Mondragon Effi n Cooperasn

The Rhetorical Construction of Efficiency: Restructuring and Industrial Democracy inMondragón, SpainAuthor(s): Peter Leigh TaylorReviewed work(s):Source: Sociological Forum, Vol. 9, No. 3 (Sep., 1994), pp. 459-489Published by: SpringerStable URL: http://www.jstor.org/stable/684711 .Accessed: 22/03/2012 07:54

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Sociological Forum, Vol. 9, No. 3, 1994

The Rhetorical Construction of Efficiency: Restructuring and Industrial Democracy in Mondragon, Spain1

Peter Leigh Taylor2

This paper examines the tension between the struggle to survive in a competitive economy and efforts to create more democratic workplaces in the Basque worker cooperative complex in Mondragon, Spain. Data from archival research, participant observation, and interviews are used to outline the historical context of structural change and policy-making in the complex. Language used in internal policy discussions is analyzed to explore the way in which arguments about efficiency have shaped interpretations of structural change and these organizations' policy responses. It is argued that in these cooperatives, the concept of "efficiency" does not operate as a neutral, objective benchmark of organizational performance, but is socially and rhetorically constructed. The predominant approach to efficiency that is emerging in Mondragon aims to make the cooperatives more competitive, but also facilitates a gradual displacement of collectively established organizational objectives such as relative equality, job security, and favorable work conditions for ones that privilege institutional interests of profitability and stability. More importantly, it has helped usher in important changes in the policy-making process itself, limiting the range of legitimate participation and weakening broad-based control over the identification of appropriate objectives and means. The paper suggests that reframing an existing rhetorical strategy to highlight more clearly the link between efficiency and any given set of objectives would stimulate a broader discussion of policy issues and help balance more effectively the diverse interests at stake in Mondrag6n's restructuring. KEY WORDS: language; rhetoric; restructuring; Mondrag6n; Spain; efficiency.

1An earlier version of this paper was presented at the 1992 annual meetings of the American Sociological Association in Pittsburgh, Pennsylvania.

2Department of Sociology, Bogaziqi University, 80815 Bebek, Istanbul, Turkey.

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0884-8971/94/0900-0459$07.00/0 ? 1994 Plenum Publishing Corporation

INTRODUCTION

The restructuring of the global economy and the crisis of traditional social democratic politics have focused much attention on policy shifts in advanced industrial societies away from the reduction of social inequality toward the pursuit of economic competitiveness. Insufficient attention has been paid to the possibility that this shift in objectives may undermine the democratic control of policy-making by transforming political and social issues into technical issues. The case of the well-known Basque worker cooperative complex at Mondrag6n, Spain, provides an opportunity to examine the tension between the struggle to survive in a more intensely competitive international economy and the attempt to create more democratic work places. Because of the complexity of their objectives, the cooperatives' adaptation to very real structural constraints is mediated by arguments about the nature of "efficiency."

This paper is an historical analysis of the language of public debate and of the implementation of restructuring policies in Mondrag6n. It argues that competing rhetorical strategies that approach the concept of efficiency from "social firm" and "businesslike" perspectives, respectively, have historically shaped the way the participants understand restructuring and decide what to do about it. In recent years, an increasingly exclusive businesslike rhetoric has come to predominate in Mondrag6n. While this strategy has arguably made the firms more competitive, it has also facilitated a gradual displacement of collectively oriented organizational objectives, such as relative equality, job security, and favorable work conditions, for ones that privilege institutional interests of profitability and stability. More importantly, it has helped usher in important changes in the policy-making process itself, limiting the range of legitimate participation and weakening broad-based control over the identification of appropriate objectives and means. Conse-

quently, the future ability of the Mondrag6n cooperatives to pursue their

original vision of developing a viable system of worker management has been

placed in doubt. This paper concludes by suggesting that while the cooperatives must adapt to external structural change, they need to ensure greater scope for protecting a broader range of objectives. Toward this end, the social rhetorical strategy might be effectively reframed to highlight more

clearly the link between efficiency and any given set of objectives. In so

doing, the proponents of a social firm can stimulate a broader discussion of what means and goals are appropriate in Mondragon and compel a wider search for restructuring policies that effectively balance the diverse interests at stake within the cooperative complex.

460 Taylor

Rhetorical Construction of Efficiency

The Basque Worker Cooperative Complex in Mondrag6n, Spain

This paper is based on 18 months of research in Spain, which included a total of 9 months of fieldwork in the Basque worker cooperative complex based in Mondragon (Taylor, 1991). Internationally known as one of the most successful experiments in industrial democracy (see Whyte and Whyte, 1991), the Mondrag6n system was founded in 1956 under the guidance of a Basque Catholic parish priest, Jose Maria Arizmendiarrieta. By 1989, the Mondrag6n cooperatives formed a group of 198 worker-owned and man- aged firms linked through several common institutions, including a powerful cooperative bank, social security system, vocational school, and research

facility. Ninety-four of the firms were industrial cooperatives; 9 were agrarian cooperatives. Most of the member firms were organized into 14 sectoral or geographic groups, of which FAGOR is the oldest and largest. The Mon- drag6n cooperative complex had nearly 20,000 worker members, comprising approximately 7% of the industrial workers in the Basque region (Green- wood and Gonzalez-Santos, 1991:16).

This paper focuses on the historical development of two Mondrag6n cooperatives, Copreci and LANA. It also considers relevant developments elsewhere in the system, at the level of these cooperatives' geographic and sectoral groups, FAGOR and EREIN, and at the newest and highest organizational level, the Mondrag6n Cooperative Corporation, which now en- compasses all of the cooperatives associated with the Mondrag6n system. (See Fig. 1 for a schematic outline of these levels. Also see Greenwood and Gonzalez-Santos, 1991, especially Chapter 10, for a detailed discussion).

Copreci is an industrial cooperative that produces components for home appliances such as refrigerators, stoves, and heaters. Founded in 1963 in Aretxabaleta, a small village near the town of Mondrag6n, Copreci in 1988 had over 1200 workers. Copreci is a member of the FAGOR Group, an integrated, geographically based group of 13 cooperatives in the Mon- drag6n area that in 1989 represented a third of the system's total sales (Greenwood and Gonzalez-Santos, 1991:21). Based in Oiiate, a small town near Mondrag6n, LANA was founded in 1960, the first of 9 agrarian cooperatives in the Mondrag6n complex. LANA has 215 worker and farmer members, and produces dairy and timber products supplied by small-scale diversified Basque farmers. It is the core cooperative of Mondrag6n's agrarian sectoral group, EREIN.

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Fig. 1. Mondrag6n cooperative system.


RESEARCH METHODOLOGY

I first became associated with the Mondrag6n cooperatives in the summer of 1986 as a participant in a Cornell University-FAGOR Group joint research project (Greenwood et al, 1989; Taylor, 1986). I returned to Spain in 1988 and, during my fieldwork, carried out research in Copreci, LANA, and the offices of their respective groups, FAGOR and EREIN. This paper draws on data from archival research, participant observation, and in-depth interviews in the cooperatives. Interviewees included white- collar and blue-collar worker members and leaders at all levels of Copreci and LANA and various executives at higher levels in FAGOR and EREIN. I also examined a wide variety of internal documents, including minutes of meetings of executive and representative bodies, internal reports, and pub- lications prepared for the public. Because of the cooperatives' concern with preserving a "paper trail" of important policy decisions, these documents are a rich source of information about the diverse perspectives behind Mon- drag6n's policy-making process.

