Co-op Study 8

Kibbutzim

by Manfred Davidmann

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CONTENTS

Introduction
Kibbutzim
Organisation and Decision-taking
Success and Wealth
Agriculture, Manufacturing, Services
Differential Pay - Differential Spending
Management Takeover Attempts
Disillusion and Apathy
Conclusions
Notes <..> and References {..}

Relevant Current and Associated Works

Relevant Subject Index Pages and Site Overview



INTRODUCTION

Kibbutzim are successful co-operative communities now experiencing both practical and ideological problems. So the study looks at what is taking place to find reasons for success and causes of problems.

This study is one of a series of eight studies of co-operatives and mutual societies which were undertaken to determine causes of failure and reasons for success, to see how these enterprises were controlled and managed, to learn from the mistakes of others. What is taking place is fascinating and often unexpected (See 'Relevant Current and Associated Works').

The main report 'Co-operatives: Causes of Failure, Guidelines for Success' is based on these studies. Its conclusions and recommendations are entirely relevant and cover fundamental and practical problems of co-ops and mutual societies, of members, of direction, management and control (See 'Relevant Current and Associated Works').


KIBBUTZIM

The kibbutz is the best known of Israel's three types of co-operative farming settlements <7>. Its members live in a single community and share the work. The word kibbutz is the Hebrew name for such a community.

Kibbutzim <1> were mainly agricultural co-operative communities. Property such as land, buildings and equipment, factories and tools, is owned by the kibbutz, is owned jointly (collectively) by the community.

There is no private wealth and members transfer all their assets (but not personal belongings) to the community when joining. The kibbutz looks after all the needs of its members and their families and usually provides communal dining, laundry and other services and facilities for its members.

Families do have private accommodation and some personal property, and what is provided depends to a considerable extent on how rich the kibbutz is, on what they can afford.

'From each according to their ability, to each according to their need' is practiced. The kibbutz looks after its members from cradle to grave and this includes education and social security. Children are largely brought up by the community.


It was only through this kind of co-operative living that a deprived people could settle successfully in a hostile environment. Aided by the community at large, the settlements successfully struggled to establish themselves and prospered.

But there are few kibbutz members who do not know that the pioneering spirit, the drive and motivation to succeed, diminished and evaporated with success. Kibbutz members are aware of the need for rejuvenating the movement, its settlements, its ideological motivation and its drive.


Children were brought up communally in age groups, away from their parents. One age group would progress from creche to nursery to school and so on, living together during the week and seeing their parents, and perhaps living with them, only at weekends.

This may have freed both parents for work and defence in the initial struggle for survival. But the practice was continued when successful, possibly to free women for work and so increase production. But it was done at the expense of the family.

Of any group in the country, the kibbutz children consequently showed the highest incidence of mental problems. The kibbutzim have had to backtrack and now give their children a more normal and strengthening family-life experience with their parents.


Kibbutzim now own and operate factories, hotels and restaurants, and much else. Degania, for example, has a factory with an annual turnover of about USD 15 million which provides roughly 75 per cent of its income. {KIB 02}

And kibbutzim are successful. Three per cent of Israel's population, about 125,000 people, live in 270 kibbutzim ranging in size from say 200 to 2,000 members. They produce something like 50 per cent of Israel's agricultural produce and about 9 per cent of its industrial goods.


ORGANISATION AND DECISION-TAKING

All are equal regardless of the work done and all share equally in the work to be done, the available services and the democratic management of the kibbutz.

Decisions are made jointly by the General Assembly of all kibbutz members. The General Assembly decides policy and allocates responsibilities (work) to individual members by electing managers and assigning work.

One member could, for example, be given responsibility for work scheduling and for allocating work to individual members. Such work in larger kibbutzim could also be handled by committees whose members are also elected by the General Assembly, the chairperson often doing this work full time.

Members occupy their role for a limited period, say one or two years, often full time in larger kibbutzim, and jobs (roles) are rotated.

The functions covered in such ways are the usual ones found in any enterprise or community and can vary from kibbutz to kibbutz. Finance, transport, health, short-term and long-term planning, social and cultural activities, communal dining, laundry, creche facilities, and so on.


