Worker Co-Ops Gaining Traction in Cleveland

As I have written before (here), worker-owned businesses are the wave of the future, because they are a superior economic organization. This has been noted in a recent CNN article (here) discussing the application of the Spanish model in Cleveland. The advantages noted in this article include: educated and supported workers, reinvestment of profits into capital and human development, limitation of executive salaries, supply chain integration, and avoidance of external debt leverage.




Some Rust Belt planners and union leaders are feeling optimistic: they're taking inspiration from the Basque region of Spain, where a network of worker-owned cooperatives launched amid the rubble of the Spanish Civil War has grown to become the country's seventh-largest corporation, and among its most profitable.

The Mondragon Corp. (MCC), based in northern Spain, is a multilayered business group with 256 independent companies (more than 100 of which are worker-owned cooperatives) that employs more than 100,000 people. It has long been legendary among scholars and activists seeking to bolster workers' rights.

The Mondragon story began in 1941, when a Catholic priest, Jose Maria Arizmendiarrieta (often shortened to Arizmendi), found in the Basque town war-torn devastation where there had been a thriving manufacturing base. He opened a polytechnic school, which in 1956 spawned its first cooperative, a stove factory. Half a century later, the Mondragon enterprise encompasses firms making everything from machine tools to electronics to bicycles, along with a retail division, a university and a significant financial sector, with the large cooperative bank Caja Laboral at its core.

While many think of cooperatives as a small-scale hippie mainstay, the Mondragon Corp. is huge, hard-nosed business-wise and successful; in 2008, with Spain's economy in the doldrums, MCC's income rose 6%, to 16.8 billion euros. The Mondragon Corp. maintains its commitment to one-worker, one-vote democratic governance through a complex, carefully honed organizational structure in which the corporation serves as a kind of metacooperative for the individual companies. Through representatives and resources drawn from the larger network, it provides support for planning, research and generation funding for new businesses.

Several nonprofit and medical institutions in Cleveland have turned to the Mondragon model for a consortium of businesses that will provide needed services and bolster an impoverished community.

"There's a value in dealing with an informed workplace," says Kiel. In terms of problems that can arise, including safety, production and theft concerns, "if people feel a part of it, that makes solving the problem a lot easier."

He adds that the spread between the high and low salaries is limited so that the CEO earns no more than five times the lowest-earning entry-level employee. This follows the Mondragon template, which keeps the ratio down to 1 to 4 or 5

One hallmark of the Mondragon model is its use of capital. Rather than flowing into the pockets of executives and outside investors, a company's profits are distributed in a precise, democratic way; set aside as seed money for new cooperatives; distributed to regional nonprofits; or pooled into shared institutions like the university and research center. In other words, each individual cooperative gains long-term benefits from the financial assets of the whole.

The companies plan to develop more businesses and are researching possibilities "along the supply chain": trucking, retail, health and wellness, as well as a funding vehicle like Caja Laboral.

Arizmendi now employs 125 workers and annually generates $12 million in sales. Despite the economic downturn, the businesses remain strong and poised for growth. This in part owes to the collective decision-making model, says Hoover. "Worker-owned cooperatives are an innately conservative form. We didn't overleverage ourselves."

Worker Owned Businesses - the Wave of the Future

Interesting spotlight on worker-owned businesses in the CNN Small Business section (here).

In theory, the worker-owned business (WOB) should be superior to a non-WOB. For one, the WOB would have a more motivated employee base.

More importantly even than that, the WOB is simply an economically superior entity. Because profits are not being siphoned off to an ownership group, the WOB should also be able to operate at lower margins. For the WOB, the bare minimum cost is employee salaries, but for the non-WOB, the bare minimum is employee salaries plus ownership profits. In tough times, the WOB becomes more competitive because it can lower employee salaries and still operate at full power. A non-WOB has to fire employees, which leads to lower overall output, forcing the understaffed business to operate at a competitive disadvantage.

So, why don't we see more WOBs? Ignorance and capital barriers are the main forces preventing WOBs from proliferating. Ignorance, simply because most people have never heard or thought of such a business arrangement. Capital barriers, because most people who would like the idea of a WOB are too poor to set one up.

Some might say that greed is a barrier to WOBs, but that is not true. It is true that most people who have the money to start a business are dreaming of their own personal enrichment. However, the power of greed can be harnessed to advantage WOBs as well, specifically, the greed of the disemplowered worker.

The WOB cannot be sold to the general public on the basis of overcoming greed or other utopian ideals. Such economic utopianism has failed time and time again. The establishment of the WOB is an act of greed by the workers who establish it, and that fact should be recognized. The purpose of the WOB is to leverage its inherent advantages to wipe other non-WOBs out of the market.

Even the barrier of capital is somewhat of an illusion. A business that requires 20K to capitalize is out of reach for the average worker. But say that business requires 10 employees -- that is really just a capital barrier of 2K per employee, which is not out of reach.

In the end, the establishment of a WOB is mainly prevented by ignorance, ignorance of its possibility and ignorance of how to accomplish it.

It is no accident that business textbooks do not list the WOB as one of the basic business entity forms. That is part of the conspiracy of intentional ignorance that keeps people enslaved. The artificial constraint of possibilities is the ultimate method of thought control, effectively preventing people from even contemplating certain lines of thought.

The victory of WOB is substantially enabled simply by publicizing their possibility. By making intelligent but dispossessed people aware of their possibility, the natural creativity of humankind is unleashed, making their implementation an inevitability.