CAPITALISM IN CRISIS: RICHARD WOLFF
URGES END TO AUSTERITY, NEW JOBS PROGRAM, DEMOCRATIZING WORK 03-25-13
http://www.democracynow.org/2013/3/25/capitalism_in_crisis_richard_wolff_urges
As Washington
lawmakers pushes new austerity measures, economist Richard Wolff calls for a
radical restructuring of the U.S. economic and financial systems. We talk about
the $85 billion budget cuts as part of the sequester, banks too big to fail,
Congress’ failure to learn the lessons of the 2008 economic collapse, and his
new book, "Democracy at Work: A Cure for Capitalism." Wolff also
gives Fox News host Bill O’Reilly a lesson in economics 101
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Links
Watch Extended Interview With Economist Richard Wolff
on How Marxism Influences His Work http://www.democracynow.org/blog/2013/3/25/watch_extended_interview_with_economist_richard_wolff_on_how_marxism_influences_his_work
VIDEO: Understanding the Mondragon Worker Cooperative
Corporation in Spain’s Basque Country http://www.democracynow.org/blog/2013/3/25/video_understanding_the_mondragon_worker_cooperative_corporation_in_spains_basque_country
Watch more
interviews with Richard Wolff on Democracy Now! http://www.democracynow.org/appearances/richard_wolff
More on
socialism in US: http://www.democracyatwork.info/
HERE THE INTERVIEW WITH RICHARD WOLFF IN MARCH 25 IN DN
Our guest is Richard Wolff, a professor emeritus at the University of Massachusetts, Amherst, now at New School University, author of a number of books, including Democracy at Work: A Cure for Capitalism.
I want to talk about austerity here at home. This is House Speaker John Boehner speaking last month defending the $85 billion budget sequester cuts that took effect on March 1st.
HOUSE SPEAKER JOHN BOEHNER: The American people know, the president gets more money, they’re just going to spend it. And the fact is, is that he’s gotten his tax hikes. It’s time to focus on the real problem here in Washington, and that is spending.
AMY GOODMAN: House Speaker John Boehner. Professor Richard Wolff, your response? And also, that the Obama administration was warning catastrophe if sequestration took place. It took place.
RICHARD WOLFF: Well, it’s a stunning comment on our dysfunctional government built on top of a dysfunctional economy. Here we are in the middle of a crisis. We have millions of people without work, millions of people losing their homes, an economy that doesn’t work for the vast majority. The United States government is one of the major customers for goods and services in America. Sequestration is simply a cutback in government spending. It doesn’t take rocket science to understand that if the government, as the largest single buyer of goods and services, cuts back on the goods and services it buys, that means companies across America will sell less, and they’ll have less need of workers, and they will lay off workers. So, this is an act that worsens an unemployment that is already severe.
If you put that together with the tax increase on January 1st—and let me say a word about that. We heard a lot of public debate about taxing rich people, not taxing rich people, Republicans and Democrats, but the tax on the wealthy is small compared to the tax on the middle and lower incomes that went up on January 1st. When we raised the payroll tax here in America from 4.2 to 6.2 percent, we raised over $125 billion—huge amount of money, much more than was raised by taxing the rich—and we savaged the middle- and lower-income groups in America, those that in the presidential election both candidates had sworn to save and support. We attacked them, thereby limiting their capacity to buy goods and services because we taxed them more.
You put together the taxing of the middle and lower incomes with the cutbacks of government spending, and you’re going to do what every European country that has imposed austerity has already discovered: You’re making the problem worse. So with all the homilies that Mr. Boehner can put out there about how spending is a problem, this abstract idea doesn’t change the fact you’re making the economic conditions of the mass of people worse by these austerity steps, not better. And that ought to be put as the fire burning at the feet of politicians, so they stop talking these abstractions and deal with the reality of what they’re doing.
AMY GOODMAN: So what do you think needs to be done?
RICHARD WOLFF: A radical change in the
policies. And I think it has to go far beyond simply reversing this austerity
program, which, again, just for a word about history, back in the 1930s, the
last time we had a breakdown of our capitalist system like this, we didn’t have
austerity, we didn’t have cutbacks. We had the opposite. Roosevelt, in the middle
of the '30s, created the Social Security system, went to everybody over 65 and
said, "I'm going to give you a check for the rest of your life." He
created the unemployment compensation system, giving all the unemployed for the
first time checks every week for a year or two. And he created a public
employment program and hired millions of workers. It’s the opposite of
austerity. So any politician who says, "We must do this, because there’s
no option," has forgotten even the American history of not that long ago.
So, the first thing I would do is go in that
direction—not austerity, but its opposite. But I want to go further, because I
think our problem is deeper. This crisis wasn’t supposed to happen. When it
happened, it wasn’t supposed to last a long time. All of that has been proven
false. The problems run deep. And I think what we have to do, and what that
book tries to do, is to talk about reorganizing our economy so that for the
first time we can say we’re not only going to get out of this crisis, we’re
taking the kinds of steps that can prevent us from having them over and over
again as our unstable business-cycle-ridden economy keeps imposing on us. So,
for me, it’s the more profound change that we finally have to face, painful as
it is. After 50 years of a country unwilling to face these questions, I think
we need basic change. And that’s what I spend most of my time stressing.
AMY GOODMAN: Before we talk about the
basic change, "democracy at work," as you put it—
RICHARD WOLFF: Right.
AMY GOODMAN: —what could Obama do without
congressional support right now?
RICHARD WOLFF: Well, I think, in many ways,
he could initiate a public employment program. I think it’s long overdue that
he find all the ways available to him to say what Roosevelt said—and not that
Roosevelt did everything correctly, and not that he’s a genius or any of that,
but to take some lessons from those people in our country before who took steps
that were successful.
AMY GOODMAN: I mean, Roosevelt didn’t
plan on doing this when he first took office.
RICHARD WOLFF: Absolutely. He had pressure
from below. The CIO, the biggest union-organizing drive
in American history, never had anything that successful before.
AMY GOODMAN: As in AFL-CIO.
