ABSTRACT

After a brief historical overview, the discussion centers on the ways that the Mondragón cooperative network has dealt with some classic problems of utopian communities: 1) capital formation, 2) charismatic leadership, 3) responses to economic cycles, 4) differences in the interests of workers and managers, 5) the role of automation and technology, 6) the encouragement of entrepreneurship, and, finally, 7) socialization to the cooperative ideal. The analysis of the responses to these challenges is based on the research literature on Mondragón, as well as on discussions with scholars and experts who have studied the system and with key individuals in the Mondragón network. The conclusion suggests some of the remaining challenges and an agenda for further research.

CITATION: Hoover, Kenneth R. , "Mondragon's Answers to Utopia's Problems," Utopian Studies 3 (1992) 2, 1-19.

 The allure of utopian visions is in the prospect of surmounting the difficulties that bedevil daily existence. As Frederic White observes, "It is this inspired disgust with things as they are that creates the literature of Utopia" (1981, viii). Yet nothing reveals the nature of these difficulties so clearly as various efforts to practice utopian ideals. The problems utopias encounter fill the concluding chapters of histories of utopian communities, provide the stuff of realist rejoinders to reformist proposals, and become the central theme of prominent dystopias such as Brave New World, and 1984.

The literature of utopia offers a critique of the failures of society, but it is a critique that itself can be analyzed to reveal the truly intractable elements of life's difficulties, as opposed to the possibilities for constructive change. The analysis offered here sets some of the classic problems of utopias against the experience of the Mondragón cooperatives, a highly successful network that has achieved some of the principal goals utopias strive for.

My plan is to review briefly the history of the Mondragón cooperatives and the record of their performance, then to identify a few of the problems utopian communities commonly face, and finally to suggest some of the ways that the Mondragón cooperatives have avoided and, in some cases, met these challenges over the last thirty-five years. In the conclusion, I will point to the unsolved problems that remain for Mondragón, and to an agenda for further research. The discussion is based on interviews with several Mondragón participants as well as with researchers working on the topic, and on the cross-disciplinary literature that has been developing steadily as the "experiment" has become institutionalized.

Background

First, what is Mondragón? The name identifies a community in northern Spain of about 28,000 located south and east of Bilbao among the valleys and small mountains of Guipuzcoa province. Mondragón is the center of a network of more than 100 employee-

owned cooperatives, including Spain's largest appliance manufacturer, and its sole producer of micro-chips. The network spreads through towns and villages across the three provinces of the Basque country.

The performance of the Mondragón cooperatives over the last three decades has attracted international attention. For example, it was reported recently in The Economist that: 

A brief overview of the Mondragón experiment may be useful. There are four periods to the development of the "Mondragón Cooperative Experience": the establishment of a technical school by Fr. José Maria Arizmendiarrieta in 1943, the development of the first cooperative in 1956 followed by rapid growth, the recession period beginning in 1979 which saw unemployment reach 25% in the surrounding areas, and the present phase which began with full recovery of the cooperatives in 1986. Currently, the cooperatives have positioned their resources for the level of competition attendant upon the 1992 dismantling of tariff barriers within Europe.

At the heart of the Mondragón network is a consortium of cooperatives in the kitchen products field marketed under the brand-name FAGOR. The FAGOR consortium is the direct descendant of the first industrial coop named Ulgor, a name composed of the first letters of the names of the five young engineers who founded it in 1956. These five were all students of a priest, Fr. José Arizmendiarrieta, whose interest in improving the lives of his parishioners took concrete form with the creation of a technical school in Mondragón in 1943. This was the first step in the creation of an innovation in political economy.

Fr. Arizmendiarietta combined many qualities according to observers: he was a deft teacher, an inspirational figure, as well as a very practical person who guided the movement without institutionalizing his power (Whyte and Whyte, 223-254; Meek and Woodworth). Making a self-conscious attempt to navigate a course between the principles of Adam Smith and Karl Marx, he found his basic texts in a combination of Catholic moral teaching on the economy and the experience of the 19th century utopian cooperative experiment at Rochdale in England.

The priest remained in the role of teacher, rather than administrator, though occasionally he took direct action to assist the movement. In one instance, he persuaded the directors of ULGOR to create the cooperative bank as a solution to their financing problems. In another, he launched the concept of a working technical cooperative as an adjunct of the polytechnical training school. In both cases, he worked through study groups and endless consultations, while becoming a knowledgeable interpreter of Spanish legal and bureaucratic requirements (Meek and Woodworth, 1991, 519). He was not an overtly charismatic leader, but he clearly had a talent for synthesizing theory and practice in response to the needs of the moment. Father Arizmendiarrieta died in 1976.

