Steelworkers Aim at Job Creation with Worker-Owned Factories

Photo: High-tech Machine Tools from MCC

‘One Worker, One Vote:'

US Steelworkers to Experiment

with Factory Ownership,

Mondragon Style


By Carl Davidson
SolidarityEconomy.net


Oct. 27, 2009--The United Steel Workers Union, North America's largest industrial trade union, announced a new collaboration with the world's largest worker-owned cooperative, Mondragon International, based in the Basque region of Spain.


News of the announcement spread rapidly throughout the communities of global justice activists, trade union militants, economic democracy and socialist organizers, green entrepreneurs and cooperative practitioners of all sorts. More than a few raised an eyebrow, but the overwhelming response was, "Terrific! How can we help?"
The vision behind the agreement is job creation, but with a new twist. Since government efforts were being stifled by the greed of financial speculators and private capital was more interested in cheap labor abroad, unions will take matters into their own hands, find willing partners, and create jobs themselves, but in sustainable businesses owned by the workers.


"We see today's agreement as a historic first step towards making union co-ops a viable business model that can create good jobs, empower workers, and support communities in the United States and Canada," said USW International President Leo W. Gerard.  "Too often we have seen Wall Street hollow out companies by draining their cash and assets and hollowing out communities by shedding jobs and shuttering plants.  We need a new business model that invests in workers and invests in communities."


"This is a wonderful idea," said Rick Kimbrough, a retired steelworker from Aliquippa, Pa, and a 37-year-veteran of Jones and Laughlin Steel. "Ever since they shut down our mill, I've always thought, 'why shouldn't we own them?' If we did, they wouldn't be running away." J&L's Aliquippa Works was once one of the largest steel mills in the world, but is now shutdown and largely dismantled. Much of the production moved to Brazil.


The USW partnership with Mondragon was a bold stroke. While hardly a household word in the U.S and little known in the mass media, the Mondragon Cooperative Corporation (MCC) has been the mother lode of fresh ideas on economic democracy and social entrepreneurship worldwide for 50 years. Started in 1956 with five workers in a small shop making kerosene stoves, MCC today has over 100,000 worker-owners in some 260 enterprises in 40 countries. Annual sales are pegged at more than 16 billion Euros with a wide range of products--high tech machine tools, motor buses, household appliances and a chain of supermarkets. MCC also maintains its own banks, health clinics, welfare system, schools and the 4000 student Mondragon University--all worker-owned coops.


Over the past decade, there have been a handful of efforts to apply the model and methods of MCC to projects in the United States. Almost all are on a small scale--several bakeries in the Bay Area, some bookstores, and most recently, an industrial laundry and solar panel enterprise in Cleveland. In Chicago, Austin Polytechnical Academy, a new public high school in a low-income neighborhood, was inspired, in part, by Mondragon, and a group of its students recently took part in a study tour of MCC in the Basque region.


But the USW initiative, and the potential clout behind it, puts the Mondragon vision on wider terrain. An integrated chain of worker-owned enterprises that might promote a green restructuring of the U.S. economy, for instance, would not only be a powerful force in its own right. It would also have a ripple effect, likely to spur other government and private efforts to both supplement and compete with it.


The USW is proceeding cautiously. "We've made a commitment here," said Rob Witherell during a recent interview at his Organizing Department's offices in the USW Pittsburgh headquarters. "But for that reason, we want to make sure we get it right, even if it means starting slowly and on a modest scale."


What this means at the moment, Witherell explained is that the USW is looking for viable small businesses in appropriate sectors where the current owners are interested in cashing out. The union is also searching for financial institutions with a focus on productive investment, such as cooperative banks and credit unions.


"It can get complicated," Witherell continued. "Not only do you have to fund the buyout, but you also have to figure out how to lend workers the money to buy-in, so they can repay it at a reasonable rate over a period of time, and still make a decent living."