RICHARD WOLFF: That’s right. And with the
socialist and communist parties, who were strong at that time, working with
them, they organized millions of Americans into unions who had never joined a
union before, and they pushed from below in a very powerful way. And they changed
Mr. Roosevelt, showing that politicians, if subject to pressure from below, can
change—same lesson that Cyprus has just taught us yet again. So, my response
is: Learn from that. Roosevelt went on the radio to the American people and
said, basically, "If the private sector either cannot or will not provide
work for the millions of Americans that need and want to work, then it’s my job
as president to do it." And he did it.
And I think Mr. Obama could and should overcome
whatever has made him hesitate. We in this country not only don’t have a
federal employment program, the Republicans and Democrats haven’t even put it
on the floor to debate it as an important issue, even though it comes out of
our own history. So I would say, put us—put our people to work. They want to
work. The Federal Reserve says 20 percent of our tools, equipment, factory and
office space is sitting idle, unused. So we have the people who want to work;
we have the tools, equipment and raw materials for them to work with. And lord knows
we need the wealth they could produce. Put them to work, and make it a national
issue that that happen.
AMY GOODMAN: Where does the money come
from?
RICHARD WOLFF: Well, Roosevelt went to the
wealthy, and he went to the corporations, and he said to them, "You must
give me the money to take care of the mass of people, because if you don’t,
we’re going to have a catastrophe in this country. We’re going to have a social
revolution." My argument is, let’s go back to the same tax rates that
Roosevelt imposed, or at least in that neighborhood, which is much higher on
wealthy people and much higher on corporations than we have today. That’s what
he did. That’s how he funded it.
And in case our politicians are worried, let’s remind
them: Mr. Roosevelt, who took those daring steps, was re-elected to be
president four consecutive times, the most popular president in American
history. It’s not a dead-end political decision. It’s the best decision a
president could make to leave his legacy in history, that, we are told, our
presidents care so much about.
AMY GOODMAN: We’re talking to Richard
Wolff, author of Democracy at Work. Again, before we talk about
"democracy at work," I wanted to go to a recent hearing in
Washington. Executives with the banking giant JPMorgan Chase appeared before a
Senate panel earlier this month to answer questions around so-called
"London Whale trades" that cost the bank more than $6 billion and
derailed financial markets worldwide. This is Arizona Republican Senator John
McCain criticizing JPMorgan’s actions.
SEN. JOHN McCAIN: JPMorgan completely disregarded risk limits and stonewalled federal regulators. It is unsettling that a group of traders made reckless decisions with federally insured money and that all of this was done with the full awareness of top officials at JPMorgan. This bank appears to have entertained—indeed, embraced—the idea that it was, quote, "too big to fail."
AMY GOODMAN: Ashley Bacon, JPMorgan’s
interim chief risk officer, testified at the same hearing.
ASHLEY BACON:
I don’t think it is too big to fail. I think there’s further work that needs to
be done to demonstrate and document that, and it’s in process. I’m not leading
that process or deeply involved in it, but I think it is—it’s something that
needs to be demonstrated to everybody’s satisfaction.
AMY GOODMAN: That was Ashley Bacon,
JPMorgan’s interim chief risk officer. Can you explain what took place here and
what is happening?
RICHARD WOLFF: Yes. On the question of
"too big to fail," there really isn’t much to say. In 2008, our banks
failed—all of them—the way the Cyprus banks failed and for very similar
reasons. They took in a lot of depositors’ money, and they made risky bets they
shouldn’t have made, and they failed, and so they didn’t have the money to
honor their obligations, and they turned to the government for a bailout. And
when the government hesitated, because it’s public money to bail out a
privately failed bank, they were told, in another kind of blackmail,
"We’re too big to fail. If you don’t bail us out, we will collapse and
take the entire economy with us." And that was a persuasive argument.
Particularly after they allowed Lehman Brothers to fail and that nearly did
take the economy with it, that was a convincing argument.
You would have thought they had then learned the lesson
about the problem of a too-big-to-fail financial institution. If you thought
that, you would have been wrong, because the same banks that were too big to
fail in 2008 are, all of them, bigger today. So we didn’t learn the lesson. We
didn’t break up the banks. We didn’t limit, control their growth. They’re
bigger now than they were then. And in a sense, maybe shame on them the first
time, but having allowed this to happen, it’s shame on us.
Number two, we seem to need, as a nation, to believe
that we have the power to control, limit or regulate, whether it’s the
Glass-Steagall Act that came out of our disaster of the 1930s or the Dodd-Frank
Act, which came out of the disaster that started in 2008. We seem to want to
believe we can leave in place private banks, no matter how big they are, and
hedge them about with regulations. The proof of the Whale trades in London, the
proof of everything we know, is that these banks have the money, the staff, the
resources to work their way around the regulations at least as fast as we
impose them on them. That’s what these hearings fundamentally show. They can
make trades that are too risky. They can lose wild amounts of money. They can
turn to the government and demand to be helped and bailed out each time. And
they get it. We are telling them, in a classic example, "Look, do whatever
you want. You don’t have any risk of fundamental failure and punishment."
Regulation doesn’t work, because we believe in place an entity, a large corporation,
with the money and the incentives to get around it.
AMY GOODMAN: Interestingly, Jamie Dimon,
the head of JPMorgan Chase, did not testify. He was brought before the Senate,
what, about last June, where the senators were asking him for advice. And then,
when you looked at the senators on the Senate committee and how much money
JPMorgan Chase had given each of them, we’re talking about millions of dollars
went to many of them.
RICHARD WOLFF: When I say that the big
corporations, particularly the banks, have the resources and the incentives,
I’m being polite. Yeah, part of the resources are going into literally making
sure that the political regulator is a good friend and understands the
complexities. In simple English, they are buying their way into the situation we
watch, which is: "We will pretend to be regretful. You will pretend to be
protecting the public. You will make regulations that we help you write so that
we can get around them." It is something that ought not to be allowed to
continue, because we’re living the economic crisis that comes from that way of
doing business.
AMY GOODMAN: What lessons have been
learned since 2008? And today, could the U.S. see the same situation as Cyprus?
RICHARD WOLFF: Absolutely. We have banks that
are literally telling us, because we know from our controls that they are
trying, even, to regenerate it. They’re trying to get people to borrow more
money again. We’re not changing the wage structure of America, which means that
Americans are required to go into debt to supplement their wages. You know, the
irony is, we are trying, in the language of some of these folks, to kickstart
our economy, to get it going again. But the problem is, our economy was a train
heading into a stone wall in the first years of this century, and if we get our
economy going again, without fundamental changes, what we’re doing is putting
that same train back on the track heading towards the same wall. Cyprus shows
us what’s happening.
