There is good reason to believe that the education debate in Australia has lost its way. It is not an easy matter to get things right when it comes to education, and distortions in policy have been the rule for quite a few years. Recent emphases on education markets and on standardised measurement in the My School internet strategy have made their own contribution to this process.

Declarations of goals for Australian education are re-written every ten years and bear the name of a state capital: Hobart (1989), Adelaide (1999) and Melbourne (2009). A large assembly of federal and state authorities of all colours and from all sectors endorses and issues them.

The first goal of the 2009 Melbourne Declaration is to promote ‘equity and excellence’. Excellence has figured in all three declarations, usually in the form of ‘access to high-quality schooling’. ‘Equity’ appears for the first time in 2009, which may reflect the predominance of Labor ministers at the table. The Howard-era Adelaide Declaration spoke of ‘all young people’ and Hobart invoked the unfashionable concept of ‘equality’. Equity is clearly a more inconstant goal than excellence. Of its several elaborations, the Melbourne Declaration’s is the most explicit (if such a word can be applied to documents of this sort): socio-economic disadvantage will ‘cease to be a significant determinant of educational outcomes’, and other forms of disadvantage will be reduced.

In recent years, the measure of excellence has been how well we keep up with other OECD nations. Here, according to Barry McGaw, a distinguished scholar and current head of Australia’s Curriculum, Assessment and Reporting Authority, ‘Australia is a relatively high performer, on average’. On the equity front, however, we are not so strong: ‘students’ social backgrounds’, says McGaw, ‘are more strongly related to achievement in Australia than in countries such as Canada, Finland and Korea’. Differences in school performance can, he says, ‘be explained by the social backgrounds of individual students and those whose company they keep. The negative effects of poor company may be much greater than any positive effect of good company’. ‘Poor’, in this case, can be glossed, in both senses.

For some time now governments have pursued policies that effectively put good students in good company and poor students in poor company. The states have multiplied selective schooling, sometimes deliberately, as in New South Wales, and sometimes by default, as in Victoria. Annual listings of Year 12 results consistently advertise the virtues of selective schools. For other levels the Commonwealth uses its program of tests (NAPLAN) and its My School website to highlight parallel differences. Selective schools rank well. Non-selective schools have their results modified by indices of disadvantage. From this sort of ‘transparency’, as then Minister Gillard loved to call it, interested parents can have little doubt about the company various schools keep and conclude, if they hadn’t already, that excellence is for their children, equity for other people’s children.

No matter what states do, parents will always find ways to seek good company. But states seeking equity ought to reflect on whether official policies might actually vitiate the pursuit of both equity and excellence. Official policies at present promote a doctrine of choice, and policy experts speak of school systems as markets. If such ideologies are ill-conceived or have unforeseen consequences, they should surely be reconsidered.

There was a time when it was taken for granted that the state would provide evenly for all comers, first in the local primary school, and thence in a district high school. In Victoria, a free, colony-wide primary system was set up definitively in 1872, but when secondary schooling was legislated in 1910 it was in multiple and selective forms. It was not until secondary schooling expanded enormously after World War II that it too became a system, highly centralised and regulated by enrolment zones, inspectors and ordained curricula.

That idea of a heavily regulated public system began to change in the late 1960s. This was partly because it was so overwhelmed by numbers that it could not cope. Students could spend years with unqualified teachers in makeshift accommodation. One union of teachers, the Victorian Secondary Teachers Association, rebelled dramatically against the crisis in the system. In a confrontation with government it enforced the related principles that teachers should be both qualified and trusted to get on with their profession without regular assessments from inspectors. Further, and this time in concert with a reforming Director of Secondary Education, Ron Reed, schools gained control over the curriculum. These were of course great challenges to central control, but both sides were as one on the essential principle that the state should provide good local schools for all comers.

Despite the crises that beset the system in those days, teachers’ morale was high. They believed in the destiny of the system to provide for all. Today’s situation seems to be the reverse. Conditions in schools are immeasurably better but school authorities appear to have lost faith in the capacity or willingness of many teachers, even of entire schools, to do their job. The Rudd–Gillard era, I suppose unwittingly, highlighted this conundrum. Much was spent on material resources, but the maligning of teachers by both Commonwealth and State authorities and the promotion of choice undermined not only faith but also the system itself.

The ideology of choice had had a spurt of growth in the 1970s. It had been present since the time when Catholics resolved to run their own school system. Their choice, they maintained, should be aided by the state. For a century it was not, and the Catholic schools sank into deplorable conditions. Whitlam resolved to rescue the Catholic system, but in doing so set up a battle, which persists to this day, between public and private schools. Had the Whitlam and later governments brought Catholic schools into the public system as a condition of their being funded, the battle might have faded away. Such an arrangement had occurred in England thirty years previously and would shortly come about in New Zealand. Yet Australia let Catholics and wealthy Protestants form an unholy alliance. Parochial Catholic schools in desperate need of funds were lumped in with established grammar schools, which needed no public funds at all. A mix of class warfare and religious prejudice left little room for principles of equity or rational planning.

As ‘private’ schooling became cheaper, choice inevitably became the controlling slogan. Parents, ran the argument, had a right to choose between private and public schooling. The state should facilitate the exercise of this right.

For a good while, choice remained chiefly a function of the public–private dispute, to be exercised mostly on the competitive playing fields of examinations for university entrance. Since that particular choice had long been sold as a right, choice in general, at all levels, was destined to be accepted as a self-evident good. In the early 1980s, the Commonwealth Schools Commission ran a project called Choice&Diversity. In the states, selective schools were either deliberately established or allowed to grow. The rationale was to create serious competition between the public system and private schools. The result, probably unseen, was to create good and bad schools. Twenty years on, as Chris Bonner has pointed out in New South Wales and Stephen Lamb and others have demonstrated in Victoria, an insidious pattern has developed. In any area of reasonable size, there will be one popular secondary school, effectively or officially selective, and two or three also-rans.

Choice was built into legislation in Victoria in the Education and Training Reform Act 2006. It is also now the essential purpose of the Commonwealth’s My School website. Again rights are invoked: ‘informed’ parents will be better able to exercise their right to choose. Accompanying spin about accountability, transparency and the power of information to change schools does not attempt to hide the reality that the choice is between good schools and others, the ‘others’ sometimes crudely described as below average, but more often as under-performing or disadvantaged.

