Spain’s Mondragón Corporation doing capitalism better

BUSINESS

There are all kinds of enormous, impressive and, frankly, noisy machines at work across the 20,000 square metres of industrial warehouses at the headquarters of Fagor Arrasate, a manufacturing company in Spain’s northern Basque Country.

Here, a team of engineers is building machines that can put together household appliances such as refrigerators and washing machines, hydraulic presses to make parts for electric vehicles and aircraft, and forges to make metal components. There are drills the size of human thighs and metal coils large enough to be a giant’s necklace.

Yet order reigns. It’s a sophisticated, slick and profit-making process. Fagor Arrasate belongs to the larger Mondragón Corporation, which in 2025 had a revenue of €11.3 billion and aggregate profits of more than €600 million.

But these considerable earnings don’t line the pockets of a wealthy few at the top. Fagor Arrasate is a cooperative — like every other business within Mondragón — and is owned by its workers, who share profits between them.

“I grew up with this way, it makes sense,” says Iker Aranburu, a 46-year-old member of the co-op, which has about 650 employees, mostly in the Basque region but also in China, Mexico and Germany. “It’s fairer. It’s more appealing for me.”

Mondragón Corporation was founded by five coworkers in 1956 as a small stove factory and today it’s the largest federation of worker-owned cooperatives in the world. It employs more than 70,000 people across 92 co-ops, many based in the town of the same name, making it the largest employer in the Basque Country and the fifth-largest private employer in Spain. The range of sectors it spans is remarkable: its grocery-store chain, Eroski, has hundreds of outlets across the nation; the Mondragón University offers college degrees; it includes Spain’s only producer of defibrillators and its largest producer of bicycles; and according to Mondragón’s estimates, more than a third of Europe’s solar panels use its tech and 60% of the world’s trains contain its parts.

Mondragón’s model is not socialism, it’s keen to stress. Despite being owned by its workers, the group is for-profit. However, Mondragón’s model has social good and humanism — rather than profit-maximising — at its heart. In an era when the rich are getting richer, and inequality is rising, supporters say Mondragón is showing — on an unparalleled scale — a better way to do business, where profits might not be as high, but society benefits.

“All the ways to govern a company are bad, but the best is a cooperative model,” says Ander Etxeberria Otadui, one of two full-time staff tasked with welcoming the two to three thousand visitors — from academics to politicians, students and tourists — who come to visit the co-ops each year. “We have to make money, to create jobs. But workers are going to get more than a decent salary.”

Perhaps the most important aspect of Mondragón’s model is worker equality. For example, Mondragón’s co-ops cap the difference in income between the highest- and lowest-paid employees at six to one. (By comparison, in Spain the average is about 110 to 1 and in the US, 280 to 1; in 1965, it was 21 to 1.) That does not mean executives are badly paid, but rather those at the bottom are better-paid: The base salary for a Mondragón worker is on average 40% higher than Spain’s minimum wage.

On top of that, company profits are shared. From annual earnings, 60% is reinvested in the business, 30% goes to employees (as capital that can only be claimed once they retire or leave the group), and 10% is invested in the local community. In 2025, Mondragón allocated more than €49 million for projects spanning social inclusion, poverty reduction, education, culture, sports, preservation of the Basque language and environmental sustainability. If a co-op sustains a loss, it is supported by a solidarity fund all 92 co-ops pay into.

Iker Gonzalez, 48, joined Mondragón in 2019 to work on solar panel production. The job was closer to his home and offered a better salary than his previous job working on railways in Bilbao. The group’s community spending also pays for a program that sees his children walk to school accompanied by a childcare provider. “We invest in our community,” says Gonzalez.

Another key tenet of Mondragón’s system is direct democracy. Everyone, from floor workers to leading executives, has the same voting power at annual general assemblies: one worker, one vote. No matter their position, they can have a voice and influence company strategy and policy. 

“Workers, we make decisions,” adds Aranburu, clad in a luminous orange safety jacket, steel-protected boots and with a wrench in hand. “We have the choice to decide. We can elect representatives. That doesn’t happen in other companies.”

And it’s more than simply theory. Aranburu, who joined the cooperative in 2006, says that years ago during a general assembly, the governing council proposed a big international expansion. But the workers, he says, “didn’t see the need”. They voted against it, the council was forced to resign, and new representatives were elected.

