Boccara Paul, Une sécurité d’emploi et de formation, Le Temps des cerises, 2002.
Guigou Élisabeth, Crise de l’emploi, malaise au travail, Pour une sécurité des parcours professionnels, Les Notes de la Fondation Jean-Jaurès, Paris, 2005.
Kasmir Sharryn, The Myth of Mondragon?: Cooperatives, Politics, and Working?Class Life in a Basque Town,State University of New York Press, 1996.
Mondragón, Annual Report 2012, Mondragón Corporation, 2013.
Penin Marc, Charles Gide 1847-1932, l’esprit critique, Éditions L’Harmattan, 1998.
Whyte William Foote & Whyte Kathleen King, Making Mondragon, The Growth and Dynamics of The Worker Cooperative Complex, Cornell University Press, 1991.
[Since the publication of Borrits’ report, the saga of Fagor Electrodomésticos has continued. Burdened by debts, bankrupt, the cooperative was separated from the Mondragón group and sold. Fagor Brandt was purchased by an algerian company, Cevital, while Fagor Electrodomésticos was bought by the Cata company, of catalonia. Mondragón’s originalindustrial jewel is no longer and what remains of the cooperative group is a house divided, weakened and uncertain of its future. And while many of the cooperative´s workers jobs were saved, the price paid was high. One is thus tempted to conclude that it is perhaps time for the Mondragón workers to take the cooperative’s factories]. (For more detailed information on Mondragón’s crisis, see El Pais)