In Cleveland, Worker Co-ops Look to a Spanish Model
Dan Clore
http://groups.yahoo.com/group/smygo
http://www.time.com/time/business/article/0,8599,1947313,00.html
In Cleveland, Worker Co-Ops Look to a Spanish Model
By Judith D. Schwartz
Tuesday, Dec. 22, 2009
Cleveland is experimenting with worker co-ops in businesses ranging from
commercial laundry to weatherization services.
While officials, pundits and the everyday folks who have to pay bills
lament unemployment rates that won't go down and wages that won't go up,
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. Evergreen
Cooperative Laundry, a state-of-the-art commercial launderer designed to
be LEED silver�certified, opened for business this fall in Cleveland's
University Circle, an area where the average annual household income is
$18,500. Rather than just bringing home wages, its eight employees will
gain equity through "patronage accounts," a portion of earnings put
aside to both build personal assets and reinvest in the company.
Another company within the Evergreen Cooperative group, Ohio Cooperative
Solar, offers weatherization services and will soon embark on
solar-panel installations � the first a 100-kw system on the roof of the
Cleveland Clinic. According to CEO Stephen Kiel, Ohio now has 2 solar
megawatts of the 60 the state requires by 2012. "Most installations in
Ohio are small," he says. "One hundred kilowatts is a pretty significant
system."
Kiel, who as a business owner and management consultant has worked with
nearly 200 companies of varying scale, says he has already seen
advantages to employee ownership. "Since the business belongs to the
workers, my job is expos[ing] them to how to run a business," he says.
"In addition to the technical training, we're training in administration
and managerial skills � how to obtain work orders, track profitability,
read a financial statement." Unlike the typical workplace, here
employees know exactly how much a company � and each individual � is
making. "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 (though in a few cases of specialized
positions, it's as high as 1 to 9).
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. (How this
would play out in the context of U.S. tax rules remains to be seen.) In
Cleveland, the Evergreen Cooperative Development Fund, managed by
ShoreBank Enterprise Cleveland, provides low-interest, long-term
financing. In the future, a financial institution more aligned with Caja
Laboral, which also handles consumer saving and lending, might be developed.
The "Cleveland model," as Evergreen has already been dubbed, creates "a
way to stabilize jobs in an area as well as democratize ownership," says
Gar Alperovitz, professor of political economy at the University of
Maryland and a founding principal of the Democracy Collaborative, a
nonprofit organization that has advised Evergreen. He says part of the
strategy has been to address growing sectors of the economy, such as
health care and energy. To have a major impact on the regional economy,
manufacturing has to be brought in, says Alperovitz. "We're thinking
about similar approaches with bullet trains and mass-transit vehicles,
asking the question, How can some of that production be organized
according to this model?"
In late October, the Mondragon Corp. and the million-plus-member United
Steelworkers (USW) union announced an alliance to develop Mondragon-type
manufacturing cooperatives in the U.S. and Canada. Says USW's Rob
Witherell: "Initially we are looking to convert an existing
manufacturing operation." As for financing new ventures, he adds,
"There's a significant amount of infrastructure already in place in the
U.S. to assist in the development of cooperatives, such as the National
Cooperative Bank and the National Cooperative Business Association. It's
possible the NCB could function in a Caja Laboral ... role for us here."
Witherell stresses that the union aims to implement the basic principles
of worker ownership and democratic governance rather than precisely
replicate the Mondragon model. Still, he says, success comes down to
well-run companies that meet a need. "The people who formed these co-ops
did not do so because of some egalitarian ideal � they did it out of the
necessity to feed and provide for their families."
The Arizmendi Association of Cooperatives, the umbrella organization for
a group of four (soon to be six) worker-owned bakeries in the San
Francisco Bay Area, took its name as well as its business plan from
Mondragon. The companies share technical and financial resources � as
well as proprietary recipes � and a portion of profits goes to funding
new enterprises. The notion of cooperative artisan bakeries sounds
quaint, but the group is thinking beyond the breadbox. "We consider this
the very beginning phase," says Melissa Hoover of Arizmendi, who is also
executive director of the U.S. Federation of Worker Cooperatives. She
says 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."
--
Dan Clore
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