RHETORIC, CULTURE, AND STRUCTURAL CHANGE

One of the most important sets of issues the Mondrag6n cooperatives have faced in recent years concerns the social implications of their efforts to remain competitive in an increasingly integrated, more intensely competitive global economy. This paper applies a theoretical model that uses language to explore the link between structural and cultural change in organizations. It focuses on how arguments about efficiency shape the way Mondrag6n's participants understand issues of economic restructuring and make decisions about what to do about it. The "new rationalization" (Alt- mann et al., 1991) of the international economy is frequently portrayed as driving firms toward ever greater "efficiencies." This perspective tends to understate the range of costs of restructuring, which include falling real wages, deteriorating working conditions, and higher unemployment. Writers mindful of these costs may point to the promise of smaller, highly skilled work forces, which in the future may participate meaningfully with management in the pursuit of more flexible production (Gaudier, 1988).

These perspectives on restructuring, however, implicitly assume the existence of a neutral, objective benchmark of "efficiency," which leads them to leave under examined the political dimension of how organizational objectives are formulated and of how progress is evaluated. In this paper, I argue that the practical employment of the concept of efficiency cannot be separated from the choice of objectives to which efforts are oriented

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and from the selection of appropriate means, decisions embedded in a particular social and political context. In a "single-objective," noncooperative firm, for example, conflicting pressures to pay out regular shareholder divi- dends or to reinvest returns illustrate that the firm's performance will be evaluated differently by different actors. Nevertheless, it is in multiobjective organizations such as cooperatives that the competition over how to define efficiency is most clearly apparent.

Recent writers (Daly, 1991; Granovetter, 1992) have pursued the earlier observation made by Weber (1978), Veblen (1934), and others that the economy is not an autonomous region of natural regulation but is articu- lated with a system of social relations. This suggests that attention be given both to agency and the cultural influences on economic action (DiMaggio, 1990; Etzioni, 1988). An adequate understanding of how economic possibilities and constraints are interpreted (Block, 1990) calls for attention to the role of ideology, knowledge, and power in making sense of the economy (Friedland and Robertson, 1990).

A critical understanding of what it means to be efficient in Mon- drag6n requires an analysis of the political and economic context in which the cooperatives' objectives and methods are developed. The formal structure of Mondrag6n's remarkably democratic decision making has been well- documented (Whyte and Whyte, 1991). Yet the question of how objectives are formulated and by whom remains to be asked.3 As members debate over policy issues, how is the boundary between the possible and the actual (Jakob, 1982) established? This is a political issue since the capacity to define such boundaries and to formulate objectives is the source of significant power (Gusfield, 1981). I will show below that in these cooperatives, even seemingly straightforward technical and economic issues have important cultural and political dimensions.

A critique of efficiency raises a larger issue of how social and economic action are to be evaluated. As will be discussed below, participants in debate in Mondrag6n often appropriate apparently universal concepts such as "rationality" and "objectivity" for their own purposes. While a com- prehensive discussion of the epistemological issues surrounding such concepts is beyond the range of this paper, it is important to recognize that the validity of such universal criteria is being contested.4 This is not to take

3Greenwood and Gonzalez-Santos (1991) provide one of the few analyses of the informal, at times conflictual processes that complement Mondrag6n's formal decision-making structures.

4Aronowitz (1988) and Knorr Cetina (1981), for example, focus on how the social context in which science is practiced shapes the development of scientific methods and the content of scientific knowledge itself. Other writers have explored the rhetorical dimension of science and social science (Brown, 1987; Gusfield, 1981; McCloskey, 1985; Nelson et al., 1987). Also see Carruthers and Espeland (1991) on how quantitative rhetoric articulates with economic rationality.

464 Taylor


a radical subjectivist stance that denies that a physical world exists independently of human intervention. Rather, it is to see the social world as an interpreted reality created through action, belief, and thought on the physical world (Overington, 1977). The problem is that the boundaries of these two worlds are often blurred in human practice.

This paper draws on recent works that, through the analysis of language use, pursue empirically the link between political and economic structure and the process of negotiating social and cultural meaning (Asad, 1979; Gusfield, 1981). The approach of this paper differs from the analyses of Nelson et al. (1987), McCloskey (1985), and others, which focus principally on the rhetorical strategies of professional scholars and scientists. In this empirical case study, I analyze the rhetorical treatment of efficiency in Mondragon, within the political and economic context facing the organizations in which debate occurs. Rhetoric does not by itself drive social change, yet neither is it a mere reflection of greater social forces. Rhetorical practices help shape the way the cooperatives handle external and internal structural change by influencing the public interpretation of their situation and the range of alternative strategies deemed to be plausible.5

Rhetoric here refers to the language used by individuals or groups engaged in argumentation. This is not "mere" rhetoric in the sense of a legitimizing ideology, though it includes the use of language to persuade. Rhetorical practices (Austin, 1975; Burke, 1969) in the cooperatives yield insight into the cultures, ideologies, and relative political influence of the participants in debate as well as into the goals the actors pursue. For the purposes of this paper, along with Swidler, culture is seen as influencing action by shaping a "tool kit" of habits, skills, and styles from which strategies of action are constructed. Swidler argues that the preoccupation with "ultimate values" has led to a theoretical dead end (Swidler, 1986:273). I suggest, however, that if "patterns, values, attitudes, and sentiments" are seen as historically structured (Friedrich, 1989:299) rather than as static, the recuperation of a crucial political dimension of Swidler's cultural rep- ertoires becomes possible. In organizations, cultural values emerge and are constantly recreated through the interaction of distinct internal social groups (Martin et al., 1985).

In Mondrag6n, two competing rhetorical strategies, the rhetoric of the "businesslike firm" and the rhetoric of the "social firm," have brought to bear distinct organizational imperatives on major policy issues. The first imperative has been to develop and conduct efficient, productive, and competitive business enterprises. The second imperative has been to develop a production model with "the human being at its center" (FAGOR Central

5See White (1984) and Thompson (1990) on the constitutive character of language.

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Social Council, 1988). These rhetorical strategies should not be seen as promoting economic concerns on the one hand and social concerns on the other, since each promotes positions on both economic and social issues. Furthermore, though considerable hierarchy and clear divisions between management and rank-and-file worker members exist in the Mondrag6n cooperatives, neither rhetorical strategy has been the exclusive resource of any particular social group. It has not been unusual to hear both rhetorical strategies employed by members of management, representative councils or the rank and file.

Nevertheless, as I will show below, the growing predominance of the businesslike rhetorical strategy in Mondrag6n narrows the range of legitimate participation in policy-making, facilitating the gradual displacement of what Perrow calls "group and community referents for justifying actions"

(Perrow, 1986:263) by institutional objectives of growth and profitability. By focusing on the political and cultural processes by which this goal displacement occurs, however, this paper avoids seeing it as an inexorable, peopleless move toward institutionalization. By acknowledging the possibility of agency and resistance, this paper suggests ways in which the devel-

opment of a new language may help make apparent alternative strategies of change.

