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Making Mondragón

Making Mondragón: The Growth and Dynamics of the Worker Cooperative Complex

William Foote Whyte
Kathleen King Whyte
Copyright Date: 1991
Edition: 2
Published by: Cornell University Press,
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  • Book Info
    Making Mondragón
    Book Description:

    Since its founding in 1956 in Spain's Basque region, the Mondragón Corporation has been a touchstone for the international cooperative movement. Its nearly three hundred companies and organizations span areas from finance to education. In its industrial sector Mondragón has had a rich experience over many years in manufacturing products as varied as furniture, kitchen equipment, machine tools, and electronic components and in printing, shipbuilding, and metal smelting.

    Making Mondragónis a groundbreaking look at the history of worker ownership in the Spanish cooperative. First published in 1988, it remains the best source for those looking to glean a rich body of ideas for potential adaptation and implementation elsewhere from Mondragón's long and varied experience. This second edition, published in 1991, takes into account the major structural and strategic changes that were being implemented in 1990 to allow the enterprise to compete successfully in the European common market.

    Mondragón has created social inventions and developed social structures and social processes that have enabled it to overcome some of the major obstacles faced by other worker cooperatives in the past. William Foote Whyte and Kathleen King Whyte describe the creation and evolution of the Mondragón cooperatives, how they have changed through decades of experience, and how they have struggled to maintain a balance between their social commitments and economic realities. The lessons of Mondragón apply most clearly to worker cooperatives and other employee-owned firms, but also extend to regional development and stimulating and supporting entrepreneurship, whatever the form of ownership.

    eISBN: 978-0-8014-7173-5
    Subjects: Political Science, History

Table of Contents

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  1. Front Matter
    (pp. i-vi)
  2. Table of Contents
    (pp. vii-xii)
  3. Preface
    (pp. xiii-xiv)
    William Foote Whyte
  4. Part One Mondragón in Context

    • 1 The Importance of Mondragón
      (pp. 3-7)

      Mondragón is still far from a household word in the United States or elsewhere, but for growing numbers of researchers and activists, this cooperative complex based in a small Basque city of Spain is a fascinating example of success in a form of organization for which failure is the general rule. The story of Mondragón is the most impressive refutation of the widely held belief that worker cooperatives have little capacity for economic growth and long-term survival.

      A negative judgment on worker cooperatives was first rendered early in this century by the prestigious social scientists Beatrice and Sidney Webb. Their...

    • 2 The Basques
      (pp. 9-22)

      To outsiders, the first contact with the Basque country may be puzzling, for although all but a few old-timers speak Spanish like the natives they are, and economically and politically the Basques are part of Spain, they are culturally distinct from other Spaniards. Without romanticizing or exaggerating this distinctiveness, it is important for one’s understanding of Mondragon to view Basque culture in the context of regional and national economic and political development.

      The most distinctive aspect of Basque culture is the language, Euskera, which is unrelated to any other. Although Euskera is spoken by only 25 percent of the Basques,...

  5. Part Two Building the Cooperative Complex

    • 3 The Foundation
      (pp. 25-31)

      If a regional planner had been asked at the end of the Civil War to select the future site of the most important industrial complex in the Basque country, Mondragón would have seemed one of the most unlikely choices. A small and inconspicuous town (population of 8,645 in 1940), nestled in a narrow valley surrounded by steep hills and mountains, Mondragón, with its narrow streets and buildings dating back to the fifteenth century, had little space for industrial expansion or population growth. In fact, substantial expansion could be accommodated only by constructing multistory apartment buildings on the hills outside the...

    • 4 The First Worker Cooperatives
      (pp. 32-48)

      After completing the education available in Mondragón, some of the first graduates of the Escuela Politécnica Profesional went to work in the dominant private enterprise, the Unión Cerrajera, but they were determined to secure further education. At first this seemed impossible because there was no university in or near Mondragón, and none of the graduates could afford to give up their jobs to live and study elsewhere. After canvassing various possibilities, Arizmendi worked out an arrangement with the University of Zaragoza in the province of Aragón (outside the Basque country) whereby students from Mondragón could study in absentia. Eleven of...

    • 5 Supporting Organizations and Diversification
      (pp. 49-57)

      The early days of Ulgor were fraught with problems. The oil-burning heater then in production was a primitive model by later standards, but it nevertheless initially presented great difficulties for the inexperienced entrepreneurs. The corrosion of metal components was a major technical problem, and when they had overcome this difficulty, a fire broke out in the plant that inflicted fatal burns on one of the ten members at work. Members worked ten to twelve hours a day six days a week, without any thought of overtime pay. It was only as Ulgor gained strength and financial stability that it was...

