Richard Wolff on the Mondragon Cooperatives

Capitalism refers an economic or political system which is based on private ownership of the available means of production and their operation mainly for profit. Capitalism is characterized by capital accumulation, private property, voluntary exchange, wage labor, competitive markets and a price system. Investment and decision-making are entirely determined by the owners of the factors of production in the capital and financial markets when it comes to the capitalist market economy. Competition in the market, however, determines the distribution of the goods and the prices. Marxism (which forms the basis for both the theory and practice of communism) is greatly opposed to the ideas of capitalism. Professor Richard Wolff, an American economist who teaches and analyzes phenomena from a Marxist perspective, believes the capitalist economy in the United States is not delivering the goods its citizens thought it would. He affirms that in fact, it’s arguably delivering the “bads.” The author of Democracy at Work: The Cure for Capitalism and the brains behind the DVD The Capitalist hits the fan reiterates that there is a massive inequality of wealth as the margin continues to broaden for those whom capitalism continues to deliver the goods by all means. A growing majority of the society that does not experience the benefits of capitalism are facing harder times, something that provokes people like Wolff to conclude that capitalism is indeed a systematic problem.

The inequality built into the capitalist system is as a result of wealth accumulating at the top, yet the economic condition of the people working has been made worse over a period of around fifty years. A recent study revealed that the pay for CEO’s grew 127 times faster than the pay of workers over the last thirty years. This shows clearly how the workplace is inherently not democratic. The payroll tax increase (4.2 to 6.2 in 2013) which is roughly a 48 percent increase continues to bite the middle class hardest while according to the Huffington post, bigger companies like the US and American airlines at the time were forming mergers to reduce competition. Far worse, 27 prominent corporations in the United States made a combined profit of $205 Billion between 2008 and 2011 of which only one paid the federal corporate income tax. In 2012 after Facebook went public, it made a billion dollars, paid no taxes and yet expected a humongous refund of $429 Million from the government. I would agree with Professor Wolff that the rich and the capitalists are determined not to bear the cost of recent bailouts due to an economic crisis which means they are not patriotic and do not have the interest of the country and its people at large.

The capitalist economy in the United States has only granted the rich and powerful more wealth and power than ever. Between the year 2009 and 2011, income substantially fell for 99 percent of Americans while for the top 1 percent, it rose by 11 percent. It’s apparent that somehow all the economic growth has gone to them even after they were saved during the 2008 financial crisis only for them to skyrocket again. President Obama, being aware of the state of the economy increased the federal minimum wage to 9 dollars an hour in February 2013 in the state of the union address. An article in the Huffington post in February 2013, however, read that “ If the minimum wage had risen in step with productivity growth, it would be over $ 16.50 an hour today”. Through increasing the minimum wage, employers will seize employing more people. Nevertheless, it might mean that the purchasing power of the fifteen million American workers increase which implies that more goods and services will be produced and therefore more jobs can be created. If not, workers operating on a minimum wage will get it hard to take their children to school and therefore the children won’t be able to contribute much to the society and therefore won’t be able to benefit the country in the long run. According to Wolff, the idea that America is a land of opportunity is misled (something I would concur with) since there is no equality of opportunity. Sending more people in the family to work so as to earn more and achieve the American dream leads to more stress, exhaustion, and debts which cannot be paid.  The rich will only get richer, and the poor will get poorer as well. Capitalism cannot deliver the kind of results the society wants as the big winners for capitalism are affluent. Instead, capitalism is more likely to breed a crisis.

Professor Wolff in another film talks about Mondragon Cooperatives, an organization that was started in 1956 by a visionary priest to save the Basque country community in northern Spain after being struck by the civil and world war 2. Mondragon is interesting because it’s owned by workers who have the mandate to move the business forward. The workers have considered Mondragon as part of their lives since they are all involved in running the company from top to bottom and have made it the largest cooperative in the Basque area. Employees at Mondragon cooperatives do not have bosses like the other companies. Instead, they are their own bosses. They own the company and run it collectively while making decisions and deciding what’s to be done with the money they make from the operations. The single most important decision-making body is called the general assembly which is held once a year. The workers meet here and can make decisions like dethroning a manager or supervising them, deciding the fundamental question of directing the enterprise i.e. whether the business moves, where to produce, how to produce i.e. the technology to be used and making other rules on how the cooperatives functions.

Mondragon cooperative is a federation of 120 companies owned and run by their workers. What is intriguing about it, however, is the fact that the gap between the highest paid and the lowest paid has been greatly minimized to less than 4.5 percent which breeds a sense of comfort since equality has been enhanced. Professor Wolff firmly believes this type of economy is the future of the world of work. He points out to how equally the income is equally distributed and everyone happy, comfortable and living pretty well. He also says the success of the company for half a century, something most capitalist companies have not been able to achieve. The company started with six members and has fast grown to accommodate 85,000 members who are also owners or operators and other 15 to 20,000 employees. They generate revenue from $25 billion annual sales. They have been able to maximize profits while creating jobs over the years. This explains why the region turns out to have the lowest unemployment in Spain. Through job creation, income is equally distributed, and people get money to buy.

While in regular capitalist companies an employee has to work for someone in a shift so as to get a wage, Mondragon does things differently and proves capitalism wrong in every way possible. Through communism, a majority of people have become more integrated and involved.  This effort has made Mondragon more competitive. By the end of 2010, Mondragon cooperatives had 77 enterprises outside Spain that were operated by the Mondragon co-operation. Some of these big economy countries include China and India and the United States where they have five enterprises. Although the Marxism idea has not been encouraged in enterprises outside Spin for cultural and socio-economic among other reasons, they are also doing well since operations are smooth. Mondragon is also an export oriented organization as they make about 62 percent industrial sales outside Spain. They have also been able to penetrate different industries such as banking, production, and retail. As a matter of fact, they operate the largest chain of supermarkets in that area of Spain. Interestingly, the retail industry employs roughly half its members (about 42,000 of them). All in all, you cannot miss Mondragon co-operatives on the 7th to 10th largest companies in Spain. They are simply a non-capitalist alternative that has grown for over 50 years and is a dramatic illustration that there’s an alternative contrary to capitalism. 43.7 percent of the members at Mondragon are women hence gender equality. More interestingly, the organization has been able to build schools like universities and better houses for its community. Their retirement benefits, remuneration, and dividends are also a thing of beauty and everyone in Spain wishes they were part of the community because the deal is too sweet.

I am somehow convinced by Professor Wolff that communism or rather Marxism can help the United States achieve the American dream because the capitalist economy has failed over and over and only lead to a financial crisis over and over. Americans can never achieve different results by doing the same thing again and again. If income can be equally distributed through communism, then maybe everything can work out well, and everyone can be happy just like the Mondragon cooperative community. It can also be an answer to a financial crisis, deliver the goods and the results the society wants to see as well as cure wealth inequality while transforming millions of lives nationwide.