The cooperatives are based on the principles of England's Rochdale Pioneers. Each member, upon being hired to work in a cooperative, loans a set amount to the cooperative's capital fund, for which he or she receives a fixed rate of interest. Compensation takes three forms: wages, 6% fixed interest on the capital loan, and profits of the cooperative which accrue to shares and are used for capital investment until the member's retirement. Wages are set at the entry level by the prevailing labor market, and constrained by the general principle of a 6:1 ratio between highest and lowest wages. The ratio was initially established at 3:1. With the increasing sophistication of technical and managerial skills required to sustain a competitive industrial position, the ratio was raised to 4.5:1, and in 1987 to the present level (Whyte and Whyte, 1991, 44-45). The initial capital loan contribution can be financed on credit through the bank for a specified period of time.

The administration of the cooperatives follows a pattern. Managers are appointed for a term, usually four years, by an elected Supervisory Board which is accountable to the General Assembly of all cooperative members. Thus there is indirect accountability, an approach that allows for some latitude on the part of managers as they pursue the economic and social objectives of the cooperatives. A second elected body, the Social Council, deals with the concerns of members "as workers," rather than "as co-owners" in the way that the supervisory board does. The management is accountable primarily to the latter, though it obviously has to work with the former as well (Whyte and Whyte, 213).

There are several features of the Mondragón network that are distinctive, and perhaps the most important are the secondary institutions that tie the whole network together. Chief among them is the bank. All of the cooperatives participate in the bank: it is their creature in a sense, though it has grown to become one of Spain's most significant financial institutions. This ingenious institution provides a source of capital and, just as important, of expert advice and planning assistance for the member coops. The agreement that is the instrument of membership in the bank is, in effect, the constitution of the Mondragón network. The agreement sets overall limits on pay ratios, the basic parameters of compensation, and many other aspects of policy.

The elaborate system of secondary cooperatives includes a health and pension system, a research institute that investigates new technological applications, an educational system covering all grades through to a technical university that is itself a producing cooperative, and an impresarial division that focuses in the start-up of new cooperatives. All are governed by boards held accountable to the member coops, as well as to their own working share-holders.

One distinctive feature that must be accounted for is the relationship with the Basque nationalist movement. This link is important for historical reasons, and a critical element in determining the transferability of the Mondragón experience. It is very nearly impossible to reach a simple conclusion about this because of the many paradoxes presented by the cultural environment. There is a long history of cooperative efforts in the Basque country; yet there is also a history of bitter competition and political rivalry. Nationalist sentiment is strong and there is reportedly substantial support among Mondragón participants for Herri Batasuna (a coalition of pro-Basque groups including the terrorist ETA), and the ETA itself. At the same time, the hiring policy is non-exclusionary and the coops do not engage directly in political activity. The coops were born in a period of adversity and persecution by the Franco regime, yet they have survived in a period of relative affluence in post-Franco Spain. The school system teaches the Basque language and emphasizes nationalist values, however more than a quarter of the cooperative's business is in international trade, and its products are widely marketed throughout Spain.

The best indicator as to whether the Basque factor is essential to the success of this form of production is to see if similarly successful efforts can be found elsewhere. The evidence shows that the cooperative sector in capitalist societies is much larger than most people realize. (Estrin and Jones; Ben-ner) While direct efforts to imitate Mondragón have had mixed results, the reasons for the failures show patterns that can be dissociated from cultural factors. Perhaps the aspect of the Basque connection that is the most important is the incentive nationalism provides for establishing a thoroughgoing educational system that stresses values congenial to the cooperatives (Meek and Woodworth, 523). The question of transferability will receive further consideration as we analyze the approaches taken to the classic problems of utopias.

THE RECORD

An analysis of the Mondragón cooperative experience must be set against the background of its remarkable economic performance. In the first twenty years, more than 15,000 jobs were created (Thomas and Logan, 9). The growth rate in the 1976-1983 was four times that of Spain's industrial output generally (Bradley and Gelb, 1987, 84). In the decade from 1976 through the recession until 1986, 150,000 jobs were lost in the Basque country while Mondragón created 4,200 new jobs and left none of its members without employment or assistance.