The core Mondragon model was developed in the 1950s by a Roman Catholic priest, Father Jose Maria Arizmendi. It starts with a school, a credit union and a shop--all owned by workers who each had an equal share and vote. The three-in-one combination allows the cooperative to rely on its own resources for finance and training. The worker-owners cannot be fired. In regular assemblies, they hire and fire their managers, as well as set the general policies and direction of the firm. The workers themselves decide on the income spread between the lowest paid worker and the highest paid manager, which currently averages about 4.5 to one. (Compared with more than 400 to one in the U.S.) As the worker-owners accumulate resources, they can encourage the formation of new coops, indirectly through their bank and directly through their firms, and bring them into the overall structures of MCC governance. This is how they grew from one small shop to 260 enterprises in the past 50 years. Finally, if a worker-owner retires, he or she can 'cash out,' but the share cannot be sold. It is only available for purchase by a new worker-owner at that firm.


This last crucial point was developed by Arizmendi during the course of deep study of Catholic social theory as well as the works of Karl Marx and the English cooperativist Robert Owen. A worker-owner's ability to sell his or her share to anyone was a flaw in Owen's approach, Arizmendi decided, since it enabled outsiders to buy the more successful coops, turning their workers back into wage-labor, while starving the other less successful coops of resources. With Arizmendi's new approach, only four out of the several hundred MCC coop ventures have failed during the half century since Mondragon began.


The difference between worker-owned coops Mondragon-style, and ESOPs, or Employee Stock Ownership Programs more prevalent in the U.S., has to do with legal structure and control. In an ESOP, a portion of the companies stock, ranging from a large minority bloc to 100 percent, is owned by workers but held in a trust. Its value fluctuates with the stock market and workers can get dividends as they are paid, buy more stock, or "cash out" when they retire. If they do "cash out," they pay taxes on the closing amount, unless they roll it over into an IRA. By and large, ESOPs are financial instruments and do not automatically lead to worker control over the workplace or a role in shaping the firm's capital strategies. Managers are hired by the firm's board of directors, in turn, connected to the trust.


"We have lots of experience with ESOPs," said Gerard, "but we have found that it doesn't take long for the Wall Street types to push workers aside and take back control.  We see Mondragon's cooperative model with 'one worker, one vote' ownership as a means to re-empower workers and make business accountable to Main Street instead of Wall Street."
The USW, however, will insist on at least one modification of the Mondragon model: the worker-owners will be organized into trade unions, and will sign collective bargaining agreements with the management team. This sets up a unique situation whereby unionized workers reach an agreement with themselves as a workers' assembly and with the management team they hire.


This is not as big of a problem as it may sound. "’This is not heaven and we are not angels’ is a common phrase heard by visitors to Mondragon," said Michael Peck, MCC's North American delegate. Within the structure of each MCC enterprise is a 'social committee' of the workers, which looks to their broader social concerns. But, it has also come to play the role of settling day-to-day disputes with the management team, thus serving as a de facto union. Class struggle surely continues, even in a modified form in a worker cooperative.


There are also other features unique to MCC that may or may not apply to its replication in the U.S. Father Arizmendi developed his plan as a community-based survival mechanism following the devastation of the Spanish Civil War and World War Two. He was imprisoned under Franco. The Basque region, a center of anti-Franco resistance, was not only in economic ruin, but was also punished by the Franco government by being denied resources. MCC evolved through self-reliance.


Under Spanish law, because the MCC worker-owners are not technically wage-labor, but get their income from a share of the profits, they are excluded from much of the country's social welfare safety net pertaining to workers. MCC responded by organizing and funding it's own 'second degree' cooperatives--health care clinics, retirement plans, schools and other social services, all cooperatively owned with their own worker assemblies. Much of this integrated second-degree structure may not be required in the U.S. Here, it may make more sense for worker-owned enterprises to form local or regional collaboratives and stakeholder arrangements with county government, credit unions, community colleges and technical high schools, and other nonprofit agencies.


What's in the partnership for Mondragon? Josu Ugarte, President of Mondragron Internacional declared: "What we are announcing today represents a historic first--combining the world's largest industrial worker cooperative with one of the world's most progressive and forward-thinking manufacturing unions to work together so that our combined know-how and complimentary visions can transform manufacturing practices in North America. We feel inspired to take this step based on our common set of values with the Steelworkers who have proved time and again that the future belongs to those who connect vision and values to people and put all three first."


