A Contribution to the Discussion on Cooperatives

By ALAN BENJAMIN

A question keeps coming up as we advance the struggle for independent working-class politics: How should we relate to the workers and activists who are part of the cooperatives — particularly the workers’ co-ops, which Marxist economist Richard Wolff (among many others) points to as a viable alternative to a capitalist system in crisis?

I support the idea that we need to reach out to all workers and youth who are looking for an alternative to capitalist exploitation; we need to draw them toward an independent working-class fightback and toward Labor and Community for an Independent Party (LCIP). This includes people working in cooperatives, especially the union co-ops. I also have learned from Black activists that forming workers’ co-ops is often the only means available to make a living; it is not a matter of ideological choice, it is simply a matter of “survival.”

But I am not in favor of embracing the workers’ cooperatives as a solution to the capitalist crisis or as a viable avenue to independent trade unionism and independent working-class politics, as Wolff suggests.

To begin, it is important to note that there are multiple forms of co-ops. Producer co-ops (including big agricultural co-ops) tend to fight unionization. Consumer and workers’ co-ops are different; they often work with unions, and many organize the co-op workers into their unions.

I have studied the issue over the years, especially the co-ops in Spain, France and Latin America.

I also have paid some attention to the Multi-Union Incubator Model (MUIM), which is the most popular form of union-oriented workers’ co-op in the United States from what I can tell. All variants of the MUIM that I came across have taken the Mondragón Company in Spain as their organizing model. Mondragón Internacional, based in the Basque Country, is Spain’s seventh-largest corporation. It began by producing household appliances and has since branched out to other sectors in recent years. It has subsidiaries worldwide, including in the United States, where it has entered into partnership with the United Steelworkers (USW).

I am attaching below an article by Phillip Gasper on the evolution of the Mondragón Company that was published in International Socialist Review in January 2014. It provides, in my view, a thorough and critical examination of this “model” of workers’ co-ops and, as such, deserves special attention.

Gasper’s article underscores the following key points:

The theoretical underpinnings of Mondragón can be found in the Catholic Worker doctrine of the late 19th century and early 20th century. It’s a doctrine that denies the existence of class struggle — that is, struggle between social classes (working class vs. capitalist class) with contradictory class interests.

Gasper writes:

“The Mondragón cooperative was originally the idea of a Catholic priest named José Maria Arizmendiarrieta who regarded class struggle as destructive and who hoped to overcome it not by directly challenging the power of the exploiting capitalist class, but by creating a small corner of the economy in which class differences no longer existed.”

To survive in a capitalist economy, co-ops — sooner or later — will have to intensify the rate of exploitation of their own workers, or downsize, to keep up with the competition. Mondragón is the best example. It has become a transnational corporation that differs very little from a traditional multinational company. Most workers employed by Mondragón outside Spain (Morocco, Egypt, Thailand, Poland and China) are not even members of the co-op. In Poland, Mondragón employed sweat-shop labor in one of its contracted operations.

Gasper writes:

“The problem is that cooperatives that are established in the context of the capitalist market must compete in order to survive, and if the rate of exploitation is high among your competitors, then you must match it.”

Given that class contradictions do not exist under capitalism, according to this doctrine, it’s just a matter of ensuring the best forms of collaboration between management and workers in the workplace. As such, work slow-downs, work-to-rule, and strikes are not just strongly discouraged, they are often contractually prohibited. This arrangement is generally known as “corporatism.” It takes on many forms — from co-ops to all sorts of “labor-management partnership schemes.”

It is therefore no wonder that, as Gasper writes,

“Even fascists have sometimes praised co-ops. In the 1960s, the labor minister of Spain’s fascist dictator General Franco awarded the Gold Medal for Merit in Work to Mondragón’s Arizmendiarrieta. Decades earlier, in fascist Italy, Benito Mussolini established the National Fascist Cooperative Agency (Ente Nazionale Fascista della Cooperazione) and encouraged the expansion of cooperatives in the farming and food processing sectors as a way to downplay class differences.”

There is another aspect to this question that Gasper does not deal with, at least not directly: the role of trade unions that enter into partnerships with co-ops, or organize co-op members into their unions.

I cannot claim to be an expert on this matter, but I have read numerous articles in the corporate media (Forbes magazine in particular), in the press of the United Steelworkers (on their partnership with Mondragón), and in the publications of many NGOs (such as Grassroots Economic Organizing) that praise the contributions that the unions can make to “improving” the productive capacity of the co-ops.

The following characterizations can be found in most of these publications:

– the unions, with their “longstanding expertise,” help “rationalize work processes”;

– unions make the workplace “more productive” and “more apt to compete in the marketplace”; and

– unions can act as buffers to “improve relations between managers (who are appointed by the workers) and the workers on the shop floor.”