As many have pointed out, a choice between good and not good is scarcely a choice. Nor can such a choice be justified as a right. It is an illusion, an image in a distorting mirror. It is not, however, a harmless illusion. It has consequences. Generations of young people will be relegated to the bad schools. Yet the policy makers, beguiled from outside the Giggle Palace by news of the success of choice and selectivity among the self-interested, have failed altogether to think of these consequences. Worse, seeing that the show is out of control, they hunt about for scapegoats. And schools offer droves of scapegoats: parents who don’t care enough about their children, leaders who can’t lead and above all teachers who are not putting in.

Intended or not, the result is to expose failing schools and expect parents to abandon them. Once the school is effectively abandoned, various schemes are advanced to repair the hole in the local provision. A task force may close the school and propose a new one, perhaps with some tempting specialism—music, sport, technology and the like. The possibility of importing the ‘charter school’ (in effect a fully supported private school) idea from England or the United States is canvassed. So too are vouchers, which put funding in the hands of parents.

In the minds of policy analysts, choice is but a part of a larger image of education as a market and there is no system in the traditional sense. Schools, they say, operate in a market. Authorities should do things to stimulate the market and sit back to watch it work.

If choice is an interesting concept vitiated by failure to consider its consequences, the market idea is simply foolish. When New South Wales took to the idea and created dozens of selective schools it was thinking of its system being in competition with other systems. What it overlooked was that it was creating competition also within its own system. However well the image of a market of competing systems might play out, the image of the system itself being a market is a triumph of image over reality. It might work as a description of the independent school sector in which each unit is comparable to a small business, but it is altogether inappropriate as an image of a fully funded public enterprise that pretends to universal provision. The markets we know do not consist solely of small businesses reacting directly to demand. If we must have a business image for a large enterprise with many units, it would be more like a corporation—a large bank or a supermarket chain, for example. These organisations run as systems. They do not offer customers a choice between good and bad branches, nor do they publish unfavorable comparisons between their customers (which My School does in the name of justice). Their corporate reputation depends on the quality and the accessibility of each of the units.

As I have said, Victoria did once have a deliberately planned school system. It had manifest fault—it was authoritarian and inefficient—but its basic premise and overall goal remain valid. The goal rested on faith in education for all. Its premise was to aim for geographic completeness—a primary school in every locality and a secondary school in every town or suburb. For over half a century this even spread of provision was sustained by a quite strict enrolment policy: students had to go to the school in their zone. I well remember my principal in the 1960s consulting his street directory to decide on an enrolment. Today it is parents who use the directory to find how far they will have to drive their children to school.

Nowadays it would be impossible to enforce zones, which is one reason why shopping around is encouraged. But the concept could be realised in other ways. If a school, for example, was defined as a district or sub-regional cluster consisting of multiple campuses, primary, secondary, tertiary or specialised, there could be some plausible restrictions on moving between districts. Choice could be made within the cluster but limited outside it. Sound leadership, management and control of quality would be more attainable, as would a more robust form of competition. The essential principle is that the basic units of a system have to be strong.

The many elements required to create strong units already exist. We are familiar with successful senior colleges, with specialised schools in arts, sports and the like, with teachers and youth workers skilled in getting through to resisters, with ways of breaking large campuses into small, caring sub-schools and so on. The weakness is that these elements exist haphazardly. Some students can get to them, but many are still in units too small to muster the resources needed to provide for all. Nor can such a haphazard system track the journeys through school and work of all the young people in an area.

Victoria’s reservoir of tradition and innovation in schooling provides all the ingredients for a strong system. What is lacking is political will. Sensible direction, matched by realistic funding of the necessary infrastructure, could wind back some of the worst by-products of choice and yet permit healthy versions of choice and competition within the system. But a search for equity cannot stop at reorganizing the shape of the system. No matter how the system is organised, what is it that parents seek and schools must offer?

The answer to that question probably lies in the nature of secondary schooling and the way it connects to tertiary education. From its beginnings in the colonies primary schooling was imagined and organised as a universal system. But when Victoria legislated for state secondary education in 1910 its mind was on schools that would gain entry for selected students to tertiary education—university, teachers’ college or technical college. Selection was ultimately by examination but also initially by enrolment procedures. Tertiary destinations fell into a hierarchy of prestige, with university at the top. Equity of a sort was achieved through scholarships awarded by examination.

This continues to be a fair description of upper secondary schooling today. Year 12 results and tertiary entrance rankings are the essential stuff of school information and eventually league tables. Built into these results is the ancient dichotomy of head vs. hand. Academic studies yield more rewards than technical ones, and within the academic curriculum studies taken by the best students contribute most to the ranking. Selective schools, official or de facto, public or private, with few exceptions pursue success within this narrowly academic framework. For a long time governments have said the right things about the virtues of vocational education, but lack of provision keeps pushing the issue to the perimeters. Any re-organisation of secondary schooling has to right this imbalance.

Historically, the character of upper secondary schooling has determined the shape of middle and lower secondary school, but not that of primary school. Choice, however, has crept into primary schooling and is starting to sort the schools out academically. National tests are largely of things learnt in primary school, essentially the three Rs. The ministers of education expect that test results reported by My School will wake parents up to their responsibilities and keep teachers on their toes. A national curriculum for the early years will straighten out those progressives who don’t teach phonics or grammar. The curriculum, former Minister Gillard told the press (at a doorstop on 1 March 2010), will ensure that once again children will be able to sound out the word c-a-t, then recognise its meaning, then be able to put ‘cat’ in a sentence: ‘The cat sat on the mat’. National assessment of the outcomes of this curriculum will show the world where the good and the bad teachers are. To act on this discovery, a dose of WorkChoices might help: let principals hire and fire staff and keep the unions out of it. And since it is teachers, not buildings, that make good schools, and since punishment works better than rewards, it can all be done within budget.

Teaching is the heart of the matter. Fortunately, no one doubts that good teaching matters more than anything else. The problem is that governments both red and blue currently believe that the cheapest and swiftest ways to buck up teachers is to have them all do the same thing and be exposed if they don’t measure up. A national curriculum is a means to this end. So too are the 1950s ideas of replacing teachers with barely qualified aspirants, and reviving inspectors. What is not considered adequately is improving teaching as a profession.

