Only once in history did democratic socialists manage to create socialism. That was the kibbutz. And after they had experienced it, they chose democratically to abolish it.
-Joshua Muravchik.
This is the chapter 9 intro in The Mystery of the Kibbutz
I wrote this post a few months ago about the kibbutzim (the plural of "kibbutz"), the Israeli experiments in private socialism (very much ongoing experiments). At the time, I had listened to the Econtalk episode featuring Ran Abramitzky, the author of The Mystery of the Kibbutz. Since then, I have read the book, and it's excellent. I will say, having listened to the podcast multiple times, that it captures the major themes of the book. Reading the book fills in interesting details, but Ran discusses all the major arguments with Russ Roberts.
The book is quite charming. It starts with Ran asking some annoying questions of his uncle, a kibbutznik (a member of a kibbutz). Ran was not naive to the concept. Many of his close family members were also raised in a kibbutz. But Ran was studying economics at the time that he (unwittingly) picked a fight with his uncle. His economics training raised some serious questions. If everyone gets the same pay regardless of effort, wouldn't there be slacking? On a related note, wouldn't there be a "brain drain" problem and also an "adverse selection problem"? In other words, a society that gives equal pay regardless of actual contribution would repel highly productive individuals, who could earn more on the private market, and attract slackers, whose poor work ethic would limit their market earnings? Wouldn't the kibbutzim be left with the "dregs" (brain drain + adverse selection), who inhabit a society that facilitates slacking (the incentive problem)? How do the kibbutzim survive at all given these seemingly insurmountable problems? (Thus the "mystery" in the book's title.)
It turns out there isn't much of a mystery here. The kibbutzim were always a small proportion of the Jewish population of Israel. At their height, they made up about 7% of the Jewish population. (Abramitzky points out that the kibbutzim were mostly an Ashkenazi phenomenon; very few if any Arabs or Sephardi were members of these institutions. Thus the qualifier about the percent of the Jewish population.) The book includes a graph tracking this over time (note that the points are annotated with the total population, while the axis shows the percent of the Jewish population). Asking why the kibbutz can exist in the face of economic incentive problems is like asking why people upload random videos to Youtube. Most people don't, but there are just enough who do that we can find almost any random clip we remember from old, obscure cartoons. In the Econtalk interview, Russ Roberts offers the example of Wikipedia. We don't need to reconcile Wikipedia with economic theories that say we're self-interested, that we will under-produce public goods. We only need to posit that there are a few charitable, public-goods-producing individuals in the world. A small fraction of the population being so inclined means we get Wikipedia. By similar reasoning, a small fraction of Israel's population live in functioning communes that have lasted a century.
The book gives an origin story of the kibbutzim and an account of how they began to decline. It turns out that Abramitzky had the right insight when he pestered his uncle with rude questions. The kibbutzim began to break down in ways that a hard-headed economist would predict. It was not so easy to create a new "socialist man," not even when the commune begins its life with willing volunteers who are ideologically committed to the enterprise. Human nature is not infinitely malleable, it turns out. The kibbutzim made concessions, compromising on the purest form of their ideology, to keep their members from leaving.
The brain drain and adverse selection problems were very real, it turns out. Abramitzky presents evidence that low-income individuals were more likely to enter, and high-income individuals more likely to leave, the kibbutzim. The kibbutzniks implicitly understood these problems, because they designed their institutions to counter them. It turns out the kibbutzim were rather exclusive. You could not simply show up and join. They were wisely suspicious of any would-be members trying to join their community. I don't know if they were explicitly asking, "What if this guy joins our commune, becomes eligible for an equal share of our production, but just slacks off all day?" But they were surely aware that this was a potentially fatal threat to their community. There was a long, intrusive interview process for people wanting to join. There were also long trial periods, after which members could be rejected. According to Abramitzky:
Applicants also had to go through a lengthy interview, fill out forms about their own and their children’s physical and mental health, and submit a curriculum vitae. The committee even sent a sample of applicants’ handwriting to be analyzed by a graphologist, with the hope of gaining more insight into applicants’ character and intentions. Finally, applicants had to answer a long questionnaire meant to assess whether they were suited to living in a kibbutz.
