Worker-managed companies in the Basque Country, Poland, and Yugoslavia


Perhaps you, Gentle Reader, have worked in a business, and wondered why the bosses get paid so much to make all the exciting decisions, whereas the grunt workers get paid little to do the boring work.

At various points in history, people have implemented worker-managed companies, and some of them have worked.

Perhaps the most famous is the Mondragon Cooperative Corporation. The photograph above shows workers voting on how to manage the company.

When it was small and all its workers lived together in the Basque Country, the MCC was a tremendous success. Every worker had a vote in the business. It was democratic capitalism.

Eventually, the democratic elite stayed, but the capitalist part expanded to other regions, where workers did not have a vote.

The Mondragon Cooperative Corporation has a bad reputation in places where the workers don’t get to vote. The MCC is a perfect labor union for the people who vote, but it’s the absolute worst possible management for workers who have no union, no voting rights, no voice.


Jul 20 2008 18:34
Mondragon Capitalists’ Exploitation and Repression in Poland
Fagor’s not a Workplace but a Workcamp: Mondragon Capitalists Fuck Workers in Poland. Strike is Imminent

Fagor is a large appliance manufacturer owned by the Mondragon “Cooperative” capitalist enterprise. In Poland it cooperatives FagorMastercook in Wroclaw. Currently there are serious labour problems in FagorMastercook. Members of the Wroclaw group of Union of Syndicalists (ZSP) went Friday to a protest in front of the factory.

The place has become quite militarized. On Friday the firm had over 200 armed security guards from the notorious firm Impel there to protect the factory. The place was surrounded by metal barricades and each worker going in was throughly searched. Some employees say that there is often heavy security and searches.

Despite the heavy security, or perhaps because of it, about hundreds of workers joined in the demonstration on Friday. About 300 people, workers and supporters, were there after the morning shift, and about 200 before the afternoon shift began. The demo was organized by the August 80 union which has been negotiating with the firm for many months to get people a pay raise.

The workers in FagorMastercook have noted many instances of people being fired for belonging to unions or even just agreeing with their postulates. At least 20 members of August 80 were fired.

In FagorMastercook there are a few unions: Solidarity, August 80 and OPZZ Metalworkers. Solidarity and August 80 are calling for pay raises. In June a warning strike took place. Over 90 percent of the workers went on strike. Then a wave of repressions started. Besides firing some unionists and others who supported them, they started to pick out people, have supervisors stand behind them on the line watching their every move, threatening to fire them if they got even a second behind production. This sort of intimidation was probably used to show people that if they tried to organize themselves, the company would find any small pretext to fire them.

On July 9, two members of August 80 were fired for “leaving their workstations”. They had been collecting votes on a strike referendum.

Members of ZSP at the demonstration were told that people were threatened with dismissal for demanding pay raises. They also heard that the workers will probably vote to go on strike.

Production workers at FagorMastercook make around 1200 zloties (400 euros) a month. Minimum wage in Poland is currently 1126 zloties a month but this will be raised to 1276 next year. So workers at this highly profitable factory are making almost nothing. That’s why one of the slogans of the workers is FagorMastercook: A Workcamp, not a Workplace.

At the end of 2006, the EBRD decided to 17.5 million euro to FagorMastercook. This money was given as part of a restructuring project. FagorMastercook wants to increase production in Poland and achieve economies of scale while making Poland its production hub for Central Europe. The company moved production from Spain when it started new production of gas stoves in Poland about 5 years ago. The production of refrigerators also got moved to Poland. Over 80 percent of the production is meant for export. They increased turnover by about 29% last year.

FagorMastercook works in a Special Economic Zone and received subsidies from the Polish state; it received a direct subsidy of 3.5 million zloties for creating jobs, plus a CIT and corporate real estate tax exemption. So in addition to money from the EBRD, FagorMastercook got help from the Polish state of about 52 million zloties. That’s equal to the EBRD’s 17.5 million euros at the current exchange rate. This means that the EBRD and Polish state invested more in the FagorMastercook facilites in Wroclaw than Fagor.

Although Mondragon still pushes its “cooperative” worker-friendly image, publishing bullshit reports on how it is concerned about the effects on globalization on the local workforce, for example in Spain, Mondragón Cooperative Corporation (MCC) is a typical capitalist employer operating plants in low-wage countries like Poland, Egypt, Morocco, Mexico, Thailand and China. Employees in these countries are not co-op members. (Some employees in other countries, even in Spain are also non-members; as many as 1/3 of Mondragon workers are not cooperative members. Any cooperative can also apply to MCC to employ up to 40% non-cooperative workers.)