Better pay is clearly one way to improve things. So are greatly improving qualifications and training. Since the beginnings of state education, the qualifications of primary teachers have markedly risen, but those required of secondary teachers have changed little. To teach excellently and equitably, a teacher must be thoroughly on top of both content and method. If you still can’t teach well enough there should be ways to move you on. One way might be to augment the meagre ranks of para-professionals employed to free successful teachers from bureaucracy and so-called non-teaching duties.

Above all, teachers need to be trusted. There is a case for national consistency and objectivity in curriculum, but that can be achieved within a relatively simple framework and set of guidelines. The detail, progression, method and assessment are matters for respected professionals. Everyone agrees that reading and writing are essentials throughout school, but experienced professionals know that there are various ways of achieving success in these basics. They are not helped—rather they are insulted—by fanatics urging phonics upon everyone and ministers spelling out ‘The cat sat on the mat’.

When the nation really has faith in the educability of all young people, and trust in teachers to bring it about, we may be able to celebrate a revolution in another decennial declaration.

In the last section of the book, entitled ‘Climate Change: The Urgent Challenge’, essays by Ian Lowe and Guy Pearse do begin to address growth, limits to growth or the particular modes of consumption and production of energy resources that lead to atmospheric and climate degradation. Yet even there, the particular sources of today’s unprecedented reconstitution of production together with its vast expansion of globalising processes are not directly related to climate change. The way of living that produces climate change is still taken to be another variant of the capitalist process. The possibility that this way of living may only be one aspect of a far more deep-seated transformation is not entertained.

Is the absence of a sufficiently developed theoretical framework that can begin to address the actual sources of the new found conjunction of the more abstracted technosciences with capital a source of this failure?

Is the challenge this presents to what we take to be the foundations of our being the actual source of the denial and passivity of our response to the prospect of environmental disaster?

The actual response to changing circumstances among the remaining contributors to this volume is a slewing away from any line of enquiry which considers more basic issues. Instead they offer a focus on the global financial crisis and the way in which the discrediting of ‘market fundamentalism’ and the excessive greed and individualism integral with the neo-liberal ideology opens the way for a return to a social democratic polity. Even given that redirection to the active regulation of capital, there is an astonishing absence of any explicit discussion of just how more favourable conditions for tackling climate change might prevail within a social democratic order. Perhaps one should assume that Manne, McKnight, Rudd or Quiggin simply take this for granted. As if in backhanded confirmation of his own ethical assumptions, Robert Manne deplores ‘the destructive role played by neo-liberalism in inhibiting an effective response to climate change’.

While the new post-capitalist conjunctionof capitalism with the technosciencesmay be seen as radically deepening a climate crisis, there is little reason to believe that a simple renewal of social democratic concern for the common good can provide an effective answer. This is by no means to dismiss the genuine significance of that concern. Rather it is to suggest that a social democratic polity is not, by itself, a likely source of the necessary level of resolve.

One main reason for that conclusion is that the history of the ethical resolve to democratically regulate capitalism ‘from within’ is one of failure. As a system it both out-produced and made its own limited ideological contribution to the self-destruction of the revolutionary socialist alternative. Social democracy, at least in its beginnings, was the parliamentary path to much the same concern for the common good as revolutionaries pursued: that of ending capitalism. Following the Great Depression of the 1930s, social democracy retained its name but changed its objective. The Keynesian answer to the capitalist cycle of growth and collapse was not to reject capitalism but to regulate it. Finally, the neo-liberal period of unprecedented growth produced the certitude that no further crisis could eventuate  open-ended growth and the prescriptions of supply-side economics were held to provide a final solution. Nevertheless the crash occurred and any effective answer must surely move beyond ‘more of the same’: a return to social democracy.

A democratic answer now may be slow in the making, but first and foremost it must generate a practical response that begins to move beyond the far too limited response of regulating capital. That practical engagement depends first of all upon renewed movement among those same intellectually related groupings who have been drawn into a conjunction with capital. Would anyone deny that their engagement and support has been a necessary condition for the surge of productivity and the individualist enchantments that have defined the recent period of neo-liberal ascendancy?

The practical movement to which I am referring is grounded in a relatively basic, as if spontaneously given, form of social interchange. It expresses a sensibility which begins to become more explicit in many contexts: in politics most readily seen in the Green movement. It is practical first of all in the sense that seemingly spontaneous acts are often experienced as if they do not have conscious intent. They appear to be grounded in a taken-for-granted sense of the relative permanence of our being in its relation to the natural world. That sense of permanence can readily feed into a rejection of changes that undermine our basic sense of being. It can begin to prompt an alternative to the mainstream impetus to half-blindly enter a process of transformation that introduces a break in the continuity of the human condition.

Given its intellectually related formation, the challenge to continuity presented by the technosciences can more readily ground a reflective awareness among those who more actively enter the practice of reconstitution: those same intellectually related groupings which, for the present, are in thrall to capitalist ‘growth’. Among them some begin to articulate a response that recognises that the significance of growth, of progress as well, if pursued blindly in the name of individualised freedom, begins to pass beyond the limits of what most people still take to be the relative permanence of the human condition. Set now within the conjunction of a capitalism and a relation to reality which breaks with these still prevailing assumptions of relative permanence, a reconstitutive practice can work towards a different order of being.

That particular sense of the natural order of being has been ‘contained’, as it were, even for millennia. Throughout the history of class societies the more abstracted powers of the intellectually related practices have elaborated interpretations of ultimate meanings which often legitimated domination by those whose privileges depend upon the labour of others.

Interpretation has been the primary activity of intellectuals; that is, until the intellectually related practices also began to play a major role in the reconstruction of labour as such. First, that is, in its rationalised mechanisation under industrial capitalism and then in the actuality of the transformational break mediated by the reconstitutive practices of the technosciences.

* * *

There is no space in this short comment to cover ground already traversed in earlier articles in Arena Magazine concerning the distinctive form of life of the intellectually related grouping. However, it is of some interest to note that, in some implicit register, the project of social democratic renewal may itself be displaying hints of a break from the limitations of its own commitment to capitalist continuity.