This is not— and nor should it be — the role of the trade unions. “Rationalizing” production under a capitalist economy (and co-ops cannot exist in a bubble outside capitalist production) means intensifying the rate of exploitation. This is inescapable.

Gasper makes a final point that does apply to the trade unions. He writes: “Co-ops by themselves do not challenge the system and may divert energy away from doing so.”

In fact, the co-ops can do much worse than divert energy away from challenging the system. In Bolivia, the government of Evo Morales — in the name of promoting the interests of “all the people,” including the employer class — privatized a large number of mines and gas fields and converted them from state-run corporations into workers’ cooperatives. This severely weakened the power and fighting capacity of the militant COB trade union confederation and the FSTMB mineworkers’ federation, as unions were banned from the co-ops. This decision, among others, turned the unions away from the Evo government — which by no means should excuse their shameful and treacherous declaration urging Evo to step down and turn power over to the fascist coup-plotters.

Trade unions must remain true to their mission: acting as independent instruments to defend and advance the sole interests of the workers (not management) and to spearhead the fight in defense of the interests of the working-majority and all oppressed communities.

Having said this, I am certain that not all co-ops conform tightly to the foundational doctrine of co-ops that I have outlined above. There are many “niche” co-ops, usually functioning in small-scale units (bakeries, food stores, etc.), that are both efficient and far-better places to work — and that have survived without having to copy the practices used by other employers.

I am also certain that many workers and activists have joined production co-ops because they want to fight against exploitative workplaces; they want to be organized against exploitation and oppression in the workplace.

And I am even certain that there are a few cases where, at least for now, workers’ co-ops have been able to survive under less-exploitative conditions. I am thinking of Republic Windows in Chicago — now New Era Windows Co-op — which was lifted out of bankruptcy with the help of UE, and workers’ jobs were preserved, which is no small matter. But this case, I would argue, is more the exception than the rule.

The growth of co-ops is understandable, particularly in the right-to-work South (which has now been extended, under Janus, to the rest of the country). It is extremely difficult — if not impossible — under current labor laws to organize new workers into unions. This is why many unions have entered into these co-op partnerships and sought out new members from co-ops, albeit under different arrangements and with a different mission.

We need to win these co-op workers (and consumers) to the banner of independent working-class fightback and trade unionism, and to independent working-class politics in the arena, one step at a time, as we are proposing with the LCIP campaign. But we can only do this, in my view, if we engage them in this discussion from the standpoint of a firm understanding of what we mean by class struggle and working-class independence. If we are not clear, I fear that we will wind up promoting a new party that is more a People’s Party — a left-populist party — than an independent party rooted in the unions and communities of the oppressed.

I, of course, welcome comments on this piece and other contributions to this important discussion.

* * * * * * * * *

Are Workers’ Cooperatives the Alternative to Capitalism?

Co-ops show that workers can run production, but they don’t offer a strategy for changing society

By PHIL GASPER

(International Socialist Review No. 93, January 2014)

(excerpts)

In an op-ed for the British newspaper The Guardian [1], Marxist economist Richard Wolff argues that a successful alternative to capitalism exists. He reports on a recent visit to the Mondragón Corporation (MC) based in the Basque region of Spain, the largest workers’ co-op in the world. Over the past few years, Wolff has been perhaps the most prominent economist who has attempted to explain to a general audience how the financial crisis of 2008 was rooted in capitalism itself.[2] He also rightly rejects Soviet-style bureaucratic planning as a solution, describing it as state capitalist rather than socialist or communist.[3] For both those reasons, the anti-capitalist model that he proposes deserves serious attention.

Mondragón was founded in 1956 and originally made paraffin heaters with a handful of workers, but over half a century later, it has developed into an economic giant. Today it is the seventh biggest Spanish company, employing over 80,000 people in financial, industrial, retail, and knowledge divisions, with over $19 billion of sales in 2012 and eighty-six subsidiaries in seventeen countries.

According to Wolff, “In each enterprise, the co-op members . . . collectively own and direct the enterprise. Through an annual general assembly the workers choose and employ a managing director and retain the power to make all the basic decisions of the enterprise.” He goes on to paint a very positive picture of how Mondragón functions, concluding “MC seems a welcome oasis in a capitalist desert.” …

Mondragón was set up with the ideals of worker participation, solidarity and equality, but as the business has grown bigger and bigger, and become more and more integrated into global capitalism, its founding principles have applied only to a shrinking percentage of its workforce.

