362 lines
14 KiB
Plaintext
Executable File
362 lines
14 KiB
Plaintext
Executable File
finance
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economics
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8329355
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-----
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# Spain's astonishing co-op takes on the world
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## As Britain's David Cameron embraces the ideal of worker co-operatives, a
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remarkable hi-tech variant with global operations is already thriving in the
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industrial heartland of Northern Spain.
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![Spain's Co-op Lesson for Cameron ][1]
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The Mondragon group is the world's biggest co-op, though the Basque network is
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better known for products such as Orbea bikes that won gold at the Beijing
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Olympics. Photo: JAVIER LARREA
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[![Ambrose Evans-Pritchard][2]][3]
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By [Ambrose Evans-Pritchard][4], International Business Editor in Mondragon,
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Spain 9:09PM GMT 16 Feb 2011
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[Comments][5]
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The Mondragon Corporacion is the world's biggest co-op with 85,000 'worker-
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owners', though the Basque group is better known for products such as Orbea
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bikes that won gold at the Beijing Olympics and sell for up to £11,000, or
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Fagur fridges, Brandt ovens, Eroski shops, or the coming electric City Car.
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Anglo-Saxon elites might find its pay scale unsettling. Top brass in
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Mondragon's mountain lair may not earn more than six times the lowliest
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cleaner. "In reality it is just three times after tax, but we don't need much
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money to live here," said an ascetic Josu Ugarte Arregui, the global director.
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The differential in big Western companies can be 400 times, and is getting
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worse. The top pay of FTSE 100 bosses has jumped from 124 times the minimum
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wage to 202 times over the last decade, according to the Hutton Review of Fair
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Pay.
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Mr Ugarte struggled to explain how the group keeps talent. High flyers seem to
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stay for reasons of tribal loyalty or the ideals of Catholic social doctrine.
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To be a Mondragon manager is to accept the vows of priesthood, and indeed the
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movement was founded by a parish priest, Jose Maria Arizmendiarreta.
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His mission was to lift youths in the hilly Alto Deba region out of poverty
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after the Civil War, when Basques were on the losing side and a particular
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target of General Franco's wrath. Nearby Guernica - flattened in 1937 by the
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Condor Legion, and seared in our collective mind by Picasso - holds the
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ancient oak tree and symbol of the Basque nation.
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## Related Articles
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* [Vibrant exports will save Spain, and perhaps the euro][6]
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13 Feb 2011
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* [Spain orders drastic caja debt clean-up][7]
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10 Feb 2011
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* [Spain tempts fate with minimalist bank rescue][8]
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24 Jan 2011
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The solidarity ethos has its allure given mounting research by the IMF and
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other bodies that the extreme gap between rich and poor was a key cause of the
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global asset bubble and financial crisis, as well as being highly corrosive
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for democracies. The GINI index of income inequality has reached levels not
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seen since the 1920s across the West.
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Mondragon weathered the 2009 slump in machine tools, car components, and its
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other cyclical niches by putting 20pc of full staff leave for a year at 80pc
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pay, with names chosen by lottery. Some of its 256 co-ops froze pay, others
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took a 10pc cut.
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The membership rule is that all new workers must put up €13,400 in share
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capital, which they can borrow from the group's Caja Laboral, one of the few
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Spanish savings banks in robust health.
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Profits are largely reinvested or sunk into research centres, though a chunk
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is spent on social projects. Worker dividends are paid into retirement
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accounts. The whole system is run by an elected Congress, known as "the
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supreme expression of sovereignty".
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Such an egalitarian venture creates all kinds of problems. "We can't offshore,
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so we have to keep climbing the technology ladder and improve core engineering
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here," said Mr Ugarte.
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The group is stepping up investment in thermal insulation, and water
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purification, and grinding machines for the aerospace industry. Its machine
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tool arm Danobat has bought Newall in Peterborough.
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If a co-op keeps losing money, it is given three years to come up a credible
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plan, but ultimately workers have to be retrained and found other work. Paid-
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up 'Co-operativitistas' cannot easily be fired. The wider headcount fell by
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7,000 during the crisis, but they were outsiders in building.
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So far none of Mondragon's plants in China, India, Latin America or the rest
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of Europe have opted for co-op status. "We encourage them to be owners of
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their future, but they are afraid of the obligations that go with it," said Mr
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Ugarte.
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Mondragon pays global staff the market wage, which creates an odd disparity
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with the Spanish mother company. Mr Ugarte said the net effect of overseas
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expansion has boosted jobs at home, still 84pc of the total.
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America's United Steelworkers has sought help from Mondragon in creating its
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co-ops, hoping to emancipate itself from a Wall Street that "hollows out
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companies by draining their cash and shuttering plants". Yet it is unclear
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whether the model can easily be exported.
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Mondragon's strength comes from the powerful clan ethos of the Basques, the
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oldest nation in Europe with a tightknit global diaspora (Nevada, Idaho,
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Argentina, Brazil) and a unique pre-historical language. Linguists doubt
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claims that Basque is linked to old Etruscan or Berber dialects.
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Recent studies of DNA suggest that the Basque have a very close genetic
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profile to the Irish and Welsh, who also pre-dated the Celtic agrarian
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settlements of the 6th Century BC.
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There is a dark side to Mondragon. The town is a cauldron of ETA terrorist
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sympathies. A socialist politician was gunned down in broad daylight two years
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ago, and the mayor has still declined to condemn the act. The Corporacion
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adamantly denies any links to ETA, insisting that it is "radically opposed to
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intolerance and any type of violence". There is now hope of a lasting peace
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settlement in any case.
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"The Myth of Mondragon", based on fieldwork by anthropologist Sharryn Kasmir,
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argues that political tourists from all over the world have been willing to
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overlook the subtle forms of peer pressure and worker stress in the valley.
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Yet the movement is still flourishing half a century after critics said it
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would never survive. It generates 3pc of Spain's industrial output of the
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Basque region and generates annual sales of €24bn. Almost 60pc of its heavy
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production is exported.
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As chairman Jose Maria Aldecoa puts it, with a Churchillian twist: "the co-
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operative model is absolutely flawed, but it has shown itself the least flawed
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in a crisis of values and models".
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**[![][9] ][10][Banking and Finance][11] vacancies at [Telegraph Jobs][12] **
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http://www.telegraph.co.uk/finance/economics/8329355/Spains-astonishing-co-op-
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takes-on-the-world.html
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Telegraph
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## [Economics][19]
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* ### [Spain »][20]
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* ### [Finance »][21]
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* ### [Ambrose Evans-Pritchard »][3]
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* ### [Business Latest News »][22]
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In finance
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[![Riot police use tear gas as protesters throw petrol bombs in Athens][23]
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][24]
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### [Tear gas and petrol bombs][24]
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[![IMF Global Financial Stability Report: the key points][25] ][26]
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### [IMF Stability Report: key points][26]
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[![Indebtedness and Leverage in Selected Advanced Economies (as a percent of
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2010 GDP) ][27] ][28]
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### [Threats to world economy: in charts][28]
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[![Monetary Policy Committee members: the hawks, the doves and the in-
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betweeners][29] ][30]
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### [Interest rate split: how they voted][30]
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Share:
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