In their introduction to this volume, editors Manne and McKnight join Rudd and several other contributors in their over-endorsement of the role of ideas, of political ideologies especially, in the formation of social realities. The reconstitutive transformation we are facing now cuts deeper than ‘ideas’ alone can encompass. At least at the level of apprehension, Rudd himself suggests a certain discomfort with the strictures of the continuity which his own ideology imposes. Listen to the portentous ring of his opening passage as reprinted here, following its first publication in the recently declared social democratic organ The Monthly!

From time to time in human history there occur events of truly seismic significance, events that mark a turning point between one epoch and the next, when one orthodoxy is overthrown and another takes its place.

This is the language of discontinuity, not that of regulating yet one more convulsion within capitalism, or even one more reversion to well-intentioned attempts to reform or regulate it in the name of the common good.

So, by way of an endnote, are we actually saying Goodbye to All That?
The history of this title hardly encourages optimism.

Only a few among the present generation would recognise that these words previously served as the title chosen by the English poet Robert Graves as he worked towards personal regeneration following the immersion of his own generation in the slaughterhouse of World War I. At least in an historical sense it was a distinctly temporary departure. It was no more than an au revoir to All That. Maynard Keynes recognised that the Treaty of Versailles, which marked the end of the war, also sowed the seeds for the renewal of conflict in the conflagration which commenced in 1939.

That war ended in 1945 at Hiroshima in an event which, as mediated by intellectual practices, reconstituted war making. It replaced the mechanised conflict of armed men by deploying the product of a physics laboratory. Was it also of truly seismic significance—a ‘turning point between one epoch and the next’, of far more general significance than even this particular event of nuclear war could encompass? Was it a portent of a shift towards the possibility of a reconstituted reality? That is, a reality in which nuclear power is only conceivable as integral with that more abstracted mode of engagement typifying the intellectually practices.

The front cover of Goodbye to All That? symbolises the great financial crash of neo-liberal capitalism by depicting a jet aircraft standing on its nose while displaying only the slightest denting. It certainly looks as if it could fly again!

At least in the immediate sense nothing said about the limitations of this collection of essays should deflect recognition of the reality that no sudden break from post-capitalism is possible. The post-capitalist process has now so worked its way through every institution that even the institutions of intellectual formation have lost much of their once quasi-independent status. Drawn into the role of direct support to the powers, their instrumentally rational expression in the technosciences becomes the main source of a post-human trajectory. Within that trajectory climate change may be seen again as only one among its potential consequences for the human condition.

If ‘some rough beast now slouches towards Bethlehem’ its present course can be redirected. In a major degree that prospect depends on an enhanced understanding among the intellectually related groupings. Their distinctive and more abstracted mode of engagement with reality co-exists with their openness to that same spontaneous sense of erosion of their own basic humanity that affects their peers. For them, most radically, it also allows a critical reflection upon the present dominant trajectory. That power of reflection above all requires them to form a new and far more active constituency within a ‘social democracy’ which helps to draw its now shortsighted forerunner into the practice of actually constituting a more viable way of living. In their distinctiveness they must stand up more vigorously than ever before; in the name of an enlarged sense of the common good, they must break the bonds of dedicated service to the existing powers.

From a standing start in 1956, the MCC has grown to the point where by mid-2008 it was the seventh largest business group in Spain. Annual sales increased between 2006 and 2007 by 12.4 per cent to some $US20 billion, and overall employment by 24 per cent, from 83,601 to 103,731. Exports accounted for 56.9 per cent of industrial co-operative sales, and were up in value by 8.6 per cent. Mondragon co-operatives now own or joint venture some 114 local and overseas subsidiaries.

Like other businesses, the co-operatives now find themselves hard hit by the economic meltdown; their members are tightening their belts in a further exercise of the solidarity that has enabled them to weather previous major downturns and achieve new heights. For example, in 2008 worker-owners at the Fagor appliance co-operative elected to forego the additional four-weeks pay normally due to them over the Christmas period, and have subsequently cut their pay by 8 per cent. As the MCC’s Human Resources Director, Mikel Zabala, points out, ‘We are private companies that work in the same market as everybody else. We are exposed to the same conditions as our competitors’. What then are the attributes to which Mondragon owes its remarkable success?

Industrial Co-operatives

The basic building blocks of the MCC have been its industrial co-operatives. The industrial co-operatives are owned and operated by their workers. The workers share equally in the profits — and, on occasion, losses — of the co-operatives, and have an equal say in their governance. That they are able to do so is due to the unique structures and systems of governance and financial management which the Mondragon co-operatives have developed. In the case of governance, the workers in a co-operative have their say in the first instance through its General Assembly, where the performance of the co-operative is discussed and its policies determined. The workers also elect a Governing Council, which conducts the affairs of the co-operative between Assembly meetings, and an Audit Committee — referred to by some as the ‘Watchdog Committee’ — which monitors the co-operative’s financial operations and its compliance with its formally established policies and procedures. Only members of the co-operative, all of them workers, are eligible to stand and voting is on a ‘one member, one vote’ basis.

Successful candidates hold office for a four-year term, but continue to be paid their normal salaries and receive no compensation for their Council responsibilities. Council meetings are normally held before the working day begins, and members then resume their normal workplace duties. The Council appoints a Manager for the co-operative on a four-year contract, which may be renewed subject to a mandatory review of his performance by the Council. The Manager may attend Council meetings in an advisory capacity, but is not a member and has no vote. There is a separate Management Council where the top executives and officers of the co-operative liase with one another on a monthly basis. The separation of the Management Council from the Governing Council reflects the clear distinction which the co-operatives draw between the governance function which is properly the prerogative of their members and the carrying on of operations for which management is responsible.

A final body, the Social Council, is elected annually, by and from shop-floor groups of from twenty to thirty workers. Members of the Social Council hold office for a two-year terms, and may offer themselves for re-election. The Council is a unique structure, with a highly distinctive contribution to the well-being of the co-operative. Whereas the Governing Council represents the members of a co-operative primarily in their capacity as its co-owners, the Social Council represents them primarily as workers. The Council’s character in this respect reflects in part the fact that the co-operatives were established during a period when trade unions had been outlawed by the Franco government. Franco’s negation of workers’ rights was unacceptable to Arizmendiarrieta and his associates. In effect, the Social Council has had built into it the union function of enabling members to monitor, question and, if necessary, oppose the policies of the Governing Council and management. The Social Council is required to give advice to the Governing Council on industrial and personnel issues — for example, working hours, the evaluation and classification of jobs, and occupational health and safety — which the Governing Council must consider before its decisions on them are finalised. In recent years, some co-operatives have mandated their Social Councils to bargain formally for members with their Governing Councils.