    • 6 Cooperative Groups
      (pp. 58-62)

      By the early 1960s, Ulgor had overcome its initial technical and marketing problems and was well on its way to becoming one of the hundred largest industrial companies in Spain (Gorroño 1975, 155). The founders had not anticipated the extent and pace of this growth. Their ideal had been to create small organizations in which all members would know one another, thus facilitating interpersonal and organizational adjustments. Success undermined this vision.

      When a private company grows with the dynamism of Ulgor, management tends to respond by establishing a divisional organization or subsidiary companies in which all units are under the...

    • 7 Applied Industrial Research
      (pp. 63-67)

      According to conventional wisdom, even if worker cooperatives can overcome the problems of democratic management and save or borrow the funds necessary to expand or survive during a recession, they are doomed to fail in the long run because they are small and lack the capacity for research and development. Even if they start with up-to-date technology, they remain competitive only until private firms modernize their technology and products. The solution in Mondragón was to create an applied industrial research cooperative that would support and be supported by the industrial cooperatives.

      Ikerlan emerged out of the Escuela Politécnica Profesional under...

    • 8 The Central Role of the Cooperative Bank
      (pp. 68-88)

      When the Caja Laboral Popular began operating in 1960, it employed two people. Within the next quarter-century, it had grown to become one of the most profitable savings institutions in Spain and was playing a central role in strengthening the Mondragón complex. The relationship between the Caja and individual cooperatives is now so strong that the bank determines their norms and guides their development.

      The General Assembly of the Caja is structured so as to represent the interests of the cooperatives it serves, as well as those of its own workerowners, who are outnumbered two to one. Only workers in...

  6. Part Three Managing Change

    • 9 Coping with Internal Conflict
      (pp. 91-102)

      The most serious conflicts experienced by Ulgor and ULARCO occurred in the early 1970s. These events must be seen in the context of internal and external changes. Throughout the 1960s and beyond, Ulgor experienced explosive growth. Its total membership surpassed 3,500 in 1974, burdening the cooperative with the constant task of assimilating hundreds of workers unfamiliar with the ways of cooperatives. This growth period coincided with the approaching end of the Franco dictatorship.

      By 1970 Spain’s dictatorship had lasted a quarter-century beyond the end of the Nazi and Fascist dictatorships. Franco had reestablished the monarchy. The Falange party retained little...

    • 10 Rethinking the Systems of Participation
      (pp. 103-112)

      The 1974 strike sent shock waves through the cooperative complex. It precipitated a series of discussions, centered on questions of internal policies and procedures, designed to discover what went wrong and to devise measures to avoid future breakdowns. As the oldest and largest cooperative and the locus of the most serious conflicts, Ulgor naturally assumed a leadership role in this process.

      In Ulgor, the review and planning activities were concentrated on the social council. After a number of meetings and considerable study, in February 1975, the council had prepared an extensive report that analyzed its own weaknesses and proposed remedial...

    • 11 Changing the Organization of Work
      (pp. 113-128)

      Until the early 1970s, worker participation in the Mondragón cooperative complex was limited to governance: from the general assembly of each cooperative to the election of members of governing councils and social councils. Participation had not been extended to the organization and management of work, which continued along lines characteristic of private firms.

      According to José Luis Olasolo, who served as personnel director of ULARCO from 1974 to 1979, the program to introduce new forms of work coincided with a shift in the organizational structure of ULARCO. From its founding in 1965 through 1969, ULARCO had a collegial form of...

  7. Part Four Coping with the Worldwide Recession

    • 12 Sacrificing for Collective Survival
      (pp. 131-149)

      The Mondragón cooperative complex had the good fortune of developing during the 1950s and 1960s and early 1970s when the Spanish economy was expanding rapidly. Even allowing for favorable conditions, all economists who have studied Mondragón’s financial history report that the cooperatives have far outpaced private Spanish firms. Henk Thomas and Chris Logan have noted (1982, 108), for example, that “a comparison with Spanish industry can only be made for 1972, in which year cooperative efficiency exceeded that of the largest enterprises by 7.5 percent and of medium and small-sized enterprises by 40 percent.”

      By the mid-1970s Spain had entered...

    • 13 Providing for Unemployment Compensation and Support
      (pp. 150-156)

      During the years of expansion, unemployment in Mondragón was a minor problem. Displaced workers generally could be temporarily transferred to cooperatives that were expanding, and even if there were no immediate openings, unemployed members rarely had to wait longer than a few weeks.

      The recession required the leaders of the complex to make major changes to support unemployed workers. These changes were made in several stages, but to simplify a complicated story, we will limit ourselves to an examination of the system prevailing in 1985. The policies and procedures we describe provide further evidence of the ways in which leaders...

