The Economic Crisis

I've been distracted by end of term deadlines and meetings, plus a short business trip to San Francisco, but have been meaning to link and reflect on an interesting story in The Jewish Daily Forward. It's a look back at the economic crisis. No, not the recent international meltdown of the financial system, but rather the spiralling hyperinflation that struck Israel in the mid-1980s.


Most experts point to the financial shock of this period as the beginning of the end of true communalism in the kibbutz movement. Many critics use the deep indebtedness of the kibbutzim at the time and their subsequent embrace of what might be described as "free-market reforms" as evidence of capitalism trumping socialism. But as author J.J. Goldberg points out, that analysis doesn't stand up to scrutiny. In fact — and I heard this from several experts myself — the kibbutz movement got a raw deal from the banks and government, especially when compared to the debt restructuring agreements hammered out for other players in the then-struggling Israeli economy. 


The result? A sense of economic desperation and disillusionment amongst kibbutz members.

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.

That might seem like ancient history in light of Israel's booming new high-tech economy. But the changes currently transforming the kibbutz movement have their roots, not  in a failure of ideology (or not entirely), but also in a political unwillingness to extend a helping hand to communities that had played a vital role in the settlement and development of the State of Israel. (One minor correction to the original article: The Likud hadn't been "feuding with the kibbutzim since the 1930s," as that right-wing party didn't come into existence until 1973. Its founder, Menachem Begin, did have little sympathy for kibbutzniks, who he infamously derided as "millionaires with swimming pools".)


J.J. Goldberg, a former member of Kibbutz Gezer, sums up the "lessons" of the last economic crisis nicely:

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.