The earnings of a Mondragon co-operative are the property of its members. In place of wages, members are paid monthly advances, referred to as anticipos, against the income their co-operative expects to receive. Two further advances required by Spanish custom are made available at Christmas and for the summer holiday period. The co-operatives observe a ‘principle of external solidarity’, under which no advance should exceed by more than a narrow margin the wages paid for comparable work by nearby private sector businesses. The level of each member’s advance is determined in the first instance by a labour value rating which the Social Council of the co-operative assigns to the job. Overall, incomes are kept as equal as possible. The highest advances a co-operative pays its members cannot exceed the lowest by more than eight to one. By 1990, members had had an estimated increase in their purchasing power since 1956 of around 250 per cent.

A further share of the co-operative’s earnings is credited to the members as capital. The capital structure has been designed to produce the greatest possible consciousness on the part of each member who is a stakeholder in the co-operative. The identification is achieved initially by requiring as a condition of entry to the co-operative that each member should make a direct personal contribution to its capital. There is an entry fee which currently stands at about $US12,500. Payment can be made on the basis of a 25 per cent initial contribution, followed by monthly instalments. The co-operative then establishes an individual capital account for the member, to which 70 per cent of their initial contribution is credited. The capital accounts earn interest at an agreed rate, and are credited each year with, say, 40 per cent of the co-operative’s surplus, apportioned among members on the basis of their salary grades and the hours worked. Members may draw on the interest accumulated in their accounts, or use the accounts as collateral for personal loans, but the principal cannot normally be touched until they resign or retire. Payouts from the capital accounts of members currently retiring in Mondragon — over and above their superannuation entitlements — are in some instances in excess of $US100,000. A further 50 percent of the co-operative’s surplus goes to its permanent reserves, while Spanish law requires 10 per cent to be set aside for social and educational purposes. A co-operative which incurs a loss may require its members to re-invest the extra Christmas or summer holiday advances which they would otherwise have taken in cash. Alternatively, they can forego the interest which would otherwise have been paid on their capital accounts. In extreme cases, the value of capital accounts can be written down or even written off.

Worker/Consumer Co-operatives

Mondragon’s initial focus on industrial co-operatives was expanded by the creation in 1968 of its Eroski worker/consumer co-operative. Reflecting the overall Mondragon approach, Eroski, unlike traditional consumer co-operatives, is not limited to consumer members. Instead, its membership falls into two categories, namely, the workers who operate its outlets and the consumers who shop at them. The Governing Council has equal numbers of worker and consumer members, with the position of chairman always being held by a consumer. A further difference is that Eroski does not pay the traditional consumer co-operative dividend, but instead concentrates on low prices, healthy and environmentally-friendly products and consumer education and advocacy.

Eroski is today the most rapidly expanding component of the MCC, with some 2441 retail outlets, ranging in size from petrol stations and small franchise stores to hyper-markets and shopping malls, in locations that now extend beyond Spain to France and Andorra. It is a key participant in the Spanish Confederation of Consumer Co-operatives, speaks for the Confederation in its dealings with government and the media and is also active in the affairs of the Consumer Advisory Council in Brussels.

Mondragon Mark I

The industrial, worker/consumer and service co-operatives at Mondragon have benefited from a unique system of second-order or support co-operatives and groups. Just as the primary co-operatives were formed in response to a pressing need on the part of workers for jobs, and of the Basque region more generally for economic development, so the secondary co-operatives have been a response to the need of the primary co-operatives to co-ordinate their activities and access capital and support services such as social insurance, education and training and research and development. The co-ordination and support structures and procedures, as distinct from the primary or frontline co-operatives, have undergone major changes. A broad familiarity with the arrangements in their original form — with what was in effect Mondragon Mark I — is needed in order to properly understand the nature and purpose of the Mondragon Mark II which in key respects has replaced them.

The Caja Laboral Credit Union

The core and nerve centre of what is now the MCC was originally the Caja. Arizmendiarrieta realised at a very early stage in the life of the group that expanding the existing co-operatives and creating new ones would require reliable access to capital on affordable terms. ‘A co-operative’, he wrote, ‘must not condemn itself to the sole alternative of self-financing’. As has been seen, his insight resulted in 1959 in the establishment of the Caja in order to mobilise capital for the co-operatives from the local and regional communities. The slogan used by the Caja in the early stages of its development was ‘savings or suitcases’, indicating that local savings were necessary in order for there to be local jobs. The Caja also provided a means for the co-operatives to manage the capital held in their permanent reserves and individual capital accounts, so enabling them to retain within the group all of their surpluses other than the 10% allocated by law to community projects. The effect overall was to free the co-operatives from the capital constraints which otherwise would so drastically have curtailed their development. The Caja enabled the co-operatives to borrow at interest rates which were 3 per cent to 4 per cent below those of conventional financial intermediaries.

From functioning purely as a source of capital for the co-operatives, the Caja then moved on to become the mechanism through which their association with one another was formalised and their activities integrated. The individual co-operatives were linked to the Caja through a Contract of Association which set out in detail their respective obligations and entitlements. For example, it was a requirement of the Contract of Association that an affiliated co-operative should adhere to an agreed system of wage levels and ratios. Returns to members on their capital contributions should be at a fixed rate of interest. The co-operative should invest in the Caja and the surplus cash and liquid assets of the co-operative should be held for it on deposit by the Caja. The co-operative’s deposits with the Caja should also include all holdings on behalf of its members, such as pension funds, social security funds, and workers’ share capital. The co-operative should adopt a five year budget and report on it to the Caja at monthly intervals. The financial affairs of the co-operative should be subject to audit by the Caja at intervals of no more than four years.