Rhetorics of Efficiency

The firm has to give us our bread, today and tomorrow. And it has to give it both to us and to others, too. For this, capitalization is necessary. (Arizmendiarrieta, nd:15)

Few of the participants in Mondrag6n's "Experiment" deny the need of economic organizations to be profitable in order to survive in a com-

petitive market. But the twin objectives of business viability and social justice implicit in the above statement by Father Jose Maria Arizmendiarrieta underscore the often apparently paradoxical nature of efficiency in the

Mondrag6n cooperatives. On the one hand, I will argue below, efficiency is employed as an abstract, objective benchmark of the success of pragmatic attempts to create firms that work well, with the most effective procedures possible, the most advanced technology, and the most highly qualified man-

agement available. On the other hand, the concept of efficiency in the Mon-

dragon cooperatives is also used to gauge progress toward larger social

goals associated with relative equality and a wide distribution of benefits. These competing visions of efficiency are closely linked to participants' as-

sumptions about how objectives are to be formulated, appropriate methods chosen, and ultimately, benefits of membership distributed. This paper does

466 Taylor


not attempt to settle the question of which concept of efficiency "best" fits the cooperatives' objective conditions for survival in the global economy. Rather, it focuses on the way arguments about efficiency shape the Mon- drag6n participants' efforts to address this issue democratically.

Below, I discuss how arguments about efficiency have shaped the question of who is to control the direction of the cooperatives' development. During the early period of rapid growth, competing approaches to efficiency helped ensure that efforts to broaden participation in management countered other tendencies in the complex to centralize decision making. The eighties, by contrast, were marked by organizational restructuring increasingly dominated by businesslike arguments about efficient, centralized decision making. By the end of the decade, the range of legitimate policy perspectives would be narrowed, as businesslike rhetorical strategies laid increasingly exclusive claim to the realm of "rational" analysis. The more limited opportunities for the rank and file to influence policy-making facilitated the gradual substitution of more institution-oriented objectives for objectives oriented toward the interests of a broader range of participants. This situation has important implications for the future viability of pursuing Mondrag6n's original vision of a distinct form of production with the human being at its center (FAGOR Central Social Council, 1988).

Defining Efficiency

Most participants in debate in the Mondrag6n cooperatives agree that the firms must be efficient but differ on how the concept is to be understood. Table I below summarizes two principle rhetorical approaches to efficiency. Those members who draw upon the rhetoric of the social firm reject a narrow economic understanding of efficiency, emphasizing the importance of the cooperatives' social purpose. "The Cooperative form was not pursued as a simple expedient for micro-economic reform but as a path toward a more far-reaching social and economic transformation. This cooperative experiment was conceived and promoted with a broad, insepara- ble commitment to liberty, social justice, solidarity and human betterment" (Caja Laboral Popular, 1967). Nevertheless, a speaker in Copreci's General Assembly pointed out in 1969 that while economic efficiency was not the firm's only objective, it was a necessary one: "our objective will always be to reach an optimum social profitability, one of the components of which is economic profitability. Without the latter, the former will be impossible to achieve" (Copreci General Assembly Minutes, 1969).

Other members have pushed the social rhetoric further, arguing that the calculation of the firms' efficiency itself includes social criteria. Copreci's

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Taylor

Table I. The Rhetorics of Efficiency

The social firm The businesslike firm

Defining efficiency

Participation

Range of legitimate perspectives on policy

Development strategies

-Efficiency is an instrument toward social goals of relative equality and a relatively wide distribution of benefits.

-Participation in management should be expanded to complement executives' limited perspectives and to offset their short-term pragmatism.

-Workable policies emerge from a synthesis of diverse perspectives on issues.

-Priority should be given to developing and supporting cooperative activities.

-Efficiency is principally a matter of lowering costs and maximizing profits to bolster the strength of the firm.

-Participation in management should be limited to those with the specialized skills and knowledge required to adapt to market demands.

-Rational, objective analysis should be employed to diagnose problems and to identify appropriate policy solutions.

-Profitable activities should be supported without regard to whether they are cooperative in form.

social council, for example, stated in 1985, "We believe that in a cooperative the purpose of profitability should be to generate wealth in general and for this wealth to be distributed through jobs" (Copreci Social Council Minutes, November 14, 1985). Management policies that do not pursue economic returns for the benefit of the members would not be socially efficient, from this perspective. Indeed, one Central Social Council member argued that without an organizational focus on the diverse needs of the cooperatives' membership, morale and social cohesion would be reduced and the firms' economic efficiency itself would be undermined. "The principal characteristic that has made these firms efficient" one Central Social Council representative argued, "is, in the judgement of many of us, SOLIDARITY, in capital letters" (Copreci General Assembly Minutes, 1988).

By contrast, other members use businesslike rhetoric to talk about efficiency in more narrowly economic, profit-oriented terms. LANA's management, for example, saw the firm as having "two basic aspects, profitability and permanence in time" (LANA, 1981). The cooperative's manager observed, regarding the cooperative's objectives, that "one can philosophize to unthinkable extremes, using social and humanist arguments . . . but at bot-

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tom, surrounded by a society with [other] well-defined and influential char- acteristics, I must argue for economic success as the basis for guaranteeing more altruistic objectives" (LANA General Assembly Minutes, 1985:24).

For LANA's management, the firm's priorities regarding these social objectives are clear:

In order for the firm to survive it must earn money. This principle must prevail over any other private short term interest. Free services and social works which disturb the firm's economic balance and affect its continuity should come from somewhere else. Anything which is not economically profitable, in the long term more or less annuls those social activities. (LANA General Assembly Minutes, 1981:22)

From this perspective, any activity not oriented toward profit threatens the firm's survival. Expenditures on services and "social works" are presumed to be costs rather than investments in participants which may contribute to the firm's effective operation.

One of the remarkable features of the early history of the Mondrag6n cooperatives was the acceptance of both of these approaches to efficiency as legitimate policy perspectives. Rather than attempt to synthesize the two into a single approach, express attention was given to incorporating both into policy-making as distinct, competing perspectives. As one of the authors of a Cooperative Bank policy paper in 1982 put it,

The Group we are trying to keep together must cast its ideological vision in two directions. On one side, being economic, the Group must have the most up-to-date, highest quality technical organization. It must do whatever necessary to make its management and its product and process technology more efficient. This is the economic and technical battle that must be won in order to survive. Without this we will not have developed Cooperativism . . . On the other side, along with this economic efficiency we must endow this technical creation with permanent values of solidarity, common welfare, and democracy according to norms chosen by all. This is [the Group's] essence. Without it, we will not have developed Cooperativism. (Caja Laboral Popular, 1982:67)

As will be seen below, the first 20 years of Mondrag6n's development were marked by a remarkable, though uneven success, not in reconciling, but in ensuring the productive coexistence of these competing perspectives. The commitment to both perspectives challenged the participants to develop productive and profitable firms, but also to develop innovative social organization in pursuit of more effective democratic decision making.

THE YEARS OF "FAT CATTLE": COMPETING PERSPECTIVES ON POLICY

The history of the Mondrag6n cooperatives can be divided into two major periods, with the early 1980s as the turning point. The years of "fat

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cattle," to borrow a rural Basque idiom meaning prosperity, began with the end of Spain's state-led autarky in the late 1950s and continued with the unprecedented expansion of Spain's economy during the 1960s and much of the 1970s. The Mondrag6n cooperatives directly benefited not only from the boom in domestic appliance, construction and other economic sectors in which they worked, but also from protectionist policies that shielded domestic markets from foreign competition. The cooperatives grew steadily throughout the 1960s in size and organizational complexity. Copreci was one of the 4 pioneer industrial cooperatives within the Mondrag6n complex. The cooperative expanded from an original 16 jobs to nearly 700

by 1969. Gross profits grew from 2 million pesetas in 1963 to nearly 40 million in 1969, and the cooperative began to receive many applications for member transfer from other cooperatives.

