How Mondragon Became the World’s Largest Co-Op

Jorge Vega Hernández, a mechanical engineer working in northwestern Spain, returned from a business trip and started to feel sick. It was March, 2020—the beginning of the pandemic—and so he called a government help line. He was told that he might have the coronavirus and that he should stay home. But, without leaving the house for a test, Hernández couldn’t get proof of his illness—and, without that proof, he had no excuse for not coming into work. A week after he got sick, he said, his company fired him. (The firm cited “insufficient” job performance as the motive.)

Alone and newly jobless during lockdown, Hernández, who was thirty-two at the time, considered 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 that he consider a position within a group of worker-owned coöperatives there called Mondragon.

The Mondragon Corporation, as it’s known, is a voluntary association of ninety-five autonomous coöperatives that differs radically from a conventional company. Each co-op’s highest-paid executive makes at most six times the salary of its lowest-paid employee. There are no outside shareholders; instead, after a temporary contract, new workers who have proved themselves may become member-owners of their co-ops. A managing director acts as a kind of C.E.O. 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 they are senior management or blue-collar, count equally.

When individual coöperatives do well, their members share in the profits. When times are hard, the coöperatives collectively support one another, sharing funds and reallocating workers among themselves to preserve jobs. During the pandemic, workers at many Mondragon co-ops voted to temporarily reduce their own salaries or hours until markets recovered; people who felt sick were trusted and encouraged to stay home. The treatment Hernández said he received when he was fired would be almost impossible within Mondragon, since worker-owners must vote to dismiss one another, and this can occur only in cases of very severe misconduct.

Worker-owned coöperatives are often considered both idealistic and inefficient; the model is seen as suitable mainly for upscale grocery stores or boutique bakeries in progressive towns. At a 2019 conference, the economist Larry Summers characterized co-ops as intrinsically sleepy and short-sighted. “When you put workers in charge of firms and you give them substantial control over the firms,” he said, “the one thing you do not get is expansion. You get more for the people who are already there.” And yet Mondragon is not a sleepy grocery store. Its collection of co-ops employs around eighty thousand people, and seventy-six per cent of those who work in manufacturing co-ops are owners. One makes bicycles at an industrial scale; others make elevators or produce huge industrial machines used in the production of jet engines, rockets, and wind turbines. Mondragon’s businesses include schools, a large grocery chain, a catering company, fourteen technology R. & D. centers, and a McKinsey-like consulting firm. In 2021, the network brought in more than eleven billion euros in revenue. The collective enforces five hundred and five types of patents and employs about twenty-four hundred full-time researchers. It also owns subsidiaries in countries including China, Germany, and Mexico, and competes effectively in international markets, winning contracts from firms such as General Electric and Blue Origin. The odds are good that key elements of something within a hundred feet of you—an espresso maker, a gas grill, a car—were made at Mondragon.

“We are a kind of mirror for conventional companies, and in it they do not see a very beautiful image,” Ander Etxeberria, Mondragon’s director of coöperative dissemination, told me as we drove between co-ops in the Basque country. A slender, affable man who speaks many languages, Etxeberria is essentially a professional explainer of Mondragon to its roughly two thousand annual visitors. It was a warm spring afternoon, and he rolled down the windows and gestured to the passing countryside as we drove. A flock of sheep clustered on a hillside above the squat, rectangular headquarters of a precision-machine-tooling co-op. We passed a bank, a language-instruction school, a grocery store, a factory—each owned by its workers.

Mondragon’s network of co-ops, many clustered along Spain’s Deba River, has managed to survive nearly seventy years of capitalism’s creative destruction. Its persistence suggests that there are fairer and more sustainable ways of doing business. But whether a version of its model could be replicated outside of one beautiful region of northern Spain is an open question, debated within Mondragon and beyond. The collective has a unique history, and its density powers a rare feedback loop in which coöperative values shape institutions, which then reinforce the same values, spiralling outward to define an entire way of life. Mondragon is an inspiring and successful experiment. Will it ever be repeated?

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 center, with stone archways that soar 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 coöperatives, are buried 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 a publication opposed to the Nationalists led 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.

He found that the area’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 early twentieth century, a locksmithing factory in Mondragón had been employing local boys, who sometimes started at the age of fourteen, clocked fifty-hour weeks, and had few prospects without further education. Upon arrival, Arizmendiarrieta began using the local Catholic Action center to educate young workers through study circles, which met in a converted seventeenth-century palace. In 1943, Arizmendiarrieta created a technical school; students there worked at the factory in the morning and attended classes in the afternoon. Eventually, he selected a group of promising workers who, in the evenings, began pursuing long-distance degrees in engineering. By 1956, five members who had finished their degrees left their factory jobs to launch a coöperative company that produced kerosene heaters. More industrial co-ops began appearing throughout the valley, drawing workers from the technical school and collaborating with one another to share expertise. Thus was born the Mondragon experiment.

The growth of the co-ops followed a pattern. An obstacle would confront local workers, and a new co-op would be created to overcome it. When, in 1958, the Spanish Ministry of Labor excluded the new worker-owners from the national social-security system, arguing that they were not eligible for workers’ benefits because they were also part-owners, Arizmendiarrieta created an internal pension and health-care system that was itself organized as a coöperative; it still exists today, supplying sick leave, parental leave, a generous pension, unemployment benefits, and medical insurance to Mondragon’s worker-owners. (The Spanish government has long since revised its position and provides coverage for co-op members, in addition to that offered by Mondragon.) To meet the need for affordable financing, Arizmendiarrieta organized a coöperative bank.

On my first afternoon in Mondragón, Etxeberria and I walked into the dark interior of the church beside the central square. I could hear a choir rehearsing a hymn. Etxeberria pointed to the tomb of Arizmendiarrieta, on one side of the central aisle. A stack of pamphlets lay beside it, and I took one; it was part of a campaign to canonize the priest, whom it described as “the apostle of coöperation.”

I stood for a while, absorbing the atmosphere. (The Mondragon Corporation has no official position on the canonization campaign, but Arizmendiarrieta is venerated even among the secular.) I saw that the pamphlet included a suggested prayer to Arizmendiarrieta, and information on whom to contact if it were answered. I walked back out into the sun.

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