But we don’t have to take just small countries. Take
Great Britain, our classic ally. Their economy is now in the second or, in some
people’s minds, the third recession within the crisis since 2007. They are
following an austerity problem—process exactly like that supported by Mr.
Boehner, and the economic downturn in Great Britain is catastrophic for that
society. And so, we have this image of a future for us, if we don’t make
fundamental change, but everyone wants to put it away and pretend that we can
let it go by itself or a few regulations will solve the problem. They haven’t.
They’re not doing it now elsewhere. That’s not a strategy we should pursue in
this country, either.
AMY GOODMAN: When we come back, we’ll
talk to Professor Richard Wolff about the alternatives, about, well, what he’s
put forward, Democracy at Work: A Cure for Capitalism. This is Democracy
Now! We’ll be back with Professor Wolff in a minute.
[break]
AMY GOODMAN: We continue with Richard
Wolff, professor emeritus of economics at University of Massachusetts, Amherst,
visiting professor at New School University here in New York, does a weekly
program on WBAI in New York called Economic Update
every Saturday at noon. His latest book is Democracy at Work: A Cure for
Capitalism. So what exactly do you mean by this?
RICHARD WOLFF: What I mean is a change in the
enterprises that produce the goods and services we all depend on and provide
the jobs we all need and want. I think those have to be, in a fundamental way,
democratized. So let me begin in that way.
We live in a country that says it goes to war around the
world to bring democracy and that its central, most important political value
is democracy. If you believe that—and I am a fervent supporter of democracy,
and obviously you are—you’ve named your program that way—then we ought to have
democracy in the place where we as adults spend most of our time. Five out of
seven days we go to work. We walk into a place where we use our brains and our
muscles eight or more hours, five out of seven days. If democracy is an
important value, it ought to be right there, first and foremost. But we don’t.
We basically have a situation where, for most of us, we go to work in a place
where the decisions that are made are made by a tiny group of people. The major
shareholders who own the block of shares in our system select a board of
directors, 15 to 20 people, and they make the basic decisions: what to produce,
how to produce it, where to produce it, and what to do with the profits. The
rest of us must live with the results of that decision.
So if that tiny group of people make a decision to
close the factory in Cincinnati or the office in Atlanta and move to Shanghai,
the chips fall where they may. If they decide to use a toxic technology that’s
not good for the air and water but is good for the profits, they do, we live with
the results. And when they decide to take the profits of their business and to
give enormous pay packages to a handful of top executives and big dividend
payouts to their shareholders, which of course they do, since they’re in a
position to do it, and the rest of us suddenly have to take out absurd debts to
get our kids through college, then that’s the inequality of income and wealth
that we have in America.
So, I look at this decision-making apparatus, I say,
"Why are we surprised that they make the decisions the way we do—they
do?" We all live with the results, and we have no say in how those
decisions are made. It’s not democratic. That’s the first thing. But the second
thing is, we’re now in five years of economic crisis that indicate that way of
organizing the decisions doesn’t work for the mass of people. It works for
them. The stock market’s back. The profits of big corporations are
back—surprise, surprise—given who makes the decisions. But we are left.
And so, for me, the solution is, let’s face this. Let’s
build an option, a real choice for Americans, between working in a
non-democratic, top-down-organized capitalist enterprise or in what, for lack
of a better term, we can call "cooperatives," workplaces that are
organized democratically. I think we’ll have less inequality of income, we will
have less pollution of our environment, and we’ll have less loss of jobs out of
the country, if those decisions were made by the people, as they should have
been from the beginning, who will not make the kinds of decisions that got us
into the mess of economic crisis that we’re in now.
AMY GOODMAN: In June, you wrote a piece,
Richard Wolff, in The Guardian called "Yes, There is an
Alternative to Capitalism: Mondragon Shows the Way." Mondragon, Spain’s
renowned co-op where all enterprise is owned and directed by co-op members. At
the Green Party’s convention last year, the keynote speaker, Gar Alperovitz,
said the Mondragon model is being replicated here in the United States. I want
to just turn to a clip of what Gar Alperovitz said, the professor of political
economy at the University of Maryland.
GAR ALPEROVITZ: So, in Ohio, the idea of worker ownership is a bigger idea. Lots of people understand it. And in Cleveland, building on the Mondragon model—some of you know about the Mondragon model—and other ideas, there are a series of worker-owned, integrated co-ops in Cleveland in a neighborhood where the average income is $18,000 per family. And they have got these co-ops, not just standing alone, but linked together with a nonprofit corporation and a revolving fund. The idea is to build the community and worker ownership, not just make a couple workers richer, to say the least, not rich, but to build a whole community, and to use the purchasing power of hospitals and universities—tax money in there—Medicare, Medicaid, education money, buy from these guys, and build the community. That model—and it’s the greenest for—one of the things is the greenest laundry in that part of the country, that uses about a third of the heat and about a third of the electricity and about a third of the water. They’re on track now to put in more solar capacity that exists—one of the other worker-owned companies—that exists in the entire state of Ohio. These are not little, dinky co-ops.
AMY GOODMAN: That was Gar Alperovitz
talking about the Mondragon model here. And when we were in Spain, Democracy
Now! went to Mondragon and interviewed one of the cooperative members, and
we’ll link to that at democracynow.org [ Click
here to watch the interview with Mikel Lezamiz, director of Cooperative
Dissemination at the Mondragon Cooperative Corporation in Spain’s Basque
Country. [NOTE 1 ] But, Richard
Wolff, talk about that model and what’s happening here.
RICHARD WOLFF: Well, the model of Mondragon
is so interesting, not only because it’s a real co-op, where the workers make
the decisions—what to produce, how, where, what to do with the profits. And
just to mention one of their achievements, they have a rule that the
highest-paid worker cannot get more than a maximum of eight times the lowest.
In our society, it’s typical in our large corporations that the CEO gets 300 to 400 times what the lowest worker. So, for
those of us that are interested in a less unequal society than what we have
here in America, the lesson is, if you cooperatize your enterprise, that’s a
sure route to get there. And we haven’t found any other route that is just as
effective.
