Last week we came
across an
article on the Mondragon Cooperatives in Spain. And what are the Mondragon Cooperatives, you
ask? (People who are not familiar with
them tend to get blank looks, even outrage, when they admit they never heard of
them so we’ll spare you the humiliation if you don’t know. And the sense of superiority if you do. . .
.)
 |
| Coinage of the short-lived Euzkadi Republic |
First off, “Mondragon”
isn’t just a cooperative, or even just cooperatives. It’s a corporation and a federation of
producer cooperatives located in the Basque region of Spain, what broke away
during the Spanish Civil War briefly to form the Euzkadi Republic. Founded in 1956 in the town of Mondragoe, it
has its roots in a technical college founded in 1943 by a Catholic priest,
Father José María Arizmendiarrieta.
Today the corporation and federation employ around 75,000 people in four
areas of activity: finance, industry, retail, and knowledge (don’t know what
the last refers to, but maybe data processing?).
Anyway, without
going into too much detail, our opinion is that the Mondragon model is excellent
— as far as it goes. From the Just Third
Way perspective, there could be a few tweaks, as even the rather laudatory
article noted some weaknesses in the system, the most obvious of which is
governance.
 |
| Alexis de Tocqueville |
By
that we mean that the system uses the principles of European style democracy
instead of American of the type Alexis de Tocqueville described in Democracy in America (we won't mention
today's version).
That
is, majority rules. It is the
organization that has the rights and doles them out to those with power or as
those in power dictate. In American
style democracy, majority rules, but only insofar as it respects the rights of
the minority. In the American model,
rights come from people and are delegated to the organization (this changed in
the U.S. with the Slaughterhouse Cases
of 1873, but that's another story. . . .).
The
bottom line is that, yes, majority should rule, but only up to the point where
neither basic human rights nor the rights of the minority are in any way harmed
or infringed. What de Tocqueville called
“the tyranny of the majority” is always a danger.
There
are two other weaknesses not noted in the article, however.
1)
reliance on past savings, and
2)
the system only applies to workers (and then, as noted, only to some, not to
all).
 |
| Louis Kelso warned of the dangers of the slavery of past savings. |
The
problem with limiting economic growth is that it restricts financing for new
capital formation to what has been withheld from consumption. This not only curtails demand, and thus
militates against the feasibility of the new capital, it tends to limit
ownership to those with the ability to save, or the persuasive power to borrow
the savings of others . . . who take a share of the profits, again reducing the
financial feasibility of the new capital.
It
is, frankly, much better to finance out of future savings instead of past
savings. That is, instead of saving by
reducing consumption in the past, you save by increasing production in the
future. The future increases in
production can be embodied in contracts called bills of exchange, which can be
turned into financing by commercial banks, or used directly in trade as money
(most Big Business transactions are done this way already; it’s called “disintermediation,”
and it’s a way that companies and individuals with good credit can avoid the
banking system for large transactions).
As
for limiting participation to workers, a more just system would apply to both
workers and all interested parties, those who have somewhat inaccurately been
described in recent literature as “stakeholders” (we have a special lecture on
why that term is misleading, but that, again, is a subject for another day). These include families, employees at
non-profits, government workers — everyone. It would be much easier to apply to everyone
by using commercial banking techniques and financing out of the future profits
of the new capital formed.
The bottom line
is that the Mondragon system — in common with many others — could benefit
greatly from the application of modern financial techniques and Justice-Based
Management.
#30#
