“It should help promoters plan their projects and then find outside investor-partners in return for a share of each project’s income rather than its profits. This is essentially how the Mondragon co-ops’ bank used to work,” Kjellberg says.

“Imagine yourself as a bank manager in a small community 50 years ago. Your friends and neighbours have their current and savings accounts with you and when they need to borrow they come to tell you about their ideas. You know most of the locals and it is not difficult for you to tell whether a proposal is going to work. Your decision is based not only on the idea’s potential commercial viability but also on the individual’s personal ability, skill and support network.

“But times have changed. Bank managers in small communities do not have the authority to give bigger loans any more. Instead, the bank that owns the branch channels the community’s savings into what it believes to be the most profitable segments of a near-global capital market. It will only lend to the people in the community if it can get a safe mortgage charge over their houses but, even here, the bursting of the housing bubble has made the bank wary about their ability to repay,” Kjellberg continues.

Kjellberg proposes that we go back to the future to the way the Mondragon cooperatives began.

“The institutions I envisage would work in much the same way as did the bank at the heart of the Mondragon co-operatives in the 1960s,” he says.

“There, if a group wanted to start their own business as a workers’ co-operative, one of the group would join the bank staff, on normal pay, to work on the business plan with a ‘godfather’ — someone who specialised in helping new businesses start up.

“Then, when the godfather judged that the plan and the group were ready, he (they were all men in those days) put the project to the bank board and funding would be approved. The godfather then helped the new business establish itself.

“The money the group received from the bank was nominally a loan, so the business knew how much it was expected to pay its partner each year; but in reality the risk was shared and the bank’s agent, the godfather, and the members of the group were equally committed to the project’s success. No projects failed under this arrangement.

“In its modern form, the institution we need could be a mixture of a (non-debt) savings bank and a meeting place for all the savers and entrepreneurs in a community. Instead of being a “credit union” it could be called an “investment union” (IU) to emphasise its co-operative character,” Kjellberg proposes.

“The job of those running the IU would be to help an entrepreneur develop his or her idea, until the IU had sufficient confidence in it, and in the people involved, to be able to recommend that savers put up the required capital in exchange for a specific share of the project’s income. The IU would be paid for its efforts by taking a share of the income itself, as would the entrepreneurs. This would ensure that all the partners were fully committed to the project’s success.

“Once the project was running, the IU would make a market in the shares and, while savers would be allowed to sell whenever they wished, the IU and the entrepreneurs would only be allowed to reduce their holdings with the consent of everyone else involved.

“Some investment unions could be purely local and deal with a wide variety of projects. Others could be more specialised and work over a wider area. For example, they might confine themselves to energy projects and build up a lot of technical expertise. Some might be akin to unit trusts, so that every member had a stake in everything. Others might allow savers to decide on their investment portfolio themselves.

“Whatever form they took, investment unions would need to perform their social financial process continuously — because a continuous flow of saved money is required to help entrepreneurs finance their continuous stream of projects,” Kjellberg says.

SOURCE

The Mondragon bank – an old model for a new type of finance (Fleeing Vesuvius)

The UN General Assembly Resolution A/RES/64/136 encourages all member States, the United Nations and all relevant stakeholders to take advantage of the IYC to promote cooperatives and raise awareness of their contribution to social and economic development and promote the formation and growth of cooperatives.

Goals for the International Year of Cooperatives are:

• To increase public awareness about cooperatives and their contributions to socio-economic development and the achievement of the Millennium Development Goals.
• To promote the formation and growth of cooperatives
• To encourage Governments to establish policies, laws and regulations conducive to the formation, growth and stability of cooperatives.

According to the UN, the International Year of Co-operatives, or IYC, “celebrates a different way of doing business, one focused on human need not human greed, where the members (who own and govern the business) collectively enjoy the benefits instead of all profits going just to shareholders”.

