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Cooperative Firms in a Competitive Market


Mark Gordon - published on 06/04/14

The grand daddy of the worker cooperative movement is Spain’s Mondragon Corporation, which competes in finance, industry, retail and education. Located in the Basque region, it was founded in 1956 under the guidance of a young Catholic priest, Fr. José María Arizmendiarrieta. Today, the organization includes 289 separate companies and cooperatives, with 80,000 employees and $14 billion in annual revenue. Mondragon recently formed an alliance with the United Steelworkers union to assist in the formation of worker cooperatives in the US.

If all of this resonates with Catholic readers, it’s because there is great consonance between the worker cooperative movement and Catholic social teaching. In the first great modern social encyclical, Rerum Novarum, Pope Leo XIII wrote:

If working people can be encouraged to look forward to obtaining a share in the land, the consequence will be that the gulf between vast wealth and sheer poverty will be bridged over, and the respective classes will be brought nearer to one another. A further consequence will result in the great abundance of the fruits of the earth. Men always work harder and more readily when they work on that which belongs to them; nay, they learn to love the very soil that yields in response to the labor of their hands, not only food to eat, but an abundance of good things for themselves and those that are dear to them.

At the time, land was considered the form of property par excellence, which accounts for Leo’s formulation in the passage above. But property can take many forms, including land but also the means of industrial production; or in our time and context, the means of providing commercial services. Whichever form it takes, what counts is the character of the property. Is it productive, meaning can it be used to generate income and assets? Is it owned, meaning that the person who wields it has a personal say over its disposition?

“The fact that God has given the earth for the use and enjoyment of the whole human race can in no way be a bar to the owning of private property,” wrote Leo. “For, every man has by nature the right to possess property as his own.” Having concluded that private property is a right in accordance with nature, Leo plunks the family down squarely as the justification for that right: “That right to property, therefore, which has been proved to belong naturally to individual persons, must in like wise belong to a man in his capacity of head of a family.”

And what kind of property? Productive property.

It is a most sacred law of nature that a father should provide food and all necessaries for those whom he has begotten; and, similarly, it is natural that he should wish that his children, who carry on, so to speak, and continue his personality, should be by him provided with all that is needful to enable them to keep themselves decently from want and misery amid the uncertainties of this mortal life. Now, in no other way can a father effect this except by the ownership of productive property, which he can transmit to his children by inheritance [bold and italics mine].

Leo was writing at a time when revolutionary socialism was making great headway in Europe, and so he believed it was necessary to offer a full endorsement of private property. Yet he also knew that socialism was a reaction to the capitalist exploitation of labor, including the imposition of a form of wage slavery that ensured the average laborer would never own productive property. On the one hand, socialists talked about abolishing private property and forcibly transferring productive resources to the state. On the other hand, capitalists talked a great deal about the sanctity of private property but had erected a system in which productive resources were forcibly transferred to a tiny economic elite. The enemy, Leo saw, was the concentration of economic power. The solution, he saw just as clearly, was an equitable distribution of productive property. Not the forcible redistribution of existing assets, but structural reform that would enhance the dignity and rights of all, including workers.

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