‘In the US they think we’re communists!’ The 70,000 workers showing the world another way to earn a living

When Marisa Fernández lost her husband to cancer a few years ago, her employers at the Eroski hypermarket went, she says, “above and beyond to help me through the dark days afterwards, rejigging my timetable and giving me time off when I couldn’t face coming in.”

She had a chance to return the favour recently when the store, in Arrasate-Mondragón in Spain’s Basque Country, was undergoing renovations. Fernández, 58, who started on the cashier desk 34 years ago, and now manages the store’s non-food section, volunteered to work extra shifts over the weekend along with her colleagues to ensure everything was ready for Monday morning. “It’s not just me. Everyone is ready to go the extra mile,” she says.

Such harmonious employer-worker relations are the stuff of corporate dreams, and they are no accident here: the Eroski retail chain is part of Mondragón Corporation, the largest industrial co-op in the world. As a fully signed-up member, Fernández co-owns part of the supermarket chain that also employs her. “It feels like mine,” she says. “We work hard, but it’s a totally different feeling from working for someone else.”

That sentiment is echoed by Mondragón’s 70,000 other workers. Made up of 81 autonomous co-operatives, the corporation has grown since its creation in 1956 to become a leading force in the Basque economy. Eroski is one of its most conspicuous manifestations, with 1,645 outlets across Spain. In addition to food, the chain has profitable sidelines in white goods, electronics, insurance and holiday bookings.

More than its economic success, though, Mondragón has become a beacon for the co-operative model, as a more humane and egalitarian way of doing business that puts “people over capital”. Every worker has a stake in the company’s fortunes and a say in how it is run, and receives a share of the profits. But the goal is more about creating “rich societies, not rich people”. That means looking after workers during not only the good times but the tough times, too.

The lowest point for Maite Aguirrebeitia, for example, came back in 2013, when, after 20 years’ service, the Mondragón co-operative that she and her husband were affiliated to, Fagor Electrodomésticos, filed for bankruptcy. Demand for its ovens and household appliances had plummeted after the 2008 financial crisis and despite help from a Mondragón “solidarity fund”, it never recovered.

“I felt this overwhelming sense of pain and grief at the time, as if someone close to me had died,” the 56-year-old communications specialist recalls. “Plus we had two kids and bills to pay and so on. The mental stress of it all was huge.”

Rather than thank the redundant workers for their service and wish them on their way, Mondragón committed to find alternative employment for as many of Fagor’s 1,900 or so workers as it could. After temporary stints in five Mondragón co-operatives in 2022, Aguirrebeitia found a permanent placement with Mondragon Assembly, a manufacturer of equipment for process automation.

Although it has meant a shift in career – she now works part-time in human resources, and part-time as a receptionist – the security of having a fixed job is a “huge relief”, she says. “I always felt confident that somehow I’d be looked after. I talked to other people who were out of work at the time and they had none of that. They were out on the street, totally alone. If I’d had to compete in the open job market against all the youngsters coming out of university, I’m not sure I’d have ever found another job.”

Mondragón’s human-centric approach originated far from any business management school. Its roots lie in a socially engaged form of Catholicism that gained ground in the 1940s, during the early years of the Francoist regime. Its initial champion was a Basque-born cleric named José María Arizmendiarrieta, who, in 1941, arrived in the small town of Arrasate-Mondragón, about 30 miles (50km) south-east of Bilbao.

Taking it as his pastoral mission to revitalise the local economy, the diocesan priest set up a technical school for young men. A few years later, he arranged for some of them to take distance-learning degrees in industrial engineering. “After graduating, they all found jobs in conventional companies in the town, but they felt stifled … they wanted more of a say over their destiny, but their employers thought otherwise,” explains Ander Etxeberria, head of Mondragón’s outreach programme.

With Arizmendiarrieta’s encouragement, five of these first 11 graduates decided in 1955 to set up the now defunct Fagor Electrodomésticos. Seeking a model that reflected their Christian socialist philosophy, they turned to the Rochdale Pioneers, a group of tradespeople from the Lancashire town who, more than a century before, had established the world’s first co-operative. That venture grew to become today’s Co-operative Group, home to the UK’s fifth biggest food retailer and its largest provider of funeral services.

Mondragón’s founders adopted wholesale many of the Pioneers’ core tenets. In their modern-day headquarters, located in a renovated 14th-century tower with a spectacular mountain backdrop, Etxeberria counts off the group’s 10 “basic principles”. The list ranges from the sovereignty of labour and democratic organisation (one member, one vote), to wage solidarity and “social transformation” – which includes reinvesting surpluses to create new jobs, supporting local charities and community development projects, and strengthening the Basque Country’s Euskara language. Top of the list is voluntary and open membership – namely, the opportunity for everyone to have a personal stake in the enterprise where they work. As an early version of the principles reads: “The first form of elemental justice that we need to practise is to consider each other as free human beings.”

These values hold true into the present, Etxeberria explains. The salary differential between the highest and lowest paid workers in Mondragón, for example, remains about six to one; for the largest 500 listed companies in the US, the gap is closer to 272 to one. At the year end, members of Mondragón’s co-operatives also decide collectively on whether they should pay themselves bonuses and, if so, how much. This profit-sharing comes in addition to a base pay rate that, on average, is 40% above Spain’s minimum wage.

Despite its social responsibility credentials, Mondragón remains a competitive business. When Etxeberria presses “play” on an introductory video, the screen shows not pictures of happy workers doing yoga but gleaming industrial facilities and straight-faced technicians in lab coats. Overlaying these images are facts and figures that would have mainstream financiers salivating: €10.6bn (£9.1bn) in annual revenues; a dozen research and development facilities; a global roster of blue-chip clients; and a diversified sector spread – industry, retail, finance and education.