The Caja lastly had a key role in developing new co-operatives, advising and otherwise helping out co-operatives which were experiencing difficulties and, more generally, providing an integrated mix of services for co-operatives in all stages of their development. These functions of the Caja were performed by its Empresarial Division. The Division consisted of seven departments — Advice and Consultation; Studies; Agricultural and Food Promotion; Industrial Promotion; Intervention; Auditing and Information; and Urban Planning and Building — with around 120 worker-members.

Where new co-operatives were concerned, a group of workers who were interested in establishing a new venture had first to find a product or service for which they believed there was a market, along with a manager. They were then in a position where an approach could be made to the Empresarial Division. If the Division believed that the proposal was sound, it assigned an adviser — sometimes known as the ‘godfather’ — to the group. The group in turn registered as a co-operative and accepted a loan to cover a salary for the manager while pre-feasibility and feasibility studies were conducted. The studies usually lasted between eighteen months and two years. In the course of that period, the group’s preferred product might be discarded in favour of an alternative drawn from the ideas bank which the Division maintained from its own market research. Attention then focused on factors such as factory design, production processes, marketing strategies and export opportunities. The completed study was presented to the Operations Committee of the Banking Division of the Caja, which determined whether the venture should be approved. Where a co-operative proceeded, the Empresarial Division godfather usually went on working with its manager until the break-even point was reached. The co-operative and the Division then remained in touch through the monthly return of operating and financial information the co-operative agreed to provide as a condition of its Contract of Association. The information was stored in a computerised data bank, so enabling the Division to at any time call up a comprehensive account of the status of the co-operative and the trends currently being experienced.

Where an established co-operative experienced difficulties, the Empresarial Division had the capacity to help out through the professional services of its Intervention Department. The data base compiled from the monthly returns of the affiliated co-operatives enabled the Department to have emerging problems brought to its attention, in some cases earlier even than the managers of the co-operative directly involved. An intervenor was then appointed, who assessed the situation of the co-operative in terms of three categories of risk. A summary of the categories by two American scholars reads in part:

1. High Risk. The life of the co-operative is threatened. The intervenor reviews every aspect of operations and in effect takes over management on a full-time basis until a reorganisation plan is approved or the co-operative must be closed. Interest payments on outstanding loans are suspended until the plan is in place.

2. Medium Risk. Bankrupcy is not imminent but could occur in the near future. In such cases the intervenor spends at least one day each week at the co-operative during the reorganisation but does not take over the management of the firm. Interest on loans is reduced temporarily by — say — half, but returns to the full rate as the reorganisation progresses.

3. Warning or alert level. Here the threat of failure is not imminent but current trends are negative, suggesting a need for remedial action that may be beyond the capacity of the co-operative. No interest rate concessions are offered, as it is anticipated that the intervention will make the interest burden manageable.

Once the seriousness of the situation has been determined, the intervenor has the task of working out with the co-operative a new business and re-organisation plan.

The plan might require changes in the marketing strategies, manufacturing methods or product mix of the co-operative. Other changes might involve the organisational structure of the co-operative or the appointees currently occupying its key management positions. Members might be required to accept reductions in their anticipos or contribute additional capital. Where in extreme cases a reduction in the workforce was necessary, it fell to the Social Council to identify in conjunction with management those members who were to be retained in their current positions, those who were to move to new positions and those who were required to leave, normally by transferring to another co-operative whose business was expanding. Once agreement on the plan had been reached, the co-operative was responsible for securing approval of it from the Financial Division of the Caja. The Financial Division was required to determine whether interest on the co-operative’s loans should be suspended or reduced or in what other ways, if any, the co-operative should be assisted.

The mutuality of interest between the Caja and the primary co-operatives which are linked with it through their Contracts of Association — together with the credit union’s functions in regard to the co-operatives of capital mobilisation and management, integration and support — were entrenched in its structure and governance. Forty-two percent of the delegates to the General Assembly of the Caja are from its workers and 58 per cent from the affilated co-operatives. Seven seats on the Board are for the affiliated co-operatives, four for workers in the Caja and one for a representative of wider sectorial groupings of co-operatives. Rather than the Caja’s workers having allocated to them a 40 per cent share of its annual surplus, as is the case in the affiliated co-operatives, their capital accounts are credited with the average of the amounts credited to members of the affiliated co-operative. The Caja has succeeded so spectacularly as to have now become effectively the tenth largest bank in Spain. Its assets are now so large that loans to the co-operatives now account for no more than 25 per cent of its overall lending, or 10 per cent of its capital, with the balance available for regional economic development and other investment projects, often in partnership with the Basque government. Its example triumphantly vindicates Arizmendiarrieta’s faith in the capacity of working people to provide for themselves through co-operation and economic solidarity the jobs for which they can no longer rely on others.

Lagun-Aro Social Insurance Co-operative

A second support co-operative, the Lagun-Aro social insurance co-operative, began as a division of the Caja. Being co-owners of the businesses where they work instead of employees meant at the time that members of the Mondragon co-operatives were ineligible for health and retirement benefits under the Spanish social security system. What was originally the social insurance division of the Caja was established to remedy the deficiency, by providing a fund to which the co-operatives could subscribe through pay-roll deductions and from which benefits for their members could be drawn. In 1967, the division became independent of the Caja as Lagun-Aro, with a Governing Council which included representatives of the co-operatives affiliated with it. The functions and service-mix of the co-operative have varied over time, reflecting changing needs and government policies. The health care clinic Lagun-Aro conducted at Mondragon for many years was taken over by the Basque government in 1987, as a model for other towns in the province. Rather than administering pensions as previously on an in-house basis, Lagun-aro now contracts out the function to a fund, Mutualidad de Autonomos, conducted by the state. At the same time, a general insurance subsidiary (Seguros Lagun Aro) and a life insurance subsidiary (Seguros Lagun Aro Vida) have been established, as have subsidiaries for leasing and consumer finance (Aroleasing and Arofinance) and a subsidiary for the development of shopping malls (Lagun-Aro Intercoop) in conjunction with the Eroski worker/consumer co-operatives.