“Having an International Year of Co-operatives provides an opportunity to captivate the attention of national governments, the business community and, most importantly, the general public on the advantages provided by the co-operative model,” the UN says.

LINKS

Official United Nations website for International Year of Cooperatives

UN General Assembly Resolution A/RES/64/136 – Proclamation of 2012 as International Year of Cooperatives

UN General Assembly Resolution A/RES/65/184 – Mechanisms for IYC

The new company resulting from this alliance, “Cikautxo Taurus Flexibles Pvt. Ltd.”, will be dedicated to the production of tubes for the Automotive market, a Mondragon statement says.

The company at present employs 200 people and has a sales forecast of of 9.5 million euros for the fiscal year ending March 2012.

This joint venture is a part of the globalization process which the cooperative is undergoing in order to meet the requirements of the key players in automotive manufacturing, who aim to set up a panel of suppliers able to offer global development and production. The new India plant will be the second Cikautxo facility in Asia, as this year production was commenced in China, in the plant located in the industrial park which MONDRAGON has in Kunshan, an area close to Shanghai.

Cikautxo, apart from its plants in the Basque Country and Aragón, also has production plants in Brazil, the Czech Republic, Slovakia, China and now India.

The Cikautxo Group, which develops and manufactures parts and groups in polymer materials for different applications, forecasts consolidated sales this year of 220 million euros, of which 85% will be from the Automotive market.

SOURCE

CIKAUTXO sets up a joint-venture in India (Mondragon)

CIKAUTXO starts production in China (Mondragon)

LINKS

www.cikautxo.es

MONDRAGON Corporation, Video report of 2010 year from MONDRAGON Corporation on Vimeo.

Also available for reading here.

SOURCE

Carl Davidson on Mondragon at the 2011 Left Forum (American Worker Cooperative)

Carl will also be speaking in Texas on 8 September.

SOURCE

Third Coast Workers Coop

In his first article, Hollender explains the basic “people before profits” principle of Mondragon.

“I’m compelled to start with purpose, mission and values,” writes Hollender.” Whatever one might conclude about Mondragon, the single most important—and profound—part of my experience is the breathtaking beauty of 120 businesses, employing 85,000 people with sales of 15 billion Euros that are dedicated in everything they do to the dignity of the human spirit.

“In an industrial, and now post-industrial age, that has turned people in to disposable assets, into tools at the service of capital, it is so hopeful to experience business at scale that chooses to honor the essence of humanity over the accumulation of wealth in service of capital.”

The second article looks at the training offered by the Mondragon system.

“What if the board members of every US corporation were trained in the basics of corporate governance – before they took office?” Hollender asks. “Imagine that kind of business world.”

“Such ideas are not “what ifs” at the Mondragon Cooperative Corporation. They are realities.  “Training must precede the establishment of a cooperative! Trained people will build better companies. To enter a cooperative you must value the community ahead of yourself,” our tour guide enlightened us.

“He was speaking at Otalora, one of the cooperative’s thirteen universities and the equivalent of a business school – it’s where we spent several hours understanding the training program offered to every new coop member elected to a coop board or a as Governing Council Member.”

Hollender also talked to Mikel Lezamiz, Director of Cooperative Dissemination at the Mondragon Cooperatives.

How do you compete against the business practices of China?

“With quality and good service. We have a co-op that produces bicycles called ORBEA. These bicycles are very expensive ($5,000 to $20,000) but much better quality than the Chinese products. I recommend that you read an interesting paper “MONDRAGON Innovating a Human Centered Globalisation” by Nick Luzarraga, PhD (Author’s Note: Dr. Luzarraga was part of our own MIT group). The major conclusion of this paper is that when we [Mondragon] create two jobs abroad, we create one locally.”

Are workers in your international locations also cooperative members?

“No, not yet.” (This was a topic of almost every conversation. Many worker/owners identified it as the #1 challenge for Mondragon. At numerous international factories were efforts were made to convert employment into cooperative ownership, local employees were unwilling to invest their own salaries in an ownership share. While these efforts were unsuccessful the consensus of our group is that greater structural innovation and flexibility is required on Mondragon’s part.)