Mondragón’s worker-owned, multi-cooperative model, the largest of its kind in the world — other cooperatives are larger but not worker-owned — also brings job security. Under its rules, no member can be laid off for financial reasons (and if they happen to be under-performing for whatever reason, they receive training). If one of its co-ops goes bust, which rarely happens, its employees are paid up to two years’ salary at 80%, and are prioritised for posts at other co-ops. 

In 2013, Igor Herrate and his wife lost their jobs when the household appliances co-op they were working at went bankrupt. But within two months, after several interviews, they were both working again. “You feel protected for life here,” says Herrate.

And when the going gets tough, while some companies don’t hesitate to lay off workers, Mondragón’s workforce adapts. During covid, some factories were forced to close, but workers at many co-ops voted to temporarily reduce their own wages until shutdowns eased.

The result of this 70-year-old heritage of pay equality, labour rights and democracy is impressive. The Alto Debo region, which is home to the majority of Mondragón’s co-ops, has the highest family incomes in the Basque Country, among the lowest unemployment rates in Spain, and some of the lowest levels of inequality in the world. All while continuing to make a profit.

In fact, while cooperative governance may slow business decision-making, studies have found that co-ops can make as much profit as companies under conventional systems. A Rutgers University study concluded that there is “substantial evidence they at least equal, and probably exceed, the productivity of their conventional counterparts”.

Yet for all its success, Mondragón’s ethos has been diluted over the years.

While at its creation everyone who worked for Mondragón was a member, that is not the case today. Of Mondragón’s 71,000 current workers, only around 30,000 are members. To become a member of a co-op, a worker must invest up to €17,000, usually paid over a few years, and after an initial trial period. And workers outside the Basque Country aren’t eligible to become members.

Similarly, while the pay ratio cap for co-ops was at first three to one, it was raised to six to one in the 1980s.

“In the 1960s, Mondragón was more radical, but nowadays it’s quite practical,” says Anjel Errasti, a researcher at the University of the Basque Country, who grew up and studied in Mondragón. Errasti, who wrote a 2025 paper analysing the Mondragón model, describes it as “Cooptalist” — with a cooperative centre and a capitalist periphery.

“There are many, many positive aspects,” he elaborates. “I think that locally, it works perfectly. There’s good working conditions, the power of decision making. It’s difficult to find a better model.”

But Errasti points to the fact that Mondragón has production facilities in more than 30 countries, outsourcing due to cheaper labour costs, yet its workers overseas cannot become members. Is Mondragón simply exporting capitalism while preserving cooperatives at home? “We have to talk about Mondragón’s internationalisation and how it should extend the cooperative philosophy to its subsidiaries abroad,” he says.

Another gnawing inequality is when it comes to gender: The cooperatives’ elected governing councils are rarely 50/50. While the total workforce is split 44.5% men to 55.5% women, the latter make up only 39% of governing councils. Ana Otadui, former MP in the Basque Parliament, says this is partly because while many women work in the retail sector, there are fewer female engineers to hire. Mondragón is investing in programs to promote women to study engineering as part of efforts to improve equality. Nonetheless, as in the rest of society, men dominate the positions of power at Mondragón.

“It is not a perfect company, far from it, but we are having an important positive impact,” adds Otadui.

Like any other business, Mondragón faces competition. In industry, above all, the might of the Chinese economy is difficult to compete with. It’s a serious threat: Fagor Electrodomésticos, Mondragón’s oldest co-op and previously an employer of more than 5,000 workers, went bankrupt in 2013 after the group eventually decided it couldn’t afford to pour more more into the loss-maker.

“That’s probably the most significant challenge today,” says Otadui.

But the cooperatives pool together financing to invest in research to compete with the largest companies. Over the last five years, Mondragón has spent €1.8 billion on R&D. At Fagor Arrasate — the second-oldest co-op in the group — efforts to innovate are in sharp focus. More than 30 staff are working in R&D, and by the end of 2027, it expects to begin production on one of its new sectors: humanoid robots.

MIDDLE Mondragón’s grocery store chain, Eroski

PHOTO Grupo Eroski S.Coop

BOTTOM A Mondragón assemby line

PHOTO Peter Yeung

There are many, many positive aspects. I think that locally, it works perfectly. There’s good working conditions, the power of decision making. It’s difficult to find a better model.

Anjel Errasti

SOURCE