Hezibide Elkartea Education and Training Co-operative

A third support group, the Hezibide Elkartea, stemmed from the establishment by Arizmendiarrieta of the training school for apprentices in Mondragon in 1943 and of the League of Education and Culture, a body to promote and co-ordinate education on all levels for all children and adults, in 1948. The apprentice school and the League played a key part in the consciousness-raising through which the establishment of the first of the industrial co-operatives, Ulgor, was instigated. The Hezibide Elkartea has come to cater for programs ranging from day-care to advanced technical and management skilling to adult education. The apprentice school is now a university-level polytechnical college, the Eskola Politeknikoa Jose Maria Arizmendiarrietra. Over and above its mainstream teaching programs, the Hezibide Elkartea brings together specialist bodies such as the Saiolan centre for new business activities education, training and development; the Goeir centre for the co-ordination and promotion of overseas postgraduate engineering and technical studies; the Eteo school of business management; the Iraunkor centre for continuing education and in-company training; the Ahizke-CIM centre for language studies; and the Otalora Centre for co-operative research, education and management training.

Students at the Eskola Politeknikoa have a co-operative of their own, Actividad Laboral Erscolar Cooperativa (or Alecoop for short), that enables them to support themselves financially during their courses, while at the same time obtaining a hands-on experience of how co-operatives work. A further network of educational co-operatives offers a bi-lingual education in the Basque and Spanish languages at the pre-school, primary and lower secondary levels. Funds for the schools are drawn in part for the social allocations of the Caja and its affiliated industrial co-operatives. Their General Assemblies include staff, parent, student and affiliate members. Faced in 1993 with demands by the Basque government that schools receiving government funds should join the government system, 80 per cent of the schooling co-operatives voted for rejecting the government’s money and retaining their independence.

Ikerlan Research and Development Co-operative

A fourth support co-operative, the Ikerlan research and development co-operative, reflects the high priority which the Mondragon co-operatives have attached to keeping abreast of modern technology. This pattern, like so much else about Mondragon, was shaped by Arizmendiarrieta, through his initial choice of technical education as the means of bringing the community together and instigating change, and his insistence throughout that by mastering technology it would be possible to bring about higher forms of human and social development. ‘Our people’, he argued, ‘require of our men the development of the means to scale the heights of scientific knowledge, which are the bases of progress’. Arizmendiarrieta’s advice caused research and development to be pursued vigorously from the start by individual co-operatives and the Mondragon polytechnical college, but this allowed insufficient scope for inter-disciplinary problem-solving and cross-fertilisation within the overall scientific and technical workforce. Ikerlan was hived-off from the college in 1977 as a separate support co-operative, in order to overcome these shortcomings, and further strengthen the competitiveness of the industrial co-operatives in the export markets where their future was seen to lie. As in other support co-operatives, the General Assembly consists of the worker/members of the co-operative and representatives of the affiliated primary co-operatives.

An extensive staff of highly qualified engineers and technicians enables Ikerlan to provide contract research and development services for co-operatives affiliated with the MCC, private sector businesses other than those in direct competition with the co-operatives and agencies of the Basque government. Ikerlan is also an active member of the European Association of Contracted Research Organisations, and offers competitive research fellowships for visiting scientists and engineers under industry re-vitalisation programs funded by the Basque government. A further support co-operative, Ideko, specialises in machine tools research and development.

Co-operative Groups

Over and above its unique support co-operatives, Mondragon was reinforced by a structure of groups or divisions which linked individual co-operatives together, both geographically on the basis of their proximity to one another, and by similarity of the sectoral activities in which they engage. Geographically, there were twelve regional groups of co-operatives. The structure stemmed from the rapid growth of the original household appliances co-operative, Ulgor, in the early 1960s. Faced with a co-operative which was outstripping by far the limits within which the advantages of growth could be achieved without succumbing to the bureaucratic rigidities, Arizmendiarrieta and his associates developed a policy of spinning-off those sections where a level of efficiency was achieved such as would enable them to function successfully as independent entities.

In this model, the components manufactured by the new co-operatives had an assured market in Ulgor but could also be sold to other buyers. In order to balance the interests of the new co-operative with those remaining behind in the parent body — and to avoid loading the new co-operative with costs such as the establishment of marketing and other specialist divisions of its own — a co-operative group, ULARCO, was formed from Ulgor itself, the Arrasate co-operative which supplied machine tools for Ulgor and the Copreci co-operative which supplied Ulgor with parts for its gas stoves and heaters. A fourth member, Ederlan, resulted from a private sector foundry being taken over and combined with the foundry at Ulgor. Fagor Electrotechnica became the fifth member when it was spun-off by the three foundation co-operatives, as an independent co-operative manufacturing electronic components and equipment.

ULARCO adopted a structure similar to that of the individual co-operatives. Its General Assembly comprised the members of the governing councils, management councils and audit committees of the affiliated co-operatives, and was responsible for determining the policies of the group, making decisions about admissions to — and exclusions from — the group, and approving all accounts and budgets. There was also a Governing Council, made up of one member from each of the affiliated co-operatives, a General Management Committee chosen by the Governing Council and a Central Social Council comprising one representative from each of the Social Councils of the affiliates. Similar structures were adopted by the other regional groups.

The groups enabled key planning and co-ordinating functions to be undertaken in the interests of their affiliates. From 30 per cent to 100 per cent of the surpluses earned, or losses incurred, by individual co-operatives were pooled through their regional groups, so providing further protection for the co-operatives against the problems to which short-term market fluctuations might otherwise expose them. The groups facilitated the exchange of members between co-operatives whose markets were expanding and those experiencing contractions. Dialogue between the Governing Councils and Central Social Councils of the groups, reflecting in part discussion within and between the affiliated co-operatives, in some instances played a major part in enabling the co-operatives to implement the re-positioning and re-structuring forced on them by Spain’s entry into the European Community and the economic stringencies of the 1980s and the 1990s.

