Who produces “wealth”? [3]

So far, the mini-series has looked at a small business moving towards a medium business and asked who produces the wealth. This is the last part.

JD has suggested looking at these two books-

Wheels Of Misfortune by Jonathan Wood, in which:

“He argues that the key to the industry’s failure lies in its long time reliance on insular, self-taught leadership and a national environment where engineering has been relegated to a secondary social status.”


Indictment by David Morrell which gives a detailed account of how Mitchell Construction became a victim of the political power game over the Kariba Dam.

JD remembers the demise of Mitchell who were a huge company up to that point. Since then political interference and influence got worse and the big companies got bigger and the smaller companies were eliminated.

We have almost reached the point, he says, where we are governed by and for corporations instead of by the people for the people.

That’s a different argument to whether cooperatives are good or not – the question of corporations gets into corruption, crime and government, JPM, GS and the like, undue influence – crony capitalism in other words.

Coming back to cooperatives, JD goes on:

Common ownership is the best way because it works (which is why that too is portrayed as a socialist or communist plot). Check out the Green Bay Packers or working men’s clubs which are all owned by their members and collectively the clubs own the Federation Brewery which supplies them (and the House of Commons!).

Or Mondragon in Spain.

So let’s look at Mondragon:

[It’s] a corporation and federation of worker cooperatives based in the Basque region of Spain.

Mondragon cooperatives operate in accordance with Statement on the Co-operative Identity maintained by the International Co-operative Alliance. The standard Statement of Co-operative Identity largely eliminates perverse incentive that contribute to many problems of governance found in organizations with more traditional management structures.

Its areas of activity include:

It’s been lauded by social activists and those of the left around the world. It’s the poster corp for them. Yet some of the harder left, the Marxists, are not happy with Mondragon:

While the Mondragon cooperatives have been successful in terms of business objectives, they are not exactly harbingers of a classless society. Despite the fact that everybody is an “owner”, the blue-collar workers on the assembly line do not feel that they have that much of a stake in the company.

The most effective work on Mondragon so far has been by Sharryn Kasmir:who was inside the corporation for some time:

The author is a sociologist who spent quite a bit of time in the ’80s and ’90s in Mondragon. The important thing about this book is that it shows that a formal system of “economic democracy” does not ensure that workers will have effective control over the places where they work.

In the Mondragon cooperatives there is an internal class division. The managers and engineers are really in control. Worker “social committees” were not given time off from work to do their job properly, to raise issues of concern to workers. And workers were prohibited by the rules of the coops to bring in outside consultants, because that would enable them to challenge management’s plans.

Effective worker management control would have to go beyond just a general meeting and “one-person, one-vote” democracy to actually training workers to know the ropes and give people paid time to learn and participate effectively.

The “myth of Mondragon” is the myth that workers are really in control of the coops. At the same time, this is not to say that workers have not benefited from the coops. And capitalist employers in the Basque country have also introduced worker participation schemes to get the same increases in productivity the Mondragon coops get from their profit sharing and nominal (but minimal) avenues for worker input.

Another review said:

While it is true that the cooperatives have provided job stability and health care – things that all folks ought to be guaranteed – Kasmir also points out that globalization has exacerbated class issues within the cooperatives as well as created an atmosphere in the cooperatives that is less distinct from the local private firms than it maybe once was.

JD points out that that may be so but the ownership is still in workers’ hands and so they cannot be taken over by corporatists and banksters.

The problems of something like Mondragon are not in the idea – a fine idea of workers having a say, a nice ideal – but in:

1. The global socialists being in a position to hijack it, especially as it has gone international in scope and that’s where Them are poised, owning most of the productive sector of the world and in a position to dictate terms [see near the end of the post].

2. Socialists seeing the chance in it of the socialist state they dream of which of course can never happen as Them are poised to be its “leadership” and have done so every time something like this has been tried.

3. As mentioned above by a few people – it is not what is claimed – in fact it is a corporation with a leadership class, managers, sub-managers and the lower class workers, exactly as it is in any other corporation. This is just human nature. The talented and managerial class will always rise and run the show.

The best that can be hoped for is that, being now global in scope, it can buttress those in Spain against the current disaster far better plus it’s not on Them’s list for elimination – quite the opposite. It is the socialist flagship and so those inside are not going to be “austeritied” like the rest of the nation. The Basque region is 40% better off than the rest of Spain for a start.

A sympathetic piece by an American who went to see Mondragon summed it up thus:

Mondragon is ultimately run by businesspeople. They make no bones about it, and this may well be a key factor behind their success. They operate based on higher principles than most enterprises, but they also realize that they have to make money or the whole project will be for nothing.

An interesting study was Eroski:

Eroski is internally complex even from a simple business standpoint. It operates everything from tiny corner stores up to massive hypermarkets, but also gas stations, travel agencies, and stores selling perfume or sporting goods. They now have roughly 2400 separate locations, employing 42,000 people. Of these, roughly 1/3 are owners, with a large minority of that group located outside the Basque Country. In many cases, Eroski builds a shopping center when it wants a new store (presumably employing other cooperatives) and then rents out the other spaces.

Eroski recently bought up a major competitor, and workers at all stores are given a chance to vote whether to become a cooperative store. But in addition to its major role in the growth of overall worker-owner membership in MCC, Eroski is also dabbling in consumer ownership, offering shares for a nominal price of 1.20 Euros. These consumer members can elect their peers to half of the seats on Eroski’s governing council (equivalent to the board of directors), and can give input through other channels. However, I found Eroski not to be a particularly strong or impressive form of consumer ownership.

As much as I hate to make this comparison, Eroski is a sort of cooperative version of Walmart. I’m not comparing their overall business models, and Eroski’s treatment of workers is a polar opposite to that of Walmart (whose employees’ pay is so low they sometimes qualify for welfare). But from the retail floor, it looked like a giant big box store full of really inexpensive products. And some of these prices are possible because Eroski has formed an international buying group with leading retailers in France and Germany (alas, not cooperatives themselves). There were dozens of checkstands, and we weren’t even in one of their biggest stores, which have up to 60 lanes.

The notion of shares is where the strength of cooperative worker ownership comes in. compare that to HP where shareholders are trying to sack the board but the board are defying them. Take Melbourne Football Club with its elected leadership but that leadership is resisting calls for a cleanout. Though it is member influenced, it is not owned in the formal way Mondragon is.

I’m not against Mondragon and if it is hedging some Spaniards and others against the ravages of recession, all well and good. I just point out that it is not the worker-owned ideal it makes out and it is seriously messing with corporations internationally. It has to because Them owns most of the productive sector now, e.g. in grain. My attitude is that of the last author who wrote:

I’m willing to cut them a break, but I’m not willing to leave it at that. MCC is a model with serious shortcomings. It is a serious attempt to apply idealistic principles in the real world, and it is doing a pretty good job of that. But the next time something like Mondragon is created, its members should learn from MCC and create an even better expression of cooperative values and principles. That’s how we can build a new future.