“The objective of the cooperative is not to produce rich people, it’s to produce rich societies”
Today, July 2nd, is the International Cooperatives Day and at Mondragon Assembly would like to contribute our bit to increase awareness about cooperatives.
As a cooperative of the Mondragon Corporation we would like to share this news extracted from Bloomberg L.P. about the largest network of cooperatives in the world.
Below you will find the full article published by Bloomberg L.P.
How a Worker-Owned Business Model in Spain Is Keeping Inequality in Check
An increasing number of workers and business owners in the US are looking to a small town in northern Spain as a model to tackle wealth and income inequality.
The 22,000-person town of Mondragon in Spain’s Basque region is home to the world’s largest worker cooperative network, called Mondragon Corporation. Founded half a century ago by a priest and some of his acolytes, the co-ops have found a way, crisis after crisis, to keep unemployment and income inequality in check.
“We are seeing growing interest, especially from very developed countries like the US or the UK or in Western Europe,” says Ibon Zugasti, an international project manager at Mondragon headquarters. Those who are interested in starting their own worker cooperatives “really think that they need something singular and disruptive to get a new solution to old problems.”
In this week’s episode of The Pay Check podcast, we visit Mondragon and hear from its executives, workers and other researchers about what sets the cooperative model apart from places that also have strong track records on equality, and how the system works during times of crisis.
At the nearly 100 cooperatives that form part of the Mondragon network, many of the workers are also owners. They set their own salaries in an annual vote and receive a share of their company’s yearly profits. As a rule, managers can only earn six times more than the lowest paid worker. At some companies, the gap is even smaller.
“The objective of the cooperative is not to produce rich people, it’s to produce rich societies,” said Igor Herrarte, an engineer at Mondragon Assembly, which makes solar panels and machinery to help firms automate their production. “We don’t have a lot of rich people — or not very rich — but on the other hand, we also don’t have poor people.”
Income inequality in the area is on par with countries such as those in the Nordic region. The province that’s home to most of Mondragon’s cooperatives, called Gipuzkoa, had a lower Gini coefficient — a measure of inequality — than Finland and Norway. The lower the figure, the smaller the differences in income distribution.
One of the ways those Nordic countries tackle inequality is by redistributing the proceeds of high taxes to lower-income residents. But taxes in the Basque region are lower, on average, than in those places. Instead, the Mondragon cooperatives create wealth for their workers.
Interest in worker co-ops tends to increase in times of crisis. The number of such companies in the U.S. doubled to more than 600 from 250 in the decade or so after the 2008 recession, according to Mike Palmieri, an associate researcher with the Ohio Employee Ownership Center at Kent State University.
“Worker co-ops, and really co-ops of all kinds, they tend to emerge when there’s a market failure,” he said. There was an increase during the economic downturns of the 1870s, 1930s and 1970s, too.
“What’s the service that a worker cooperative provides? A very simple answer is good, stable employment with some wealth building opportunities,” Palmieri said. As the US emerges from the pandemic, “conditions are pretty ripe for further worker cooperative development.”
Co-ops also have the potential to allay some concerns that underpinned the Great Resignation, such as frustrations about not having a say in workplace decision-making. The model can also help workers address concerns about precariousness that came to the fore during Covid-19. Drivers in New York City, for example, launched a cooperative in 2021 to compete against Uber and Lyft. It now has 6,700 drivers.
The ability to set pay, benefits and other parameters is what led Beth Heeg and several other teachers in January to purchase Shine Nurture Center, a child-care center in Cincinnati, Ohio, where they had been working.
“I would never have chosen to become an owner of a child-care center without the option of the cooperative,” said Heeg, who now works as the office manager there.
“There’s just a lot of pressure put on child care. And there’s not a lot of voice given to the folks who are in charge of it,” she said. Post-pandemic, a transition to such a model, she adds, “might be a really good solution for teachers at centers who feel like they want to have a voice.”
Shine is one of fourteen cooperatives in the Co-op Cincy network in Greater Cincinnati, which was founded in 2011. The organization received requests and applications from one dozen small businesses at the end of 2020 that were interested in turning themselves into co-ops, an increase from the previous year.
Some of the inquiries were from Baby Boomer-generation business owners who were exploring options to sell their companies before they retire. Much of the interest is from executives and employees who are “unhappy with how their current jobs, the current economy has been working for them,” said Ellen Vera, director of co-op organizing at the network.
As Vera and her colleagues work to transition existing businesses into worker-owned cooperatives, or create new ones, they say they are looking to Mondragon as an example of the kind of impact they seek to have in Greater Cincinnati.
“On issues like inequality and on issues like poverty, I think there’s just a true tendency to throw up our hands and feel like we can’t really do anything,” said Kristen Barker, Co-op Cincy’s executive director. The impact of Mondragon’s vast cooperative network, which employs 80,000 people globally, shows progress is possible, Barker says. “Mondragon is our North Star and many other people’s North Star.”
That impact is evident in and around the town of Mondragon.
“When I go to other areas, I notice much greater social differences. Here, the manager can be my neighbor. Elsewhere, I guess they live in gated communities,” said Baltasar Garcia Leon, who has worked for more than three decades assembling washing machines at the cooperatives. That’s brought him professional stability and relative affluence.
“My experience has been very positive,” Garcia Leon said. “I’m 59 years old and I’m still working and I’ve held on to everything I’ve fought for.”
The profit-sharing at his cooperative has allowed Garcia Leon to build up enough savings to retire early, he says, an example of how shared ownership can help members build wealth.
“What employee ownership allows you to do is not just provide a higher wage via income, but it gives individuals who otherwise wouldn’t have wealth and assets, wealth and assets,” said Kent State’s Palmieri. That, he said, attacks “economic inequality at its root.”