Decision-taking by the General Assembly can involve heated argument, infighting between factions and marshalling of support. Suppose money is limited, a tractor has to be bought and only one child can be sent to study at university, both fees and maintenance being required. One child out of two and your child is one of the two. Such problems can prove very divisive within such a close community.


SUCCESS AND WEALTH

The success of the kibbutzim became a byword in Israel. Agriculture in Israel was more capital intensive than in the USA. While urban life was tough and insecure in a taxing climate, kibbutz members had a secure and high standard of living and a good quality of life.

Life on a prosperous kibbutz includes its cultural centre or concert hall, use of swimming pool and tennis courts, film shows, lectures and concerts. <2>

As an open-air swimming pool was replaced by an even bigger one, as a new concert hall was built, as factories were started and outside labour was employed, the rest of Israel saw them as living in a 'paradise on earth', as a 'community of millionaires'. And there are many struggling Israelis who see kibbutz wealth and life-style as the result of state handouts.


How come? And what does the future hold? So let us look in a little more detail at what actually happened.

The kibbutzim were backed and supported by world-wide Jewish communities. Much if not most of the money was channelled through the Jewish Agency (Sochnut) which financed, or else provided, water supplies, electric power, roads and capital for land (when required), housing, equipment, machinery, livestock.

Here are some simple figures {KIB 04}:

Take agriculture. Take the year 1975. In that year alone farmers received USD 130 million <3> in unlinked loans, about 83 per cent of the total investment in agriculture. 'A good part of these loans were given by the Jewish Agency, for the traditional 50 years at 2 per cent, unlinked of course, and with a grace period <4> of 20 years'.

At Israeli inflation rates of about 40 per cent each year all the loans mentioned are practically wiped out in seven years, never mind 50 years. The loans were, for all practical purposes, free gifts to agricultural settlements <5>.

Kibbutzim received unlinked fifty-year loans with repayment starting after ten or twenty years. At interest rates far below rate of inflation, the amounts being paid back to the Sochnut were negligible compared with the loans received, in effect a free gift.

The success and wealth of kibbutzim resulted from large capital sums provided without strings by world-wide Jewish communities at considerable hardship to the communities.

No wonder the riches and success of the kibbutzim and of kibbutznicks (kibbutz members) became a byword in Israel. Living a good life in paradise on earth, that is how the rest of Israel saw them.


AGRICULTURE, MANUFACTURING, SERVICES

The underlying kibbutz ideology of shared work and shared success, of community-orientated living and social responsibility, was weakened by material success. So now socialist kibbutzim permanently employ labour from outside the kibbutz.

Year by year volunteers flocked to the kibbutzim to share in the struggle for a better and more secure life for the kibbutz and so for its members and for the community at large. Freely contributing their labour while sharing to some extent in the life of the kibbutz. But volunteers to a considerable extent ceased to be motivated by ideology. And to a considerable extent are now regarded as cheap labour by the kibbutz.

Kibbutz members had struggled hard and well and were now enjoying the fruits of their labours. Economic success, social security and wealth came in, co-operative principles went out.

Working for their own benefit, they became profit-taking owners and employers. Kfar Blum and Kfar Hanasi, for example, employ workers from outside in their factories. None of the manual workers in Kfar Hanasi's foundry is a member of the kibbutz. {KIB 01, 03}

Kibbutzim have become employers of labour. Co-operative ideology has been replaced by self-interest. To this extent is their higher standard of living and quality of life the result of profiting from the work of others.


And this outlook has began to affect life within the kibbutz.


DIFFERENTIAL PAY - DIFFERENTIAL SPENDING

Within the kibbutz all are equal, all share to the same extent. Some are more able than others, some do more than others, but all are paid the same. Earnings are pooled and divided equally. But in at least one instance are differential allowances being introduced: members are to be paid according to the market value of their work {KIB 02}.