Furthermore, by the range of products manufactured, the network has demonstrated that cooperatives can successfully compete across nearly the entire range of the economy. The most surprising aspect of the list of products is how many rely on high technology. Cooperatives have an image as service-related organizations, however the Mondragón experience is that the system works better in association with forms of highly organized production.

The achievements of the Mondragón cooperatives are numerous, significant, and increasingly well-documented by scholars from several nations. The cooperatives are more productive than comparable capitalist firms, and have absentee rates that are 50% lower (Thomas and Logan,, 50-51). Well organized cooperatives generally seem to have a stronger ability than conventional firms to survive and even prosper during recessions and downturns (Ben-ner, 22). Keith Bradley suggests that state policies favorable to worker-owned firms are more likely to produce solid economic results than interventionist strategies designed to shore up or subsidize conventional firms ( 51-71). In the case of Mondragón, as much as a third of the production of some cooperatives is exported, and this is where the growth is for most product lines.

All of these economic benefits are in addition to the advantages to the workers of participating in a system where information is accessible, where there is a genuine commitment to providing a reasonable level of security for workers and their families, and where there is the real prospect of increasing community educational standards, health, cultural participation, and wealth itself.

Rather than reducing human labor to the status of a commodity in the marketplace, the cooperatives use markets to provide the critical information necessary to plan for the security of workers. Mondragón has come to represent a major new "social invention," in the phrase of William Foote Whyte and Kathleen Whyte -- one that many would say has vindicated those who have labored in the utopian vineyard down through the centuries. But is it a utopia? A partial response to that question lies in appreciating Mondragón's answers to utopia's problems.

UTOPIA'S PROBLEMS

One common scenario found in historical accounts of utopian communities unfolds as follows: the hopeful beginning, early struggles, a fruition of effort that bears the seeds of destruction, and a sober conclusion with lessons drawn as to the weakness of leaders, the perversity of followers, and the folly of planned communities The less pessimistic histories draw further lessons about the good effects of efforts at designed communities and the sense in which they point the way toward reforms of society generally.

There is a chronic aspect to the problems that are revealed in utopian experiments, and it is these symptoms of dystopia in the heart of utopia that I want to focus on. If there is a clinical metaphor here, our purpose is to understand the forms of preventive medicine, therapy, and intervention that have kept Mondragón healthy through more than thirty years of changing conditions.

A number of classic problems need not be discussed in any detail since they do not apply to the case of Mondragón. The problem of economic isolation generated by differences between the internal and external systems of economic exchange does not arise because Mondragón operates as a business in the marketplace, rather than as a fully self-sufficient set of communes.

The familiar difficulty of disappointed expectations has been minimized since Mondragón was founded in adversity, and has never aimed to offer a complete recipe for human happiness. The focus has been on economic security, with attention given to the forms of socialization required to achieve it. Mondragón has not challenged the mores and customs prevailing in Basque society except insofar as they limit economic modernization. There is a political agenda related to Basque nationalism, however the network has a non-exclusionary hiring policy.

On the other hand, the significant issues that have been dealt with include: 1) capital formation, 2) charismatic leadership, 3) responses to economic cycles, 4) differences in the interests of workers and managers, 5) the role of automation and technology, 6) the encouragement of entrepreneurship, and, finally, 7) socialization to the cooperative ideal. Each of these has had fatal consequences for previous efforts at the establishment of utopian communities; and each has been the subject of careful attention at Mondragón.

Capital

Capital formation is a fundamental weakness of cooperatives historically. Modern requirements for technological modernization exacerbate the problem. Furthermore, the need for capital investment sets off a conflict between compensation for labor, on the one hand, and investment in machinery, on the other.

In the latter part of the 19th century, Sidney and Beatrice Webb argued that this was reason enough for the Fabian Society to turn toward statist solutions to the evils of capitalism (Thornley, 27). On the contemporary scene, problems of capital investment pose the principal threat to the continuation of the Israeli kibbutzim. In a time of rising inflation, Israeli collectives engaged in speculative forms of investment using generous government credits. These credits reduced the need for discipline with respect to the trade-off between labor compensation and investment requirements. With the subsequent explosion of interest rates, a heavy debt burden has imperiled numerous kibbutzim (Brooks, A20).

