Cooperative Labour Relations: Mondragon's Response to Recession

Date01 March 1987
AuthorKeith Bradley,Alan Gelb
DOIhttp://doi.org/10.1111/j.1467-8543.1987.tb00702.x
Published date01 March 1987
Cooperative
Labour
Relations:
Mondragon‘s Response
to
Recession
Keith Bradley* and Alan Gelb
*
*
I. INTRODUCTION
Alternatives to collective bargaining have been slow to percolate into the
mainstream of labour relations, and are often dismissed as impractical.
Nevertheless, interest has steadily increased in employment contracts which
link pay to profits and encourage more flexible labour use. Recent years
have seen the growth
of
concession bargaining in which employees trade pay
for shares, the spread
of
Employee Stock Ownership Plans and a steady fall
in unionisation rates in major countries (Bradley and Gelb, 1986. pp.
14-
17). Nevertheless, many industrialised countries, notably in Europe, have
adjusted inflexibly to economic shocks since 1973 especially relative to
Japan, and since the early 1970’s productivity growth has slowed in most
industrial and developing economies. These factors have spurred the search
for alternative systems of labour contracts and relations. Dore (1973) and
Cole (1979) argue for shifting industrial relations towards the ‘paternalist-
lifetime-commitment’ model
of
Japan. Weitzman (1984) argues for a ‘share’
economy whose natural propensity to absorb labour will obviate the need
for inflationary public deficits. Interest in the cooperative economy as a
‘third way’ between capitalism and socialism has been stimulated by Meade
(1979), Ward (1958), Vanek (1970) and others.
This paper analyses the Mondragon Cooperative Group in the Basque
provinces of Spain, the largest concentration
of
industrial producer cooper-
atives outside Yugoslavia and China. Enterprises within the group are
financially independent and operate under distinctive rules. While Basque
history and culture is permissive of cooperative organisation, they do not
appear to be the main explanatory factors for the existence of Mondragon
(Bradley and Gelb (1983b))’ and there has been considerable interest in its
The group has been extensively analysed, by Gutierrez-Johnson and
White (1977), Oakeshott (1978), Thomas and Logan (1981), Bradley and
Gelb (1983b) but only through 1979, a period
of
rapid growth which
coincided with expansion of the Spanish and Basque economies. In terms
of
*London
School
of
Economics
**World
Bank
78
growth, profitability, job creation and export competitiveness Mondragon
outperformed its local capitalist environment, and was a major force for
regional development. Financial success was helped by its ‘cooperative’
nature, as manifested in high labour-management trust, equity ownership
by all members and democratic control over management.
Despite their general appeal and certain theoretical advantages cooper-
atives have a mixed record and their sustainability and resilience in recession
remains in doubt.3 From the late
1970’s
Spain entered a period
of
stagflation. This paper compares the adjustment
of
the Mondragon group
over
1976-84
with that of the surrounding Basque and Spanish economies.
Section I1 presents a brief description
of
Mondragon for those not familiar
with the group. Section I11 outlines four potential features
of
the responses
of a cooperative group to recession which are assessed in Section
IV:
(i) Cooperative adjustment involves greater wage flexibility, smoother
labour relations and less reliance on layoffs. The more efficient
response results from internalising the externalities between those
with and those without (or potentially without) work and abolishing
the distinction between capital and labour.
(ii) Cooperatives respond cautiously in terms of investment because
those groups making investment decisions risk their own funds,
enterprises and jobs.
(iii) An environment of increased economic uncertainty will promote
attempts to diversify.
(iv) The moral authority of a tight community and better information
flows between its members can be used to improve the efficiency
of
social goods delivery and thus provide a substantial cost advantage.
Mondragon data are from
Group Annual Reports,
reports
of
Lagun Aro
and interviews. Data on the Spanish and Basque economies are drawn from
the Caja laboral Popular’s
Economia Vasca,
the Bank of Spain’s
Annual
Reports
and the World Bank and IMF data bases.
British Journal
of
Industrial Relations
11. THE MONDRAGON EXPERIMENT
History
and
Organisation4
In
1956
Jose Maria Arizmendi-Arrieta, a priest, inspired the purchase
of
a
small bankrupt factory as a worker-managed experiment. Arizmendi’s
search for an alternative enterprise arose out
of
Catholic social doctrine, his
familiarity with the works of Robert Owen, one
of
the earliest industrial-
philanthropists, and the example
of
the Rochdale Pioneers who. had
founded the first successful cooperative in Britain in
1844.
The geographic-
ally and culturally isolated yet previously industrial Basque provinces had
been devastated by the Spanish Civil War and were suffering the burden
of
Franco’s repression.

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT