Venerable entrepreneur was a 'cooperative' man

Who was Fr. Arizmendiarrieta?

Arizmendiarrieta—sometimes called “Arizmendi” for short—was born in 1915 and grew up in a modest farmhouse in the province of Biscay on the central northern coast of Spain. In due time, he entered the seminary at Vitoria, but his studies were interrupted in 1936 by the Spanish Civil War.

Arizmendiarrieta was mobilized by the Basque government but deemed unfit for combat because he had lost an eye in a childhood accident. Instead, he was made editor of a government-run, Basque-language newspaper. This work led to his arrest by Nationalist rebel leader Ferdinand Franco’s army in 1937, when he narrowly escaped being shot.

After being mobilized again by Franco’s army, Arizmendi was allowed to continue his seminary studies. He also became involved in the social apostolate in Vitoria, focusing particularly on laborers and youth. With this background in communication and social work, Arizmendiarrieta was finally ordained a priest in late 1940 and assigned to the small town of Mondragon.

The war had left poverty and a lack of prospects in its wake, particularly in Mondragon’s agricultural and industrial economy. “The townsfolk were caught in a vicious cycle of poverty,” said Michael Severance of the Acton Institute in a recent essay. “The war was destructive both materially and spiritually. Arizmendi thought deeply about how to break this cycle.”

He broke it first with education, both religious and professional. In 1943, he opened a polytechnical school that allowed its students to work in the mornings and attend classes in the afternoons.

In 1956, five graduates from the school banded together with Arizmendi’s support to form ULGOR, the first of the Mondragon cooperatives.

Making Mondragon

What is a cooperative? Organizations with this label vary in their precise structure, but the Mondragon Corporation’s website explains that their cooperatives are based on a democratic system. Most or all of the workers in any Mondragon cooperative are also part-owners in the company and get to vote on major decisions.

They also get to distribute profits among themselves based on the amount of labor contributed. “Capital … is a necessary resource,” says Mondragon, “but it does not confer the right to vote and its stake in the profit is limited and subordinated to labour.”

During the 2020 pandemic recession, many worker-owners of Mondragon cooperatives voted to reduce their own salaries or hours temporarily, rather than eliminate positions, according to the New Yorker. Thus, Mondragon workers cooperated to preserve their jobs until the economy recovered.

Today, Mondragon consists of 95 cooperatives. After ULGOR, other cooperatives were founded as needs arose: a cooperative pension and insurance organization was created in 1958, followed by a cooperative bank in 1959. More cooperatives were formed or joined the association over the years. Today, the Mondragon cooperatives employ around 80,000 people and make sales in over 150 countries around the world.

Eternal principles

The cooperative business model is based on the principles of Catholic social teaching: solidarity, subsidiarity, and commitment to the common good.

In 2008, Pope Benedict defined solidarity as “the virtue enabling the human family to share fully the treasure of material and spiritual goods.” Mondragon says it is “driven by a commitment to solidarity”: workers who shared in the labor share in the profit, and in decisions about how to allocate it.

Subsidiarity is also evident in the Mondragon structure: the 95 cooperatives are self-governing, although with a common ethical code and values. In Centesimus Annus, Pope St. John Paul II explained the principle of subsidiarity: “a community of a higher order should not interfere in the internal life of a community of a lower order, … but rather should support it in case of need and help to coordinate its activity with the activities of the rest of society, always with a view to the common good.”

That common good is twofold: internal and external. “Communities of work have a duty to conduct their operations by choosing courses of action that deliberately subserve the common good of that community and advance the common good of society as a whole,” said Stephen Cortright, professor of philosophy at St. Mary’s College of California, in a recent interview.

As shown by the cooperatives that voted to preserve jobs with a pay reduction, job security is an internal common good that the members of each cooperative are happy to share.

But Mondragon also promotes broader societal goods. One of their principles is education, not just of their own worker-members but of “young people in general,” according to their website. The technical school founded by Arizmendiarrieta has grown into the multi-campus Mondragon University, and several other cooperatives are focused on research and development, technology, and innovation.

Some of Mondragon’s initiatives, like the Azaro Foundation, work to sustain the Basque region and its unique language and culture. Another, the Mundukide cooperative, shares resources and knowledge to help communities in developing countries thrive in a self-managed way.

Temporal results

All of Catholic social teaching promotes a person-first attitude, seeing markets and business as at the service of human flourishing, rather than the other way around. Mondragon incorporates this in its entire structure.

In 2022, the New Yorker highlighted the story of Jorge Vega Hernández, who was fired from his previous job in the middle of the Covid-19 shutdowns after staying home from work when he felt sick but could not prove he had the virus. Later, he got a job at a Mondragon cooperative that trusts its employees to make the choice to stay home when they are ill—and doesn’t fire anyone without taking a vote.

This respect for human flourishing has typically led to stable businesses and healthy financial returns. Mondragon’s latest annual report says that aggregate sales in 2021 totaled 11.404 billion euros (about $12 billion), and net profit was 392 million euros (about $415 million).

“People’s satisfaction is greater [in cooperatives] and, as a result, their contribution to the collective project and the effectiveness and sustainability is also greater,” said Jose Manuel Sinde, president of the Arizmendiarrieta Christian Foundation, which promotes the venerable priest’s model.
 
“The Mondragon experience … proves that [Catholic] social doctrine is not a set of well-intentioned but non-applicable principles; but rather that they are able to inspire useful, practical solutions to solve the problems of individuals and communities.”

RACHEL HOOVER is a contributing writer for Legatus magazine.