Perhaps the most innovative aspect of the Mondragón cooperatives is the creation of a banking system, named the Caha Laboral Popular (CLP), that works diligently at providing capital, monitoring performance, and planning new cooperatives. Founded at the initiative of Fr. Arizmendiarrieta in 1960, it is now the 15th largest bank in Spain (Anon., 61). It has several hundred thousand depositors, over $2 billion in assets, and more than 200 branches (Lutz and Lux, 263).

As a secondary cooperative, the Caha Laboral Popular is tied closely to the welfare of the network. The bank's board is made up of two-thirds representatives from the other cooperatives and one-third from the employees of the bank (the Social Council is elected by employees only). Compensation to the employees is in part dependent on the overall performance of the cooperative network. The Caha makes about 80% of its loans outside the network since the number of profitable opportunities for investment within the system is limited, however the profits are used to the advantage of the member cooperatives.

The initial success of the bank had to do with a law that permitted cooperative banks to pay 1/2% higher interest than regular banks, an advantage that contributed to a dramatic rise in deposits. If there is one area where state intervention may play a useful role in facilitating cooperative development, it is in providing an advantage for cooperative banks. The public receives in return the benefits that come from the creation of stable jobs that contribute to durable communities. Coops avoid the social costs of capitalist firms. They are far less likely to be bought out, or dealt with as exploitable property, than are conventional firms. Both the treatment of workers, and the treatment of the community by the cooperatives, offer substantial public benefits.

The centrality of the bank is underscored by the significance of the "contract of association" that all members must hold to. By refining the contract over time, the experience of the cooperatives has been given practical form. If there is a constitution to Mondragón, this is it. Everything from ratios of pay, to the organization of authority, to external audit arrangements, to non-discriminatory employment policies are specified. The bank retains the right to intervene in failing cooperatives and has done so with dramatic results in several cases (Whyte and Whyte, 68-88).

The arrangements for using capital have become a principal strength of the Mondragón cooperatives rather than, as with the Rochdale experiment, a source of weakness. The challenge of capital formation will be put to the supreme test, however, as Mondragón faces up to the difficulties of competing with the major corporations of the European Community without tariff protection in post-1992 Europe. Currently experiments are under way with holding companies and joint ventures formed with conventional firms as a way of accessing international markets.

Charismatic Leadership

For all of the impressive social and economic machinery of Mondragón, there is a factor of leadership that must be accounted for. Fr. Arizmendiarrieta died in 1976; Mondragón is still alive and well 13 years and many severe challenges later. He was not, in any event, a domineering figure. Indeed, he preserved his role as teacher and guiding spirit while avoiding an active role in, for example, Mondragón's one major labor dispute (Whyte and Whyte, 96-102).

Three of the founding five students of Fr. Arizmendiarrieta are still active in the cooperative, one in FAGOR as its international director, Sr. Jesus Larrañaga, whom we were able to interview. The other two, Sr. Ormaechea and Sr. Gorroñogoitia, served as heads of the cooperative banking system that now plays a powerful role in assuring the fiscal integrity of the cooperatives. While the departure of the founders will be clearly noticed, it is apparent that there has been substantial executive talent recruited from within as well as brought in from outside. Several outsiders have provided major leadership skills during periods of change and crisis (Whyte and Whyte, 113-127).

However, it must be said that the visitor senses that some of the cooperative zeal has dissipated with the passing of Fr. Arizmendi. Judging from interviews with participants, there is some concern that this has weakened the cooperative spirit. The necessity for laying down a firm educational base as the first condition of successful cooperative life is the key element that concerns activists in the Mondragón network. As Meeks and Woodworth have suggested in their work on the centrality of education to the Mondragón experience, both ideological and technical training are critical to the success of cooperatives (Meek and Woodworth). There are many cases where the former has been tried without the latter, and cooperatives have often failed for lack of participants who have the requisite technical skills.

For Mondragón, the challenge may be the reverse. The polytechnical college is now one of Spain's most prestigious schools. The question is whether, in the absence of the socialization provided by the first wave of leaders and activists, the ideological dimension of cooperative socialization will be sufficiently dealt with.

Thus the impression at this stage is that the technical leadership is in place to deal with economic decisions; though there is less certainty about the exercise of leadership in the socialization and education functions associated with Mondragón. Perhaps the organization of a highly successful schooling system has put in place a process that is self-renewing independently of charismatic leadership, however there is no reliable evidence available on this point.