How do wages compare between how much you pay here in Mondragon and in factories you own and operate internationally?

“We offer not only wages but also other benefits that make labor stable. We definitely pay more than our competitors so that labor does not leave our co-ops.” (However, there is currently no independent verification of formal benchmarking in place.)

Do you have a problem with managers leaving your co-ops for General Electric, General Motors or other international industrial conglomerates?

“No, because we offer our workers much more. Our workers are at the top of Maslow’s pyramid. In other work places, workers are dealing with lower levels of the Maslow’s pyramid.” (Hiring managers however, when salaries at Mondragon are often a fraction of the marketplace is a different challenge.)

SOURCE AND FULL INTERVIEW

A Visit to Mondragon: People Before Profits (Jeffrey Hollender)

A Visit to Mondragon: Training Board & Governing Council Members (Jeffrey Hollender)

A Visit to Mondragon: Interview with Mondragon’s Director of Cooperative Dissemination (Jeffrey Hollender)

The program started last year after Green Mayor Gayle McLaughlin visited the Mondragon Corp., a federation of worker cooperatives in the Basque region of Spain. She was part of a national delegation, SFGate reports.

“Even in good times, Richmond has high unemployment,” McLaughlin says. “In hard times, cities like Richmond suffer even more.”

McLaughlin said the city could act as a conduit by hiring co-op businesses to provide services to the city.

City officials are now re-working a vendor ordinance that would allow a health-food truck co-op onto city-owned property.

The city Chamber of Commerce and its traditionally conservative Council of Industry have also expressed interest in the co-op project, the paper says.

“Everybody is looking for alternatives and new ideas to stimulate business, and this is one of them,” McLaughlin said. “We can’t continue with the same strategies, and these co-ops offer the chance to create new jobs and build personal wealth.”

The program is still in its infancy, but there are already more than a half-dozen co-op efforts under way.

“We’re focusing on worker co-ops where people own their own jobs and manage themselves,” said Terry Baird, who was hired by Richmond as a consultant. Baird, a Richmond resident, is a co-founder of Arizmendi Cooperative Inc.

Miguel Espino, who established the East Bay Agricultural Project, wants to establish aquaponics farms in Richmond that grow fish and vegetables.

Baird has consulted with a budding North Richmond health food co-op, an electric bicycle builder and a group that wants to sell hydroponically grown organic foods.

Most recently, Baird advised the Latina Center, a women’s group of Central and South American immigrants who dream of one day running a bakery similar to Arizmendi.

Baird, a 30-year co-op veteran, has advised the group to start small and think big.

SOURCE

Read more: Richmond co-op program holds potential for jobs (SF Gate)

LINK

Richmond, California

Since the end of the 19th century, economics has sought to do away with justice, especially distributive justice, but in doing so it has lost the ability to accurately describe any actual economy. Therefore, no one should be surprised to learn that 90% of economists missed the warning signs of the current meltdown.

The same was true during the last meltdown, and the one before that, etc.

You cannot accurately predict the course of a system if you cannot accurately describe it.

Distributism, on the other hand, asserts that justice is not only a moral problem, but a practical, economic problem, and that without economic justice, you cannot reach equilibrium. When economics abandons justice, the government is constantly forced to intervene to insure stability, even though the interventions may only work in the short run.

We have abandoned justice on a global scale, which has led to chronically unbalanced trade. When trade is chronically unbalanced, it is not really “a trade” at all. Rather, it is a system by which foreign producers finance our consumption of their goods, a system that impoverishes both parties.

ZENIT: Most people believe that the battle for the soul of capitalism is between the followers of Keynes and the followers of Hayek. But you believe both theories lead to what Hilaire Belloc called the “servile state.” Why is that? What are they and their followers missing?