So, the importance of Mondragon is, they start in the
middle of the 1950s with a Catholic priest, Father Arizmendi—I always have to
remember it—with six workers in the north of Spain, desperately trying to
overcome the unemployment there. And here we are over a half a century later.
Having to compete with countless capitalist enterprises, they won that
competition. Trying to grow, they have a growth record that would be the envy
of any capitalist corporation. They went from six workers in 1956 to 120,000
workers today in Spain.
AMY GOODMAN: And they are making?
RICHARD WOLFF: And they are making
everything. They make dishwashers. They make clothes washers. They raise
rabbits on farms. They do high-tech research, together with General Motors and
Microsoft as some of their partners there. They do an immense array. They’re
really a family of 200 to 300 co-ops that are united within the Mondragon
cooperative corporation. So they’ve shown the ability to grow.
They’ve shown
the ability to adapt. They’ve shown their competitive power. They have—excuse
me, they’ve shown all the different ways that a corporation can develop without
a top-down hierarchical, undemocratic structure. So we don’t have to choose
between effectiveness, growth, job, security, and a cooperative structure. The
cooperative structure can be a way to get there.
Here in the United States, we have lots of such co-ops
developing. There’s one even named after Father Arizmendi in California in the
Bay Area. There are six Arizmendi bakeries and coffee shops that were set up on
that model. They started with one; they’re now six. Hint: They’ve grown. And
you can do this. And all over the United States, there are these efforts, often
done by people who want a different kind of life. They want to be in charge of
their own job. They want to have a sense of control and a sense that they’re
not just a drone doing the work, but they’re part of the folks who design and
direct. It brings out new capacities. It makes you more happier to go to work.
It’s a more satisfying job life than you would otherwise have. So I think it
recommends itself on all kinds of levels.
One other example, we can learn something from a
country called Italy that we admire for its cuisine and its lovely countryside.
They have a law there, passed in 1985, called the Marcora Law after the name of
the legislator. Here’s what it does. It offers a choice to unemployed workers.
You can take a dole every week, an unemployment check, the way we do in this
country, or you have an option, an option B that we don’t have. If you get at
least nine other workers to make the—unemployed workers, like yourself, to make
the following choice, here’s what you can get. As a lump sum, you can get your
entire unemployment program of two years of checks in your hands right at the
beginning; you have to have nine other workers or more, and you have to use
that money as the start-up capital for a cooperative enterprise. The idea of
the Italian government was, if we give workers this to set up a job and an
enterprise, they will be much more committed to it than they would if they
didn’t have that role.
AMY GOODMAN: How do they know they’ll do
it?
RICHARD WOLFF: They don’t. But they know
those workers have an incentive, because if they don’t make that work, they
can’t go back and collect unemployment. That’s what they got. The government
doesn’t spend much more money than it would have anyway, but it creates jobs,
and it creates workers committed, because it’s their enterprise, to make that
work as their personal solution and as a way not only for them to survive, but
for the whole of the Italian society for the first time to see what it’s like
to have an enterprise where you run the affair.
You know, here in America, we want to believe in
freedom of choice. Let’s give our people freedom of choice. They can have the
choice to go work in a top-down, capitalist enterprise—what we’re used to—but
if we develop the alternative, really a program of co-ops around the country,
then American young people and older people could say, "What would it be
like to work there? Let’s see what that’s like." And then we would have the
choice we do not have in this country now.
AMY GOODMAN: Professor Wolff, before we
end, I want to turn back to the crisis in Cyprus and relate it to what’s
happening here. Bill O’Reilly of Fox News warned his audience last week that
Cyprus and other European countries are facing economic hardships because
they’re so-called "nanny states."
BILL O’REILLY: Greece, Italy, Spain, Portugal, Ireland, now Cyprus, all broke. And other European nations are close. Why? Because they’re nanny states, and there are not enough workers to support all the entitlements these progressive paradises are handing out.
AMY GOODMAN: That’s Bill O’Reilly of Fox
News. Richard?
RICHARD WOLFF: You know, he gets away with
saying things which no undergraduate in the United States with a responsible
economic professor could ever get away with. If you want to refer to things as
nanny states, then the place you go in Europe is not the southern
tier—Portugal, Spain and Italy; the place you go are Germany and Scandinavia,
because they provide more social services to their people than anybody else.
And guess what: Not only are they not in trouble economically, they are the
winners of the current situation. The unemployment rate in Germany is now below
5 percent. Ours is pushing between 7 and 8 percent. So, please, get your facts
right, Mr. O’Reilly. The nanny state, you call it, the program of countries
like Germany and Scandinavia, who tax their people heavily, by all means, but
who provide them with social services that would be the envy of the United States—a
national health program that takes care of you, whether you’re employed or not,
and gives you proper healthcare. In France, for example, the law says when you
go to work, you get five weeks’ paid vacation. That’s not an option; that’s the
law. You get support when you’re a new parent for your child care and so forth.
They provide services. And they are successful in Germany and Scandinavia, much
more than we are in the United States and much more than those countries in the
south.
So they’re not broken, the south, because they’re nanny
states, since the nanny states, par excellence, are doing better than
everyone. The actual truth of Mr. O’Reilly is the opposite of what he says. The
more you do nanny state, the better off you are during a crisis and to minimize
the cost of the crisis. That’s what the European economic situation actually
teaches. He’s just making it up as he goes along to conform to an ideological
position that is harder and harder for folks like him to sustain, so he has to
reach further and further into fantasy.
AMY GOODMAN: In our last minute, other
cures for capitalism, as you put it?
RICHARD WOLFF: Well, I think that there’s a
set of fundamental reorganizations. When you have a private banking system in
the United States, the way we did up until, say, the 1970s and '80s, you had it
in a position relative to the economy that made a certain sense. But over the
last 30 and 40 years, for a whole host of reasons, we have made debt a central
part of the economy. Today it is not unusual for a person who goes into a
grocery store to get a bottle of water to use a credit card, basically to make
a loan in order to buy that bottle of water. Everything that consumers do is
now mediated by debt. Everything corporations do, and as we look around the
world, the governments are in debt. Debt is everywhere. It has become the water
we swim in, the air we breathe. That puts the banks in an unbelievably powerful
position, because they're the repository of the means to borrow. If we’re going
to make an economy dependent on debt, we can’t leave the power to control that—
AMY GOODMAN: We have 10 seconds.