What is the value of one person's work when compared with another? How do you assess the value to the kibbutz, to the community, of the work of a nurse, teacher, manual worker, musician or manager? Market value is a rate of pay which outside the kibbutz rewards service to directors and chief executives and not service to the community. {KIB 05}

Introducing differential pay is often the prelude to managers, directors or professionals demanding higher differentials and pay for themselves. Demanding the higher pay which can be earned outside as a result of maximising profits regardless of its cost to the community {KIB 06-08}.

In some cases, kibbutz members and families are being enabled to do more for themselves, to have greater choice.

Ein Zivan shut its communal dining room and slashed collective expenditure, leaving more choices to individuals. {KIB 02}

Kfar Hanasi in 1995 intended to convert its large dining room into what will in effect be a restaurant. Kibbutz members will then have the choice of community dining, eating out or cooking at home. Family budgets are to be increased accordingly. {KIB 03}


The risk is that such changes can lead to greater inequality, particularly if combined with income differentials within the kibbutz. Such changes could reverse the very ideals on which community life is built by creating poor and rich kibbutz members.


It is those who expect to gain financially at the expense of others who are likely to advocate internal income differentials.


MANAGEMENT TAKEOVER ATTEMPTS

Afikim, with 1,400 residents the second-largest kibbutz in Israel, has factories which are 'run on purely capitalistic lines by boards of directors, mostly outside experts appointed for their business or technical acumen.' {KIB 02}

Its industrial enterprises have been separated from the kibbutz community. Policy setting and management have been distanced from kibbutz members and it would appear that to this extent managers and directors have begun to take over control from kibbutz members.

Kibbutz members are at risk of losing control over their destiny as community-orientated decision-taking moves towards profit-maximising. And so one would like to know more about their policy setting processes, about how they hire and fire directors and managers, about how the pay of directors and managers compares with kibbutz members.


But Kfar Hanasi are now treating individual kibbutz operations as profit centres, looking at their profitability and costing labour. 'Contribution to profits' seems to be replacing 'service to community', motivation and commitment.


Borrowing had been cheap at the time kibbutzim were lent (received) donated funds from Jewish communities at next to zero interest rates compared with inflation. The prosperity of the kibbutzim had developed from the donated funds they had been lent (given) in the past. <8>

So when about ten years ago inflation in Israel reached over 200 per cent and exceeded interest rates then being charged, borrowing again seemed cheap. And kibbutzim took out large loans from banks.

But the banks were not giving money away as had the Jewish communities. Inflation dropped to 50 per cent and then to 20 per cent while interest rates stayed high at 60 per cent and then 40 per cent.

As a result many kibbutzim now have to repay what they borrowed, have to repay large debts and pay high interest charges to the banks.


In a deal completed with the government, the banks agreed to write off a quarter of the debts. The kibbutzim have to repay debts totalling something like GBP 1.5 billion. A condition is that 'kibbutzim will have to cut back on many of their non-profitable operations'. {KIB 01}

So it seems that these kibbutzim are expected to maximise profits (for the benefit of money lenders) at the expense of what may be more worth-while community-orientated activities.


DISILLUSION AND APATHY

For some time now many able and disillusioned young have been leaving kibbutz life for more rewarding and satisfying life outside.

Kibbutzim are attempting to counter this trend by letting younger members study for professional and academic qualifications, largely of their choice. In turn the member is expected to commit himself to life on the kibbutz.

Members work to an increasing extent outside the kibbutz and their salary goes directly to the kibbutz. {KIB 03}


The system of allocating work by handing out jobs, by rotating them, is fair from the point of view of some work being more pleasant or satisfying than other kinds of work, from the point of view of members' abilities and skills, likes and dislikes. Decisions about work are made by and close to the people doing the work.

On the other hand, imposing decisions about work when these are made remotely in a managerial hierarchy, usually demotivates. In a natural reaction to the style of management, workers cease to care, lack commitment and dedicated effort. {KIB 09-12}


And now look again at what has been reported about Kfar Hanasi {KIB 03}:

  1. None of the manual workers in Kfar Hanasi's foundry is a member of the kibbutz.

    Kfar Hanasi are now treating individual kibbutz operations as profit centres, looking at their profitability and costing labour.

    Differential salaries are being discussed and kibbutz members are to have the choice of community dining, eating out or cooking at home.