Medaille: Capitalism and socialism are really not opposed realities; one is just the continuation of the other, and distributism is the opposite of both: it is the free market.

Capitalism tends to concentrate property in the hands of a few, thereby choking off the market, and socialism continues this by concentrating ownership in the hands of the state. In practice both systems end up with control of the most important resources of the nation in the hands of a few bureaucrats — über-managers who claim to represent the interests of the nominal owners, be they the shareholders or the general public, but who actually control these resources for their own benefit.

Further, in concentrating economic power, they also concentrate political power, and the large corporations are able to obtain vast privileges and subsidies for themselves, as we saw in the recent meltdown. Thus, between the gargantuan state and the gargantuan corporation, the individual is reduced to a situation of servility.

What both capitalism and socialism are missing is the willingness to admit that power follows property. Both systems claim to create freedom by concentrating capital, but because this also concentrates power, what is left for the mass of men is powerlessness.

Distributism, on the other hand, seeks to build an ownership society of free men and women, conscious of their rights and with the means to defend them against the centralizing tendencies of both the state and the corporate collectives.

ZENIT: What is distributism? Isn’t it just redistributionism, or splitting the difference between capitalism and socialism? How could such a philosophy, which relies on a certain amount of government intervention, create a truly “free” market?

Medaille: Actually, it is not so much a question of what the government should do as what it should stop doing.

In truth, the accumulation of property usually depends on government power; the higher the piles of capital, the thicker the walls of government necessary to protect them.

There are, of course, positive things that government can do, with tax policy, for example, or simply by enforcing its own laws against monopoly and oligopoly. And there are cases where the title to land or other resources is questionable to begin with.

But in general, a distributive society requires a smaller government with powers properly distributed throughout all levels of society.

In contrast to a system of concentrated economic and political power, distributist systems rely on a variety of forms of small ownership to distribute economic power: proprietors for property that can be easily used and managed by a single person or a family, cooperatives for larger enterprises, local public ownership for resources like water or sewer systems, employee stock ownership systems, when that is appropriate, and so forth.

In this way, both economic and political power is distributed throughout all levels of society. There are really only two choices when it comes to property and power: concentration or distribution.

The former leads to servility, and the latter to liberty.

ZENIT: What does a distributist society look like? Are there any examples anywhere in the world?

Medaille: Excellent question!

When dealing with economic systems, it is best not to rely totally on abstract theory, but to trust only systems that are on the ground and working.

For example, pure capitalism and pure communism (outside of monastic settings) have never worked, and have no functioning examples. Capitalism has always been imposed through, and sustained by, government power, while socialism has had to allow some freedom in the market in order to function at all.

Distributism, on the other hand, can display any number of working models, both on large and small scales. There is the worker-owned Mondragón Cooperative Corporation of Spain, which has 100,000 worker-owners and does $25 billion in sales; there is the cooperative economy of Emilia-Romagna, where 40% of the GDP is from cooperatives. And there are thousands of ESOPs, cooperatives, mutual insurance companies, and credit unions.

Indeed, the historical truth is that distributism goes from success to success, while capitalism stumbles from bailout to bailout.

What is especially interesting is that a distributist society like Mondragón has been able to provide its own social safety networks, school systems, training institutes, R&D Centers, and a university all from its own funds and without government subsidies.

It is much closer to the libertarian ideal than anything that laissez-faire has ever been able to produce.

ZENIT: By offering practical solutions to today’s toughest economic problems, your book seems to address the many critics of distributism who ignore it for its supposed impracticality or its neo-agrarianism. What are the basic principles or building blocks a distributist uses to compare and construct policy alternatives?

Medaille: The major principles of distributism are subsidiarity and solidarity.

By subsidiarity, we mean that the lowest levels of society, starting with the family, are the most important, and as much decision making authority and power as possible should reside there. Higher levels justify their existence only by the help they can give to the lower levels.

Solidarity dictates that any political decision must keep in mind the poorest and most vulnerable members of society.