RICHARD WOLFF: —in the private hands of
banks. Either we don’t become a debt-ridden country, or we make borrowing and
lending a social program. We can’t allow private banking. It doesn’t work. It
needs to be changed.
AMY GOODMAN: Richard Wolff, I want to
thank you for being with us. If you’d like a copy of today’s show, you can go
to our website at democracynow.org. Richard Wolff is professor emeritus at
University of Massachusetts, teaches at New School University.
-----------------
Watch a 2012 interview Democracy
Now! host Amy Goodman did with Mikel Lezamiz, director of Cooperative
Dissemination at the Mondragon Cooperative Corporation in Spain’s Basque
Country. He described how the project relies on a participatory model in which
the workers are the cooperative’s members.
AMY GOODMAN: This is Democracy Now!, democracynow.org, The War
and Peace Report. I’m Amy Goodman. We’re in the Basque region of Spain, not
far from one of the largest worker cooperatives in the world. It’s called
Mondragon. And we’re joined right now by Mikel Lezamiz. He is director of
Mondragon Cooperative Dissemination. We are sitting in his backyard in Busturia,
Spain.
Welcome to Democracy Now!
It’s great to have you with us. Explain what Mondragon is, how it got started.
MIKEL LEZAMIZ: Mondragon started in 1956, creating the first industrial
cooperative. But before that, Father Arizmendiarrieta, the leader, the priest,
who started with all the projects, started in 1943 creating the school, the
technical school. And after that, the students of this school, he pushed to
five people to create the first cooperative in 1956—the name at that time,
Ulgor; today, Fagor.
AMY GOODMAN: And why did this priest want to start a cooperative? Talk
about the political times here in Spain.
MIKEL LEZAMIZ: OK. In that time, it was hard times after the civil war
that finished in 1939. And Father Arizmendiarrieta went to Mondragon in order
to be a priest, but he started with a school. And he wanted to—first of all,
before to create the cooperative, he went to the biggest company in Mondragon
to—with the directors, telling to give the possibility to all the workers to be
part in management, in profits and being ownership. That was 1955. They didn’t
assent him, and for that reason he pushed to some workers to set up their own
cooperatives where everybody can participate in management, in profits and
being ownership.
AMY GOODMAN: And these were graduates of the school that he had set up,
the technical college.
MIKEL LEZAMIZ: That’s true. They were engineers in that times, and they
were working in that big company. But in the company, they didn’t assent, and
for that reason he pushed to these five people to create their own projects.
The idea was—and it is—that the workers, everybody, has to be the director or
has to be the entrepreneur or has to be the person who makes the decision and
not to work for anyone. So we have to part—we have to have parts in management,
in profit and being ownership. That is the most essential idea. Before, there
were a lot of ideas of the Catholic Church innovate to humanize the factories,
to humanize the industrialization at that times. But Father Arizmendiarrieta was—went
more than only humanizing. So he wanted to give the power to decide the future
each one, not depending from another manager or another capitalist.
AMY GOODMAN: So these were very difficult years. Franco was in power.
People felt marginalized. They didn’t have jobs. So this priest comes into this
town, sets up a college, and then tries to set up this cooperative. But didn’t
he need a bank to support it?
MIKEL LEZAMIZ: Yes. After three years—that was in 1959—so, they started
the first cooperatives in 1956, and after, they create another three
cooperatives. And Father Arizmendiarrieta had the idea that we have to set up
the cooperative bank in order to create new cooperatives and to support the
cooperatives with financial support. But not only with the financial, most very
clever, creating the entrepreneurial division inside that cooperative bank in
order to research the market and to decide, OK, which kind of jobs we can
create, which kind of product we can produce. And after that, from this
entrepreneurial division, we help—or, they help to create new cooperatives. And
after the bank, the entrepreneurial—no, the bank division support financially,
but it was a very good idea to create the bank with this entrepreneurial
division to create new cooperatives.
AMY GOODMAN: Now explain, in these first years, what were the Mondragon
cooperatives? What were they making? What were the products they were coming
out with?
MIKEL LEZAMIZ: Yes, in Fagor, domestic appliances, they produced domestic
appliances. But the first one was a cook. And—
AMY GOODMAN: A stove?
MIKEL LEZAMIZ: A stove, a stove. And after that, they start producing the
refrigerator, the washing machine and water central heatings. And now is the—
AMY GOODMAN: So why would people buy Mondragon products?
MIKEL LEZAMIZ: Because good quality and good price and good service. I
think that all over the world and everybody buy because good quality and price
and service. Sometimes you can buy because philosophy, but no, but if you have
a bad quality or it’s more expensive, you don’t want to buy. So, for that
reason, we always—we are trained to produce always with quality, train to give
the best price, you know, to permit to everybody to buy this kind of good for
their house. And after that, we have to give the good service.
AMY GOODMAN: Now, people probably, if they’ve heard of co-ops, have
heard of food co-ops, where a community gathers together, and they provide a
couple of hours a week to make a cooperative work, and that’s a lot of human
effort. But Mondragon is also highly technological. You are making products.
Can you talk about how you came to be on the cutting edge of technology? It
wasn’t just people working in a good-natured way, in a cooperative way
together.
MIKEL LEZAMIZ: Yes. In fact, we have at this moment 14 research and
development centers, in order to help to the different sectors that we are
producing different goods or our products. Innovation was a very important
value for us, and today it is. And today maybe it’s more than before also, in
order to be profitable and [inaudible]. But always we have this idea that, OK,
education is very important for people, and as [inaudible] for enterprise and
for the community. But after the education, innovation is very important. Social
responsibility is another value. And cooperation and solidarity with the
community is very, very important. But innovation, it’s a very important
feature inside Mondragon. And from the first ideas, Father Arizmendiarrieta had
this idea to create the research center in order to help and to be independent
from the American or German or Japanese technology. So we have to be—we don’t
have to depend from different technologies. And, first of all, maybe they start
buying the goods or buying the rights to produce, but at this moment, for
example, we have at this moment 716 patents, worldwide patents, that give us
the possibility to be independent from another high-technology companies or
cities or countries. So, innovation is very important.