It pretends to be “one of the world’s top 10 best employers” and pays completely shit wages here in Poland and is actively repressing unionists. This is even worse than having typical capitalism disguised as a cooperative; it’s just typical exploitation of people from poorer countries by those in the richer ones.

Compare Yugoslavia to Mondragon:

Socialism was the greatest political and economic experiment of the twentieth century and of all the countries in Eastern Europe, Yugoslavia is, perhaps, the most fascinating from which to learn.

Yugoslavia was the fastest growing socialist economy in the post World War Two era. In fact, as noted by Balassa and Bertrand in 1970 , it was one of the fastest growing countries in the world – despite, some might say paradoxically, being socialist. Whilst the country might at first seem to present itself as a poster boy for those on the left, the Yugoslavian socialist engine eventually ran out of steam, leading Leonard Kukic, a young researcher from the London School of Economics, speaking at the Conference and the author of the new research, to ask: what went wrong?

Two key possibilities present themselves: technology and labour. In other words, a failure of what economists call total factor productivity (TFP) growth, which could revolve around the supposed limited technological potential of non-market economies, or labour constraints – workers whose incentive structures under socialism were not conducive to economic growth. Whilst both could have potentially played a role, the trick is to measure the relative contribution, to see whether socialism in action hampers the economy more through technology or through distorted labour incentives.

Using a relatively new business cycle accounting technology, and based on a standard Ramsay-Cass-Koopmans growth model, Kukic models the Yugoslavian economy from 1952 to 1989 allowing for four “wedges”. These wedges reflect the potential deviation of the socialist economy from free-market efficiency principles in the realms of labour, capital, TFP (technology) and demand. By estimating these wedges, he attempts to identify the causes of Yugoslavia’s initial success in the post War period (in the 1950s and 1960s) – and of it’s eventual growth slowdown in the 1970s and 1980s.

Kukic finds that total factor productivity growth actually became more and more important for economic growth in Yugoslavia during its golden age in the 1950s and 1960s. This includes through the efficiency enhancing effects of structural change (shifting labour out of low value-added sectors such as agriculture) and the entry of the country to GATT in 1966, which helped open Yugoslavia to global markets. By the 1980s, however, TFP was starting to stagnate.

Interestingly, however, Kukic finds that stagnating total factor productivity wasn’t the most important factor behind Yugoslavia’s growth slowdown. Instead, labour distortions should take more of the blame.

Kukic dates the labour driven slowdown to 1965, when Yugoslavia introduced reforms that shifted control of production towards the work councils of labour-managed firms. Control was taken from the hands of the state and placed directly in the hands of the workers. What, you might wonder, could possibly go wrong?

Amongst other things, these work councils were now free to decide on the distribution of income between wages and investment. In one sense, this policy change was a success: income per worker increased and wages became a bigger share of the economic pie. However, labour-managed firms seem to have reaped such rewards by hurting other members of the labour force, restricting the employment of new workers so as to limit the worker-based labour market competition that could scupper the wage demands of the “insiders”.

Naturally, unemployment soared, from under 5% in the 1960s to close to 15% by the end of the 1980s. Whilst in a free-market economy there would have been an incentive for new businesses to enter and compete with incumbents, employing some of the unemployed labour along the way, the entry of firms was severely restricted under the socialist regime. Business people were viewed with suspicion.

The result: the insiders, whether already employed workers or already established firms, gained at the cost of the outsiders (new workers, including the youth, and potential but never established new firms).

All in all, then, it seems that the problems socialist economies face revolve more around labour than they do technology. Of course, given Russia’s success in the space race, something which shocked America at the time, we shouldn’t be that surprised. However, what the findings do provide is an important warning to those on the left who look to the good old days of worker power and worker management with rose-tinted spectacles. Not only can the economy suffer when it lacks “capitalists”, but so can workers that fall outside of the privileged (already established) groups.

Do workers need capitalists? New lessons from Yugoslavia’s socialist experiment

The lesson to be learned is that groups of humans have appropriate sizes. Almost any political system can work with fewer than one hundred citizens. A political system that produces utopia when it is limited to fewer than ten thousand citizens often produces dystopia when it grows any larger than that.

This entry was posted in political economy. Bookmark the permalink.