Co-operatives should be at the heart of the Welsh economy

Derek Walker reports on lessons that can be learned from the Mondragon experiment in the Basque Country

There should be an expanded role for co-operatives in Wales. Links should be improved between co-operative businesses and universities. Worker co-operatives should be promoted more aggressively in manufacturing. There should be more education about co-operatives in our schools and colleges.

These are some of the lessons I brought back from a recent visit to Mondragon in the Basque Country, where over the last fifty years an extremely successful network of worker cooperatives has been developed. A report on that visit, Leading the Dragon – Lessons for Wales from the Basque Mondragon Co-operative, is being launched at the annual Co-operative Cymru/Wales conference at the Atrium in Cardiff today.

In February 1981 a Wales TUC delegation visited Mondragon and came away inspired to found the Wales Co-operative Centre. This is now 30 years old and over the past three decades has had a substantial impact on the Welsh economy. In April 2012, another Welsh group, including Alex Bird Executive Chair of Co-operatives and Mutuals Wales; Mark Drakeford, AM for Cardiff West; John Osmond, Director of the IWA; Liz Moyle an elected Member, and Ashley Drake, Membership Manager with the Co-operative Group Cymru/Wales; and myself returned to Mondragon to assess the progress it has made and to see what new directions might be possible.

Founded in the town of Mondragon in 1956 the beginnings were modest, starting with a small workshop producing paraffin heaters and later a technical college. However, over the next five decades the group expanded to become a major economic player. Today it is the leading business group in the Basque Country. It is one of the ten largest Spanish companies in terms of turnover, comprises 120 co-operatives, employs more than 83,000 members, has a turnover of €14 billion, has a bank and numerous research institutes, and has founded a university with some 3,600 students.

Our delegation came away convinced that we can learn from the Mondragon Corporation’s hard-headed, strategic approach to co-operative development. It has a four-year planning cycle whereby a structured, bottom-up approach is used to involve the member businesses in developing a strategy for the federation. One of the results is to identify sectors where new co-operatives can be established based on the potential for job creation as well as the surpluses that can be made. Current priority sectors include ICT, new materials, health and food, renewable energy and care services for older people.

Co-operative businesses work together to develop these new businesses. As part of the deal of being a member of the Mondragon Corporation, businesses agree not to compete with one another and to contribute 10 per cent of their gross profits each year. This money is used to invest in new businesses. It is the sixth co-operative principle in action – co-operation amongst co-operatives.

We were told how this worked in practice. The GSR co-operative is a nursing home business that has recently opened its first, wholly owned, nursing home. GSR operates other homes but this is the first time it has built a residence of its own. The new nursing home exists because several years ago the Mondragon Corporation recognised health and social care as a strategic sector that was growing and would enable the federation to diversify its activities. As a result the Corporation put up some of the capital required, as did an engineering co-operative and a catering co-operative. Now the business is profitable, employing 400 staff and the workers are gradually buying out the business.

No such strategic approach exists in Wales or even within the UK when it comes to developing co-operatives. Co-operative organisations do come together through the auspices of Co-operatives and Mutuals Wales, their umbrella organisation, but there is no commonly agreed strategy.

Ten years ago the Co-operative Commission was successful in providing a strategic direction for the co-operative sector in the UK. The following decade has seen significant progress, particularly in the growth of the sector. In the way that the Welsh Government has moved beyond looking only at horizontal business support measures to identifying nine key economic sectors, there is a case for those of us in the co-operative sector in Wales to put together a similar strategy and work together to achieve it.

Replicating all of Mondragon’s successes in Wales will not be possible. Despite similarities, such as a thriving indigenous language, beautiful mountain scenery and a similar population size, there is too much that is different to make it possible to copy what Mondragon has done. Nonetheless, it seems to me, some of the learning can be translated and adapted for the Welsh context.

Action number one would be to help co-operatives work together in the way they do in Mondragon. Here, many of our successful enterprises hide the fact that they are a co-operative because they fear this will not go down well with customers. There is little evidence that many Welsh co-operatives know each other exist, let alone work in partnership.

A second action would be to promote the adaptability of the co-operative model. At Mondragon it is tweaked to suit the circumstances. Many businesses are termed ‘mixed’ cooperatives. They are not made up just of workers but might involve the Mondragon Corporation, the bank, another business or another section of the community. All own a share in the business.

Another example of this flexibility – perhaps we should refer to it as creativity – is the Eroski supermarket model. The business is part worker co-operative, part consumer co-operative and partly not a co-operative at all. The details are complicated and some of it difficult to follow. But what was clear is they did not get too hung up on the purity of the model. Priority was given to thinking about how co-operative values and principles could be applied, and then the form was developed to suit the circumstances.

A third action is to make efforts to apply the learning from co-operatives to the rest of the private sector. So much of the learning from successful co-operative businesses could be applied to mainstream businesses, without them becoming a co-operative. Concepts of employee engagement and co-operative leadership could be applied to most businesses. The best business leaders recognise this already, it is not a revolutionary idea. These concepts are found on leadership and management courses throughout the world. Trade unions have also been pushing for their adoption through their partnership agenda for many years. In Mondragon there is a co-operative culture management school that nurtures the culture of the businesses because it helps make them stronger and more profitable. Working with universities we could develop something similar in Wales.

A fourth action is to develop a strategy for the co-operative sector to provide it with a route map for the years ahead. To support this strategy there is a need to consider the funding needs of co-operatives. The availability of affordable finance was a crucial factor in Mondragon’s success.

In 1981 the Wales TUC Mondragon delegation had a clear idea about what it wanted to achieve when it returned to Wales. The ‘resource centre,’ that became the Wales Co-operative Centre, has been the main output and the Welsh economy would have been significantly weaker without the Centre’s existence. If we were to be as successful in implementing some of ideas that have emerged from our 2012 visit, then the trip would have been more than worthwhile.

Derek Walker is Chief Executive of the Wales Co-operative Centre. This is an edited extract from his contribution to Leading the Dragon – Lessons for Wales from the Basque Mondragon Co-operative being published by the IWA today - details available here

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