Along with its core values and unique ownership structure, MCC is still a business producing goods and providing services in markets, anchored in Spain but reaching across the globe. It seeks to sustain itself and grow, although it is not driven by the same 'expand or die' compulsion of traditional corporate or privately owned firms. Adding more worker-owners simply gives each worker a smaller slice of a bigger pie. There's no removed batch of nonproducing stockholders raking in superprofits, or trading their stock speculatively as it rises or falls.


MCC firms still compete with traditional rivals for customers in the marketplace, and thus are always seeking a competitive edge. MCC enterprises, for example, are mainly known for high quality products. But when this is combined with a fact of self-management, that they have far fewer supervisory layers on the payroll, the higher quality products hit the marketplaces with a lower price. This puts MCC on the leading edge of Spain's economy.


MCC also looks for other advantages, such as horizontal integration and securing competitive sources of supply. This is why it has cautiously been expanding abroad, buying up supply firms or other complimentary businesses, and seeking to reshape them into the MCC cooperative structure. Often, however, they run into difficulties, where another country's laws treat cooperatives with disadvantages.


That is not the case in the U.S., where even though industrial coops are not common, there are few undue restrictions on their formation. "As we look for firms to purchase," said Witherell, "MCC is not just interested in buying up companies and having the workers as employees. It's the MCC rep that's always pushing on how readily we can convert to worker ownership."


The Mondragon initiative is not the first innovative project of the Steelworkers seeking wider allies. With the encouragement of International President Leo Gerard, following on the anti-WTO street battles in Seattle in the 1990s, the USW helped found the Blue-Green Alliance together with the Sierra Club and other environmentalists.  It has worked closely with Van Jones and 'Green for All's jobs initiatives and the union plays a major role in the ongoing annual 'Good Jobs, Green Jobs' conferences. Most recently, the USW was a major participant in the week-long series of events making the oppositional case at the G20 events in Pittsburgh.


For Gerard and the USW, these alliances are matters of utmost practicality and survival. Gerard points out that 40,000 manufacturing facilities in the U.S. have closed since the onset of the 2007 economic crisis, throwing 2 million people out of work. His answer is structural reform in the economy along the lines of a 'green industrial revolution' and to fund it with a tax of speculative capital's financial transfers, known as the 'Tobin Tax.'


"Americans going green--manufacturing windmills and solar cells--would benefit both the economy and environment," said Gerard in a Campaign for America's Future article. "As the Wall Street debacle that pushed this country into the Great Recession last year showed, the United States cannot depend on trading in obscure financial products to support its economy. To survive, America must be able to manufacture products of intrinsic value that can be traded here and internationally." He often notes that there are 200 tons of steel and 8000 moving parts in every large wind turbine--a concept that is never lost on the unemployed and under-employed manufacturing workers that hear it.


The same point is not lost on small and medium-sized businesses looking for orders from new endeavors. This is where green entrepreneurs can form alliances with worker-owned cooperatives, trade unions, living wage job advocates and the global justice movement. The key question is whether the political will and organizational skill can be brought together to make it all happen in a way that most enhances the strength and livelihood of the working class.


Here is where the ball returns to the court of left organizers and solidarity economy activists. Lending a helping hand to the new initiative entails a good deal of investigation into the state of local businesses and conditions, plus building alliances, generating publicity, and contributing educational work among all those concerned. It’s not crowded, and there’s a lot to be done.

[Carl Davidson writes for Beaver County Blue and SolidarityEconomy.Net. He is a national board member of the Solidarity Economy Network and a national co-chair of Committees of Correspondence for Democracy and Socialism. If you like this article, make use of the PayPal button on http://solidarityeconomy.net ]



email2friend

The URI to TrackBack this entry is: http://www.solidarityeconomy.net/2009/11/03/steelworkers-aim-at-job-creation-with-worker-owned-factories/trackback/

22 Responses to “Steelworkers Aim at Job Creation with Worker-Owned Factories”

  1. hi

    Photos from Mondragon or Arrasate in Basque

    Earlier this year, we where able to visit Mondragon or Arrasate in Basque and spend time at the Mondragon Cooperative researching a Permaculture worker cooperative.

    This slideshow are photos of the town of Arrasate. It’s a wonderful combination of Basque village, modern city and industrial park.