Cycles in the Economy

For the first two decades of Mondragón's existence, there was little outside attention paid to it. Partly as a matter of survival in Franco's Spain, the coops did not invite notoriety. For those who were inclined to notice the experiment, the Basque cultural factor may have seemed to render it unique and therefore of little interest as a generalizable experience.

What really attracted international attention was the ability of the coops to survive a major depression in the Basque economy. Western nations in the late seventies and early eighties experienced huge dislocations in their industrial economies. The successful adaptation to these adversities at Mondragón contrasted sharply with the dislocation and despair found in other European and American industrial centers was startling indeed.

Economists began to look systematically at the cyclical adaptation of Mondragón in comparison with Basque capitalist firms, and to relate that data to the comparative performance of cooperatives in other European countries. The comparative performance of Mondragón was amazing; that of other cooperatives was, at the very least, impressive. Both forms of analysis yielded generalizations that could be applied to cooperatives generally, while diminishing the significance of the cultural factor in particular. (Bradley and Gelb, 1982, 1987; Whyte and Whyte, 129-222)

What emerges generally is that worker-owned firms have a lower likelihood of failure in downturns than capitalist firms, and they distribute the costs of recession far more equitably among the stake-holders in the business. The peril for worker-owned firms occurs, paradoxically, in prosperity when there is a tendency for some cooperatives to respond to immediate economic incentives by hiring non-members as workers in order to reduce both labor costs and long-term commitments to job security (Ben-ner, 26; Bradley and Gelb, 1982, 30-31). Over the long term, cooperatives may be in more danger of dissolution on the upside of a cycle than the downside. While this is the pattern for European cooperatives generally, Mondragón appears to have benefitted from the downside strengths without succumbing to the upside threats to its integrity as a cooperative network.

Perhaps the most important factor in avoiding this development is the pro-active stance toward job creation through the expansion of membership rather than temporary labor. It is a condition of the contract with the Caha Laboral Popular that cooperatives will undertake membership expansion when market opportunities are present and capital is available.

It is also true that the cooperatives are situated in small communities where limited mobility makes transient labor less available and desirable. So far the rule that non-members may not be hired other than as a very small percentage of employment has held.

The semi-isolated situation of the Mondragón cooperatives probably contributes another element to their stability by reducing labor turn-over. This has the effect of reducing training costs, and preventing the loss of equity capital. The labor market of these cooperatives, both for locational and cultural reasons, is somewhat separated from the national labor market which, in turn, makes it possible to operate with constraints on wages and particularly on managerial salaries that would be much less acceptable in a major urban area.

Diversification of risk is another major advantage of the Mondragón network. The wide array of products manufactured, and the dispersion of manufacturing through a variety of units, means that risks from market failure as well as management failure are minimized. Correspondingly, the ability to adjust through labor transfers, and to avoid management failures by close monitoring and careful counseling through the bank, makes successful adjustment far more likely.

The fact that Mondragón came through a recessionary period comparable in severity to a U.S. depression with virtually no real unemployment in the cooperatives is evidence for this extraordinary adaptive ability. What remains to be seen is how the cooperatives adapt to a new wave of prosperity in the context of a challenge from the European Community in 1992.

Differing Interests of Workers and Managers

The divergence of interests between managers and workers is built in to the foundation of the industrial system. It accounts not alone for the failure of cooperatives, but of capitalist firms as well. Indeed, much of the overhead cost of management in capitalist firms is devoted to dealing with the problems of motivation, productivity, absenteeism, stress, and turn-over attributable in large part to the human inefficiencies of this critical relationship.

Cooperatives generate expectations that such differences will be minimized; indeed that is the rationale for their existence. The classic error of cooperatives is to presume that democratic decision-making alone can address the problem. Mondragón's constantly evolving system for minimizing class conflict is thus far a successful response to the problem as evidenced by the perceptions of participants. In a systematic survey in 1980, Bradley and Gelb report that "only 18 percent of co-operateurs perceived a substantial social divide (between workers and managers); 45 percent saw no division at all. (Bradley and Gelb, 1981, 221).

Beneath the question of social divisions lie the hard realities of divergent economic interests. The whole logic of the Mondragón's institutional framework is that management must be constrained to operate in the interest of the security of the members. It is management's job to reconcile security with the marketplace, rather than to maximize profits for absentee owners at the expense of labor. At Mondragón workers are rewarded for performance through increased financial security, and protected against arbitrary personnel management through carefully developed systems of representation and accountability.