    Kfar Hanasi's Member Assembly has been replaced by closed circuit television apparently because it has been 'so poorly attended in recent years'.

  2. Motivation is lacking, people do not seem to care any more. The young tend to leave the kibbutz, and there is a fear of people leaving.

What seems to be happening in this kibbutz is that 'contribution to profits' is coming in, pay differentials are coming in, decision-taking by members is going out, 'service to community', motivation and commitment are going out, younger members are leaving.


CONCLUSIONS

The success and wealth of kibbutzim resulted from large capital sums provided without strings by world-wide Jewish communities at considerable hardship to the communities.

But most Israelis outside the kibbutz movement were then struggling under tough conditions to make ends meet and gain a reasonable standard of living.

Although kibbutzim had the ability to give and share with others who were in need, to pass on the benefits of what they had been given, to spread the application of co-operative principles, they signally failed to do so.


Some kibbutzim have become capitalist employers of labour. Co-operative principles have been replaced by self-interest. To the extent to which this is so is their higher standard of living and quality of life the result of profiting from the work of others.

And some of these kibbutzim have separated their industrial enterprises from the kibbutz community. Policy setting and management have been distanced from kibbutz members and it would appear that to this extent managers and directors are attempting to take over control from kibbutz members. Appointing of external managers is likely to make matters worse in the end.

Kibbutz members are at risk of losing control over their destiny when community-orientated decision-taking moves towards profit-maximising.


Borrowing had been cheap at the time kibbutzim were lent (received) donated funds from Jewish communities at next to zero interest rates compared with inflation. The prosperity of the kibbutzim had developed from the donated funds they had been lent (given) in the past. <8>

So when about ten years ago inflation in Israel reached over 200 per cent and exceeded interest rates then being charged, borrowing again seemed cheap. And kibbutzim took out large loans from banks.

But the banks were not giving money away as had the Jewish communities. Inflation dropped to 50 per cent and then to 20 per cent while interest rates stayed high at 60 per cent and then 40 per cent.

As a result many kibbutzim now have to repay what they borrowed, have to repay large debts and pay high interest charges to the banks.


Within the kibbutz all are equal, all share to the same extent. Some are more able than others, some do more than others, but all are paid the same. Earnings are pooled and divided equally.

But some kibbutzim are now considering introducing income differentials. Members could then be paid according to the profit-maximising market value of their work. Together with giving members greater spending choices, there is the risk that such changes can lead to greater inequality. Such changes could reverse the very ideals on which community life is built by creating poor and rich kibbutz members.


The system of allocating work by handing out jobs, by rotating them, is fair from the point of view of some work being more pleasant or satisfying than other kinds of work, from the point of view of members' abilities and skills, likes and dislikes. Decisions about work are made by and close to the people doing the work.

On the other hand, imposing decisions about work when these are made remotely in a managerial hierarchy, usually demotivates. In a natural reaction to the style of management, workers cease to care, lack commitment and dedicated effort.


For some time now many able and disillusioned young have been leaving kibbutz life for more rewarding and satisfying life outside.

Some kibbutzim are attempting to counter this trend by letting younger members study for professional and academic qualifications, largely of their choice. In turn the member is expected to commit himself to life on the kibbutz.

And members may work to an increasing extent outside the kibbutz, their salary being paid directly to the kibbutz.



NOTES AND REFERENCES


NOTES

<1>     Kibbutzim: Plural of kibbutz, more than one kibbutz, all of them.
     
<2>   Kfar Blum {KIB 01} 1990 and Degania {KIB 02} 1993
     
<3>   Israeli currency (Lira) converted to USD at the then current average rate of exchange.
     
<4>   'Grace period' means that during this period one does not have to pay back the loan or pay interest.
     
<5>   In all fairness, while here only looking at kibbutzim, the same process was applied to industry, tourist industry and the buying of apartments. Vast sums were handed out, year by year, in effect virtually as free gifts, to those who obtained such unlinked loans <6>. But only agricultural settlements obtained loans at the negligible interest rate of 2 per cent.
     