Emphasis mine. If private socialism has to be this exclusive to function, it is just completely absurd to think that it would work out fine if it were imposed on everyone, all at once, as a political system. Historical examples of political socialism get dismissed as "not real socialism" by its proponents. Okay, fine, but here we have an example of real socialism in practice. It goes to great lengths to keep the riff raff out, so to speak. Maybe the lesson here is that this doesn't work, except for a very small and highly committed subset of the population. It certainly doesn't scale up very well. The book discusses at length the average size of a kibbutz and the (unrealized) possibility of having one big kibbutz rather than a few hundred small ones.
Note also the part about screening for the health of family members. The kibbutzniks knew what insurance companies know about adverse selection: keeping a safety net viable means screening out expensive liabilities.
Abramitzky discusses at length how the kibbutzim solved the incentive problem (the tendency of an existing member to slack), the brain drain problem, and the adverse selection problem. Some of these solutions trade off against each other, such that solving one makes other problems worse. For example, one solution to the adverse selection problem is to have a very strong sense of community with shared, deeply-felt norms of behavior. The stricter, the better. If the vetting process for a new member is a months-long ordeal of ascetic living and strict adherence to religious principles, that will surely deter slackers who just want to free ride on their neighbors' community spiritedness. The book discusses many American communes, reaching all the way back to early colonial times, that used similar "trial periods" to see if would-be members were truly committed. In addition to weeding out bad applicants, this process also fosters a sense of community and solves the incentive problem. Someone who has sacrificed to acquire this shared sense of community will feel bad about slacking off at the expense of his neighbors. Losing the esteem of your colleagues means losing something that you fought hard for. ("Sunk cost" nothing; you value something quite highly when you pay for it with blood and sweat.) People are inherently social creatures. They will feel the sneers of their neighbors who notice them not working to their full potential, and their meals at the communal dining hall will be awkward, possibly lonely. Social censure was a strong incentive not to slack off.
The trade-off here is that strict religious orders, work protocols, and always-prying eyes of your neighbors will drive out the marginal member, who aren't fully committed to the cause. That is, it exacerbates the brain drain problem even as it solves the incentive and adverse selection problems. In the kibbutzim, this trade-off was most evident in the grown children of kibbutzniks. The founders of kibbutzim were extremely committed individuals who opted in voluntarily. Their children had made no such choice; the "opting in" was decided for them. They often realized that the kibbutz life was too strict for them, and many of them ultimately opted out. Given the decline in the kibbutz population over time (at least in percentage terms), it looks like the "exit option" was a serious threat to the kibbutz's long-term viability. Kibbutzim made many concessions, compromising on socialist ideals, in order to keep their members from leaving. (Abramitzky mentions his mother's exasperation with the lack of privacy. She had been raised in a kibbutz and decided to leave. Whenever anyone asked, "Mother, where are you going?" she would respond, "I stopped answering that question thirty years ago when I left the kibbutz!")
The book highlights the many concessions the kibbutzim made to retain their members. Early on in the history of the kibbutzim, children were raised together communally, living and spending most of their days with the other children but separate from their parents. This practice arose from their communitarian ideology. Children who grew up together with other children would have a shared experience, in a way that children raised individually by their own parents would not. It might foster a sense of community that would ensure the long-term survival of the community. This fought an uphill battle against human nature: parents like to raise their own children. By the early 70s and 80s, all kibbutzim had abandoned the practice of separating children from their parents.
The kibbutzim were compelled to institute further market-style reforms in the 80s. Part of this was a continuation of a pre-existing pattern, but it was partly brought on by financial shocks in the mid- to late-1980s. (The book calls this a "debt crisis". Apparently these socialist mini-utopias saw fit to tap into capitalist financial markets?) Kibbutzniks felt the hit. They were suddenly poorer than they thought they were, and they felt the decline in their material standards of living. The exit problem reared its ugly head. Why live poorly in a kibbutz when you can go live in the city and earn a better living as a software engineer or a derivatives trader? The more talented individuals would feel particularly compelled to leave. They would see the highest gains in material standards of living by opting out. There were some fierce ideological battles over this, but the kibbutzim ultimately compromised on the notion of complete communal sharing. Early kibbutzniks didn't personally handle any money at all, but gradually the kibbutzim started paying small salaries to their members. And, more and more, they began paying those salaries in accordance with productivity. Abramitzky includes a useful chart:
There were other market-style reforms. Initially the kibbutzim had communal dining halls. People simply came to them and ate at meal time. This was ultimately discovered to be wasteful, and kibbutzim implemented a practice of paying for one's own meals. On the one hand, this killed an important source of community. Kibbutzniks ate at home rather than in the dining hall. On the other hand, it fostered frugal use of scarce resources. Quoting Daniel Gavron, the book gives the following passage:
[T] he kibbutzim were living beyond their means was an acknowledged fact, but there were also several endemic weaknesses in communal life, one of which was wastage. Food was “free,” so members took more than they needed. Huge quantities were thrown away, and expensive items were fed to domestic animals. Electricity was paid for by the collective, so members left their air conditioners on all day in the summer and their heaters on all winter.