    • 14 From ularco to fagor
      (pp. 157-168)

      To understand how ULARCO coped with economic adversity, adopted a new development strategy, and became FAGOR, we need to review the earlier years of the cooperative group.

      During the first five years of ULARCO, from 1965 to 1970, the general management of the group consisted of the coequal managers of the constituent cooperatives, plus some support personnel. This structure provided freedom to develop some exchange of services and information but lacked the capacity for leadership in strategic planning for the group as a whole.

      The appointment in 1970 of Javier Mongelos to the newly created position of general manager of...

    • 15 Expanding Service and Agribusiness Cooperatives
      (pp. 169-176)

      The founders of the Mondragón movement were dedicated to building industrial worker cooperatives with the infrastructure to support their development and growth. In the early years, Mondragón’s leaders reacted with only minor interest to requests for assistance in creating enterprises such as services and agribusiness cooperatives. In the 1980s we see a shift toward a more proactive role, brought about in part by the recession, which had a serious impact on industrial production and employment, and by the interest of the autonomous Basque government in the growth of agriculture and agribusiness. In the 1980s, growth in employment in the complex...

    • 16 The Changing Role of the Caja Laboral Popular
      (pp. 177-192)

      The recession of the 1980s had two major effects on the Caja—and therefore on all of the Mondragón cooperative complex. First, it required the Caja to make a substantial shift in the focus of its operations, from the creation of new cooperatives toward the defense and rescue of cooperatives threatened by impending shutdowns. Second, even as the Caja was confronting crises in many of the cooperatives, its leaders set in motion a process of strategic planning. As a result, major changes in structure and policy occurred, designed to strengthen the position of the complex as it faced intensified international...


    • 17 Strategic Organizational Restructuring
      (pp. 195-211)

      The late 1970s to the early 1990s was the first stage of a period of major organizational restructuring that called for substantial sacrifices. The changes were not nearly as rapid as in earlier decades, but they called for increasing investments in human and material capital and organizational growth.

      Two concerns of the leadership of the Caja set the process of major organizational restructuring in motion: the need to mount the defense and rescue efforts described in chapter 16 and the need to prepare the cooperatives to face intensified international competition as Spain entered the European common market. Responses to these...

    • 18 Facing the Social Challenges of Intensified Competition
      (pp. 212-238)

      This chapter concentrates on the social challenges facing Mondragón as a result of intensified competition. It is, of course, impossible to separate economic and social challenges completely in that many social changes entail major material costs. Here the analysis focuses on the perceived social needs that resulted in those costs.

      Upon returning from Mondragon after our 1990 visit, it seemed that perhaps Mondragón people were even more worried about the future than they were when we visited in 1983. We raised the issue in correspondence to Alex Goiricelaya, chairman of the Central Social Council of fagor, who wrote this response:...

  9. Part Six Lessons from Mondragón

    • 19 Understanding Mondragón’s Founder
      (pp. 241-269)

      Don José María Arizmendiarrieta resisted any attempts to honor him and thus personalize the movement he and his associates founded. Now that he is gone, symbols and images of Arizmendi pervade the cooperatives in Mondragón. The technical school has been named after him. The street linking the school, Lagun-Aro, Ikerlan, and the Caja Laboral Popular now bears his name. Portraits and busts of Arizmendi, made after his death, are in the lobbies of major organizations that support the cooperatives. Quotations from his writings are liberally used in reports for publication and internal circulation and are displayed, along with his portrait,...

    • 20 Ethnic and Organizational Cultures
      (pp. 270-281)

      Were the Basque culture the primary basis for the creation and development of the Mondragón cooperative complex, then the practical implications to be drawn from Mondragón for other societies would be extremely limited. We do not deny that Basque culture has influenced the shaping of Mondragón, but we reject claims that it was culturally determined. At the same time, we recognize that the leaders of Mondragón have built a distinctive organizational culture and that we can better advance our understanding of Mondragón by analyzing this culture than by concentrating on the ethnic culture of the Basque people.

      As applied to...

    • 21 Implications of the Mondragón Experience
      (pp. 282-300)

      Evaluation of the implications of the Mondragón experience naturally falls into two topics: (I) the influence of Mondragón on worker cooperatives elsewhere and (2) a theoretical analysis of the practical lessons to be drawn from the complex.

      The striking economic success of Mondragón has conveyed worldwide the message that a worker cooperative need no longer be considered simply a utopian ideal of a few visionaries on the fringes of an industrial economy. The complex is attracting increasing attention and interest from both practitioners and scholars searching for better ways of organizing production and distribution and the relations between labor and...

  10. Appendix: Evolution of Our Research on Mondragón
    (pp. 301-314)
  11. Bibliography
    (pp. 315-324)
  12. Index
    (pp. 325-334)
  13. About the Authors
    (pp. 335-335)