AMY GOODMAN: I was just speaking to lehendakari, the president of
the Basque region, Patxi López, talking about Mondragon and its importance, one
of the largest businesses in the Basque region. Can you talk, Mikel, about the
Basque quality, if you will, of the Mondragon cooperative? I mean, why it grew
out of the Basque region, for people outside of not only the Basque region, but
Spain?
MIKEL LEZAMIZ: OK, well, first of all, I have to tell you that I believe
and we believe that everybody can create cooperatives, and it’s possible to
create cooperatives, because, as you know, cooperatives idea, it didn’t start
in Mondragon. Cooperatives started in the U.K., and before to the Basque
Country, they were in France, in the States and wherever. But after that, what
about the cooperative culture, what about the Basque culture connected with the
cooperatives? And, OK, yes, we have in fact the internal, the political
democracy. In the last 10 centuries also, it was here. They were more or less
[inaudible] democracy, because in each town and in each provinces, we choose.
But 10 centuries ago, we choose the—or they choose the boss or the—
AMY GOODMAN: The leader of the town.
MIKEL LEZAMIZ: The leaders, OK. But also, today, we think that one of the
very important features of the Basque region is the solidarity, in order to—in
order to help each other. But this is not a paradise. The Basque Country is not
a paradise. And Mondragon cooperatives is not a paradise. And we are not
angels. And so, sometimes when we have to tighten the belt, people start having
problems and speak, and we are very critical also about all the problems that
we have. And so, I think that cooperatives is possible all over the world.
Basque people are better than the others? No. We are normal people.
AMY GOODMAN: No, in fact, it didn’t rise out of a paradise; just the
opposite. You’re talking about Spain during Franco’s years, and perhaps the
most repressed area in Spain was the Basque region for Franco.
MIKEL LEZAMIZ: Yes, that’s true.
AMY GOODMAN: The bombing of Guernica, for example—
MIKEL LEZAMIZ: Yes, that’s true.
AMY GOODMAN: —in 1937, 75 years ago.
MIKEL LEZAMIZ: And this kind of problems maybe gave us the possibility to
work together and to be more in solidarity, more solidarity. And that will be
one of the features that permit us to create this kind of a cooperative project
maybe.
AMY GOODMAN: Mikel, can you talk about the response of small businesses
in the area, because Mondragon is big now? It’s not just the alternative; it is
the power here in Basque region in Spain. How many people work now for
Mondragon cooperatives?
MIKEL LEZAMIZ: Yes, in Mondragon cooperative groups, we have 83,000—83,000
workers, full time. And after, we have another 15,000 or 20,000 working part
time, mostly in the supermarket. So, we are close to 100,000 workers
altogether, full time and part time. And we have 120 cooperatives. So,
cooperatives are not very big. But working together and with the close
inter-cooperation that we have, we are now the best, the best now, the biggest,
the biggest company in the Basque Country. And speaking about jobs and
employment, we are the fourth biggest in Spain and among the seven biggest in
sales.
AMY GOODMAN: And the largest cooperative in the world.
MIKEL LEZAMIZ: OK, well, there are—well, but, for example, in U.K., they
design a cooperative that the name is the Co-operative Group, that is a
supermarket. And after that, they have some bank services and a funeral
services. And they are, for example, 110,000 workers. In that case, it’s a
consumer cooperative, so the consumers or the clients are their members. In our
case is that we are the workers, and we are the members.
AMY GOODMAN: How do small businesses in Spain compete with Mondragon,
now one of the largest businesses in Spain?
MIKEL LEZAMIZ: OK, for us, the first market is not Spain. It’s Europe. So
we are competing with—because we are selling at this moment 70 percent of our
products all over the world. We are exporting to 150 different countries. And,
for us, yes, the first foreign market is Europe. And also, Spain is important
for us—yeah, that’s true. But I think that the other companies feel or think
that, OK, we are working well, because we are working all together, because the
most important feature or characteristic of Mondragon is that these 120
cooperatives, that are big and small cooperatives, are working together, and we
set up one group, one corporation, but we pass people from one to the other
cooperatives. We pass also money from one to the other cooperative. We pass
cash, liquidity, from one to the other cooperatives, and also innovation. And
that is very important in order to overcome the economic crisis. So in this
moment, a lot of small companies also are thinking or think that Mondragon is
going well because we can compete all over the world, because the internal
amount of the exportation is very high and because we are overcoming much
better than the others, in general, the crisis.
AMY GOODMAN: Well, that’s very interesting, the financial crisis and how
it’s affected you. And I think this would be very interesting for people to
hear in the United States. You have large banks in the United States that are
only getting larger and only more profitable for the top managers, but are
foreclosing on people’s houses at a very high rate, etc. How did Mondragon
respond to the financial crisis, how you fared during these times?
MIKEL LEZAMIZ: Yes, we believe that, first of all, yesterday we were 430
directors of Mondragon together in a congress that we set up every year,
speaking of the future, about the challenge that we have for the next years.
And we believe, there also, we were—we clever said that, OK, we are going to
overcome the economic crisis because this inter-cooperation, the relation
between cooperatives, because if one cooperative have some problems—
AMY GOODMAN: Give us an example of a cooperative, what it makes, and
another cooperative, what it makes. And—
MIKEL LEZAMIZ: For example, at this moment, we have 250 people relocated
in another cooperative. They don’t have no jobs in their own cooperatives.
AMY GOODMAN: What was that cooperative doing? What was it making?
MIKEL LEZAMIZ: No, different kind of cooperatives. For example, in the
domestic appliances sector, from Fagor, that they are now suffering a big
problem because the lack of construction in Spain, and in Europe also, because
the economic crisis. And Fagor domestic appliances, they are selling for new
apartments and also to repair, that does one. But in this case, Fagor is suffering
this economic crisis, and some of these workers are working in another
cooperative.
AMY GOODMAN: And what is that cooperative?
MIKEL LEZAMIZ: For example, machine tools sectors, car components
cooperatives. Yeah, in different cooperatives. And so, that is a very important
idea. First of all, we are passing money, cash, liquidity, from one to the
other cooperatives, because, as you know, the lack of liquidity from the banks,
it’s very high. And some of our competitors are suffering. And some of them,
they are going down and closing because this lack of liquidity. Now, we don’t
have this kind of problem, because it’s very common to pass money from one to
the other cooperatives, to pass liquidity, cash, from one to the other
cooperatives, in order to overcome the economic crisis.