LANA was established during the early stages of the crisis of the Basque family farm (caserio), which had roots in the restructuring of

Spain's agrarian sector (Etxezarreta and Viladomiu, 1989). LANA's powerful sponsor, the Caja Laboral Popular (CLP), Mondrag6n's Cooperative Bank, saw the cooperative as a vehicle for disseminating modern, efficient agrarian techniques. LANA grew from an original 13 farmer members to 275 farmer and worker members by 1967. It expanded its activities in

marketing fruit, vegetables, and raw milk to include pasteurization and timber milling plants, and the provision of technical services to member farmers.

During the cooperatives' period of rapid growth, some of the most

important policy debates in Mondrag6n concerned how to structure decision making in ways that were effective, yet consistent with a commitment to democratic process. As outlined in Table I, the businesslike perspective advocated delegating management authority to those with the specialized skills and knowledge needed to adapt to market demands. Indeed, the founders of the first industrial cooperatives-Ulgor, Arrasate, Comet

(later renamed Ederlan) and Copreci-organized day-to-day production along highly Tayloristic models of efficiency and hierarchical management. Yet at the same time, a social perspective on efficiency encouraged broad- based participation in policy-making in order to complement executives' limited perspectives and to offset their short-term pragmatism. Salary differences in the new firms were limited to a one to three ratio, for example, and within a few years other "cooperative" features were developed, in-

cluding one person/one vote balloting and a system of social councils to

represent worker members' interests (Taylor, 1986).

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Efficiency and Supracooperative Policy-Making

The expansion in the cooperatives' size and complexity must also be seen in relation to higher level organizational structures being developed in Mondragon. In 1964, Copreci, Ulgor, Arrasate, and Comet established ULARCO, a second-level cooperative organization. ULARCO amounted to a multilateral contract through which the firms coordinated certain as-

pects of their management, provided certain services in common, and stand- ardized and pooled an increasing share of profits and losses. ULARCO quickly became the model for higher level coordination and management among other cooperatives associated with the Mondrag6n complex.

Yet the development of ULARCO also reflected the tension between social and businesslike approaches to management efficiency. ULARCO initially lacked executive powers, being explicitly based on an ideal of collegial management that preserved the autonomy of the individual member firms (Taylor, 1986). Indeed, according to founding members interviewed in 1986, their fear of ceding executive authority above the level of the firm led Copreci's members' to initially vote down the creation of ULARCO. The measure was approved in Copreci only after intense lobbying by the

leadership and the convocation of a second, extraordinary general assembly (Taylor, 1986:14). A Common Services division (later renamed Central Services) was soon created in ULARCO with seconded personnel from the member firms. This division began standardizing the guidelines within which member firms' bylaws, internal regulations, and labor practices should fit.

By 1969, the initial collegial management model had given way to an ultimately unsuccessful attempt to integrate completely the ULARCO firms, with a single director general exercising executive authority over each of the five firm's managements (Arrasate General Assembly Minutes, March 14, 1970; Ulgor General Assembly Minutes, March 27, 1971). The written record shows little evidence of widespread discussion of this decision, but ironically, the restructuring project appears to have failed not because of opposition to its centralizing tendencies, but because of financial concerns. Transforming ULARCO into a single large cooperative would mean the loss of eligibility for credits from the National Fund for Work Protection. Furthermore, Mondrag6n's Cooperative Bank was legally barred from directing more than 30% of its loan portfolio to a single firm. The ULARCO firms at that time were receiving 63% of those resources (Copreci General Assembly Minutes, March 24, 1971).

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Efficiency and Policy-Making in the Cooperatives

A similar tension between social and businesslike approaches to management efficiency informed policy debates within the individual cooperatives. During the late 1960s and early 1970s, the Mondrag6n cooperatives began for the first time to encounter market instability and limits to growth. Spain's balance of payments difficulties, the state's restrictive financial measures and the oil crisis beginning in 1973 each contributed to a general economic slowdown. In addition, serious internal social conflict emerged for the first time in Mondrag6n's industrial cooperatives.

In 1974, the only major strike in Mondrag6n's history6 occurred in Ulgor and another ULARCO cooperative, Fagorelectrotecnico, triggered by the institution of a new job rating policy regulating pay scales throughout the Group. From the point of view of the Mondrag6n leadership, because all members were also owners of the firms, the possibility of adversarial relations between management and labor could not be admitted. At the same time, they viewed the strike as a serious breach of discipline and opted to respond with a firm hand. With the subsequent approval of the associated cooperatives' general assemblies, they expelled seventeen leaders of the strike.

From the social perspective, the roots of the strike lay in the fact that the cooperatives' rapid growth had outstripped their ability to involve members in important decision making. As one Copreci rector put it not long before the crisis,

The strong growth of recent years has to a degree decoupled our governance bodies and participation. Information does not arrive or if it arrives to members, it is not smooth and is often distorted, giving rise to misunderstandings. (Copreci General Assembly Minutes, March 24, 1971)

This social rhetoric emphasizes the importance of broad-based participation in decision making for the proper functioning of the cooperatives. The exacerbation of internal divisions of interest along traditional management- labor lines was in large part the result of distancing important decision making from the worker members affected. To counter these problems, after the strike, ULARCO's social councils were reorganized. Smaller permanent and ad hoc committees and study teams were established throughout the Group

6The cooperatives have historically tolerated externally motivated strikes, usually held in solidarity with workers in noncooperative firms or for political purposes, with the understanding that production losses are later to be made up. Though the 1974 strike is widely viewed as Mondrag6n's first and only internal strike, a 11/2-hour work stoppage occurred the year before in both Ulgor's San Andres and Garagarza plants. The firm's administrative council at the time opted for a low key response rather than risk a divisive open debate in an extraordinary general assembly (Copreci Administrative Council Minutes, April 27, 1973). Also see the discussion of the 1974 strike in Alzola (1985).

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(Gutierrez Johnson, 1982:298). Efforts were also made to broaden participation through experiments in work organization. Copreci, for example, played a pioneering role in much of the early experimentation with management committees, work tables, and work groups (Taylor, 1989b). Significantly, four years after the strike, the general assemblies of the ULARCO firms voted to reinstate the expelled leaders without loss of seniority.

Throughout its initial period of expansion, LANA struggled with dairy and timber sectors characterized by severe price fluctuations. The cooperative also suffered chronic supply problems stemming from mismatched sea- sonal timing of bovine milk cycles and consumer demand. LANA's management confronted such problems by emphasizing the firm's industrial orientation and by centralizing its control over policy-making. This approach coincided with the CLP's active promotion of structural change among LANA farmer members' operations to make them more "efficient." From the bank's businesslike perspective, "in addition to being profitable by themselves, [agrarian cooperatives] should constitute an example of business structuring and of the application of technology" (Caja Laboral Popu- lar, 1987:1). The CLP assigned technical advisors to work directly with LANA's farmers on their farms and with the management council. These advisors' mandate, to advise on "the precise solutions aimed at better agricultural use, grouping, crop changes and techniques" (Van der Broek and Van der Schoot, 1983:12), reflected the bank's tendency to see agrarian problems primarily as problems of technical efficiency.

