Cooperatives

In 1956, a Catholic priest named José María Arizmendiarrieta gathered five workers in a converted school in Mondragón, a small town in the Basque region of Spain, and started making paraffin heaters. The school had been set up to train young workers who had no other way into higher education after the devastation of the Spanish Civil War. The stove factory was meant to give those workers somewhere to apply what they had learned; what Arizmendiarrieta wound up building instead was one of the most durable experiments in worker ownership the twentieth century produced.

By 2024, the Mondragón Corporation employed roughly 80,000 people across manufacturing, retail, financial services, and education. Its retail chain, Eroski, operates hundreds of supermarkets across Spain. Its finance arm, Laboral Kutxa, is one of the larger banks in the Basque Country, and its manufacturing division makes everything from machine tools to household appliances. None of this is run for the benefit of outside shareholders, because there are no outside shareholders. The workers own the enterprise. They elect the management, they negotiate pay scales internally, and when Spain’s economy collapsed after 2008—collapsing hard enough that national unemployment hit 27 percent—Mondragón moved workers between cooperatives rather than letting them go.

Mondragón is the most-cited example of worker ownership at scale, but it is not the oldest. In the 1860s, Friedrich Raiffeisen was running a rural municipality in what is now Germany and watching small farmers get crushed by moneylenders. Commercial banks weren’t interested in lending to peasants—the collateral was uncertain and the administrative costs ate into profit margins—So Raiffeisen organized the farmers to lend to each other. Members pooled deposits, the cooperative extended credit to members at rates commercial lenders couldn’t match, and the surplus stayed within the cooperative rather than flowing to outside investors.

The model spread across rural Germany to Austria and Switzerland and then to the rest of the world. Today the Raiffeisen network is one of Europe’s largest banking groups, with operations in over a dozen countries and hundreds of billions of euros in assets. The World Council of Credit Unions estimates that roughly a billion people worldwide are members of credit cooperatives of one kind or another. That means a substantial fraction of the adult population of the planet choose to do their banking outside the shareholder model, but you wouldn’t know that listening to conversations in Silicon Valley.

Vienna in the 1920s faced a housing crisis that would look familiar to anyone paying rent in a large city today. The city had grown rapidly during the late nineteenth century, housing conditions for working-class residents were appalling, and private landlords had neither the incentive nor the capital to fix things.

The Social Democratic city government, elected in 1919 and governing what became known as Red Vienna, decided to treat housing as a public utility rather than a market good. Between 1923 and 1934, the city built roughly 60,000 apartments in large municipal complexes called the Gemeindebau. These were not the grim concrete towers that social housing became associated with in many countries. They were substantial brick buildings with courtyards, laundries, libraries, kindergartens, and clinics built in. The Karl-Marx-Hof, completed in 1930 and still standing today, is over a kilometer long and houses several thousand people. The whole program was funded by a progressive tax on luxury goods: people buying fur coats and racehorses paid for workers to have decent apartments.

The program did not stop in 1934. The city of Vienna still owns about 220,000 apartments directly and subsidizes roughly another 200,000 through a nonprofit cooperative housing sector. About 60 percent of Vienna’s residents live in subsidized housing of one kind or another; rents are set by law rather than by the market. Vienna consistently ranks among the most livable cities in the world, and the housing policy is a big part of that ranking.

Amul is an Indian dairy cooperative founded in 1946 in Gujarat after farmers organized to break the monopoly of a single private contractor who controlled their access to the Bombay milk market. Today Amul is the world’s largest dairy cooperative by volume, collecting milk from roughly 3.6 million farmer-members across India and distributing it through a network that reaches every major Indian city. Amul did not stay small and artisanal: it scaled.

Canada’s credit union sector, which is one of the largest in the world per capita, also proves that cooperatives can scale. Desjardins, based in Quebec, was founded in 1900 by a journalist named Alphonse Desjardins, who had noticed that working-class Canadians were being charged usurious rates by commercial moneylenders. Desjardins is now one of the largest financial institutions in Canada, with roughly eight million members and assets over 400 billion Canadian dollars. Members own it, members elect the board, and surplus is returned to members rather than to shareholders. It survived the 2008 financial crisis in considerably better shape than many of the shareholder-owned banks that had been busy congratulating themselves on their sophistication.

Mondragón, Raiffeisen, the Viennese Gemeindebau, Amul, and Desjardins are not arguments in a seminar: they are institutions that issue annual reports. The claim that these structures cannot work at scale is simply false. The more interesting question is why the claim persists when the counterexamples are so large and so obvious. Part of the answer is that the people who benefit most from shareholder-owned structures are the same people who write most of the business press. They cannot easily see alternatives in the same way that a landlord genuinely cannot understand why anyone would object to market-rate rent.

The shareholder firm captures value for shareholders, transfers risk to workers and communities, and concentrates decisions in a board appointed to serve shareholder interests. The worker cooperative captures value for workers, distributes risk across the membership, and makes decisions through governance structures the members design and can change. Neither of these is natural or inevitable. They are all choices, and the choice that has dominated tech for the past forty years is not the only choice available.

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Blasi2013

Joseph R. Blasi, Richard B. Freeman, and Douglas L. Kruse: The Citizen’s Share: Putting Ownership Back into Democracy. Yale University Press, 2013, 9780300209334.

Morrison1991

Roy Morrison: We Build the Road as We Travel: Mondragón, a Cooperative Social System. New Society Publishers, 1991, 9780865712546.

Ostrom2015

Elinor Ostrom: Governing the Commons: The Evolution of Institutions for Collective Action. Cambridge University Press, 2015, 9781107569782.

Whyte1991

William Foote Whyte and Kathleen King Whyte: Making Mondragón: The Growth and Dynamics of the Worker Cooperative Complex. Cornell University Press, 1991, 9780875461823.