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31 Indus. & Lab. Rel. Rev. 18 (1977-1978)
The Mondragon System of Worker Production Cooperatives

handle is hein.journals/ialrr31 and id is 20 raw text is: THE MONDRAGON SYSTEM OF WORKER

T HIS is a success story in a field where
failure has been the general rule-a
rule well summarized in the following
statement by Paul Blumberg:
...Producers' cooperatives, which do involve
workers significantly in management, have re-
peatedly been proved both economically and
socially an inappropriate vehicle for workers'
management. Economically, they have always
been plagued with chronic shortages of capital,
stemming from their inadequate initial resources,
and the hostile milieu in which they operate
makes borrowing from the private capital mar-
ket quite difficult. In the Western world, they
are  economically inconsequential, especially
when compared to the flourishing consumers'
cooperative movement.
Socially, producers' cooperatives have a tendency
to degenerate as the Webbs and others ob-
served long ago, due in part to the lack of out-
The Mondrag6n system of industrial production
cooperatives in the Basque country of Spain is a
major exception to the time-honored belief that
production firms organized on a cooperative basis
of worker ownership are doomed to a short and
precarious existence. This paper traces the evolu-
tion of the Mondrag6n industrial firms, in associa-
tion with cooperative educational, banking, and
commercial institutions, and examines the personal,
cultural, organizational, and economic factors that
account for the extraordinary growth and dynam-
ism of the system since its founding in 1956. The
authors also describe the lessons of the Mondrag6n
experience they believe are applicable to the devel-
opment of more successful industrial cooperatives
in the United States and elsewhere.
Ana Guti6rrez Johnson is a Ph.D. candidate and
William Foote Whyte is Professor in the Department
of Organizational Behavior, both in the New York
State School of Industrial and Labor Relations,
Cornell University-ErTOR

side public control of their activities. This de-
generation takes some of the following forms:
transforming the cooperative into a simple
profit-making, profit-seeking business, indistin-
guishable from a private enterprise; exploiting
a monopoly situation, often to public disadvan-
tage (as has happened in Israel) ; closing off of
cooperative membership; raising the cost of
membership to a prohibitively high level; and
resorting to the anti-cooperative device of taking
on hired labor.'
The Blumberg statement applies very
well to the general scene, but there is one
important exception: the system of produc-
tion cooperatives centered in the small
Basque city of iMondrag6n in Spain. If we
can come to understand the conditions that
have enabled this system to overcome the
well-documented general rule, we shall ad-
vance our knowledge regarding the human
potential for extending worker ownership
and management in production organiza-
The system is so complex that we can
present here only a preliminary interpre-
tation based upon 1975 field work (seven
weeks by Johnson, two weeks by Whyte)
and extensive documentary records. John-
son will continue the study with field work
in 1977, but this report is based upon the
1975 field project and subsequent analysis.
Components of the System
The first firm of the cooperative system
of Mondrag6n was founded in 1956 by five
'Paul Blumberg, Industrial Democracy: The Soci-
ology of Participation (New York: Schocken, 1968),
pp. 3-4.

Industrial and Labor Relations Review, Vol. 31, No. 1 (October 1977). ©g) 1977 by Cornell University.

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