    I cannot recommend Arrasate highly enough

    http://permaculture.tv/?p=1050

    Photos of Mondragon Cooperative Tour
    We where very generously given a tour and lunch around Mondragon Cooperative.

    http://permaculture.tv/?p=1056

    Permaculture worker cooperative blog
    http://gaiapermaculture.com/projects/permaculturecooperative

  2. have written more about sustainability (permaculture) worker cooperatives, including info from a PPT received from the Mondragon tour

    The Mondragon Cooperative is actually a group of 120 cooperatives, all working within a inter-cooperative framework. Organised with Industrial groups.

    INDUSTRIAL 87
    CREDIT 1
    CONSUMER 1
    AGRICULTURAL 4
    EDUCATION 8
    RESEARCH 13
    SERVICES 6

    TOTAL 120 cooperatives

    Mondragons Strategy is

    People are the mainstay of the enterprise (twenty-first century, century of knowledge)
    We are all owners and protagonists
    One person, one vote (democracy)
    The involvement of everyone in: Management, Ownership and Results
    Self-management
    Decentralised organisation
    Real inter-cooperation in funds and people
    Reinvestment of surplus
    Social responsibility
    Innovation: Technical/Technological, Organisational, Financial, Social
    Balance between job creation and financial profitability
    Internationalization

    Mondragon’s 10 principles are

    1. Open Admission.
    2. Democratic Organization.
    3. Sovereignty of Labor.
    4. Instrumental and Subordinate Nature of Capital.
    5. Participatory Management.
    6. Wage Solidarity.
    7. INTERCO-OPERATION.
    8. Social Transformation.
    9. Universality.
    10. Education

    http://gaiapermaculture.com/projects/permaculturecooperative/blog/2009/11/07/permaculturecoop-notes-on-mondragon-permaculture/

  3. [...] share and an equal vote in key enterprise policy decisions. Workers in Mondragón businesses, notes long-time progressive analyst Carl Davidson, “themselves decide on the income spread between [...]

  4. A Do-It-Yourself Giant Does It to Workers…

    Home Feature Box: 
    Amid double-digit joblessness, two top U.S. corporations cut still another mega merger deal that enriches executives and tosses workers, by the thousands, out onto the street.
    Summary: 
    Amid double-digit joblessness, …

  5. [...] equal share and an equal vote in key enterprise policy decisions. Workers in Mondragón businesses, notes long-time progressive analyst Carl Davidson, “themselves decide on the income spread between the [...]

  6. [...] Fuente: Solidarity Economy [...]

  7. Contact: Sonia Pichardo
    Tel: 718- 617- 7807
    Email: sonia@greenworker.coop

    1st Annual Pioneer of Change Awards Press Release

    COOPERATIVE HOME CARE ASSOCIATES & SOUTH BRONX FOOD COOPERATIVES CHOSEN FOR AWARDS IN THE 1st ANNUAL PIONEER OF CHANGE AWARDS

    Pioneer of Change Award is a first-time award given by Green Worker Cooperatives that seeks to recognize people, organizations and businesses who have made significant contributions to address environmental and economic problems in working communities that don’t pollute the earth or exploit human labor.

    Green Worker Cooperatives has chosen Cooperative Home Care Associates (www.chcany.org) for this award because of their contribution to the South Bronx Community by providing a positive and democratic workenvironment in quality home health care. Cooperative Home Care Associates (CHCA) is a for-profit, worker-owned cooperative that provides home health care aides on a contract basis to large health-care providers such as the Visiting Nurse Service and major hospitals. Founded in 1985, CHCA now employs more than 1600 home health aides, most of whom are women of color, and has provided a model for replication projects in Pennsylvania and Wisconsin.

    COOPERATIVE HOME CARE ASSOCIATES is a concrete, profitable example that worker cooperatives can reorient our economy and can improve conditions for workers.

    Green Worker Cooperatives, also presents this award to the South Bronx Food Cooperative (www.sbxfc.org) in recognition of their pioneering efforts in establishing the first consumer-owned food cooperative in the South Bronx and promoting cooperative ownership in the Bronx.