In 1993, Britain’s Guardian newspaper reported that Mondragón was restructuring to get ready to compete in the European single market. It noted that “increased salary differentials, advertising campaigns in Fortune and cooperative alliances with companies like Hotpoint have had many co-op workers wondering whether in the new Mondragón Cooperative Corporation [MCC] some members are more equal than others.”[9]

By this time daily life for most Mondragón workers was not noticeably different from working for a more traditional capitalist employer, although with greater job security. Decision-making had become highly centralized, with most co-op members having no say in the company’s day-to-day operations. Perhaps not surprisingly, in a survey comparing job satisfaction of Mondragón manual workers with workers in a similarly sized privately-owned company, there was little difference between the two groups, with the Mondragón workers slightly less satisfied.[10]

A few years later the Guardian reported, “MCC members have learned to think like the shareholders of any other global business. In order to protect their own jobs from fluctuations in demand, 20% of the workforce are on part-time or short-term contracts and can easily be shed.” The corporation president, Antonio Cancelo explained: “Our clients cannot guarantee us steady workloads, so we have to have a number of people on temporary contracts. We live in a market economy. That we cannot change.”[11]

Meanwhile, most workers employed by Mondragón outside of the Basque region are not members of the co-op. By the late 1990s Mondragón was setting up joint ventures with capitalist firms in other parts of Spain, and operating plants employing low-wage labor in countries such as Morocco, Egypt, Thailand, and China.

MCC adopted an ethical code for its foreign employees and promised that their treatment would reflect the cooperative’s “core values.” But in early 2011, Mondragón was accused of employing sweatshop labor in an appliance manufacturing company it owns in Poland, where low-paid workers started a work-to-rule.

MCC’s image suffered a further blow last November [2013] when one of its largest components, the domestic appliances manufacturer Fagor Electrodomésticos, was forced to declare bankruptcy. Fagor had run up debts of over one billion dollars during Spain’s severe and continuing economic crisis, and the Mondragón Group General Council decided it could not risk lending the company any more money. Attempts by Fagor’s management to persuade US hedge funds to invest in the co–op also fell through.

Almost 2,000 workers lost their jobs in the Basque region and another 3,500 were laid off from Fagor factories in France, China, Poland, and Morocco. MCC’s Corporate Employment Office offered the Basque workers help with finding work, but hundreds of them occupied one of the affected plants in Edesa and workers later formed a human chain outside MCC’s main office in Mondragón.[13]

§ § §

But the problem is not just that over time Mondragón has accommodated itself to the practices of the capitalist market in order to survive. From the very beginning the co-op saw itself as providing an alternative to struggle against the system.

The Mondragón cooperative was originally the idea of a Catholic priest named José Maria Arizmendiarrieta who regarded class struggle as destructive and who hoped to overcome it not by directly challenging the power of the exploiting capitalist class, but by creating a small corner of the economy in which class differences no longer existed.

Co-ops by themselves do not challenge the system and may divert energy away from doing so.

Even fascists have sometimes praised co-ops. In the 1960s, the labor minister of Spain’s fascist dictator General Franco awarded the Gold Medal for Merit in Work to Mondragón’s Arizmendiarrieta.[14] Decades earlier, in fascist Italy, Benito Mussolini established the National Fascist Cooperative Agency (Ente Nazionale Fascista della Cooperazione) and encouraged the expansion of cooperatives in the farming and food processing sectors as a way to downplay class differences.[15]

Individual co-ops do not threaten the system, are likely to degenerate, and can absorb time and resources that could be used for other kinds of organizing. What is needed is a political strategy, not one focused primarily on attempting to create alternative economic models within existing capitalist society.

Endnotes

[1] “Yes, there is an alternative to capitalism: Mondragon shows the way,” The Guardian, Sunday, 24 June 2012 (http://www.theguardian.com/commentisfree…).

[2] Capitalism Hits the Fan: The Global Economic Meltdown and What to Do About It, 2nd ed. (Northampton, MA: Interlink Books, 2013).

[3] Democracy at Work: A Cure for Capitalism (Chicago: Haymarket Books, 2012), chapters 3 and

[9] Andy Robinson, “Co–ops face an unequal fight,” January 2, 1993.

[10] Sharryn Kasmir, The Myth of Mondragón: Cooperatives, Politics, and Working Class Life in a Basque Town (Albany, NY: SUNY Press, 1996), chapters 5 and 6. See especially pp.162–4.

[11] Giles Tremlett, “Basque co-op protects itself with buffer of foreign workers,” October 23, 2001 (http://www.theguardian.com/business/2001…).

[13] John McNamara, “Contradictions in Paradise: When the Workers Become Bosses,” January 31, 2011, http://www.cooperativeconsult.com/blog/?….

[14] Kasmir, The Myth of Mondragón, p. 86.

[15] Vera Zamagn, “Italy’s cooperatives from marginality to success,” paper presented at XIV International Economic History Congress, Helsinki, Finland, August 2006 (http://www.helsinki.fi/iehc2006/papers2/…).