The 6:1 pay ratio, the term of appointment for managers, and the formal representation of workers through the Supervisory Board and the Social Council establish parameters for the reconciliation of interests. The ethos of cooperation and the peer pressure for performance in a system of shared benefit from productivity sustain the cooperative mode of behavior.

There are limits to the success of participation as a key to reducing worker-management differences in Mondragón however. The Whytes report that reactive participation is very high in Mondragón. Workers have many opportunities to respond efficaciously to management proposals for changes in working situations. However pro-active participation is not as great as in some of the most advanced capitalist firms where workers may be involved from the beginning in job design. Most of the job redesign in the Mondragón cooperatives has been management-initiated and has been slower to catch on than might otherwise have been the case (Whyte and Whyte, 210-211).

The growth of pro-active participation, one may speculate, has been limited first by the origins of the cooperatives in a poor area characterized by minimal education. The job redesign initiatives came with prosperity in the seventies. However they took second place to concerns for employment preservation in the face of recession. Now, with stability restored, there is new interest. However, again, a larger issue looms which is adaptation to the realities of European Community competition in an increasingly open environment. It is likely that further advances in this area await a period of stability and perhaps the incorporation of a new generation of better educated young workers who will wish to advance the agenda of humanizing work.

Automation and Technology

Cooperatives are often associated with service enterprises, and occasionally with resistance to technology. This resistance has roots in history as well as in the practical dimensions of these experiments. One root of the cooperative movement is found in the old craftsmen's guilds (Thornley, 26-29). The antipathy to technology arose out of rearguard actions against the arrival of industrialization and, finally, the systematization and schematization of blue collar work in the form of Taylorism.

Mondragón represents an adaptation of Taylorism, and a rebellion against the managerial domination of the personal lives of working people known as Fordism (Meyer). An illustration is the response in the cooperatives to automation. FAGOR, the largest and most significant Mondragón cooperative, operates Spain's most automated assembly line for producing refrigerators. Due to the sophistication of the machine tools, some of which were designed in the coops, four different models of refrigerators can move through the line simultaneously. As another example, EROSKI, the consumer cooperative associated with Mondragón, has developed an automated warehouse with computer-driven forklifts.

Rather than avoiding automation, the Mondragón cooperatives have defined the "problem" of automation as a matter of obtaining control over the benefits of technology on behalf of members. The dilemma posed by automation for job creation, a central social goal of the network, has been faced. The objective has not been to preserve every job at any cost, but rather to preserve the security of member's positions through the best use of technology. It is a system that treats direct labor as a "semi-fixed cost" similar to the treatment generally accorded to the cost of machinery and facilities, and often to indirect costs and managerial labor. Changes in demand are dealt with through burden-sharing and phased change.

In conventional firms, Fordism was a system of social control over workers aimed at reducing the behavioral problems involved in harnessing human labor to machine paced production. The conflict of interest between the laborer and his mechanical pace-setter was resolved through discipline, incentives, and manipulation. In the Mondragón network, not all of these problems are resolved -- and there are still complaints about the monotony of factory work. However, the monetary benefits of technology accrue directly to the accounts of workers. Furthermore there are extensive facilities for adjustment and re-orientation as work processes change.

There is, finally, an element of Taylorism that cannot be eliminated in modern industrial production. Mondragón has met that challenge in two ways: amelioration of the worst aspects of assembly line work, and redesign of the work process itself. In the refrigerator factory, the assembly process is integrated with rest areas that have green plants, work stations where employees can provide their own decorations, and a community bulletin board that contains all of the financial data about the coop and an invitation to the free expression of ideas.

In the COPRECI cooperatives where electronic components are the main product, work redesign experiments have been underway for the last fifteen years. One technique is to install tables where groups of workers build components in teams instead of working at assembly lines. Production is converted from a function base to a product base. Rather than being harnessed to functional processes with no immediate connection to a finished result, workers are now brought directly into a relationship with the end product. This led to many salutary effects for motivation, cost-reduction, product improvement, and adaptability to customer's needs (Whyte and Whyte, 118-127).

Beyond revising the process of production, it is becoming apparent that technology and cooperatives have an interactive relationship that is the reverse of what one might have expected. While cooperatives are often associated with labor-intensive service operations, the literature on cooperative success factors now recognizes that these may be the most difficult forms of cooperative venture. Technology seems to bring to the work-place a self-evident need for order and discipline that helps to objectify sources of conflict in the workplace so that they can be dealt with through the techniques of democratic consultation combined with economic rationality.