The same no-nonsense, professional vibe is on show at Fagor Arrasate, a Mondragón affiliate located on one of the many industrial estates that ring Arrasate-Mondragón, a vibrant town of cafe-strewn streets and busy bars. A specialist in metal presses and stamping systems, Fagor Arrasate boasts several hangar-sized workshops full of robotic machinery and giant components ready for export. “Some of the installations we make for customers can be three to four storeys high, so these are massive, multimillion-euro investments,” enthuses Edorta Mendieta, the venture’s marketing manager.

Pinned to a cork noticeboard beside a busy production line are photos of a recent charity run, a printout of donations to local causes (including €60,000 for a nearby organic food association), and a poster about a forthcoming “women in science” event. In the centre of the board, an A4 sheet of closely printed text gives notice of the co-operative’s general assembly, where next year’s strategy plan will be put to an all-member vote.

Mondragón’s collective spirit also offers an edge with innovation. In a process that the movement refers to as “inter-cooperation”, co-operatives within the group frequently swap ideas between themselves and engage in joint research.

Over the years, many of the best innovations have come from alliances with Mondragón’s homegrown university. Located on a leafy campus in Arrasate-Mondragón, the university was set up with a strong practical bent to both its teaching and its research. So much so, in fact, that the European Commission recently selected it to co-lead a major “dual training” programme aimed at blending academia with business to tackle global challenges such as the climate crisis.

Mondragón’s approach has proved itself profitable and resilient, so could it become a realistic alternative to the modern corporation?

It’s a moot point. Despite their worker-first philosophy, the movement’s leaders are reluctant to denounce the wealth-maximising nature of modern market capitalism. The reason is as simple as it is awkward: Mondragón must actively participate in that same capitalist system for its survival.

This tactic of being “in, but not of” the world of mainstream business has seen the Basque-based movement face charges of double standards. In particular, critics highlight its outsourcing of some of its production to low-wage countries with weaker labour standards, such as China and Mexico. Mondragón argues that it has checks and balances in place to ensure that its foreign business partners uphold workers’ rights, and that keeping costs low is part and parcel of staying competitive. “For us, workers will always come before capital. But capital is still important because without it we cannot fulfil our mission of social transformation,” says Javier Marcos, Mondragón’s director of communications.

Radical as that mission is, its focus is and always has been primarily on el territorio (the local Basque region); less about rewriting the global economic order and more about improving co-op members’ lives. That said, if others want to copy the Mondragón model, then its doors are always open, insists Etxeberria. In the past month alone, he has hosted large groups of policymakers and business students from the Philippines, Brazil and the US. “They come to see if our approach works in practice,” he says. “They all go back pleasantly surprised, I think.”

Young people, in particular, are attracted to the notion of business and entrepreneurship going beyond just the pursuit of profit, but they “don’t know the co-operative possibility exists,” says Ana Aguirre, a graduate of Mondragón University. The 33-year-old now co-runs Tazebaez, a worker-owned consultancy and education provider that she and eight fellow students created during their bachelor’s degree. For the few who have heard of co-operativism, she adds, most relegate it in the folksy, do-gooder box. “The problem is that it’s portrayed as something to do with charity or [philanthropic] foundations, rather than as a credible business model.”

Pursuing a co-operative model is far from plain sailing, however. Numerous hurdles exist. For one, membership does not come cheap. To join a co-operative, workers typically put up a one-off payment of about €17,000 each. Plus, just as they are entitled to a share of any profits, so, too, are they liable for any losses.

Commercial pressures can also prove acute, as Fagor Electrodomésticos’s troubled history shows. The fact that all major investment decisions have to be put to the vote can also make Mondragón’s co-operatives less agile than their conventional competitors. And finding financing can be problematic as the private capital markets are effectively closed to them, admits Fagor Arrasate’s Mendieta: “We can’t incorporate external capital into the co-operative’s share capital because we are governed by the principle of ‘one person, one vote’, which no capitalist investor would accept.”

In some parts of the world, Mondragón’s approach just looks downright weird. No one bats an eyelid at the co-operative model in countries such as Germany, “but with these ideas in Texas or Kansas, you’re basically a communist,” says Mendieta, only half jokingly.

Across Europe, at least, the co-operative model is widespread. In Norway, for instance, co-ops have a strong heritage in the social housing sector. Italy’s Emilia-Romagna region boasts a long tradition of industrial co-operatives similar to that of the Basque Country. And, as well as the Co-operative Group, the UK’s almost 7,000 co-operatives include the mighty John Lewis Partnership, which has a turnover of nearly £10bn. In total, the EU hosts about 250,000 co-operatives, providing 5.4m jobs.

Increasingly, the movement’s footprint is also being seen in company law. Germany has long required corporate boards to have worker representatives, for instance. Similarly, Spanish law allows unemployed people to lump together their unemployment benefit to set up small businesses – known as Sociedades Laborales – as long as they are majority owned by their employees. The rise in mainstream corporations now talking the language of employee autonomy, horizontal management, dignified wages and similar themes suggests co-operativism is leaving its mark on business company practices if not – yet – on capitalist ownership

Back in Mondragón’s fort-like headquarters, Etxeberria is quietly confident about the movement’s prospects. Co-operativism, he says, is a little like zirimiri – the Eusakara word for “drizzle”. “It’s the same ideas that keep falling; they’ll settle eventually.”