<6>   From {KIB 04}: The Bank of Israel's annual report for 1975 showed that at the end of 1975 the balance of loans granted on concessionary terms to agriculture, industry, households and tourism came to approximately USD 1,900 million, with the interest rate averaging less than 9 per cent. The amount of free gift, of grant in just one year, in 1975, amounted to about USD 500 million. This will continue on the unpaid part of the increasing balance as more and more money is distributed in this way, year by year.
     
<7>   There are three distinct types of co-operative agricultural settlements in Israel.
     
    KIBBUTZ
(Collective
Community)
Mainly an agricultural co-operative community. Land, factories, buildings and equipment are owned jointly (collectively) by the community.
       
    MOSHAV
(Farming
Village)
A more or less self-contained farming village. Each farm is held and farmed independently by the settler and his family.
       
    MOSHAV SHITTUFI
(Collective
Settlement)
Combines the co-operative ownership and working of land and factories (as in a kibbutz) with maintaining the strength and independence of the family (as in a moshav).
     
<8>   See 'Success and Wealth'


REFERENCES

{KIB 01}     Israel's Kibbutz Movement Faces Changes if it is to Repay its Debts
Keith Harper,
Guardian, 13/07/90
     
{KIB 02}   Kibbutzim Learn to Adapt and Survive
Ian Black,
Guardian, 13/02/93
     
{KIB 03}   Correspondent
BBC TV, 03/06/95
     
{KIB 04}   Who's afraid of inflation?
Meir Mershav,
Jerusalem Post, 24/3/77
     
{KIB 05}   Work and Pay
Manfred Davidmann
http://www.solhaam.org/
     
{KIB 06}   Social Responsibility, Profits and Social Accountability
Manfred Davidmann
http://www.solhaam.org/
     
{KIB 07}   Exporting and Importing of Employment and Unemployment
Manfred Davidmann
http://www.solhaam.org/
     
{KIB 08}   Creating, Patenting and Marketing of New Forms of Life
Manfred Davidmann
http://www.solhaam.org/
     
{KIB 09}   Style of Management and Leadership
Manfred Davidmann
http://www.solhaam.org/
     
{KIB 10}   Role of Managers under Different Styles of Management
Manfred Davidmann
http://www.solhaam.org/
     
{KIB 11}   Motivation Summary
Manfred Davidmann
http://www.solhaam.org/
     
{KIB 12}   The Will to Work
Manfred Davidmann
http://www.solhaam.org/


Relevant Current and Associated Works

MAIN REPORT
CO-OPERATIVES: CAUSES OF FAILURE, GUIDELINES FOR SUCCESS
Manfred Davidmann
http://www.solhaam.org/

ASSOCIATED CO-OP STUDIES
Manfred Davidmann
http://www.solhaam.org/
1. The Trustee Savings Bank Give-Away
2. Credit Unions
3. Building Societies
4. Co-operative Retail Services Ltd
5. 5a. Co-operative Wholesale Society Ltd
5b. Co-operative Bank PLC
5c. Co-operative Insurance Society Limited

6. John Lewis Partnership PLC
7. Mondragon Co-operatives (Mondragon Corporacion Cooperativa)
8. Kibbutzim



Other relevant current and associated reports by Manfred Davidmann on leadership and management:

Title   Description
     
Directing and Managing Change     How to plan ahead, find best strategies, decide and implement, agree targets and objectives, monitor and control progress, evaluate performance, carry out appraisal and target-setting interviews. Describes proved, practical and effective techniques.
     
Style of Management and Leadership     Major review and analysis of the style of management and its effect on management effectiveness, decision taking and standard of living. Measures of style of management and government. Overcoming problems of size. Management effectiveness can be increased by 20-30 percent.
     
Role of Managers Under Different Styles of Management     Short summary of the role of managers under authoritarian and participative styles of management. Also covers decision making and the basic characteristics of each style.
     
Organising   Comprehensive review. Outstanding is the section on functional relationships. Shows how to improve co-ordination, teamwork and co-operation. Discusses the role and responsibilities of managers in different circumstances.
     
Work and Pay   Major review and analysis of work and pay in relation to employer, employee and community. Provides the underlying knowledge and understanding for scientific determination and prediction of rates of pay, remuneration and differentials, of National Remuneration Scales and of the National Remuneration Pattern of pay and differentials.
     
