Travel Reference
In-Depth Information
their traditional farming economy with industry and tourism and established other enter-
prises that brought in increased revenue and profi ts. Indeed, even as the kibbutzim's popula-
tion continued to grow, the number of members engaged in agriculture was dropping. By
1990, more were working in industry than in farming. Some members also left, attracted by the
material and other advantages of city life.
The real blow to the movement came in the 1980s as the hyperinfl ation that struck the Is-
raeli economy caused the kibbutzim's debts to balloon and exposed their economic ineffi cien-
cies. In 1989, they reached the fi rst debt bailout agreement with the government and its bank
creditors. Kibbutzim were forced to sell land and industrial enterprises, including the giant
dairy cooperative Tnuva in 2008, and to begin running their operations on a business basis. By
2009, the great majority of the kibbutzim had solved their debt problems.
In the wake of the debt crisis, the kibbutzim also did away with much of their collectivist
structure, a process informally called “privatization” even though each community remains
under collective ownership. In most kibbutzim today, members can work outside the settle-
ment at salaried jobs, outsiders rent homes in the settlement, and professional managers run
kibbutz-owned enterprises. Rather than being allocated goods and services in kind, members
are paid stipends for their work, which they can spend on meals in the dining hall, clothing,
and entertainment. Indeed, in 2007, three years short of its centennial, Degania (now called
Degania Aleph to differentiate itself from a sister kibbutz, Degania Bet, formed in 1920) priva-
tized itself.
Even if privatization has meant jettisoning many of the movement's original values, it has
helped the kibbutzim to recover from the crisis of the 1980s. After declining in the following
decade, their combined population has slowly begun to grow again, and since 2005 the kib-
butzim have attracted more new members than they have lost. Their combined membership
stood near 130,000 in 2011, close to its record high seven years earlier.
INVESTMENT, SAVINGS, AND MONETARY POLICY
In the early years of the state, Israel was faced with the enormous task of building an econ-
omy, as well as industry, homes, and infrastructure, with few domestic resources to meet the
challenge. Although Israel's private savings rate was high, it was not high enough to meet the
economy's needs, in part because the government has almost always had a net negative savings
rate through nearly all of its history.
The solution to the shortfall was twofold. First, Israel became an importer of foreign capital
in the form of loans, such as Israel Bonds, which were fi rst issued in 1950, and grants and gifts,
which amounted to $2.2 billion between 1952 and 1960. Second, the government gradually
established an almost complete monopoly on the allocation of capital to various sectors of the
economy. The government gave itself the authority to decide where banks would lend money
(a practice known as directed credit), when and how companies could turn to the capital mar-
kets to raise funds, and where institutional investors, such as pension and provident funds,
could invest their assets. By assuming control over access to capital, the government effectively
assumed control over the entire economy.
Why did the state come to supplant the banks and fi nancial markets? Certainly one critical
factor was the private sector's inability to raise capital on its own. There was little cross-border
