Not only that, cooperatives can be just as competitive in the global market as transnational corporations.
The Dragon’s Mountain
There’s a small town in Spain, nestled away in the shadow of a mountain that used to house a vicious dragon. It’s called Mondragón—and it’s home to the largest cooperative federation in the entire world.
That dragon—now long extinct—was likely a brutal lord or local king who terrorized the people of the small town during the feudal dark ages. But now, as the United States and other Western economies descend into a form of neofeudalism with predatory transnational corporations terrorizing labor around the world, Mondragón is a beacon of hope for a new capitalism.
Back in 2009, Louise and I visited the town that lies in the shadow of the mountain, as well as the Mondragon Cooperative, which employs more than ninety thousand people in more than 250 different companies focused on retail, finance, industry, and knowledge. In 2008, Mondragon’s revenue was $24.2 billion—and every single penny of profit was either reinvested back in the business, given to charity, or paid as dividends to Mondragon’s worker-owners.
Unlike the top-down nature of most capitalistic businesses—and even communism—Mondragon and other cooperatives have flipped the pyramid upside-down. There are no CEOs making two thousand times more than the average worker, there is no board demanding higher and higher profits and pushing for offshoring, there is no contract with an outside acquisition firm, such as Mitt Romney’s Bain Capital, to “trim the fat.” The workers are trusted to determine the best direction for their company, for themselves, and for the economy.
I saw firsthand how decisions are made at Mondragon as I stood on the spotless factory floor of a washing-machine manufacturing plant within Mondragon. All around me, worker-owners at the state-of-the-art industrial facility were converting sheet metal into finished washing-machine parts and assembling electronics to go in those washing machines on a U-shaped assembly line. That’s when a “manager” walked up asking for everyone’s attention. He notified his colleagues that the following Thursday there needed to be a schedule change due to a local event and therefore a different number of units would have to be produced.
Rather than giving new orders regarding how the workers were supposed to deal with the change, he ceded his authority to those on the assembly line and asked, “How do you think we should do this?”
Then a conversation took place. The workers offered suggestions, critiquing the strengths and weaknesses of each idea. There was no arguing or complaining or fighting; it was an exchange of ideas, with the “manager” listening attentively as though he was actually the one who was being told how things would change next Thursday.
Ten minutes or so passed and a consensus was reached on how the factory would adjust; the “manager” thanked everyone and walked off; and the machine and conveyor belts were turned back on. It was true democracy in the workplace.
But cooperatives are just one way of “democratizing capital.” Germany has another way.
The Mercedes and the Labor Union
When the American auto companies were on the verge of failure following the financial crisis of 2008, the Obama administration moved to bail them out.
Conservatives were outraged. Mitt Romney in particular called for letting the American auto industry go bankrupt. Since most of the American auto plants employed unionized workers, a bankruptcy would have allowed the companies to renegotiate union contracts and pensions, thus continuing the right-wing assault on unions.
At the time, the Economic Royalists argued that American auto companies were failing not because they were getting destroyed in the market by better-quality cars made overseas or by irresponsible free-trade policies but instead because they were paying unionized workers far too much. In today’s global economy, the Royalists insisted, workers had to take pay cuts so that the corporation they worked for could be more profitable and more competitive in the global market. You can call it the growing pains of globalization.
But is it true? Do American workers really need to lose wages for the sake of our economy?
Not if we just do what Germany is doing. In 2010, Germany manufactured 5.5 million cars. The United States manufactured less than half that—just 2.7 million cars. So according to the logic of the Economic Royalist—Germany must pay their autoworkers jack, right?
Actually, Germany paid their autoworkers about $67 an hour (including wages and benefits). But the United States paid its average worker only $33 an hour (also including wages and benefits). On top of that, German car manufacturers were highly profitable, despite the comparatively large paychecks of their workers. BMW earned a before-tax profit of 3.8 billion euros, and Mercedes-Benz hauled in profits of 4.6 billion euros.
So how did Germany just completely blow up the Royalist myth that car companies have to pay their workers less to be more profitable and manufacture more cars? How can Germany do the opposite: pay their workers more, be more profitable, and make more cars?
The answer: democracy.
First, Germans have completely democratized the auto plant by unionizing nearly every single autoworker in the country—under IG Metall, the German autoworkers union. With such a high union membership rate, autoworkers hold a lot of sway when they threaten to go on strike. That’s how workers have been able to keep wages high and working conditions satisfactory. But as Horst Mund, the head of the International Department of the German autoworkers union, pointed out, unions hardly ever go on strike in Germany, “because there is an elaborate system of conflict resolution that regularly is used to come to some sort of compromise that is acceptable to all parties.”
One reason for the more collaborative relationship between CEOs and workers is that, unlike in the United States, unions aren’t under attack and there aren’t any “right to work for less” zones in Germany to which car manufacturers can flee so they can ignore the voice of organized labor.
Another and perhaps more powerful reason is that there is a constitutional amendment in Germany that forces corporate executives to listen to labor unions. The Works Constitution Act requires every factory to set up a works council that gives representatives of the workers a seat at the table in every decision-making process at the factory. That is the democratization of capitalism, expanding the decision-making process to not just the corporate elite but the entirety of the company, from the bottom up.
This, according to Mund, is the real reason why the autoworkers union has a loud voice in the German economy. Pointing to the adversarial relationship between employers and labor unions in America, Mund says, “The accusation that American unions are more radical and destructive… definitely has to do with the hostile environment in which the unions have to act. How can they be constructive and friendly if their asses are kicked all the time?” He goes on to say that without the Works Constitution Act in Germany, “employers would not talk to us either if they had the choice.”
But intentions aside, the empowerment of labor unions in Germany and the democratization of the workplace through an enforced constitutional amendment has been an economic boon for Germany, as demonstrated by car sales, employee wages, and profitability.