 Entrepreneurship

 The monastery is the utopia of the virtuous. Nineteenth century communal visions, including Marx's, envision a utopia of the creative (Geoghegan). The liberation of the creative instincts of the individual rose to prominence as a utopian ideal with the decline of feudalism and, with it, the diminution of monasticism and chivalry (Hirschman).

Yet, paradoxically, it is the entrepreneurial form of creativity that appears to be missing from many contemporary visions of utopia, and the communities they have spawned. It may be the attachment of the utopian tradition to arcadia and to the guild society of craftsmen that condemns it to commercial conservatism, but there is a distinctly reactionary style to most socialist utopian visions of economic life. Creativity is good, but commercial entrepreneurialism, particularly if it involves technology, is eschewed.

Whatever its relationship to utopian visions, the problem of entrepreneurial innovation is a practical issue for cooperatives. The tendency to stay with successful patterns of production is very strong when the security of one's share is a constant concern. The known product is a temptation for both capitalists and the members of cooperatives. Mondragón's answer is to institutionalize the entrepreneurial function.

Originally, it was the Caha Laboral Popular that took on the function of identifying new products and advancing the formation of additional cooperatives. Working with Ikerlan, the secondary cooperative that specializes in research, planners from the bank facilitated product innovation at existing cooperatives and promoted new initiatives. Ikerlan operates as a research institute with clients in many fields of production technology, both within and outside of the Mondragón cooperatives. It serves the purpose of linking the network to the latest trends in research-based product innovation.

Concern over the growing power of the bank led to the formation of a separate impresarial division which has just recently become an independent cooperative answerable to the governing council (Cornforth). While the imagery of entrepreneurialism is individualist in the mythology of capitalism, the practice is very often corporate. Mondragón is no different in that respect.

The Impresarial Division works with Ikasbide, an educational conference center, and Alecoop, the cooperative of the technological university, to bring together new ideas and shape them into commercial concepts. The adaption to the recession in the past decade was aided immeasurably by the forward-looking activities of this research and development center.

Socialization and the Maintenance of Community

The renewal of socialization after the first generation of cooperative development is, of course, the critical test for utopian communities. It is a little too early to tell what the result will be in the Mondragón network. Given the fact that Mondragón represents a less than comprehensive attempt at community, and one that fits into many of the conventions of the market economy, the burden placed on socialization is lower than for other experiments.

If we take as a benchmark for understanding the role of socialization Rosabeth Moss Kanter's six "commitment mechanisms" (1972), Mondragón relies on five of them to one degree or another: communion in terms of a group ideal is symbolically present, though membership is open to all and structured in terms of substantive individual incentives. What is perhaps instructive is that so much could be accomplished in the Mondragón system with so little overt emphasis on the expressive forms of solidarity. Investment is tangible in the form of a share purchased and the cumulative savings that accrue over the years.

Renunciation of the outside world is a factor principally for those committed to Basque nationalism and its indirect affiliation with Mondragón, though there are many other ways to express this commitment in Basque society. Another kind of renunciation may be found in the experience of those at the top of the pay scale in Mondragón who could be earning more money, and achieving higher relative status, for similar work in the conventional economy. For these people, renunciation of the materialist status heirarchy of the conventional economy comes with acceptance of the alternative values of security, stability, and harmony that are found within the cooperative system.

Sacrifice was an early aspect of the experience, and a factor of renewed significance during the recession when some cooperatives voluntarily reduced wages rather than eliminating jobs. This form of sacrifice is the clearest indication that the bonds forged in the Mondragón system are indeed strong. The transcendence of everyday experience through charismatic leadership is of a low order in Mondragón. The remaining device, mortification, really has no place in this instance.

While Mondragón fits in these respects with the general profile of utopian communities, perhaps the success of Mondragón lies in not having over-estimated the level of community that could be achieved in a modern industrial economy. Differences of degree are important. Mondragón, for all of its accomplishments, has presented a lower order of challenge to its socio-economic environment than most utopian communities.

There are critics who have pointed out that Mondragón does not go far enough. Some feminists have criticized the cooperatives for not having moved more quickly and decisively to improve the position of women. Hacker, for example, attributes the limitations on the progress of women at Mondrag n to its common roots with capitalist firms in "militarist and patriarchal" forms of development. There is, on the other hand, a successful women's cooperative, and women are present in all phases of the network's activities in significantly higher percentages than in comparable Basque industries (Whyte and Whyte, 75-78).

