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Only in Israel: Socialist Capitalists

The Israeli economy miracle is not just about being the Start-Up Nation. It also owes to a unique phenomenon: the industry of the Kibbutzim (plural of a Kibbutz).

What is a Kibbutz? More than 100 years ago the first Kibbutz (from the Hebrew word kvutza, meaning group), was established. It was a revolutionary idea of a voluntary society in which people live in accordance with a specific social contract, based on egalitarian and communal principles in a social and economic framework. The main characteristics of Kibbutz life were established in adherence to collectivism in property alongside a cooperative character in the spheres of education, culture and social life. With this came the understanding that the Kibbutz member is part of a unit that is larger than just his own family.

The Kibbutz operates under the premise that all income generated by the Kibbutz and its members goes into a common pool. This income is used to run the Kibbutz, make investments, and guarantee mutual and reciprocal aid and responsibility between members. Kibbutz members receive the same budget (according to family size), regardless of their job or position. The Kibbutz is governed by a system of direct participatory democracy, where the individual can directly influence issues and events in the community.

The Kibbutz founders led very demanding and modest, lives, living under conditions that would be, now a days, considered as real poverty. Just over a few decades, endless determination and very hard work, led many Kibbutzim to be the real socialist paradise, where they still had to work hard, but could lead a comfortable satisfying standard of living.

Although encompassing only three percent of Israeli society, the Kibbutz has made a dramatic mark on Israeli production, culture and ideology.

the Kibbutz of today has evolved dramatically and the focus of Kibbutz life on society has substantially become more moderate. And yet, much of the Kibbutz physical and financial assets are still collectively owned, thus keeping the Kibbutz a significant financial entity.

Being very young and idealistic, during the Kibbutz early years, as well as, to address the urgent needs of the poor country, Palestine (the name of the country prior to the establishment of the state of Israel), these pioneers based their being on agriculture (still today, a major part of the Israeli agriculture originates from the Kibbutzim).

Towards the late 60’s and early 70’s, the founders who were still enthusiastic pioneers, were not that young any longer. Despite all the technology, they applied to their agriculture, they had to leave the hard work, out in the field, under the Middle Eastern sun, to their sons and daughters. For an idealistic Kibbutz pioneer, retirement is never an option. They started small workshops, in which the founders could do work that generated income for the Kibbutz, but was not be as demanding as working in the fields. At first, they built small carpentry shops, textile workshops, small scale toys manufacturing shops etc. (the first Israeli made TV sets, in the 70’s, were assembled in a Kibbutz workshop). Some opened a print shop, a small shoe factory or a bakery. All collectively owned and managed!

But, even an aging Kibbutznik (member of a Kibbutz), is still a determined hard worker; thus, many of these workshops for the elderly members, developed rapidly and became full scale industrial facilities; now, some times, leading an industry, exporting goods and making the Kibbutz money, that in most cases will be further invested in the Kibbutz industrial activities. These factories needed additional headcount and professional management. The Kibbutz became an employer of people from neighboring towns, who now work shoulder to shoulder with the Kibbutz members. The young generation, did not, any longer, automatically go to the fields. More of them were sent, by the Kibbutz, to acquire education to address the evolving needs of the factory.

Now a days, the Kibbutzim industry is manufacturing high tech products such as optical lenses, advanced construction elements, the best irrigation technologies, armored vehcles, pool cleaning robots, advanced plastic products, food-tech products, aerospace parts, biotech, advanced machinery and many more, reaching over $50B annual sales and investing hundreds of millions in R&D and M&As.

Some Kibbutzim made their complete or partial exit, but most still own their industry. Many publicly listed their companies, to facilitate growth, and some partnered to private sector (local and global) companies, or private equity funds.

Thus, still being socialist in its essence, in the southern Israeli desert, a Kibbutz can own a publicly listed huge company, with global subsidiaries, invest in other companies and be a large global employer.

So, if one day, when you can fly again, come visit Israel and make sure you include visiting a Kibbutz as part of your plan. The elderly lady, modestly dressed riding and electric scooter (manufactured in another Kibbutz) on the pavement surrounded by the ever green Kibbutz lawns, rushing to visit her grandchildren on the other side of the Kibbutz, please note that might well be part of a controlling group of an impressive technology company! If you happen to meet the CEO of the Kibbutz NASDAQ company, believe it or not, next Friday, you might find him running the industrial dishwasher at the Kibbutz collective dining hall after the Friday evening festive dinner…

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