The Basques' Big Society

Randeep Ramesh writes:

When Javier Larañaga wants to relax, he shuts up his bar in the Basque heartland of Guernica and walks up the street to join his friends in the txoko, a gastronomic society only open to male members who come together to cook, drink and socialise.
Along with 100 other men Larañaga, 50, pays €15 (£13.20) a month to rent a local restaurant and stock it with food, wine and spirits. Spanish law ends at the front door. Unlike nearby restaurants smoking is permitted inside the txoko – and women are barred. "We cook Basque food, drink, play cards. It's only for members. It is run democratically and we elect a president. Some modern txokos let in women but we are more traditional," he says.

Txoko, pronounced "chock-o", is derived from the Basque word for nook and represents one of the key building blocks of this rugged, hilly society. Although the private dining clubs began in the 19th century, this form of social solidarity took off during General Franco's postwar dictatorship. Txokos were one of the few places where Basques could legally gather, talk in their distinctive language and sing songs. Such associations – which are owned by their subscribers and run democratically on the principle of one member, one vote – have sunk deep roots into the region's loamy soil.

If Britain is on the way to getting a "big society", the Basque country has already got one. While London urges communities to take over local pubs and run their own public services, Basques already do so with gusto – rather than relying on the state. One does not have travel far in Guernica to find groups of teenagers – or cuadrillas – turning disused shopfronts into youth clubs. Britons by contrast seem only to band together when they want to oppose something.

Tellingly, two proud symbols in the Basque country are not businesses but social enterprises managed and owned by their members. La Liga club Athletic Bilbao is the property of its football fans, while Mondragón is the world's largest industrial worker co-operative. This region is an extreme example of Spain's love affair with co-operatives. Today's Spanish constitution explicitly recognises that co-operatives encouraged democracy after Franco – and as a consequence pay lower rates of tax.

But what happened here in northern Spain was nothing short of a revolution. Twenty years ago the Basque's country's traditional industries of shipbuilding and steelmaking collapsed. To revitalise the economy without putting profits above people, the regional government threw its weight behind worker co-operatives – businesses owned by staff which supported social goals.

Hundreds of co-ops were set up all over the region, attracted by generous tax allowances in return for investing 10% of their annual surpluses in the local community to support cultural activities, education and to tackle unemployment. While unemployment runs at 20% across Spain, here it is half that. In an article last year, the Basque region's former president Juan José Ibarretxe Markuartu wrote: "The model [was] built on three principles: the ethical principle, the democratic principle and sustainable human development."

He pointed out that despite being splattered for decades by the bloody violence of separatist Eta gunmen and bombers, the 2 million people of the Basque Autonomous Community are today not only richer than Britons, they also live longer and are better educated. The region's most important city Bilbao, once a mephitic industrial hole, now bristles with civic pride. Dominated by the spectacular titanium-clad Guggenheim museum on the site of an old shipyard, its citizens whizz around metro stations designed by Norman Foster.

The biggest Basque success story is undoubtedly Mondragón, which began life 50 years ago and is now Spain's seventh largest business group, with a €14bn turnover and 85,000 people employed globally in more than 250 companies. It accounts for 15% of the total number of workers in Spain's 25,000 co-operatives. Mondragon employees wear their conscience on their sleeves. Bosses earn on average five times the salary of a worker, staff vote to take pay cuts, strikes are almost nonexistent and around half the profits go towards employee healthcare and pension funds.

It mixes workers' rights and global profits. The group's brands include the £11,000 Orbea bicycles which won Olympic gold in Beijing, Spain's third largest supermarket chain Eroski, one of its largest banks and a university with fees a third that of private rivals. Mondragón operates 75 plants in 16 countries. But it is more movement than multinational, accounting for 4% of Basque GDP. Mondragón was founded by a young priest, José María Arizmendiarrieta, who arrived in the valleys in 1941 to find civil war had left the Basque country desolated – a destruction immortalised by Picasso's masterpiece showing the bombing of nearby Guernica

Inspired by British co-op pioneer Robert Owen, Arizmendiarrieta began by forming a technical school to teach unemployed youth. He then convinced villagers to pool funds for a credit union and lent cash to the school's first five graduates. They started a co-operative producing kerosene stoves in 1956. From these humble beginnings sprang Fagor, Mondragón's kitchen appliances division, which today employs 4,000. Mondragón is now a collection of 120 co-ops. So when the recession saw it lose 14,000 jobs and cut pay by 8% in 2009, there was barely a murmur from staff.

Mikel Lezamiz, its director of co-operative dissemination, says that co-ops handle recessions better because members don't really receive a salary. They receive an advance of what they expect the company to earn, so wages fall alongside performance. "We don't need trade unions because staff know if profits fall so do their wages," he adds. The upside of worker power is a striking equality in pay. The highest paid chief executive in the group, the boss of the bank Caja Laboral, received €112,000 last year – eight times Mondragón's minimum wage. By contrast the average top pay among Britain's 100 biggest firms is more than 200 times the minimum.

To become a member of Mondragón, workers have to pay €14,000, which can be borrowed at low rates. Once in they have a job for life as it cannot make members redundant or sell off divisions. Losses in one unit are covered by the others. Unviable co-ops can be closed, but members must be re-employed within a 31-mile radius. Daniel Martinez, director in innovation at Orbea, said his co-op had to send half its 150 staff to other parts of Mondragón during tough times. "It was a very difficult. People had technical jobs and went to do paperwork. But it was necessary. Once we got [Orbea] working again sales doubled to €70m a year and we are back employing 150 staff."

Mondragón's utopian ideal, however, is tempered by the fact that only half of staff are co-op members and their vote decides the future of the other 50%. The result is a two-tier system. During the recession it was non-member staff who suffered, losing jobs as temporary contracts were not renewed. None of its foreign divisions have become co-ops, stymied by a lack of profits and trade unions abroad suspicious of worker ownership. Carlos Fernández Isoird, a former manager who left to set up social enterprises, says Mondragón is too large, too multinational and too capitalist in outlook: "Mondragón stopped forming co-ops years ago. They have 6,000 workers in China and just opened two factories in India. Tell me when will a Chinese get to be president of Mondragón?"

When they choose to join it. Although, yes, this does want watching.

The football club ownership model is well worth exploring in this country, as is the municipal relationship also common on the Continent. Some combination of the two might very well be the game's last hope in Britain.

As for bringing Mondragón to Britain, one for the Catholic Church, I feel. With any luck, the orthodox section (not, please note, "the conservative wing") will seize this and other opportunities. Of course, Fr Arizmendiarrieta celebrated what we now know as the Extraordinary Form. Anglo-Catholicism has a history of this sort of thing, so this an chance for the Ordinariate to prove its usefulness to the wider Church. Communion and Liberation is much concerned with Social Teaching. And then there is an apostolate with its roots in Spain...