LANA's management and its CLP advisors became increasingly dis- illusioned with the failure of farmer members to restructure their operations as advised, despite evidence that trends of change in the dairy and timber sectors demanded a more market-oriented, specialized, and professional organization at all levels of production. By 1975, the CLP's plan had been reoriented to "industrialize the rural area" (Caja Laboral Popular, 1975:4). If existing farmer members could not or would not cooperate, the bank intended to "create new firms that integrate or modify the caserio according to modern industrial patterns" (Caja Laboral Popular, 1975:116). Advisors were soon engaged in research and planning that aimed "not to search for solutions for a caserio but to create profitable agricultural firms with a future, of optimal size and with technical management" (Caja Labo- ral Popular, 1975:4).

By the late 1970s, the bank had despaired of being able to make over the small farmers' operations and had turned its attention to agrarian activities organized according to an industrial model.

.... today we want to experiment with other, more business-like forms. The cooperative (possessor or renter of land and agricultural machinery) takes responsibility, through its executive team, for programming worker members (with

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schedules which must be regular), or productivity in all its aspects, of marketing and other areas, the same as in all firms and in any industrial cooperative. (Caja Laboral Popular, 1977:11)

In LANA, the result of this businesslike approach to agrarian efficiency was a circumvention of LANA's dependence on small farmer suppliers, who were increasingly seen by the management as impediments to the firm's competitiveness. An internal milk production division was organized, for example, which would better conform to the management and the CLP's expectations of efficient management.

THE YEARS OF THIN CATTLE: PRIVILEGING THE BUSINESSLIKE RHETORIC

In the early 1980s, the Mondragon cooperatives began a new stage of economic uncertainty as Spain entered its worst economic crisis since the post-Civil War era. When Spain's economy emerged from recession, however, the cooperatives found that they faced new global market restructuring trends of increased competition, concentration of firms, and more rapid technological changes. Spain's 1986 entry into the European Eco- nomic Community only intensified competitive pressures as borders were opened to foreign firms.

Efficiency and Restructuring in ULARCO

ULARCO's leaders anticipated these developments and, supported by the conviction that "organization is no more than a means towards objectives and strategies" (ULARCO, 1985), initiated a major restructuring project. When the project was completed in 1986, ULARCO had been renamed FAGOR Group to emphasize a new "corporate identity," and greater executive powers had been given to the FAGOR General Govern- ing Council (see Fig. 1). For example, this supracooperative representative body was empowered to ratify the appointment of cooperative management. Its Central Departments (formerly Central Services) was charged with developing financial, accounting, personnel, technology, marketing, strategic planning, and other policy guidelines for member firms (Taylor, 1986:72; Greenwood et al., 1989:84-85).

These final results of the restructuring project, however, had emerged only after four years of exhaustive discussion and revision of several drafts at all levels of the cooperatives. As originally submitted, for example, the

restructuring plan had called for a general council composed almost entirely

474 Taylor

Rhetorical Construction of Efciency

of representatives from the cooperatives' executive management councils. The final project, however, balanced these professional managers with elected representatives from the rank and file (Taylor, 1986).

Members using a social rhetorical strategy had argued that early plans called for too much centralization of decision making. As Copreci's administrative council observed in 1985, "we understand that efficiency and the answer to the Group's problems have to be sought through decentralization" (Copreci Administrative Council Minutes, July 19, 1985). One member of the social council of the machine tool cooperative, Aurki, linked efficiency to issues of power and accountability:

The direction of change is radically mistaken. The best response to such rapidly changing outside conditions is decentralization. That the Group, in making decisions, presumes itself to be the most efficient is, in my opinion, absolutely unjustified. It seems to me that this project vests too much power and almost no accountability in the Group's organs. (ULARCO, 1986)

These and other opponents to centralization in Mondragon feared that its result would be inefficiency rather than efficiency. They feared increased distancing of decision making from the shop floor and with it, the dilution of accountability to the membership. Ultimately, they argued, this situation would contribute to the undermining of effective administrative, management, and social councils in the cooperatives (Copreci Administrative Council Minutes, July 19, 1985).

Rather than addressing the implications of ULARCO's reform for the internal distribution of power and accountability, proponents of greater executive powers for ULARCO used businesslike rhetoric to link global economic changes to future chronic loss of profitability. As the president of ULARCO introduced the restructuring project to Ulgor's general assembly in 1982,

. . . the economic model established after the world war lasted until the mid-seventies but is now defunct. What we call economic crisis has consolidated itself, generating new relations of exchange and different models of social behavior. Consequently, we need to transform our firms to allow them to adapt, to regain profitability. (Ulgor General Assembly Minutes, April 17, 1982)

The new stage of development facing the Mondrag6n cooperatives, the same speaker remarked to Copreci's administrative council three years later, augured an unstable, intensely competitive market requiring more complex, specialized management (Copreci Administrative Council Min- utes, November 14, 1985). A CLP executive's view illustrated the businesslike perspective of what that management should be like:

Today the basis of a firm's profitability rests fundamentally on professional management by a coherent and competent management team. [A team] which knows how to face business uncertainty with its knowledge, with an entrepreneurial view of the business. [They] manage in the short term but carry out above all an

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efficient management for the future, with clear objectives and planning strategies, accepting perfectly controlled risks. (Maiztegui, 1987:18)

"Management," in this businesslike rhetoric, is largely abstracted from the people or even the specific production activity involved. Despite the reference to a management "team," the speaker's selection of the entrepreneur as the model actor deemphasizes solidarity and collective responsibility for decision making. Rather, it emphasizes the lonely decision maker at the top, evaluating risk and making bold decisions in pursuit of efficiency.

Efficiency and Restructuring in the Cooperatives

In the midst of Spain's recession during the early 1980s, the associated industrial firms of ULARCO succeeded in modernizing their plants without significant unemployment by relying on temporary transfers of laid-off members to other associated firms. But even the strongest industrial cooperatives by the mid-1980s began to suffer the economic and social effects of global market restructuring. In Copreci, though austerity measures were approved in periodic general assemblies, members began to complain that working conditions were deteriorating. From the perspective of many worker members, austerity measures affected the lower ranks of blue-collar, less skilled labor, women and temporary workers disproportionately.7 In- creases in production rhythms and the introduction of rotating shifts, for example, principally affected shop floor workers. But white-collar workers also suffered as wages were frozen, profit distributions were suspended, and additional capital contributions were required. These problems were exacerbated by the fact that strategic decisions were now being made far- ther from the shop floor. The restructuring of FAGOR had significantly reduced the autonomy of the individual firm in favor of the Group. Nev- ertheless, Copreci's heavy losses in 1988 and the resignation of its popular manager lent dramatic support to arguments by Mondrag6n's leadership that the global situation had irrevocably changed.

LANA, for its part, revamped its timber milling operations during the 1980s and established a cheese factory, which promised more profitable dairy products. Its management relied more heavily on market incentives to encourage higher volume and more highly capitalized production among member suppliers and the firm became more dependent on milk supplies from the in-house dairy operation. These actions were taken despite the

7During the 1980s, temporary nonmember workers were used routinely to provide labor flexibility. In Copreci, the proportion of temporary workers varied from 5% of the total work force in 1985 to 7% in 1986, to 14% in July of 1987 (Copreci Administrative Council Minutes, July 20, 1987).

