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.



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.


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.


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