Debts Dampened the Idealism
At Many Israeli Communes;
Next: Private Ownership?
By KARBY LEGGETT

Staff Reporter of THE WALL STREET JOURNAL

May 26, 2005; Page B1

 

KIBBUTZ GAN SHMUEL, Israel -- The Israeli kibbutz has survived wars, drought, hyperinflation, political turmoil and a failed peace process with the Palestinians. Now, nearly 100 years after the first kibbutz was established, many of the communal farming communities are being undone by something far more prosaic: commercialization.

Kibbutz Gan Shmuel, north of Tel Aviv, is a case in point: In the early 1990s, debts were mounting, younger residents leaving. Then help arrived in the form of the Golden Arches. McDonald's Corp. opened a restaurant. An Ace Hardware store opened, as did a Toys "R" Us.

 

Once a utopian, socialist enclave, Gan Shmuel has turned a big chunk of its lush farmland into a shopping mall. The dining hall, once free for residents, has been replaced with a pay-as-you-go meal plan. Utilities, housing and other services are still free, but further changes appear inevitable, says community manager Oded Zentner, adding, "We are doing very well."

 

The pioneering kibbutzim of Israel were once a model of communal living: Members owned no private property and drew no salaries. Many kibbutzim operated small businesses, often agriculture-related, but the money they earned was pooled to pay for community services, from housing and food to education, health care and transportation. Many children born on the kibbutz lived apart from their parents, so as to elevate community above family.

About 110,000 Israelis still live on kibbutzim, down from a peak of 125,000 in 1990. But the socialist dream now seems to be nearing an end, as the 270-odd kibbutzim open their doors to a creeping phenomenon known here as privatization. After fostering kibbutzim in their early years with free land and subsidized water, the Israeli government has left them to fend for themselves. Many kibbutzim are no longer viable on a strictly communal footing and now require members to pay for food and utilities. Some are home to profit-making businesses serving an outside client?le and charging market prices.

 

Privatization may go further: A bill slated for submission to Israel's parliament in coming weeks would give kibbutz members formal, private ownership of the communities' assets, including the homes that members live in and land they farm. Passage is uncertain, partially because of questions over whether the land should be given away free or sold.

But the bill's mere presentation will be a watershed in Israel, where many people see the kibbutz as the foundation of the state and its members as the embodiment of Israel's hard-nosed determination for security and independence and deserving of financial compensation. "The kibbutz movement was the main tool for establishing Israeli statehood and sovereignty," says Ephraim Sneh, a member of parliament who is sponsoring the bill. "It's inconceivable that now, when we have a strong state, their members are being deprived of any benefits."

 

The bill highlights just how much has changed for kibbutzim. These largely secular communities played a crucial role in establishing Israel after the 1948 independence war, providing food for the nation's meal table and security along its once-vulnerable borders. Through most of the 1960s, they were an economic engine and a leading force in Israel's political and social life. They achieved near-mythical reputations abroad, drawing hordes of young American and European visitors.

In recent years, however, the encroaching global economy has forced certain changes on the traditional kibbutz. Shlomo Getz, a kibbutz specialist at Haifa University, says more than 75% of Israel's kibbutz now charge for meals; 82% require payment for electricity; more than 25% have introduced salaries based on sliding scales and more than 30% charge for health care.

 

The roots of the changes are economic, but Prof. Getz says they also reflect a shift away from socialist values and toward greater materialism and individualism in Israeli society. "It's the end of an era," Prof. Getz says.

After Israel captured the biblical West Bank and other lands in the 1967 War, religion began to exert a stronger influence and the Israeli government began guiding financial resources to the new territories and away from the kibbutzim. Pinched for money, many of them borrowed from banks. But when Israel's central bank ratcheted up interest rates to fight inflation in the mid-1980s, many kibbutzim faced a cash crunch. The government put together a debt-relief plan, but the damage was done.

 

At Kibbutz Gvat, in the foothills of the Galilee region, the pain was deep and lasting. Facing a mountain of debt, young residents moved out, shrinking the labor market and, eventually, speeding a downward economic spiral. The community's farming business slowed; its plastics factory struggled to fend off competitors. Gvat's members, no longer able to afford free communal services, debated privatization through the 1990s and voted in favor of it in 2000.

 

Today, the tidy white homes and colorful gardens are among the few things that haven't changed on Kibbutz Gvat. Once a community of 600, Gvat now has just over 450 members, and more leave every year. Nearly every service has been privatized -- laundry, garbage collection, newspaper delivery, utilities, food and some education and medical services. "It's a completely different place than the kibbutz I was raised on," says Paz Isarel, Gvat's 29-year-old manager and a lifelong resident.

The biggest change may lie ahead: privatizing Gvat's houses and apartments, a step many residents expect in the next couple of years. It would allow members to sell their homes freely, but it would also eliminate the kibbutz's control over membership, something it has always guarded fiercely. And when that happens, Mr. Israel says, "it will be the end of our kibbutz as we know it."

 

Commercial enterprise has been a boon for some kibbutzim. Members at Kibbutz Hatzarim, in the southern Negev region, have created one of Israel's largest industrial companies, Netafim Corp., a maker of drip-irrigation and other greenhouse products that employs 200 of the kibbutz's 420 members. Last year, the company, with 32 subsidiaries in more than 100 countries, rang up $300 million in sales, and it forecasts even stronger growth for 2005.

 

Other kibbutzim have flourished by offering niche services within Israel. A short drive outside Jerusalem, Kibbutz Maale HaHamisha runs a luxury spa with an exercise center, swimming pool, hot tub, sauna and beauty salon -- all set on a hilltop with sweeping views. It's open to anyone who can afford the annual membership fee of nearly $1,000; members of the kibbutz also have to pay. Maale HaHamisha also runs a "rehabilitation center" for orchids. Customers pay up to $10 to have their flora cared for, retrieving them when they bloom. Says Nir Meir, Maale HaHamisha's chairman: "Rich Israelis used to be embarrassed by their wealth; now they flaunt it."

As privatization creeps ahead, money matters have come to dominate the agenda at almost every kibbutz. At Kibbutz Mishmar HaEmek, also in the Jezreel Valley area, profit from its plastics factory has allowed it to retain all of its communal services. Even so, efforts to earn even more money have sparked a new debate, about whether to open the kibbutz's retirement home to outsiders. "It's about money, which we never worried about before," says Chen Tsur, a 41-year-old secretary at the kibbutz.

 

Money is also on the minds of residents at Kibbutz Gan Shmuel, which runs the shopping mall. Gan Shmuel has emerged in economic good health over the past decade. Revenues collected from the mall's nearly three dozen retail stores, including a supermarket run by the kibbutz, contribute nearly 30% of Gan Shmuel's annual income. The remainder comes mostly from a fruit-drinks factory the kibbutz operates. The businesses earn enough to subsidize Gan Shmuel's communal services, but some members wonder how long it can last.

 

A sign of this concern emerged last year, when kibbutz members put together a plan to deal with possible full privatization. The plan spells out how assets such as apartments and houses would be distributed; it will be activated only if a majority of members endorse full privatization.
Mr. Zentner, the kibbutz manager and longtime member, calls the scheme a dormant plan, reflecting his hope that full privatization never becomes a reality. Even so, he says no kibbutz can afford to ignore the winds of change. "We want to make sure we are ready for it," he says.