The Mondragon Experience: a Story of Grassroots Economic Revival

My first post addressed the urgent need for a economic renewal of our inner cities.  In this post we look at an amazing precedence established in Spain that gives us inspiration to consider how we might achieve this type of economic transformation in Memphis.

The Story of the Mondragon Corporation

The year is 1941 and Spain has just gone through one of the darkest periods in its country’s history.  The fascist regime led by Republican establishment has decimated entire towns and families in the Spanish region. Particularly hard hit was the Basque country.  The residual   effects of the Civil War were disastrous: inflation soared, economic recovery faltered; Spain registered negative growth rates for the next decade while the per capita gross domestic product (GDP) during this period was barely 40% of the average for West European countries.  The period was the age of hopelessness. 

Enter a poor Spanish Priest

Father José Maria Arizmendiarrieta Madariaga also known as Father Arizmendi, was a Spanish priest born in the Basque region of the country. He lost an eye in a childhood accident and because of his resistance to the Republican front, he nearly lost his life in front of a firing squad saved only by an administrative oversight.

He was assigned to a small church in the Mondragon area to replace the previous priest that had been shot.  Needless to say the man’s presence was unremarkable: the one-eyed priest read badly; one parishioner described him as such: “He spoke in a monotone and was difficult to understand.” The church members initially requested him to be replaced. Nevertheless, he was determined to find a way to assist his congregation and realized that economic development – jobs – was the key to solutions to the town’s other problems.

Charter school funded with street solicitations

In 1943, Arizmendi set up a vocational charter school. The most fascinating, odd or unconventional aspect of the school is how the priest raised money to start it:  his church members would stand on street corners and solicit contributions. Begging really. Under his tutelage, the school quickly expanded and played a key role in educating and economically empowering the townsfolk using a worker-ownership cooperative business model conceived by the priest.  In this model, the worker is also the owner, a simple but radical adjustment for the time period.

The first business

In the 1950s, Arizmendi and 5 graduates of the school set up the first co-operative enterprise  Ulgor, where they manufactured  a simple kerosene stove.

The striking aspect of this start-up business, is that the Arizmendi and his students raised $350,000 dollars from the poor townspeople. That’s a lot of money back in 1955!  They would go into the bars and restaurants and other “brick and mortar” social outlets and talk about their great plans. In reality they had no business!   The money raised went towards purchasing the licensing and ownership rights for a pre-existing failing business.  You see,  at that time, only the select class, not the working class could obtain new business licenses- a convenient way to keep the select class intact and keep the working class “in their proper place”.

The growth of a vision

From Arizmendi’s original vision for economic transformation, the corporation, now known as the Mondragon Cooperative Corporation, has grown into a complex worth 24 billion dollars and employing 100,000 worker-owners in 120 internal semi-antonymous businesses. It comprises factories,  a multibillion dollar bank, housing, insurance agencies, a grocery store chain and a network of retail stores throughout Spain. Globally the MCC invests in industries located all over Europe, Latin America and Asia. It also has a full-time University dedicated to research and development of new products and technologies.

No lay-off policy

From the founding of the company in 1956 to the present there has not been one job lay-off. Why? Arizmendi founded the company on the basic philosophy that a corporation should the place rights and well-being of workers above capital, with company growth aimed at providing additional jobs and job security to employees.

Entrepreneurial heaven

The corporation is well aware that it can’t generate and maintain high-quality well-paying jobs without continual innovation and creativity infused into the culture.  As such, the company formed a cooperative unit dedicated to incubating ideas into new business units. The result has been rates of innovation that challenge those of the world’s most successful corporations.

Mondragon manufactured Spain’s first computer chips. Other Mondragon cooperatives are producing wind, solar, and hydrogen power. New business opportunities in health and food, communications, and alternative energy are now being researched, as well as shared housing for elders and furniture convenient for older people.  A quarter of the products that the Mondragon Corp will make in 2012 are not yet in production. That’s innovation!

Democratic

Each worker-owner had one vote and profits were pooled and largely reinvested into the company for entrepreneurial efforts and for covering losses in difficult years ( as opposed to cutting jobs).    These bylaws promoted equality, ensured future jobs and prevented corruption that could emerge from concentrated power and wealth.

Closing

Clearly,  Arizmendi was a person deeply disturbed by what he saw around him.  Seemingly, he was overwhelmed and ill-equipped to provide what the town needed.  He had a choice, do something or retreat into a spiritually paralyzed state of despair.   He acted and he demonstrates that a clear vision born and sustained by a pure unyielding conviction can lead to both spiritual and economic transformation of a society.  He gives us the inspiration and hope that we can do the same in our own communities . Be encouraged.

P.S. I must give credit where it is due: Anon 3:46 back July 2008 was the original person ( whoever you are!) that suggested I look at the Mondragon model. Thanks again!