Mondragon: a model for an inclusive economy

The Mondragon Corporation offers a new way to reimagine our economy, through its combination of economic success and social benefit, a new report by the Young Foundation says.

The Basque-based organisation, the world’s largest worker-led cooperative association, with annual revenues of over €12 billion, was founded in 1956. It seeds and supports new businesses through an ecosystem approach and has grown to 261 autonomous cooperatives operating across 41 countries.

Its model – while enjoying economic success – has cooperation and equality at its core. Each organisation is owned by its workers, and salary ratios do not exceed 1:9 between the lowest and highest paid workers.

Its growth comes not through external finance or drivers but through inter-cooperation between the companies. Within the network are schools, a university, banks and welfare support, all of which provide the infrastructure to support and create new cooperatives. When one of its oldest ventures – Fagor – collapsed in 2013, its workers were relocated to other cooperatives.

Profits are reinvested into employment creation, funds for education and local and regional development.

Speaking at the launch of the report last week Dr Mary Hodgson, director of research at the Young Foundation, described Mondragon as a ‘social innovation ecosystem’ that has thrived because of the ‘shared social values that drive and underpin it’.

Carlos Barandiaran, director of the management consultancy business unit at Mondragon, said: ‘Our competitiveness and our social approach are totally linked. Our social heart is part of our competitiveness.’

But could the success of Mondragon be replicated in the UK? Coops UK and the Young Foundation have set out a number of policy proposals in response to the report.

Key recommendations are for UK-based companies to learn from the corporate governance and pay ratio of Mondragon, which offer an alternative to excessive executive pay and give workers a greater say in the businesses in which they are employed, and for the establishment of a cooperative entrepreneurs programme.

Ed Mayo, secretary general of Cooperatives UK, called for the abolition of employee shareholder tax breaks in favour of local hands-on support for low and middle income workers to set up cooperatives and to establish a worker buyout investment fund.

Mayo said that one of the challenges in Britain is the focus on the lone entrepreneur model and on innovation systems such as Silicon Valley. The Mondragon model shows the social and economic benefits of a more collective – and systemic – approach to entrepreneurialism.

As Mayo said: ‘If we limit enterprise in post-Brexit Britain, we are self-harming’.

Gorka Espiau, associate director at the Young Foundation, said that social and economic transformations can take place with the right narrative and attitude in place.

‘It’s about allowing people to behave innovatively and asking “what is the story we are telling ourselves”’.

Mondragon, he says, ‘demonstrates the radical model needed to face today’s inequalities’.

• The report can be read here.