476 Taylor


fact that the cooperative's smaller scale farmer members for several years had been complaining more openly of being marginalized by the cooperative's development trajectory (LANA General Assembly Minutes, 1977:12).

The debates that accompanied internal restructuring illuminated not only the material dimensions of the cooperatives' problems but also the increasingly lopsided rhetorical competition over how to envision appropriate organizational objectives and strategies. One of the policy debates in Mondrag6n during the 1980s that most clearly reflects the competition between social and businesslike perspectives on efficiency concerned executive wage scales. Mondragon's original 3 to 1 salary ratio, though in practice expanded to 4.5 to 1 for most executives, had resulted in cooperative executives earning as much as 60% less than their peers in noncooperative firms (Consejo de Grupos, 1987:8). An influential group of high-level executives and planners feared that the cooperatives would begin losing their best executives and would find themselves unable to attract new management talent.

Few Mondrag6n members argue seriously that inequality can or should be completely abolished in the cooperatives. On the contrary, Father Arizmendiarrieta, in an interview late in his life, explained the principle in Mondrag6n that a degree of relative inequality had to be accepted in exchange for adequate work incentives.

[W]e understood that in a firm, one could not give equally to everybody. The problem lay, then, in establishing the limits within which the personal incentive to participate in the daily work of the firm could be maintained, to maintain its fire, while at the same time, [ensuring that] personal demands would not exceed collective tolerances. (Arizmendiarrieta, nd:13)

The controversy over executive wages lay in how to establish adequate personal incentives and how to identify collective tolerance for inequality.

Proponents of increasing executive salaries argued that higher executive wages were necessary in the current labor market to attract and keep competent and efficient managers.

Today things have changed drastically. To be successful in management one must not only try hard but know perfectly the new management techniques: marketing, production, research and development, exporting, etc., so that with these, one can maintain oneself decently in a competitive supply market. (Maiztegui, 1987:18)

According to this businesslike rhetorical strategy, there were two choices: to have "mediocre managers" or "competent managers."

The first option could lead to cooperatives which are unstable but which are on solid cooperative ideological grounds, according to current criteria. And the second option could lead us to fundamental changes throughout the Experiment, but with greater possibilities of success in the cooperatives.

477

Given these choices, the proper decision was clear. "One must clearly opt for the second option, widening the salary ratio, within a perfectly prede- termined order and with clear criteria of profitability. Just as one purchases a machine, one does not purchase the cheapest, but within an order of things, the most profitable" (Maiztegui, 1987:19). Interestingly, the above speaker did not advocate abolishing a salary ceiling, but rather, was careful to ground his call for "the most profitable" managers within certain (albeit unspecified) limiting parameters.

Businesslike proponents of higher management salaries were careful to argue that the change was consistent with the cooperatives' need for internal social cohesion. One report developed by the Group Council, the highest executive body in the Mondrag6n system (see Fig. 1), argued that "good management will engender economic returns and social peace" (Consejo de Gru- pos, 1987:24). Furthermore, according to one speaker, increased executive wages were actually consistent with the commitment to internal solidarity.

[I]n no case should [the definition of solidarity] cause insurmountable operational difficulties for efficient management, when the latter is established with criteria of justice, equity and honesty .... The degree of solidarity that is necessary with the outside will have to be limited, just as with the rest of the cooperative members, so that the initial principles of the Experiment have a real ideological consistency today ... This degree of solidarity must in addition motivate the manager to obtain a satisfactory result on the basis of an efficient management. (Maiztegui, 1987:19)

Several important rhetorical twists and turns occur here. Solidarity will not interfere with an efficient management, if the latter is based on certain ideals. Though the reference to solidarity, justice, equity, and honesty appear to echo a social rhetoric, the speaker is actually referring to commitments that are due the executive. The rhetoric of the businesslike firm here succeeds in turning the question of the executives' solidarity with the majority of workers into an issue of solidarity with the executives as a means of eliciting efficient performance.

The Central Social Council of FAGOR, by contrast, argued in 1986 that remuneration policies had an essential social objective of minimizing inequality rather than merely being aimed at attracting and keeping man-

agement talent. Wage policies should work toward "eliminating excessive differences out of respect for the common dignity of work and [they should] consider the existence of inequality of opportunity and the priority owed to adequately satisfying basic needs" (FAGOR Central Social Council, 1986). These speakers also urged that existing nonmember workers be made permanent as quickly as possible.8

8In addition to hundreds of temporary, nonmember employees used routinely since the early 1980s, there also existed a limited number of high-level executives contracted as nonmembers with pay above the salary limit (Taylor, 1991:280).

478 Taylor


Social rhetorical strategies, moreover, were used to counter directly the assumption that higher pay would bring more efficient management. One member, the general manager of Mondrag6n's giant consumer cooperative, Eroski, flatly disagreed with the assumption that high wages were

automatically associated with efficient management talent. This speaker turned the businesslike arguments of his opponents on their heads, stating that

The efficiency of an executive is not a function of his price. His price, what he is paid, depends simply on his abundance or his scarcity, ultimately, on the adjustment between supply and demand .... Our project tries to create life conditions that permit an equality of opportunity for access to education, work, health and recreation .... If we are not capable of creating these conditions of access to these cultural goods, recreation etc., under nondiscriminatory conditions, we will be perpetuating privilege. We directors of the cooperatives should not forget that, despite everything, we have the highest incomes of the entire collective. (Cancelo, 1986:5)

This focus on Mondrag6n's collective project was underlined by a

joint statement issued by five managers of the FAGOR Group. They argued that increased inequality would undermine the effective operation of the

cooperatives. "Any change made which widens the limits of the wage system . . . will produce, inevitably, a deterioration in the degree of internal solidarity" (Consejo de Grupos, 1987:21). As discussed above, such speakers see a direct relationship between internal solidarity among members and the cooperatives' economic efficiency.

Furthermore, such members denied the presumption that efficient managers could only be satisfied with high pay. A CLP official, for example, had written the following in 1976: "It is important to understand that the managers of co-operatives are not martyrs just because they are paid half what they would receive in other concerns. The loss in economic terms is

compensated for by other considerations" (Perez de Calleja Basterrechea, 1976:5). According to interviews with white-collar members in 1988, other nonmaterial incentives included job security, informal working relations, the sense of ownership associated with membership, and opportunities to gain experience rapidly through job rotation.

In 1988, the Cooperative Congress of Mondrag6n approved a new 6 to 1 salary ratio. The FAGOR Group's general assembly, however, voted not to implement the change, considering the existing 4.5 to 1 ratio to be adequate. Given the practice of making work conditions as uniform as possible among member cooperatives, however, it is probable that the higher ratio will eventually prevail throughout the system.

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EXCLUSIVE RHETORIC AND THE CONSOLIDATION OF THE BUSINESSLIKE STRATEGY

As seen in Table I, the social and businesslike rhetorical strategies differ on the range of perspectives on policy that they deem to be legitimate. The social rhetorical strategy argues that given Mondragon's internal diversity and its commitment to the model of a social firm, workable policies emerge from bringing together diverse perspectives on any given problem. The more exclusive businesslike strategy, by contrast, holds that solutions to problems are best developed by experts equipped to employ rational, objective analysis. The growing predominance in the 1980s of the businesslike perspective on policy has been facilitated by its ability to claim exclusively the realm of rational, objective analysis.

