This story was originally published by Reasons to be Cheerful
12 min read
There are all kinds of enormous, impressive and, frankly, noisy machines at work across the 20,000 square meters of industrial warehouses at the headquarters of Fagor Arrasate, a manufacturing company in Spain’s northern Basque Country.
Here, a team of engineers is constructing machines that can put together household appliances like refrigerators and washing machines, hydraulic presses to make parts for electric vehicles and airplanes, 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 is 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 ($12.8 billion U.S.) and aggregate profits of more than €600 million.
But these considerable earnings do not go into the pockets of a wealthy few at the top of the pyramid. Fagor Arrasate is a cooperative — like every other business within Mondragón — and it 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 cooperative, 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.”
Founded by five coworkers in 1956 as a small stove factory, Mondragón Corporation is today the largest federation of worker-owned cooperatives in the world. It employs more than 70,000 workers across 92 cooperatives, 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 percent of the world’s trains contain its parts.
Mondragón’s model is not socialism, it is keen to stress. The group, despite being owned by its workers, admits that it is capitalist: It is for-profit. Yet Mondragón’s model has social good and humanism — rather than profit-maximizing — at its heart. In an era when the rich are getting richer, and inequality is rising, supporters say that Mondragón is showing — on an unparalleled scale — a better way to do business, where profits might not be as high, but society benefits. Others question whether the model could work elsewhere or if it can survive increasing globalization.
“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 cooperatives 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.
Strikingly, for example, Mondragón’s cooperatives 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.) 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 percent higher than Spain’s minimum wage.
On top of that, company profits are shared. From annual earnings, 60 percent is reinvested in the business, 30 percent goes to employees (as capital that can only be claimed once they retire or leave the group), and 10 percent 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 cooperative sustains a loss, it is supported by a solidarity fund that all 92 cooperatives pay into.
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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 the city of 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, said 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 companies goes bust, which rarely happens, its employees are paid up to two years of salary at 80 percent, and they are prioritized for posts at other cooperatives.
In 2013, Igor Herrate and his wife lost their jobs when the household appliances cooperative they were working for went bankrupt. But within two months, after several interviews, they were both working again.
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“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 the pandemic, some factories were forced to close, but workers at many cooperatives voted to temporarily reduce their own wages until the crisis lessened.
The result of this 70-year-old heritage of pay equality, labor rights and democracy is impressive. The Alto Debo region, which is home to the majority of Mondragón’s cooperatives, 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. The model continues to make money: In 2025, net profits were €618 million, and in 2024, they hit a record €632 million.
In fact, while cooperative governance may slow business decision-making, studies have found that cooperatives can make as much profit as companies under conventional systems. A Rutgers University study concluded that there is “substantial evidence that they at least equal, and probably exceed, the productivity of their conventional counterparts.”
Nick Romeo, author of the book The Alternative: How To Build a Just Economy, believes the Mondragón model of employee ownership and economic egalitarianism is as salient as ever amid growing recognition of the flaws of free market economics.
“It’s an impressive institution, or set of institutions,” he says. “And it questions the dominant paradigm that we have in America. I think a lot of people are aware that the current environment is unsustainable. That recognition is increasing.”
Meanwhile, Betsy Bowman, president and research associate at the Center for Global Justice, a Texas-based research group, argues that business models like Mondragón’s could even address social divides and plummeting trust in democratic institutions.
“Worker ownership and collective, democratic self-management are the solutions to not only the effective running of enterprises, the emotional health of workers, and the benefit of communities but are also a solution to the growing wealth disparities in the world,” she says.
“It could maybe even rekindle faith in one’s own agency and the power of democratic decision-making. Maybe it can turn discord and disgruntled workers into finding a means to cooperation and happiness.”
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 far from the case today. Of Mondragón’s 71,000 current workers, only around 30,000 are members. To become a member of a cooperative, a worker must invest up to €17,000, usually paid over a few years, and after an initial trial period. And workers outside of the Basque Country are not eligible to become members.
Similarly, while the pay ratio cap for cooperatives 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 authored a 2025 paper analyzing the Mondragón model, describes it as “Cooptalist” — with a cooperative center 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 over 30 countries, outsourcing due to cheaper labor 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 internationalization 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 percent men to 55.5 percent women, the latter make up only 39 percent of governing councils. Otadui says that this is partly down to the fact that 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.
The system isn’t bulletproof either. While there largely hasn’t been a “brain drain” of the best talent away to better-paid roles in conventional companies, it can happen. In 2022, two large cooperatives, Orona, an elevator manufacturer, and the ULMA Group, which covered multiple markets including greenhouses and packaging, voted by majority to leave Mondragón during special general assembly meetings, reportedly over issues related to autonomy in decision-making and an unwillingness to transfer so much money to the central Mondragón group.
Like any other business, Mondragón also 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 cooperative and previously an employer of more than 5,000 workers, went bankrupt in 2013 after the group eventually decided that it could not 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 — which was created in 1956, making it the second-oldest cooperative in the group — efforts to innovate are in sharp focus. More than 30 professionals are working in R&D on its team alone, and by the end of 2027, it will have begun production on one of its new sectors: humanoid robots.
But could this worker-owned industry model succeed in the U.S., home of low-paying gig economy behemoths like Uber and Amazon?
Small-scale projects like the six worker-owned Arizmendi bakeries in the Bay Area do exist, according to Romeo, and employee stock ownership plans (ESOP) are popular, even if they lack the component of political power for workers. But the decline of workers’ unions in the U.S. has made the emergence of cooperatives more difficult, he adds.
“Is it going to look exactly like Mondragón?” says Romeo. “No, is my prediction. There will be different forms and flavors. There’s historical and cultural specificity. But I do think there is potential for it.”
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