    GREEN WORKER COOPERATIVES (www.greenworker.coop) is a South Bronx-based organization dedicated to incubating worker-owned and environmentally friendly cooperatives in the South Bronx. Our approach is a response to high unemployment and decades of environmental racism. We don’t have the luxury to wait for new alternatives. That’s why we’re creating them. We believe that in order to address our environmental and economic problems we need new ways to earn a living that does not require polluting the earth or exploiting human labor.
    ###

  8. Modernized Craft guilds to revive Detroit
    Craft Guilds as a solution to pervasive off-shoring.

    The problem facing western societies is that the current existence of offshore labour on truly a massive scale is a relatively new phenomenom since the fall of the Berlin wall and the PR China`s entry into the WTO. This has allowed those companies with good contacts overseas or by hiring N. Americans from the PRC knowing the language and who to pay the inevitable kickbacks to the means to crush their local rivals without the infrastructure and or the indifference to the implications of their decision to offshore. The vast army of eager to please cheaper labour that isn’t overly concerned with the environmental degradation of their country as well as their blatant exploitation effectively doubles as a club to keep those who haven`t already lost their jobs in their countries of origin in line and is effectively morally bankrupt. It`s in this environment of managerial bliss that the creative individual is increasingly marginalized and his efforts muted and in the case of Detroit an entire city. The Wal-Martization of the world means that corporations force inventors and artists to sign humiliating contracts resulting in them essentially handing over the rights to their creations for relatively little in return and without even a guarantee of long term employment and in turn offshoring the work to China etc..: the old social contract has definitely ceased to apply. There is a great deal at stake as those societies which engage wholeheartedly in creative endeavours stand to be in the best position possible to deal with the plague of off-shoring. De-industrialization and a falling birthrate have resulted in a surplus of industrial and educational buildings to be available (at least in some parts of the world) and are frequently owned by the state. My solution would be to provide these buildings to a new type of social construct called craft guilds that would have temporary non-profit status for a 5 to 10 year period in order to permit them to aquire the equipment, machinery, educational liasons and infrastructure necessary to get started and off the ground. The ideal craft guild would be an assemblage of architects, engineers, artists and production technicians who would enter upon mutual contracts respecting their individual rights and not excessive in their demands. It would be unwise to limit this idea to arts and crafts and or furniture etc… as I see this being applicable to the full range of economic activities and could allow western societies to effectively compete against the military dictatorship called the PR China. Patents, copyrights and designs would be owned by their creators with a 10 % royalty fee for the first invention etc…reverting to the guild enabling the continuity of the guild`s existence. Guild types can cover the entire spectrum of creative activities but the special status of the guild would be dependant upon their being engaged in creating goods and services not readily available and not simply being job shops which in reality would have them compete with existing companies and be disruptive as a result. It should also be an objective of the guilds to disavow any government assistance whatsoever for the building and renovation assistance of it and donations if possible and the tax benefits to society for donations of capital and machinery etc…that would be available from the ten year tax free status. I believe these guilds can be operated within the current capitalist system as another type of entity just like the corporation as a creation by government decree but of course with different objectives and methods of achieving their goals. Guilds can offer society the benefits of invention and creative production in order to combat the flood of cheap imports produced by having limited production capabilities as part of the guilds`structure. Prototypes, proof of concepts and short production runs in the least should be possible and even existing corporations can benefit from this concept. Marketing can be carried out via direct internet marketing over Craigs list, Kijiji, and a host of other free internet classified sites and Ebay if necessary in order to bypass the Wal-Mart lowest price is the law phenomenom. This would be a closed loop between creator and the end consumer thus guaranteeing the integrity of the design and manufacturing process and at least allowing the possibility of options for consumers.

    A seal of the guilds`approval along with details as to how the product or service was created/mfd. could be given giving the consumer that cares the peace of mind that he/she is part of the solution and not part of the problem. All members of the potential guilds should be have a proven track record of creativity without any financial assistance completely independant of any institution so as to demonstrate the ability to think outside the box and survive with limited or even no resources as anything is possible with money but things get far more difficult without it. This is about creativity and not getting on a gravy train, the soft life is for those hiding out in universities pontificating as opposed to being in the trenches trying to repulse the PRC onslaught, it`s tough love and sink or swim.