Rationality and the Power of Numbers

The social view of efficiency in Mondrag6n, as seen above, dovetails with a participatory approach to policy-making. Though both insiders and outside observers frequently see the CLP as a powerful and monolithic pro- ponent of strictly businesslike policies, one of the authors of a bank policy paper in 1983 wrote of the need to incorporate multiple perspectives into the highest level policy-making.

[The original social objectives of the Mondrag6n Experiment] would not be considered suitable if left to the judgment of a Group Council with a technical character. [This would be so] even if [the Council] served a very clear social ideal and were run by well-selected men. These important doctrines require a more participative treatment of all opinions. [They require] a framework which does not follow only [the Council's] voice and decisions, which are skewed by the management's pragmatism and its pursuit of immediate efficiency. (Caja Laboral Popular, 1983:88)

This social rhetoric involves two important philosophical assumptions. First, there can be no single, "objective" perspective on policy. Rather, a workable policy is produced by synthesizing multiple, legitimate perspectives on a problem. Second, the notion of pragmatism is suspect, as beneath its per- suasiveness may lie an unwarranted presumption of consensus on organizational objectives.

The businesslike rhetoric, by contrast, argues that management decisions must be made on the basis of rational, objective analysis of the constraints and possibilities facing the cooperatives. LANA's case is illustrative of this approach. In 1971, its management wrote with reference to the management techniques it was promoting on member farms:

480 Taylor


[Planning] requires knowledge of the situation, a profound analysis which indicates the causes and possibilities which encircle the [agrarian] sector in the general economic framework. [This allows] programming the adaptation of production means to the needs of the market in a rational manner, within the possibilities which are presented. (LANA "Plan de Gesti6n," 1971:2)

Most of LANA's farmer members, according to this perspective, were op- erating in an irrational and essentially unbusinesslike fashion. For example, the small farmer's choice of economic activity "is not decided by criteria of economic rationality, of better or less profitability .... Ultimately, the structure of production of the caserio reveals the absence of an entrepreneurial character, one without an orientation toward the market" (Caja Laboral Popular, 1975:94).

The management's belief that its perspective alone was rational and businesslike helped precipitate a crisis in 1984. Financial imbalances created by heavy borrowing for the restructuring of LANA's timber division and the establishment of its cheese factory led the management to call for an obligatory capital contribution. The measure was voted down for two years by the majority of smaller scale farmer members, who complained of being marginalized by LANA's development policies. In 1984, a coalition of management, worker members, and larger scale farmer members succeeded in passing an obligatory contribution in general assembly, a measure that ob- ligated 75 of its smaller scale farmer members to resign. Significantly, the management had insisted on an identical lump sum contribution from all members rather than a contribution according to volume of activity in the firm or one payable over time. The cooperative, it believed, could not afford to do business with farmers whose scale of operation could not support the lump sum contribution (LANA, 1986).

LANA's management dismissed the credibility of internal opposition to its policies, maintaining that its diagnosis and prescription for the cooperative were the only ones possible. "Without forgetting possible errors that we may have committed in the way social relations have been conducted," LANA's management wrote in 1985 just after the departure of most of the firm's smaller scale farmer members, "we must keep in mind that this has been an event that reflects the advance of technology and order and business logic, [which] will determine in general the agrarian sector of our [Basque Country]" (LANA, "Plan de Gesti6n," 1984:4). Not only was the loss of members inevitable; according to this businesslike perspective, it was rational that it occurred.

This exclusive claim to rational, objective analysis also appeared in policy debates elsewhere in Mondrag6n. For example, the Group Council's arguments in favor of increasing the salary ratio were preceded by headings such as "A Reform Whose Implementation Should be Made Objective"

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and "The Objectivity of the Figures" (Consejo de Grupos, 1987:10, 11). A similar appeal to the analytical rigor of numbers appeared in an earlier CLP paper proposing a new policy of investing bank resources in noncooperative ventures. According to this paper's businesslike rhetoric, the success of the Cooperative Bank had allowed it to enter the orbit of intermediate size banks

whose philosophical approach should maintain coherence with the irreducible response of the numbers. And these counsel, among their basic laws, flight from the concentration of risks and the backing up of action with a rigorously efficient management, that any technical frivolity be avoided so as to incorporate ideals which emerge from a financial framework. (Caja Laboral Popular, 1983:31)

The use in this businesslike rhetoric of words like "coherence," "irreducible," "basic laws," and "rigorously efficient" conjure up a world that is susceptible to complete human comprehension and control. This language discourages critical discussion of the financial indicators and others numbers being used. For example, should investment in associated cooperatives be evaluated by the same yield criteria as investments in noncooperative ventures? How much risk is too much risk when it comes to supporting member cooperatives? In similar fashion to LANA's case above, this businesslike rhetoric dismissed the credibility of opposing views. "Only a dogmatic attitude could brake the extension of CLP's financial activities toward non-member organizations and persons" (Caja Laboral Popular, 1982:40).

Policy Implications of a Businesslike Approach to Efficiency

Whether or not efficiency is conceptualized as having social as well as economic dimensions has important implications for Mondrag6n's future development. In the early 1980s, the modernization of FAGOR's production plants occurred successfully without significant loss of members' jobs because the process was planned and timed to allow temporary transfers out of firms undergoing restructuring. By contrast, during the same period, LANA's management planned and implemented restructuring that would exclude most of its farmer members. As one of its executives explained, "the small farmer is going to disappear. A firm like ours cannot base itself on so fragile a base. Supporting the small farmer, that is not efficient"

(quoted in Van der Broek and Van der Schoot, 1983:44). From a businesslike perspective, it might be argued that the economic

changes since the early 1980s had affected the industrial and agrarian co-

operatives differently and had provided LANA with relatively less leeway in restructuring. A social perspective, however, could counter that

482 Taylor


FAGOR's policies were the result of decision making procedures that pushed its leaders to try to balance social and economic criteria of efficiency. There is little evidence that alternative activities for small farmers were seriously sought after in LANA. Such alternatives pursued elsewhere in Spain with significant success have included intensive greenhouse agri- culture, poultry, pig and beef production, and marketing activities (Taylor, 1989a). Significantly, the CLP's Agrarian Division helped organize separate agrarian industrial cooperatives in Mondragon's agrarian group, EREIN, to pursue successfully these activities.

By the late 1980s, analogous economic challenges to the Mondragon cooperatives were being approached with a more narrowly economic con- ception of efficiency. After the First Cooperative Congress in 1988, for example, the CLP began to formally distance itself from direct financial support of its associated cooperatives, a move presaged several years pre- viously. "[Cooperativism's] presence has been limited to one hundred associated firms which account for most of the risk assumed by CLP. In addition to the failure of Cooperativism to expand, this constitutes an af- front to norms of financial efficiency" (Caja Laboral Popular, 1982:32). In 1987, a CLP document explicitly linked the development of new cooperatives to "a limit, fixed as a function of the efficiency of the effort realized and of the profitability of the firms created. [B]usiness solidity [is] the fundamental base upon which any balanced and coherent development process is to be sustained" (Caja Laboral Popular, 1987). The bank's objective came to be the creation of new jobs rather than new cooperative jobs, a policy shift originally driven by the bank's method rather than a directive origi- nating in general assembly.