AMY GOODMAN: So here you are in Spain really actually thriving,
certainly getting by, as Bankia, the largest bank conglomerate, has—is going
under, involved in perhaps the biggest banking fraud in Spain’s history.
MIKEL LEZAMIZ: And in fact, for example our cooperative bank, Caja
Laboral, that is the second-biggest in the Basque Country, and in the north of
Spain, from Madrid to the north of Spain, it’s the—among the second-, the
third-biggest bank, is going very well. In fact, all the data that we have are,
in general, much better than the banks on the—most of the banks. And it’s
because, in this case, we—in the Basque Country, there is not so big a problem
with the construction, because the problem of the real estate and the construction
was more in the east part and the south part of Spain. Here, we are not—we
don’t have this kind of problems connected also with the banks. And also, it’s
because the bank also is more connected with industry. And as you know, the
Basque Country is more industrial than the construction or than the others.
It’s the most influence or the most important industrial area of Spain, the
Basque Country.
AMY GOODMAN: Mikel, can you explain how the management structure works?
What does it mean to say worker-owners?
MIKEL LEZAMIZ: OK. Yes, we set up the most important things, therefore, in
the cooperatives is the general assembly, the general assembly formed by all
the workers that are the members of this cooperative. For example, going to
Fagor domestic appliances, they are at this moment 2,500 workers, producing
washing machine, dishwashers, the refrigerator, and then so on—2,500. And they
set up at least once a year the general assembly in order to make the most
important decision and decide the strategy, the annual report, and to approve
the annual report, and then so on. And in this case, it’s the general assembly
who makes the decision. But after that, we choose the governing council—the
board of directors, you say—the governing council, that in the case of Fagor,
they have 12 people—president, vice president, secretary and another nine. In
the small cooperatives, there are maybe only three or maybe five, seven, nine;
or being big, 12 people. And this governing council set up at least once a
month in order to make the decision every month. And they choose the general
manager, the CEO, in order to execute and to manage the company, and in this
case, to propose the important decision. But it’s the governing council that
makes the decision. It’s not the general manager. And after that, the general
manager has the finance director, the people director, production director,
marketing director, as they need.
AMY GOODMAN: And how do you share the profits?
MIKEL LEZAMIZ: OK, from the gross profit in each cooperative, they have to
put some money in the cooperative—in the corporate, Mondragon corporate
corporation. So, for example, all the cooperatives has to put 10 percent of
their gross profits in Mondragon investment fund. This investment fund is to
create new cooperatives or to help the cooperatives to set up new business or
for the internationalization. If one company needs to buy a factory in the
States, or they want to create a new factory in the States, the cooperatives is
going to put 60 percent of the investment, and 40 percent is put from this
Mondragon investment fund. They have to put another 2 percent in Mondragon
education, to help mostly to the university, Mondragon University, and another
2 percent in Mondragon solidarity fund. This is—this fund is in case of losses
of each cooperative, solidarity fund. But after that, they have to pay their
taxes. And after paying taxes, they have their net profits.
How we share the net profits: 10
percent should go, because by law it’s compulsory to do so, 10 percent goes to
the fund of education and for the society. This is to help the children or the
NGOs or support for the society. Each cooperative, they say how they are going
to share this 10 percent. And after that, we send another 45 percent to the
fund or reserve of cooperatives. This is to invest in the cooperatives to work
every one all the year. And the other 45 percent are returns, returns to
workers. But in this case, we don’t get these returns—these dividends, as you
say; we say "returns"—because these returns is to work. And we don’t
get these dividends in cash. We capitalize. So, everyone—we have the initial
capital, and after that, all this capital, all these returns that we share
between us, and I’ll get this money when I retire. But in the meantime, my
company is using this capital, this investment, and that is another way of
overcoming the economic crisis. One of the most important features of Mondragon
is that 90 percent of the profits, we reinvest, because only 10 percent goes to
the society directly, and the other 45 goes to the cooperatives to invest in
new product and new machines and then so on, and the other 45 is my money, but
that is inside the cooperatives, and the cooperatives invest. So, 90 percent of
the profits, we reinvest in order to create employment.
AMY GOODMAN: Did you have to decide about job cuts or pay cuts during
the crisis?
MIKEL LEZAMIZ: We never fire any member of Mondragon—we never—in these 56
years, because we pass, and before of going unemployed, we pass from one to the
other cooperatives. At this moment, only 250 are relocated. But before, I can
remember that in 1991, ’92, ’93, that were a very high crisis, in that moment
we had more than 2,000 people relocated in the other cooperatives in order to
overcome the economic crisis. And after that, in 1994, we started growing, and
now we are more than before.
AMY GOODMAN: Mikel, Mondragon has an actual MBA program for
cooperatives?
MIKEL LEZAMIZ: We have, yes. And I have already made it, the MBA, master’s
business administration.
AMY GOODMAN: Where?
MIKEL LEZAMIZ: In Mondragon University. In Otalora, in my case, I made it
in Otalora. Otalora, it’s our management and cooperative training center that
belongs to MCC, but the teachers are connected with the university, and the
title is given by the university. But after that, there are another MBA in
different universities also here—in Bilbao, for example—and in the public
universities. And it’s possible to do the MBA in management, cooperative management.
AMY GOODMAN: Your wife teaches in Mondragon. She teaches kids. Does she
teach a Mondragon philosophy of cooperatives? Do the kids learn about what it
means to live in a cooperative way in school?
MIKEL LEZAMIZ: OK, we don’t have any subjects specific with—that the name
is "cooperative education," no. Only in the university, in the last
year of the engineering school, but only in the engineering school, we have
this subject that is cooperative education. But in the other [inaudible]
schools, in the other faculties and also in the primary school and secondary
school, we don’t have any subject that the name is "cooperative
education." But we try to teach them and to educate them in cooperative
values, cooperative values that are transpersonal values, not only the
knowledge, but also we try to, for example, working together and giving them
more and more autonomy, or giving them more and more participation possibility,
because, for example, in the university, the students are members of the
university. Not only the workers or not only the teachers and the staff are
members; also the students—the students are the members, and after that, the
companies, cooperatives. But also, conventional companies, they are not allowed,
but all of them, they can be part of the university. And in this case, students
are participating in the cooperatives. And after that, all the works they have
to do, they work in groups. And so, the cooperative values, we try to
implement, to integrate in each students working every day.