    The original craft guilds didn`t have a steady stream of government handouts to rely on yet they managed to bring about some pretty crafty innovations such as the Chartres and the Notre Dame cathedrals in Paris, London Bridge, the Gutenberg press and the Sistene chapel etc…. . The impact of creativity should not be underestimated as it has taken a single mother scraping by in England to being a billionaire. How many other J.K. Rowlings have yet to have their creations see the light of day due to narrow corporate interpretations of what society would be interested in which in reality can be totally off the mark as they more often than not play to the lowest common denominator and underestimate the intelliegence of the audience. I believe modernized craft guilds can be a medium by which society can be enriched and the rights of the creative better promoted and protected. This way the current prevalence of societies begging and bribing corporations to invent things and employ people in the western world when in reality they are merely re-inventing the wheel and buying off the shelf items instead of `researching` and then offshoring the production to the PRC as soon as no-one is looking can be remedied to a certain extent. Robert Hennecke.Thanking in advance for your consideration.

    The above is my solution for Detroit and if employed correctly could create hundreds of thousands of self directed jobs that would not be vulnerable to off-shoring.

  9. [...] models within the US, all the more interesting.  Most notable has been the decision by the United Steel Workers Union to court and co-opt the Basque, worker-owned cooperative model of Mondrag… The United Steel Workers Union, is after all, North America’s largest industrial trade [...]

  10. [...] 200 enterprises in 40 countries with 100,000 employess and annual sales of 16 billion Euros.  As Carl Davidson explains, Mondragon workers build buses and appliances and high-tech machine tools and operate a [...]

  11. [...] equal share and an equal vote in key enterprise policy decisions. Workers in Mondragón businesses, notes long-time progressive analyst Carl Davidson, “themselves decide on the income spread between the [...]

  12. Frank says:

    The market place of ideas needs a viable competitive alternative to capitalism. The failure of communism in the marketplace has allowed the capitalists to dis-improve their market offering. The market is rolling back all the goodies given to previous generations to dissuade them from being communists. It’s not that capital can’t afford them, it’s that capital no longer has to.

  13. [...] share and an equal vote in key enterprise policy decisions. Workers in Mondragón businesses, notes long-time progressive analyst Carl Davidson, “themselves decide on the income spread between [...]

  14. [...] share and an equal vote in key enterprise policy decisions. Workers in Mondragón businesses, notes long-time progressive analyst Carl Davidson, “themselves decide on the income spread between [...]

  15. I am very interested in this subject and desire much info about “Mondragon” and ESOP’s and cooperative and community owned companies and businesses. Please include me on updates and any new infomation available now and in the future about this subject. I have a strong desire to participate in these concepts and the implementation of changing who to make this country competitive again.

  16. Herb says:

    The cooperative systems from local, regional, and national levels are ready to develop green and “returning to the USA” manufacturing jobs. What is needed of course is the means to unite the current movement manifesting across the USA. A work group to design the RFP, obtain the funding, coordinate training, evaluate the development options, then fund the optimum number of cooperatives creating the optimum number of jobs. All of which utilizes the wisdom from the global cooperative movement and the American “can do attitude” to create large scale worker owned, managed,and enjoyed cooperatives.

  17. [...] United Steel Workers Union is getting in on the (cooperative) action. The union is partnering with Mondragon to explore the possibility of steel worker cooperatives. With over 40,000 manufacturing facilities [...]

  18. [...] share and an equal vote in key enterprise policy decisions. Workers in Mondragón businesses, notes long-time progressive analyst Carl Davidson, “themselves decide on the income spread between [...]

  19. [...] share and an equal vote in key enterprise policy decisions. Workers in Mondragón businesses, notes long-time progressive analyst Carl Davidson, “themselves decide on the income spread between [...]

  20. New In Brief says:

    [...] Quote November 5, 2009 Andrew Villeneuve Leave a comment Too often we have seen Wall Street hollow out companies by draining their cash and assets and hollowing out communities by shedding jobs and shuttering plants. We need a new business model that invests in workers and invests in communities. United Steel Workers discussing workplace democracy and its partnership with Mondragon. Mirror. [...]

Leave a Reply

Please note: Comment moderation is currently enabled so there will be a delay between when you post your comment and when it shows up. Patience is a virtue; there is no need to re-submit your comment.

[SolidarityEconomy.net is proudly powered by WordPress.]