If, as the businesslike rhetoric suggests, the major indicator of efficiency is presumed to be profitability without significant reference to other social considerations, then there may indeed be little "rational" incentive to take the trouble to create and maintain organizations that earn less than conventional noncooperative firms. In a world in which cooperatives suffer profitability problems, this understanding of efficiency suggests their aban- donment to the optimism of an earlier era. Indeed, few new cooperatives have been created in the Mondragon system in recent years, while joint ventures and private firm buy-outs have become accepted practice (Green- wood and Gonzalez-Santos, 1991:162; Whyte and Whyte, 1990).

But this situation signals more than a decision not to found new cooperatives. As Mondrag6n's leaders have often insisted, they have no a priori commitment to the cooperative model of organization as such (Mora Aguirre, 1987:32). Rather, their commitment historically has been to pursuing a vision of production with the human being at the center (FAGOR Central Social Council, 1988). The businesslike approach to efficiency, how-

483

ever, narrows the range of legitimate actors involved in making important policy. It encourages the definition of objectives and strategies that respond first to organizational interests of stability and profitability and only then to the aspirations and needs of the diverse social groups involved. It is beyond the scope of this paper to determine whether the material conditions facing the cooperatives "require" this businesslike approach to efficiency. But the paper does suggest that the most serious threat that economic restructuring poses to the members of Mondrag6n is not the deterioration of their wages, work conditions, or even job security. It is the relinquishing of the members' right to exercise control over the process of identifying organizational objectives and developing appropriate strategies for change. The principle that "organization is no more than a means towards objectives and strategies" (ULARCO, 1985) implies that objectives and appropriate means are clear and that the real work lies in reshaping the organization. This paper suggests that greater attention be given to ensuring that the means are appropriate for the Mondrag6n community's collectively determined ends.

Of course, institutional and collective objectives cannot be assumed to be necessarily mutually exclusive. Indeed, it could be argued that members' acceptance of Tayloristic organization in Mondrag6n's early years, and their widespread support for belt-tightening measures in the early eighties, suggest that a majority may choose to embrace the businesslike perspective on efficiency and the policies implied therein. However, the strike and its aftermath in the seventies and the rising internal social tensions during the late 1980s suggest that members have opposed allowing the businesslike perspective to operate independently of social considerations such as relative equity in the distribution of burdens and benefits. Regardless of what choice the majority may make in regard to the definition of efficiency, this paper focuses on the way in which arguments about efficiency shape the

ability of Mondrag6n's members to make those choices democratically. During Mondrag6n's early years, rank-and-file members influenced

policy-making not only through their vote in general assembly, but through participation in firm-level administrative and social councils and through informal interaction within their cooperative. Though these lower level processes continue to operate, subsequent to structural changes in the system introduced during the 1980s, important policy initiatives increasingly originate and are debated by specialized bodies far from the shop floor where they have their impact. Members' opportunities to influence policy- making in firm-level general assemblies are increasingly limited to choices between highly structured alternatives developed elsewhere. The shift away from direct participation to a more indirect representative form of democracy may be an inevitable consequence of the system's greater size and

484 Taylor


complexity. Yet the businesslike approach to efficiency serves to narrow further the range of legitimate participants in important policy-making to those with a particular kind of specialized knowledge. And by reserving the status of rational, objective analysis to itself, the businesslike perspective conflates institutional with collective objectives and hinders the ability of members to offer effective, socially oriented arguments. In so doing, the businesslike approach to efficiency threatens to undermine the democratic process that ensures the maintenance of a healthy rivalry between Mon- drag6n's competing objectives.

CONCLUSION: REFRAMING THE RHETORIC OF THE SOCIAL FIRM

The Mondrag6n cooperative complex is undergoing a crucial moment in its three-decade history. Both its organizational structures and its internal cultures are undergoing great change. The debate and negotiation surrounding these changes are informed by arguments about efficiency, yet the way "efficiency" is invoked in the Mondrag6n system is closely linked to differing views on organizational means and objectives. The growing influence of businesslike perspectives on efficiency encourages an increasing predominance of institutional over collective objectives. Examples include the shift in LANA from service to small farmers to the promotion of industrial-style agrarian production, the decision of the Mondrag6n Coop- erative Congress to orient the wage system toward executive incentives rather than minimizing inequality, and the greater focus in FAGOR on centralized management rather than pursuing self-management by cooperative-level representative bodies. The cooperatives must adapt to external change, but unless that adaptation is to come at the cost of a fundamental transformation of their collective project, they need to protect a broader range of objectives. Reintroducing a more even competition between distinct policy perspectives could be an important step toward protecting those objectives.

An important part of successfully reframing a socially oriented policy strategy in Mondrag6n will be the development of a new language. While language and culture do not by themselves determine history, they help shape political processes that may open up or close off opportunities for particular strategies of change. The rhetoricians of the social firm in Mon- drag6n have not adequately challenged the definition of efficiency supplied by the rhetoric of the businesslike firm. Consequently, these speakers must find fault with the conclusions of their competitors' analysis or the way they use their analytical tools. Or, they must resort to moral suasion and

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calls for individual sacrifice. The first option is often stymied by these members' lack of specialized technical training. The second option is less effective at addressing the very real external and internal structural pressures that shape Mondrag6n's organizational possibilities.

The problem facing members using the rhetoric of the social firm is not that their perspective is irrelevant, but that they must find a more effective way of bringing their policy concerns into line with the cooperatives' current structural environment. Currently, discussion of the cooperatives' development trajectory risks being reduced to whether to operate rationally or irrationally, in the market or out of it. The challenge for Mondrag6n's social rhetoricians is not to be placed in the position of arguing against efficiency but to link the concept to the objectives of a broader range of the cooperatives' participants. If Mondrag6n's social rhetoricians were to take issue with the way efficiency and rationality are invoked by their rhetorical competitors, they could point out how the uncritical adoption of management and analytical tools developed in the noncooperative sector can also reshape organizational objectives by presenting a world in which certain objectives appear to be possible and others, impossible. The cap- turing of the idea of "efficiency" and thus special power over the definition of appropriate means and objectives undermines the possibilities for a democratic community, closing off opportunities to participate, and inhib- iting a search for the most fair and balanced distribution of the costs of restructuring.

Nevertheless, the past resilience of the Mondrag6n cooperatives and the remaining internal pressures in favor of broad-based discussion of im-

portant policies militate against too pessimistic a view of Mondrag6n's future as a democratic model of production. As long as there exists in

Mondrag6n a basic participative framework of representative assemblies, councils, and members committed to a vision of their community, however diverse, a more open language and balanced policy-making process remains

possible. In the cooperative members' own words, Mondrag6n is still an "unfinished experiment."

An important issue raised by Mondragon's experience is whether it and similar organizations are facing an inevitable, historical process of rationalization presaged so pessimistically by Weber years ago. To what ex- tent, under the current conditions of the international economy, does space exist to organize economic activities in ways that incorporate social considerations into the calculation of efficiency? This paper has suggested that the actual constraints of structural parameters on organizational change will

only become apparent if an adequate exploration is made of all possible alternatives. A critical reexamination of evaluative criteria such as efficiency can help ensure that that search is undertaken.

Taylor 486


ACKNOWLEDGMENTS

Research for this paper was supported by grants from the National Science Foundation and the Fulbright-Hays program. I would like to thank

Davydd Greenwood, Leyla Neyzi, and three anonymous reviewers for their comments on earlier drafts.

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