The Experiment That Did Not Want to Become a Model

Don José María Arizmendiarrieta said: “We are not a model that can be copied — we are an experiment.” That humility was right. The question that must be asked seventy years later is a different one: what has become of this experiment? And is what today bears the name Mondragón still the same thing?

This essay is the continuation of another that describes Mondragón as a source of hope. It does not contradict it. It asks what happened between the origin and the present — and whether what happened was inevitable.

I. The Iron Law

In 1896, Franz Oppenheimer formulated the “Iron Law of Producer Cooperatives.” The word “iron” — cast from ore, as immutable as metal — belongs to a tradition of the nineteenth century in which social scientists described regularities they considered as unavoidable as natural laws. Lassalle had formulated the Iron Law of Wages, Michels the Iron Law of Oligarchy. Oppenheimer joined their ranks: what he described was no accident, no moral weakness, no individual betrayal. It was structure.

The mechanism is simple and relentless. A cooperative is founded out of solidarity and necessity — people building together what none could build alone. When it succeeds, the value of membership rises. The existing members now have an economic interest in keeping new members out — every new member dilutes their share, their influence, their privilege. So they hire wage workers instead. With that, the core of the transformation is complete: the cooperative has begun to place capital above solidarity. The rest is only a matter of time.

Oppenheimer’s law is “iron” because it is not broken by good intentions. It is broken by structure — or it is not broken at all. Arizmendiarrieta knew this law — his entire institutional work was a conscious attempt to overcome it. The Caja Laboral as an instrument for founding new cooperatives rather than accumulating capital. The solidarity funds. The wage ceiling. These were not ideals — they were structural components designed against a specific structural failure.

The struggle held for four decades. Then the law won.

The question is not whether Mondragón failed. The question is: did Mondragón know Oppenheimer, forget him — or simply not take him seriously enough when globalisation forced the decision?

II. The Numbers That Do Not Lie

Mondragón today employs over 80,000 people. That sounds like success. But one number changes everything: of those 80,000, fewer than 40 percent are cooperative members. The majority of people who work for Mondragón work for Mondragón — not in Mondragón. They are wage workers in conventional subsidiaries, in China, India, Morocco, Poland. They have no voting rights. They share no profits. They are not members — they are workforce.

The core of the industrial division now consists of cooperative multinationals managing more than 100 subsidiaries as joint-stock companies employing wage workers across multiple countries — primarily in developing and transitional economies. These subsidiaries operate according to the same rules as any other multinational corporation.

There is a precise term for what Mondragón has become: a “coopitalist hybrid” — one that maintains a cooperative core of worker-members while operating capitalist subsidiaries with wage workers lacking membership rights. This is not polemic. It is the description of reality by researchers who have studied Mondragón for decades.

III. The Erosion of Democracy

Mondragón’s core principle was never the cooperative as a legal form. It was democracy as lived practice: one person, one vote. Decisions from below. Capital serves labour, not the other way around.

What has become of this practice? Heras-Saizarbitoria found in 2014 that Mondragón’s basic cooperative values — democratic organisation, participatory management and education — have become decoupled from workers’ daily activity, and that the principle of secure membership and employment is the only one that encourages “most workers to remain quiet and compliant in a system that gives them limited ways to participate.”

The democratic possibilities for socios are limited. Participation tends to be more reactive than proactive, with proposals primarily prepared by the Consejo Administración, leaving little room for broader organisational involvement. This gradual erosion of democracy is evident in members growing less motivated to attend general meetings — repeated absences are now sanctioned with wage penalties.

That is a remarkable inversion. The cooperative that once celebrated the engagement of its members as its highest value now punishes absent engagement. Democracy has become an obligation — and obligations are fulfilled or sanctioned, not lived.

IV. The Fagor Moment

2013 was the year in which the quiet failure became loud. Fagor Electrodomésticos — the first and symbolically most important cooperative, founded by five students of Arizmendiarrieta — declared insolvency.

The external causes are known: the Spanish property crisis, a 37 percent collapse in sales, overambitious international expansion into 18 factories across six countries. But the internal causes are more revealing. Members criticised “the distance from management and the difficulty in understanding the decisions taken by people above.” Corporate managers criticised Fagor’s management for maintaining the illusion that Fagor was viable enough to survive, when it was in fact a dying company consuming all its resources to meet operating costs.

That does not sound like a cooperative. It sounds like any large corporation that loses its lines of communication in a crisis.

What followed was even more revealing. While many of Fagor’s cooperative members were reassigned to other Mondragón cooperatives through extensive relocation efforts, a substantial number of non-member employees lost their jobs. The solidarity that had made Mondragón great now applied only to the inner circle. The wage workers — the majority of the workforce — were not part of that circle.

