What Actually Undermined the Kibbutz

Good Fences

By J.J. Goldberg

Published April 07, 2010, issue of April 16, 2010.
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This April marks the kickoff of a worldwide series of events celebrating the 100th anniversary of the founding of the first kibbutz, Degania. Fine words have been spoken in Degania and Tel Aviv, and many more will be spoken elsewhere in the months ahead in praise of Israel’s kibbutzim, the iconic farming communes once considered modern Israel’s greatest contribution to human betterment — what Martin Buber called the “experiment that did not fail.”

The celebrations are tinged with melancholy, though. The institution of the kibbutz has survived its first century, but the hope of pioneering a new and better model of human society has not. Over the past quarter-century, most of Israel’s 270 kibbutzim have abandoned the founders’ socialist credo, “from each according to his ability, to each according to his need,” and replaced it with the new “privatized” kibbutz. Today’s kibbutz boasts differential salaries, shuttered dining halls, individual home ownership, private bank accounts and investment portfolios and, of course, richer and poorer kibbutzniks. Only about 80 kibbutzim, fewer than one-third, still preserve the old egalitarianism.

We’ve all heard the explanations. The socialist dream succumbed to the realities of the market and of human nature. Communal enterprise couldn’t compete in the free-wheeling economy of the late-20th century. Collective life stifles ambition and rewards laziness. Kibbutzim got by on idealism for several generations, but by the mid-1980s the stagnation of the commune couldn’t compete with the glitter of capitalism. Now kibbutzim are wising up and trading their impractical ideals for hard-headed market realism.

It’s a dramatic story, and some of it is actually true. But not much. If you listen to the leaders and financial managers who were running the kibbutz movement during the crisis that undermined the kibbutzim during the 1980s, you get a very different story.

The way they tell it, the old kibbutz dream didn’t die out. It was more like murder. A combination of malice and neglect by government officials and incompetence by planners in the central kibbutz federation in the 1980s short-circuited a social and economic system that had been working fine for decades.

There are precise dates and numbers to back up the case, for anyone who takes the time to listen. But for more than 20 years nobody has bothered to listen.

Consider, for example: As the usual story goes, traditional kibbutz collectivism stifles economic growth. Over the past two decades, supposedly, those kibbutzim smart enough to recognize this truth have gone private. They’ve created incentives for productivity, rewarding the best and brightest with higher salaries. The non-privatized kibbutzim, presumably, have remained mired in socialist stagnation.

But the truth is just the opposite. The kibbutzim that maintained classic kibbutz socialism are the ones that thrived economically over the past generation. Their members have kept innovating regardless of kibbutz structure, developing and marketing high-tech irrigation systems, operating state-of-the-art printing, plastics manufacturing and even financial services. It turns out that when money comes in, nobody minds sharing. It’s when the kibbutz treasury runs dry and living standards are slashed that bickering erupts. That’s when members start leaving to pursue those dreams they didn’t know they had until the kibbutz cut their consumer allowance.

A little history lesson is in order here. In 1984, the Israeli economy nearly collapsed. Inflation, which had reached an alarming rate of 40% back in 1976, the last year of Labor’s long rule (and the height of the oil crisis), started doubling almost every year under Menachem Begin’s Likud. By 1984 it was at 450%. In that year, Shimon Peres became prime minister in an uneasy power-sharing arrangement with the Likud’s Yitzhak Shamir. Peres developed a program to stabilize the economy by freezing wages and prices, nationalizing the banks and restructuring debt. By 1986 the inflation rate had dropped to 20%.

Restructuring debt was the trickiest part. At the height of the madness, people and companies were treating banks like casinos, borrowing money at 150% interest, knowing that inflation would soon reach 200% and their repayments would amount to pennies. Peres’s problem was that if inflation were cut to 20% while half the country held loans at 150% interest, the result would be ruinous.

Accordingly, the government sat down to renegotiate loans sector by sector, with manufacturers, retailers, unions and cooperatives. Only the kibbutz movement’s debt was not renegotiated, according to movement officials I’ve spoken to, including two kibbutz federation secretaries-general from that era and a half-dozen individual kibbutz treasurers.

Why were the kibbutzim left out? The people I’ve spoken to believe it was politics. Half the government, including the Finance Ministry, was controlled by the Likud, which had had been feuding with the kibbutzim since the 1930s. The leader of the Labor half, Peres, had every reason to want to embarrass his bitter rival, Yitzhak Rabin, the kibbutz movement’s political patron.

Others have their own explanations: Kibbutzim borrowed too liberally during the casino years. Too much of their debt was not for productive growth but rebuilding members’ apartments to permit at-home child-rearing. The rise of the Likud ended an implicit loan guarantee that kibbutzim enjoyed under Labor.

Whatever the reason, kibbutzim didn’t receive even partial debt restructuring until 1989. By that time, the combined kibbutz movement debt was near $6 billion, or about $50,000 per kibbutznik. Draconian debt repayments were emptying kibbutz treasuries and driving down living standards, except on the wealthiest kibbutzim. Members with marketable talents began leaving, and kibbutzim began searching for ways to entice them to stay. Exit socialist idealism, enter private incentive.

Ironically, the kibbutz was more productive than ever. In 1990 kibbutzim accounted for about 2% of Israel’s population, but were responsible for 7% of its gross domestic product and fully 15% of its exports. The crisis wasn’t economic viability. The problem was that the banks were getting the money instead of the kibbutzniks.

It’s all water under the bridge, of course. The old kibbutz ideal is mostly history, and nothing is likely to bring it back. But the truth still matters, because the crisis of the mid-1980s has lessons for us today. The same cynical arguments brought against the kibbutz at a time of crisis — it never worked anyway, idealism is naïve, greed rules, dog must eat dog — are being hurled these days against every effort at a kinder society, from health care reform to minimum wages to pensions to consumer credit protection. It was bunk back then, and it’s bunk today.

Contact J.J. Goldberg at goldberg@forward.com and read his blog at blogs.forward.com/jj-goldberg


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