Work and Pay: Summary   Concise summary review of whole subject of work and pay, in clear language. Covers pay, incomes and differentials and the interests and requirements of owners and employers, of the individual and his family, and of the community.
     
Social Responsibility, Profits and Social Accountability   Incidents, disasters and catastrophes are here put together as individual case studies and reviewed as a whole. We are facing a sequence of events which are increasing in frequency, severity and extent. There are sections about what can be done about this, on community aims and community leadership, on the world-wide struggle for social accountability.
     
Social Responsibility and Accountability: Summary   Outlines basic causes of socially irresponsible behaviour and ways of solving the problem. Statement of aims. Public demonstrations and protests as essential survival mechanisms. Whistle-blowing. Worldwide struggle to achieve social accountability.
     
Motivation Summary   Reviews and summarises past work in Motivation. Provides a clear definition of 'motivation', of the factors which motivate and of what people are striving to achieve.
     
The Will to Work: What People Struggle to Achieve   Major review, analysis and report about motivation and motivating. Covers remuneration and job satisfaction as well as the factors which motivate. Develops a clear definition of 'motivation'. Lists what people are striving and struggling to achieve, and progress made, in corporations, communities, countries.
     
What People are Struggling Against: How Society is Organised for Controlling and Exploiting People   Report of study undertaken to find out why people have to struggle throughout their adult lives, in all countries, organisations and levels, to maintain and improve their standard of living and quality of life. Reviews what people are struggling against.
     
Community and Public Ownership   This report objectively evaluates community ownership and reviews the reasons both for nationalising and for privatising. Performance, control and accountability of community-owned enterprises and industries are discussed. Points made are illustrated by a number of striking case-studies.
     
Ownership and Limited Liability   Discusses different types of enterprises and the extent to which owners are responsible for repaying the debts of their enterprise. Also discussed are disadvantages, difficulties and abuses associated with the system of Limited Liability, and their implications for customers, suppliers and employees.
     
Ownership and Deciding Policy: Companies, Shareholders, Directors and Community   A short statement which describes the system by which a company's majority shareholders decide policy and control the company.
     
Ownership: Summary   Ownership means control, means decision-taking. This short review covers where the right to ownership comes from and how it is exercised. Ownership of land, means of production, and wealth. Ownership in relation to incomes, need, and human rights.
     
The Right to Strike   Discusses and defines the right to strike, the extent to which people can strike and what this implies. Also discussed are aspects of current problems such as part-time work and home working, Works Councils, uses and misuses of linking pay to a cost-of-living index, participation in decision-taking, upward redistribution of income and wealth.
     
Using Words to Communicate Effectively   Shows how to communicate more effectively, covering aspects of thinking, writing, speaking and listening as well as formal and informal communications. Consists of guidelines found useful by university students and practising middle and senior managers.
     
Exporting and Importing of Employment and Unemployment   Discusses exporting and importing of employment and unemployment, underlying principles, effect of trade, how to reduce unemployment, social costs of unemployment, community objectives, support for enterprises, socially irresponsible enterprise behaviour.
     
Transfer Pricing and Taxation   One of the most controversial operations of multinationals, transfer pricing, is clearly described and defined. An easily-followed illustration shows how transfer pricing can be used by multinationals to maximise their profits by tax avoidance and by obtaining tax rebates. Also discussed is the effect of transfer pricing on the tax burden carried by other tax payers.
     
Inflation, Balance of Payments and Currency Exchange Rates     Reviews the relationships, how inflation affects currency exchange rates and trade, the effect of changing interest rates on share prices and pensions. Discusses multinational operations such as transfer pricing, inflation's burdens and worldwide inequality.

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Relevant Subject Index Pages and Site Overview


The Site Overview page has links to all individual Subject Index Pages which between them list the works by Manfred Davidmann which are available on the Internet, with short descriptions and links for downloading.

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Copyright    ©    1996    Manfred Davidmann
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History
08/10/96 Completed
17/03/97 To Website
02/06/02 Added 'Relevant Current and Associated Works'