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William Foote Whyte - Making Mondragón: The Growth and Dynamics of the Worker Cooperative Complex (Cornell International Industrial and Labor Relations Reports)

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Making Mondragón: The Growth and Dynamics of the Worker Cooperative Complex (Cornell International Industrial and Labor Relations Reports)
Author:
William Foote Whyte / Kathleen King Whyte
Publisher:
ILR Press
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Books / Politics
Year:
1988
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CORNELL INTERNATIONAL INDUSTRIAL AND LABOR RELATIONS
REPORT NUMBER 14

MAKING
MONDRAGON

The Growth and Dynamics of
the Worker Cooperative Complex

WILLIAM FOOTE WHYTE
KATHLEEN KING WHYTE

SECOND EDITION, REVISED

ILR PRESS
AN IMPRINT OF CORNELL UNIVERSITY PRESS

Ithaca and London

Contents

Tables and Figures

Tables

Figures

Map

Preface

Until Mondragn came to my attention, I had believed that worker cooperatives reflected noble ideals but had little prospect for long-term survival and growth in modern industrialized economies. My introduction to Mondragn occurred in 1974, when I noticed an article by Robert Oakeshott (1973) on a bulletin board at Cornell University.

The discovery of Mondragn excited me, as it had Oakeshott, and I decided I had to see the Basque cooperative complex for myself. Kathleen King Whyte and I thus set out for Mondragn in April 1975 to conduct our first field study. This trip was supported by a travel grant from the German Marshall Fund.

At that time, the research problem was to explain Mondragns extraordinary record of dynamic development, survival, and growth. That theme was pursued particularly by Cornell graduate student Ana Gutierrez-Johnson, who accompanied us on the 1973 trip, remained after we left, and returned for two more field trips before completing her masters and doctoral theses (1977 and 1982).

In the 1980s, the research problem was to determine how the Mon-dragon cooperatives were coping with extreme economic adversity. The cooperatives had to struggle simply to hold their own in the Spanish economy, which was much more severely affected by the recession than were the economies of other Western industrialized nations.

In October 1983, Kathleen and I made our second trip to Mondragn. That visit began a much more intensive research process during which our personal project developed into a highly collaborative relationship with Mondragn people and colleagues and students from Cornell. This enabled us to follow at close range the painful but extraordinarily successful struggles of the cooperatives to reorganize without sacrificing their human values. As we left the field in 1986, it appeared that Mondragn was gaining new economic and technological strength and again entering a period of dynamic growth. In fact, that year, when unemployment in the Basque provinces remained higher than 25 percent, the Mondragn cooperatives had added 500 jobs to reach an all-time-high employment level of more than 19,500.

With the publication of our book in 1988, we thought we had completed our Mondragn research. We continued to receive Mondragns monthly magazine, Trabajo y Union, and other documents, however, and it soon became clear that we had ended our study just as the cooperative complex was undergoing a series of extraordinary structural and policy changes. Designed to fortify Mondragn so it could compete successfully in the European common market, these changes were so exciting that we decided to return to Mondragn for six days in April 1990. Interviews with some of the key people involved in the changes, combined with rich documentation they gave us, encouraged us to bring the story up-to-date and reflect on the significance of the events that were unfolding. The appendix describes the evolution of our research, including what we learned in working with our Mondragn associates on a Spanish edition of this book and during our field trip in 1990.

WILLIAM FOOTE WHYTE
March 1991

PART ONE

Mondragn in Context

The Importance of Mondragn

Mondragn 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 Mondragn 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 verdict has been the conventional wisdom ever since:

All such associations of producers that start as alternatives to the capitalist system either fail or cease to be democracies of producers.

In the relatively few instances in which such enterprises have not succumbed as business concerns, they have ceased to be democracies of producers, managing their own work, and have become, in effect, associations of capitalistsmaking profit for themselves by the employment at wages of workers outside their association. (Coates and Topham 1968, 67)

It is now clear that the Mondragn cooperatives have met both tests posed by the Webbs. Besides their employment growthfrom 23 workers in one cooperative in 1956 to 19,500 in more than one hundred worker cooperatives and supporting organizationstheir record of survival has been phenomenalof the 103 worker cooperatives that were created from 1956 to 1986, only 3 have been shut down. Compared to the frequently noted finding that only 20 percent of all firms founded in the United States survive for five years, Mondragns survival rate of more than 97 percent across three decades commands attention.

Nor have the Mondragn cooperatives lost their democratic character. They continue to operate on the one-member one-vote principle. Many of the cooperatives employ no nonmembers, and, by their own constitutions and bylaws, no cooperative may employ more than io percent nonmembers.

THE SIGNIFICANCE OF A UNIQUE CASE

Responding to the first report on Mondragn at the 1976 annual meeting of the American Sociological Association (Gutierrez-Johnson and Whyte 1977), a discussant dismissed the case as simply a human-interest story. His argument was that the success of Mondragn depended on two conditions: the unique nature of the Basque culture and the genius of the founder, Father Jos Mara Arizmendiarrieta. Because neither of these conditions could be reproduced anywhere else in the world, he felt the Mondragn story was without scientific or practical significance.

The most general answer to such a critic is that the criticism is itself unscientific. It is one of the fundamental principles of science that, on discovering an exception to a law or generalization, one does not rationalize it away and reaffirm the general principle. On the contrary, one concentrates ones attention on the exception, in the hope that it will lead to a modification of the previously accepted generalization, or to a more basic reformulation, opening up new avenues of scientific progress. Nevertheless, we are now grateful to this critic for forcing us to think harder, both about Mondragbn in the context of the Basque culture and about the general scientific and practical implications that can be drawn from this case.

QUESTIONS FOR RESEARCH AND PRACTICE

The salience of the questions we raise throughout this book depends in part on the time period we are addressing. Mondragn experienced rapid growth from 1960 through 1979. Employment leveled off from 1980 through 1986, while Spain was mired in a severe recession. There were slight drops in employment in 1981 and in 1983, and then small increases again from 1984 through 1986.

Although questions regarding economic success and failure are relevant for both periods, the primary question for the years through 1979 is, How did Mondragn manage such rapid and sustained growth? For the later period, the question is, How has Mondragn been able to surviveand even resume modest growthin the face of extreme economic adversity?

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