V. The General Pattern — and Oppenheimer’s Law

What Mondragón has undergone is not a failure. It is a pattern that cooperative research has described for decades under the name of the “degeneration thesis”: cooperatives tend over time to transform themselves into conventional enterprises.

The mechanism is always the same. At the beginning: a small collective, shared fate, living democracy, because everyone knows everyone and every decision is felt. As it grows: professionalisation of management, emergence of hierarchies, distance between leadership and base, declining participation. At the end: the legal form of the cooperative without its lived substance.

Mondragón held this process at bay longer than any other cooperative in history through its institutions — the Caja Laboral, the university, the solidarity structures. But holding it at bay is not the same as stopping it. Mondragón is on the degeneration trajectory. The paradigmatic earlier example was the Rochdale cooperative, founded in England in 1844, which in 1859 took on investor members to finance a new factory and thereby hollowed out its cooperative principles.

The difference is not the whether. It is the how fast — and whether the process is reversible.

VI. The Globalisation Trap

It would be unfair to condemn Mondragón for the decisions it took in the 1990s without understanding the pressure under which it operated.

Globalisation meant: competitors outsourced to low-wage countries. Those who did not lost market share and endangered the jobs of their own members. Mondragón chose to play the game — in order to protect cooperative core jobs in the Basque Country. The cooperatives invested in China to manufacture labour-intensive goods cheaply and to be close to growth markets — a strategy the cooperative members themselves approved by vote.

That was a democratic decision. And it was simultaneously the decision to limit the cooperative principle to existing members and to treat the rest of the world as available wage labour. The privileges of cooperative membership are underwritten by an exploited international workforce.

That is not malice. It is the logic of a system that must survive and in doing so partially abandons its own values.

VII. What the Wage Gap Numbers Conceal

Mondragón still advertises its wage ratio: a maximum of 1:9 between the lowest and the highest salary. Compared to corporations where this ratio is 250:1 or more, that is impressive.

But the figure applies only to cooperative members. It does not apply to wage workers in the subsidiaries. The lowest current salary is around 15,000 euros, the highest 90,000. That is respectable by Basque standards. What is missing: what do the workers in the factory in China earn? What do the seasonal workers at Eroski earn?

If one takes the entire workforce — members and non-members — as the population, the wage gap looks different. Nobody publishes this figure.

VIII. Is This Inevitable?

Here the analysis becomes uncomfortable — not for Mondragón, but for all who regard Mondragón as a model.

If what Mondragón has undergone is inevitable — if every cooperative that grows large enough to compete in global markets necessarily becomes coopitalist — then Mondragón is not a model for the world. It is proof that the experiment works only up to a certain scale under the conditions of globalised capitalism.

But there is another reading. Mondragón has not failed — it made a wrong choice, and this choice is reversible. Cooperatives can survive and regenerate democratically by embracing innovative organisational structures and practices that reinforce collective ownership and decision-making — as Mondragón has already done several times.

That is the decisive sentence. Mondragón has already corrected itself several times. It has not lost the capacity for self-reflection — it has simply used it too rarely of late.

IX. What a Genuine Renewal Would Require

Arizmendiarrieta never said: we are finished. He said: there is always still another step.

The next step would be more radical than anything Mondragón has done so far. It would mean asking the question that has so far been avoided: how can the cooperative principle be extended to the entire workforce — including the wage workers in the subsidiaries?

This is not a utopian demand. There are approaches: some Mondragón cooperatives have begun converting their subsidiaries into mixed cooperatives that integrate local workers as members. This is slow, complex, costly. It is also the only thing that would be consistent.

Without this step, Mondragón remains what it has become since the 1990s: a company that offers its members in the Basque Country a remarkably fair and democratic work environment — and treats the rest of the world according to the same rules as any other corporation.

The experiment was: can labour govern capital? The answer was: yes, for us. The unasked question was: and for everyone else?

X. Why It Still Matters

This essay is not a reckoning. It is an invitation to a more honest discussion — one that does not treat Mondragón as an icon beyond criticism, but as an experiment that is valuable precisely because it is real, with real failures and real opportunities for correction.

Mondragón remains the most important example the world has that economic democracy is possible at scale. No other cooperative has combined similar size with similar values and achieved similar economic results.

But an example is not a model. And a model only becomes useful when it honestly describes where it has failed — not only where it has succeeded.

Arizmendiarrieta always insisted: not copy — understand. That applies to the failures too.

The experiment deserves more than admiration. It deserves the honesty it once had itself.