AMY GOODMAN: How do you deal with having to manufacture products outside
of the cooperative? You have factories in other countries. Where are they?
MIKEL LEZAMIZ: Yes, we have at this moment 77 factories overseas, all over
the world. But mostly—most of them are in France and in Europe. But we have
also in the States, in Brazil, Mexico, China, India. But—
AMY GOODMAN: Where in the United States?
MIKEL LEZAMIZ: We’re in Arkansas, for example.
AMY GOODMAN: Arkansas.
MIKEL LEZAMIZ: Little Rock, yes. And—but these companies, these factories,
are not cooperatives yet. So, most of them, most of the workers that are
abroad, are not members; they are employees. We have a plan, and we started
before, two years before the economic crisis. We started with the pilot
projects—one of these in Poland, another one in Mexico, and another one in
Brazil—speaking with the trade unions, speaking with the workers, white-collar
worker, blue-collar workers, and also with the administration, in order to give
them the possibility to participate in property, so being ownership, in
management and in results. But because the economic crisis, because this is a
process, it’s a long process, and that it takes at least five years, and after
two years, in 2008, start the economic crisis, and overseas, we have stopped.
We have already started becoming cooperatives in Spain, in the Basque Country
and in Spain, but not yet in the other parts of the world.
AMY GOODMAN: And where do you unions fit in? I mean, when you started
during Franco’s time, unions were forbidden, and maybe Mondragon cooperative
was an answer to that. But now, working with unions in this country and around
the world?
MIKEL LEZAMIZ: OK, well, we have—also here, we have good relation with the
trade union. As you know, here in a cooperative, trade union don’t work,
because it’s the general assembly of all the workers who makes the decision,
the most important decision. And, for example, how much we are going to
increase the salary or how much we are going to decrease the salary, it’s the
general assembly who makes this kind of decision. But overseas, we speak with
the trade union, because we have to—we have to be together and to work together
in order to give them the possibility to understand what does it mean to work
for cooperatives. And in this case, trade unions are important, and—but the
most important, in order to convince all the trade union, all the workers, is a
very important value that the name is transparency. Transparency is very important
here, but also overseas and in a conventional factory. If we are transparent,
giving to all the workers and to the trade union the possibility to know
everything about the company, and making every month meetings to explain how is
going the company and what is the strategy and what is the—how we see the
future and then so on, that is the best way to integrate and to motivate
everybody and also to understand from the union, trade union.
AMY GOODMAN: Mondragon International, one of the world’s largest worker
cooperatives, starting to work with the United Steelworkers a few years ago,
you announced an agreement with Mondragon to develop unionized worker
cooperatives in the manufacturing sector in the U.S. How has that gone?
MIKEL LEZAMIZ: OK, well, we have an agreement with them in order to work
together or to help them to build or to create cooperatives or to become some
worker-owned companies and cooperatives. We are working. We have a very good
relation. Maybe it’s not easy to make steps quickly, because this kind of
process, I told you before that it takes at least five years, because we have
to change the culture, and it’s not easy to convince everybody. But we think
that that is going well, slowly. But we think that it will be profitable for
them, for us and for the world.
AMY GOODMAN: The United States, in the corporate media, capitalism is
equated with democracy, so you question capitalism, you’re questioning
democracy. Yet you provide an alternative to capitalism, the Mondragon
cooperatives, where people live very well, and they—and no one has lost their
jobs, you say. Explain how it works. Is this an alternative?
MIKEL LEZAMIZ: We—always we say that we prefer to work in our own way. We
don’t want to create conflicts between us and with the others and with the
capitalists and then so on. We think that in this century, in this 21st
century, that everybody has a lot of knowledge. Every worker, and so, at this
moment, in most of the countries, that the workers are not illiterate. So, and
they have a lot of information and a lot of training. Today, the management
model, also the management system, should be more participative, more
democratical, because everybody wants to—everybody knows a lot, and everybody
can participate, and it will be much better for them. And in this case, we
think that—we don’t say that it’s another way or—no, we say that this is good
for everybody. If everybody can make their own decision, it’s much better for
them and for the society, because, after that, the aims is not to resolve my own
problems. We have to resolve—or we have to develop the society, because our
mission is to create wealth within the society. Our mission is not to earn
money. Our mission is to create wealth within the society.
How? Through entrepreneurial
development and job creation. That is our aim. And in this case, we think that
democracy is much better for everyone, if participation possibilities is much
better for everybody. And trying to be in solidarity—and being in solidarity,
we can develop the community. And for that reason, we think, OK, this is maybe
another way, or not, but this is—we think that it’s a very human way, a better
human way than another one. And we think that it’s possible to compete with
everyone, being a cooperative and being ownership. And we think that in the
future, in this 21st century, all the things, all the ways, all the affairs,
also the business, should came to this idea of giving the participation
possibility to everyone, and not to only one people or 10 people making the
decision, and the others has to continue, has to work behind this decision.
AMY GOODMAN: The 99 percent?
MIKEL LEZAMIZ: Ninety—yeah, or more. Why not? Yeah.
AMY GOODMAN: The wage differential between the highest paid in Mondragon
and the lowest-paid workers, Mikel?
MIKEL LEZAMIZ: In most of the cooperatives, the biggest differences
between the top and the low is one to 4.5 times, 4.5 times. But the biggest,
the CEO of Mondragon, is earning six times the minimum minimum salary.
AMY GOODMAN: Mikel Lezamiz, thank you so much for joining us.
MIKEL LEZAMIZ: OK.
AMY GOODMAN: Mikel Lezamiz is the director of Mondragon Cooperative
Dissemination. We’re speaking here in Busturia, Spain, in the Basque region,
not far from Mondragon, where he works and lives. More than 100,000 people work
in the Mondragon cooperatives. This is Democracy Now!, democracynow.org,
The War and Peace Report.
GUEST
Mikel Lezamiz, director of Cooperative Dissemination at the Mondragon
Cooperative Corporation in Spain’s Basque Country.
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