Subsidiarity is difficult to realize in a situation where power is concentrated; only by the diffusion of economic and political power (and the two are just different aspects of the same power) can local communities and families flourish.

ZENIT: Does distributism have any basis in Catholic social teaching or the papal encyclicals like the recent Caritas in Veritate?

Subsidiarity and solidarity are, of course, straight out of the social encyclicals, and distributism owes much to its Catholic founders, G. K. Chesterton and Hilaire Belloc.

That being said, a distributist social order does not depend on the prior establishment of a Catholic social order. However, we believe that such a social order will thrive under a distributist system.

ZENIT: Can you briefly summarize the distributist solution to the seemingly intractable problem of providing as many people as possible with affordable health care?

Medaille: Our country has just been through a rather poisonous debate on this topic, one which entirely missed the real point, because it was based on a spurious distinction between socialism and the private market.

The reality is that in health care we have neither. The government already pays 45% of all health care costs, and the “private” market is in fact dominated by government-enforced monopolies through patents, licenses, and “certificates of need” for hospitals.

Indeed, the signature of a monopolistic market is constantly rising prices even in the face of declining services, and that is the reality of our health care market.

Now, distributism would not be of much use unless it could solve practical problems like this, and it can.

In brief, in the book I propose an expansion of the licensing authorities to increase the supply of medical personnel; it proposes a way of expanding research and development without resorting to monopolistic patents; and proposes the formation of cooperatives of doctors and other personnel which can serve as both “insurance” companies and health care delivery firms, thereby giving the firm the ability to ensure health rather than just treat diseases.

Of course, I go into much more detail on this in my book, but yes, distributism offers a new path on many of the most vexing problems.

SOURCE

Distributism and the Economic Crisis (Zenit.org)

LINKS

“Toward a Truly Free Market”: http://www.isi.org/books/bookdetail.aspx?id=eb565cff-c3d4-44ed-8029-bd74a87f2a2b

“Given the current job crisis and economic downturn, we need to think outside the box and explore every possibility for turning things around, both at the local and national level,” McLaughlin says, the Independent Political Report says.

“To this end, I am attending an international seminar this week (at no public expense) with the Mondragon Cooperative Corporation in Spain, a 54-year old network of over 100 worker-owned cooperatives, to learn about a very promising strategy for job creation, worker empowerment and local wealth building. http://www.mondragon-corporation.com/language/en-US/ENG.aspx .

“There is much potential for Richmond, and upon my return I look forward to bringing local stakeholders together to look seriously at this model,” McLaughlin believes.

SOURCE

Gayle McLaughlin re-election bid update (Independent Political Report)

LINK

http://www.mayorgayle.net/

The U.S. Federation of Worker Cooperatives (USFWC), is holding its biannual conference at the Clark Kerr Center at UC August 6-8, riding an exhilarating wave of a movement that has swelled to worldwide importance over the past decade. The United Nations has recognized and encouraged this growth, and has asked all governments to form a partnership with the cooperative movement to solve the global problems of unemployment and poverty, problems that the current economic system is not structured to solve, and that are poised to engulf the world in disasters of enormous magnitudes. The UN has declared 2012 the International Year of Cooperatives.

All around us numerous people search anxiously for a job, while numerous storefronts and workspaces lie empty. What stands in the way of these two vast resources coming together to create new businesses and jobs on a large scale? The dominant economic system controls the resources to make that happen, but full employment and economic equity were never goals of the capitalist system. On the other hand, those goals mesh well with the cooperative movement. However, while numerous unemployed people would happily take a job as co-owner of a cooperative business, there are comparatively few cooperative jobs and businesses. At the precise moment that a great influx of resources is needed, funding sources are cut back. One focus of the conference is to examine different strategies for cooperative development, creating mechanisms to organize and finance the movement, and ultimately to fulfill its mission.

U.S. Federation of Worker Cooperatives