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In the pre­vi­ous two arti­cles in this series Michael Livni pointed out that by the end of the 1970’s all was not well in the kib­butz move­ment. This was so in spite of the fact that the kib­butz appeared to be flour­ish­ing. In the early 1980’s the moment of truth arrived.

The newly elected Likud’s poli­cies of eco­nomic dereg­u­la­tion led to the finan­cial cri­sis that hit Israel in the early 1980’s. There was a con­scious inten­tion to emu­late the neo-liberal eco­nomic poli­cies of Ronald Rea­gan and Mar­garet Thatcher. In the atmos­phere of eco­nomic expan­sion, bank pro­mos exhorted the pub­lic, day and night, to take out loans and “grow with the bank.” Infla­tion reached 400%. In 1983 Israel’s whole bank­ing sys­tem went through a melt­down as a result of finan­cial spec­u­la­tion – not dis­sim­i­lar to what hap­pened in the U.S.A. in 2008. In effect, the gov­ern­ment had to take over the banks.

The Labor party pol­icy of “dis­pers­ing the pop­u­la­tion” was dis­con­tin­ued. It had meant a pro­tec­tion­ist eco­nomic pol­icy for agri­cul­tural prod­ucts. This ben­e­fit­ted both kib­butzim and moshavim who con­sti­tuted a major ele­ment in Israel’s geo­graphic periphery.

 

FINANCIAL CRISIS AND THE KIBBUTZ

Many kib­butzim took part in the finan­cial spec­u­la­tion cat­alyzed by infla­tion. Many spec­u­lated in sup­pos­edly gilt-edged bank stocks. The banks had lent bil­lions of shekalim to the kib­butzim for indus­trial expan­sion in non-indexed loans. Kib­butzim also uti­lized such loans for infra­struc­ture such as enlarg­ing mem­bers’ houses for the tran­si­tion to lina mish­pachtit.

As kib­butz his­to­rian Henry Near pointed out in his His­tory of the Kib­butz Move­ment(1995): “Dur­ing the period of gal­lop­ing infla­tion it was vir­tu­ally impos­si­ble to make any real­is­tic esti­mate of the prof­itabil­ity of an invest­ment or in many cases of the sim­plest day-to-day trans­ac­tion.” There was the expec­ta­tion that the loans would have neg­a­tive inter­est as a result of infla­tion. Kib­butz debts to the banks were a sig­nif­i­cant com­po­nent in the banks’ liq­uid­ity crisis.

In 1985 the gov­ern­ment acted. Non-indexed loans lib­er­ally granted by the banks became indexed. Under those cir­cum­stances, many kib­butzim, includ­ing cen­tral finan­cial insti­tu­tions of the Kib­butz move­ment and the net­work of mutual guar­an­tees no longer had the assets to cover their lia­bil­i­ties. The Moshavim were hit just as badly. Each indi­vid­ual moshav mem­ber had to con­tend. Many sim­ply aban­doned their hold­ings on the moshav and walked away from their debts. This was not an option for the kibbutzim.

The agri­cul­tural sec­tor in gen­eral and much of the kib­butz move­ment in par­tic­u­lar were badly affected by cut­backs in agri­cul­tural sub­si­dies and devel­op­ment funds. In par­tial com­pen­sa­tion, the gov­ern­ment instructed the Israel Lands Author­ity make kib­butz land avail­able for real estate devel­op­ment. (For exam­ple: Gesher Haziv tripled its pop­u­la­tion in a decade). This enabled some kib­butzim to par­tially repay their loans to the banks.

CAUSE OR EFFECT?

Was the finan­cial cri­sis in and of itself the CAUSE of the kib­butz move­ments’ ide­o­log­i­cal implo­sion? Maybe – but the alter­na­tive propo­si­tion is that the vul­ner­a­bil­ity of the kib­butz in the finan­cial cri­sis was a RESULT of an ide­o­log­i­cal vac­uum which had devel­oped. The lat­ter is my firm belief.

Stan­ley Meron‘s metaphor of “ide­o­log­i­cal ane­mia” was par­tic­u­larly apt. A nor­mal per­son has six liters of blood. Sup­pose that such a per­son has an acci­dent and suf­fers a sud­den loss of a liter of blood. He/she will have to rest for a day or so to recover. A per­son suf­fer­ing from ane­mia because of a chronic dis­ease can, over a period of time, lose a liter of blood or even more. He/she will not be a well per­son but will con­tinue to func­tion. How­ever if that per­son then suf­fers an addi­tional sud­den loss of an addi­tional liter, his/her life is in imme­di­ate dan­ger. That was the impact of the finan­cial reg­u­la­tions pro­mul­gated in 1985 on many of the kib­butzim and the cen­tral eco­nomic insti­tu­tions of the movement.

But the above con­clu­sion leaves a num­ber of ques­tions unan­swered. Were all kib­butzim affected by the cri­sis and if not, why not? What were the causes of the assim­i­la­tion of the kib­butz (and by exten­sion, of Labor Zion­ism as a whole in Israel) to neo-liberal val­ues with its atten­dant pit­falls? What were the under­ly­ing fac­tors behind the loss of pur­pose, of inten­tion, of mis­sion (shlichut)? The kib­butz had been both a home and an ide­o­log­i­cal path. What hap­pened to the ide­o­log­i­cal path?

Down the line the ques­tions are: What is hap­pen­ing now? Can the move­ment make a come­back? Can it regain mis­sion? Can it regain Zion­ist pur­pose? Under what con­di­tions? These ques­tions will be the sub­ject of later arti­cles in this series.