Mondragon Mark II

What has been effectively the replacement of Mondragon Mark I by Mondragon Mark II between 1987 and 1991 reflects the capacity of the co-operatives to re-invent themselves in the light of new challenges and changing circumstances. A series of congresses of the co-operatives since 1987 — drawing in part on recommendations from the Caja adopted by a pre-constituente congress in 1984 — has radically altered the original structure, so that the co-operatives now relate to one another in new ways. The governing philosophy of the co-operatives was codified by the 1987 Congress in an explicit ten-point declaration known as ‘The Basic Principles of the Mondragon Experience’. The ten points are respectively open admission, democratic organisation, sovereignty of labour, the instrumental and subordinate character of capital, participatory management, payment solidarity, interco-operation, social transformation, universality and education. The declaration reads in part that admission to a Mondragon co-operative is available without discrimination on religious, political or ethical grounds or due to gender, subject only to applicants agreeing to be be bound by the principles and proving that they are professionally capable of carrying out such jobs as may be available. Members participate in the governance of the co-operative on a ‘one member, one vote’ basis, irrespective of their positions, seniority, hours worked or capital contributions. The co-operative recognises the primacy of labour in its organisation and the distribution of the wealth created; rejects the contracting of workers who are not admitted to membership; and seeks to provide work for all who are in need of it.

Capital is seen as being an instrument, subordinate to labour and subject to a maximum rate of return. The democratic character of the co-operative implies a progressive extension of opportunities for involvement by its members in business management, through mechanisms and channels for participation, freedom of information, consultation, implementation of social and professional training plans for members and the establishment of internal promotion as the basic means of filling positions of higher professional responsibility. Solidarity should be observed externally, so that rates for equal work are roughly the same within the co-operative as in the wider community. There should be co-operation by co-operatives, both within and between sectoral groups, and by the MCC with the Basque and international co-operative movements. The MCC should contribute to economic and social reconstruction and to the creation of a Basque society which is more free, just and expressive of solidarity; act in solidarity with all those working for economic democracy in the sphere of the social economy and championing the objectives of peace, justice and development which are essential features of international co-operativism; and provide education and training in co-operation for its members, management bodies and in particular the younger generation of members on whom its future depends. The Basic Principles broadly reflect, and in key aspects improve upon, those of the International Co-operative Alliance.

The 1987 Congress also established a special fund, the Interco-operative Solidarity Fund (Fiso), to help out co-operatives in economic difficulties with resources over and above those available from the Caja, and so avoid job losses. A further fund, the Fund for Education and Inter-co-operative Development (FEPI), was established by the 1989 Congress, to assist participation by smaller co-operatives in larger and longer-range projects, with funds drawn from the social contributions of those which are larger or better off. The 1991 Congress endorsed recommendations from the Governing Council in 1989 for the move to the sectoral groups and the establishment of the MCC. The Caja has surrendered its central co-ordinating functions, and is now a conventional co-operative financial intermediary, lending largely to private sector businesses. Co-ordination and strategic planning are now the responsibility of the MCC. The MCC is a tripartite structure, made up at its base of three sectoral groups – the Financial Group, the Industrial Group and the Distribution Goods Group. The Industrial Group in turn has a further eight sub-groups, namely Capital Goods I, Capital Goods II, Automotive Components, Domestic Appliance Components, Industrial Components and Services, Construction, and Household Goods.

The General Assembly of each co-operative affiliated with a group sends a delegate to a Group Assembly. The Group also has a General Council made up of the chairperson of each co-operative together a further member from each co-operative’s Board, and a Management Committee consisting of the managers of the co-operatives. The General Council selects a member of the Management Council as the Group CEO. The aim is to have a common business strategy for each sector, including the adoption of common identifiers such as brand names, trademarks and logos. The groups have also had devolved to them the intervention function which was previously performed by the Empresarial Division of the Caja. Other function of the Empresarial Division have been assumed by the Lankide Suztaketa I and Lankide Sustaketa II management and engineering consultancy co-operatives, the Saiolan business activities development co-operative and an MCC Services Co-operative within the corporate headquarters of the MCC.

The groups are responsible for the management of workers whose co-operatives cease to have positions for them. Workers so affected are normally relocated – and where necessary re-trained – for positions in co-operatives whose businesses are expanding. While the objective of protecting employment has largely been achieved, the groups have not necessarily in all cases been thanked for their efforts. Transfers are seen to have generated frustration, rejection and ill-will among these affected by them. ‘The transferee’, in the view of a major study, ‘feels himself/herself to have been ‘managed’ rather than consulted; feels less a co-operative member than the rest, as if he/she were a second-class citizen’.

Members of the co-operatives affiliated with the MCC elect delegates to a Mondragon Co-operative Congress. The Congress meets at intervals of not more than two years, to consider the philosophy, policies and operation of the MCC. Two further bodies, the Standing Committee and General Council of the Congress, look after the affairs of the Congress between its meetings. The Standing Committee consists of the president, vice-president and secretary of the Congress, together with representatives from each of co-operative groups and secondary support co-operatives. The members of the Council are the heads of the co-operative groups and support co-operatives. Congress decisions ‘in general will have the character of recommendations to the co-operatives represented in the Congress’. In order for a decision to be binding on the co-operatives, ‘it must be proposed by the Governing Council, be presented by the Standing Committee and be approved by the full Congress by an absolute majority’.

Conclusion

In the face of the world’s economic vicissitudes, Mondragon has been steadfast in its adherence to the fundamental principles with which its founders endowed it, and continues to enlarge the scope of their application. Eroski is currently adopting new measures to enfranchise the 35,000 of its 50,000 workers who are not currently worker members. The co-operatives have entered into a solemn commitment to extend worker ownership measures to their local and overseas subsidiaries on a case by case basis, consistent with their differing cultural, legal and financial circumstances.

In a passage written a few days before his death in 1976. Arizmendiarrieta wrote in part:

Hand in hand, of one mind, renewed, united in work, through work, in our small land we shall create a more human environment for everyone and we shall improve this land. We shall include villages and towns in our new equality; the people and everything else: ‘Ever forward’. Nobody shall be slave or master to anyone, everyone shall simply work for the benefit of everyone else, and we shall have to behave differently in the way we work. This shall be our human and progressive union — a union which can be created by the people.

It is not necessary for us to suppose that the Mondragon model can be transplanted in its entirety to other countries. What is required of us is rather that we should take from Arizmendiarrieta the message of hope his words hold out to us, study such aspects of the Mondragon experience as are relevant to our needs and circumstances and open our minds to what it can teach. Arizmendiarrieta summarised the Mondragon approach as ‘We build the road as we travel’. The question in these straitened times is whether we will make for ourselves the future of our choice — whether we will take back control over our lives and destinies by the co-operative means whose availability Mondragon so plainly demonstrates — or by default allow others to choose the future for us.