Absent the pressure exerted by the EC's transformation in 1992, the socialization factor might not be so critical. The educational system associated with Mondragón might be sufficient to reproduce the conditions for its maintenance. However both the level of material expectations and of market performance demanded by burgeoning world competition place fresh strains on the Mondragón cooperative experience. It remains to be seen if the network is equal to this new challenge.

CONCLUSIONS

Is this a utopia at all, or is it, to adapt a phrase from Sir Thomas More, "a fiction whereby the [capitalist] truth, as if smeared with honey, might a little more pleasantly slide into men's minds?" (In Kumar, 24). Certainly there are skeptics on the left, Edward Greenberg principal among them, who fear that cooperatives may well become a form of "collective capitalism." My own conclusion is that Mondragón does indeed combine elements of the utopias of Marx and Smith. Scarcity is overcome in an environment where the humanization of the labor process can at least be attempted, and Marx might have settled for that if he had seen the 20th century results of other avenues towards his utopia (cf. Hoover and Plant).

Adam Smith had a utopian vision as well. He conceived of industrious individuals increasing the social product through rational investment of their energies and capital. Smith defended his utopia against the accusation that it enshrined avarice by pointing out that the self-discipline engendered by the marketplace would provide a larger moral dividend than any attempt at altruistic preaching on behalf of "moral sentiments" (Hirschman).

In Mondragón self-interest is indeed harnessed to the increase of the material product of the society, but the link is through a cooperative system that guards against abuse and exploitation. The reward to self-interest is made more secure and comprehensive by the functioning of the secondary cooperatives, and they, at the same time, give to the community an institutional claim to moral achievement that is considerably more secure than Smith's proposition about the ability of vanity somehow to discipline lust and avarice.

While there may be no intrinsic reason why a cooperative as opposed to a capitalist firm would behave in a more socially responsible fashion toward, for example, the environment, the conditions for prudence and long term vision are clearly in place. Absentee ownership, mobile labor, the treatment of products and facilities as speculative property all conduce to bottom-line short term thinking of a kind that is quite obviously dangerous to the rhythms and continuities that familial, social, and ecological survival require. Mondragón has demonstrated this by generating its own social institutions and setting aside a fixed percentage of profits for community improvement. The relative performance of capitalist and cooperative firms in this region on environmental issues would make an interesting research project.

Beyond cooperative housing developments and the educational system, communal life styles are not, however, part of the experiment. Clearly it is not a liberationist utopia on the Freudian model of Norman O. Brown, Herbert Marcuse, or Charles Reich (Kumar, 401-402). Mondragón attempts to build a kind of middle class familial utopia that carries its own benefits for the personal life, as well as the life of the community. Mondragón can claim to provide the basis for family life through its cooperative housing developments, educational system, social agencies, and health programs.

The problem with assessing this aspect of Mondragón is that virtually all of the research thus far has concentrated on its economic and political characteristics. It would be fascinating to know how the life of the Mondragón member differs from that of other citizens with respect to social interactions, educational experiences, recreation, and family life. Research on these cultural and socio-psychological questions remains to be done. A fascinating project awaits.

Hopefully, inquiry of this sort will be an extension of the research model presently in place. Through a partnership between Mondragón and Cornell University, a "participative action research" team has been developing new studies that grow out of a meeting of the minds between participants in Mondragón and skilled social scientists experienced in labor and industrial relations. Independently of its association with Mondragón, the research model needs to be considered as a pathbreaking attempt at resolving the tension between values and positivist analysis in modern social science (Whyte, Greenwood, Lazes, 5; Whyte, 1982; Hoover, 138-144).

Participative action research is linked in the Mondragón case to the task of creating a "social invention," to use another of William Foote Whyte's evocative phrases. Thus the meaning of Mondragón for academicians may well be that it is the harbinger of a new social science -- one that brings together the implicit agenda of social science, which is the improvement of human society, and the appropriate tools and strategies for analysis in an experiment with great significance for the future of the industrial world.

While there is surely more to be known about Mondragón, it is apparent that by adopting a rather modest and straightforward approach to the classic problems of utopia, it has achieved far more than thousands of other experiments. This record of durability suggests that it may even be able to compete successfully in the new world of global competition, while retaining important elements of the cooperative ideal.

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NOTES