International Business : Debt-Plagued Kibbutz Community Embraces the Capitalist Revolution

An Israeli toilet paper factory did something unprecedented recently: It fired a lazy worker.

The move was remarkable because the factory is owned by Kibbutz Snir, one of Israel’s celebrated collective communities founded on the principle of guaranteeing work to all members and providing for all their needs.

Snir is at the forefront of a capitalist revolution in the kibbutz movement, whose members--plagued by mounting debts from the 1980s--have had to abandon some of their socialist principles in the struggle for financial solvency.

Many kibbutzim are now in transition toward privatized economies in which kibbutz businesses are run by outside professionals, members manage their own household budgets and workers are paid according to their contributions.

Kibbutz leaders say the changes are already showing signs of raising productivity, reducing overheads and turning old-school socialists into educated consumers.

“Privatization is one of the only ways for the survival of the entire kibbutz movement,” said Gilad Shafran, Snir’s secretary general. “If the system will allow the strong people to earn more, it will push all the members forward.”

Under the old system, a kibbutz factory manager earned the same salary as an assembly line worker, and many complained that lazy members coasted by on the efforts of the more productive.

Shafran said it was too soon to tell whether privatization would solve Kibbutz Snir’s financial woes, but expenses were down 20% since privatization began in January and attitudes toward work had dramatically improved.

Ariel Halperin, head of a joint committee that manages kibbutz debt, said privatization was an economic imperative for the most financially distressed kibbutzim.

“It’s a necessity, it’s not a question of ideology,” Halperin said. “In some cases, we see no solution within the kibbutz system. What we need then is a change in the organization.”

The debt for Israel’s 256 kibbutzim, which have a few hundred members each, was once estimated at $56,000 per member. It peaked after kibbutzim borrowed at interest rates as high as 10% to 12% in the early 1980s, then could not repay the loans in the midst of triple-digit inflation.

The movement was rescued largely by government help. But the kibbutzim promised to economize. The changes have transformed the social fabric and daily life on kibbutzim, once seen as idyllic collective farming communities.

On Kibbutz Kalya, a West Bank settlement overlooking the sweltering Dead Sea region, members said they used to let their air conditioning units run 24 hours a day.

But when families started paying their own electricity bills from household budgets, consumption plummeted, kibbutz officials said.

Kalya members now finance their own haircuts, pay their own phone bills and even shell out their own shekels for dog food.

“I don’t have a dog, so I don’t have to pay for someone who has a dog. I don’t smoke, so I don’t have to pay for people who smoke,” said member Sima Cohen, who has lived on Kalya since 1981.

But traditionalists in the parent movements are fighting the more advanced stages of privatization, especially differential salaries, which some say are the final breaking point of the kibbutzim’s founding socialist principle: From each according to ability, to each according to need.

“When a kibbutz decides to pay salaries to members of a kibbutz, it’s not a kibbutz anymore,” said Amiram Efrati, general secretary of the 85-member Kibbutz Artzi movement, which has taken steps to oust privatizing kibbutzim.

Efrati said a capitalist model that left some poor and homeless in cities would not work inside a kibbutz.

But reformers say the financially beleaguered settlements must focus on the bottom line.

“So call it another name, what’s the difference?” said Aharon Ben-Nun, an economist who helped design privatization measures on his own Kibbutz Ein Zivan on the occupied Golan Heights.

“What’s better, that it will be a kibbutz but not survive, or that it will survive but not be a kibbutz?”

Ben-Nun said that in the three years since his kibbutz introduced differential salaries, productivity in its orchards and factories had increased sharply along with morale.

“The main difference is that people feel much better--they’re more satisfied with what they’re doing,” he said.