Any libertarian or conservative-leaning economist would tell you that this is perfectly predictable. Put simply, people respond to incentives. They will overuse resources when the costs of those resources are socialized, and they will discover restraint and frugality when they're financially responsible for the costs of their actions.
On the privatization of salaries and living expenses, Abramitzky writes:Under the reformed system, private allowances to members were extended, and members used these allowances to pay for their own electricity consumption. In 1990, less than 10 percent of kibbutzim had adopted this reform, but by 2001 about 80 percent had done so. Kibbutzim even started to turn their dining halls into cafeterias where members paid for their meals. Whereas in 1990, no kibbutz charged its members for meals, 70 percent did so by 2001.
On the production side, kibbutzim started to privatize many of the kibbutz production and service branches by turning them into independent centers, whose goal was solely to reduce costs and maximize profits. Importantly, they were now able to make decisions without having to consult kibbutz members. This change was in part motivated by the 1989 negotiations between the government, banks, and kibbutzim to settle the debts of kibbutzim, which called for kibbutzim to increase accountability for costs and profits. The kibbutz federations required their member kibbutzim to introduce reforms but left it to the discretion of each kibbutz to pick which reforms to adopt. For that purpose, many kibbutzim set up “innovation teams” to identify appropriate reforms. But kibbutzim went further in this process than simply improving the transparency of their balance sheets. Besides turning the dining hall into a restaurant and the branches into businesses, kibbutzim hired outside managers to run their economy and paid high salaries to these professionals. By 1997, more than half of the kibbutzim adopted this reform. These reforms achieved a clear separation between kibbutzim’s economy and community. Outside managers, all with university degrees and considerable professional experience, were hired to run kibbutzim’s economy without consideration of whether they cared about the kibbutz way of life; kibbutz members in leadership positions, such as the kibbutz secretary, were in charge of running the kibbutz community.
I found this next part truly interesting. They discovered the classic insights of David Ricardo:
Kibbutzim also discovered the economic principle of comparative advantage: “A lawyer who was also a skilled cowman could be replaced relatively cheaply, and his monetary value to the kibbutz was much greater as a lawyer than as an agricultural worker” (Near 1997, p. 353). Kibbutzim began encouraging members to seek high-paying jobs outside the kibbutz and to establish small businesses within the kibbutz.
In other words, put someone to work at their highest valued task, even if that means earning income on the open market and sharing that income communally.
The book discusses other market-style reforms. Some of the janitorial and food-service work were done by contractors rather than kibbutz members. Clothing had initially been subject to communal sharing, in a "just grab a suit off the rack" sense, if I'm reading the book correctly. But people wanted to own their clothes, maybe even have an individual sense of style.
Abramitzky tells an "incentives trump ideology" story in Chapter 9. What's perhaps more interesting than the market reforms is their correlation with a kibbutz's wealth. Kibbutzim differed in their material endowments: productivity, land-wealth, debt, total population, etc. A very wealthy kibbutz with a large endowment might weather a financial hit better than one that is closer to bankruptcy. The less endowed kibbutzim were quicker to institute market reforms (though, as hinted at above, virtually all kibbutzim ultimately implemented these to some degree or another). Once again, incentives matter. A kibbutzim whose immediate survival depends on making market-style reforms will implement them sooner. One with a financial buffer has the luxury of indulging ideology. Ideology matters, but incentives matter, too.
The following wasn't a major theme of the book, but the extremely hard work required to run a kibbutz bears mention. Chapter 5 begins with a quote from Jerry Seinfeld:
I worked in the banana groves. . . . I couldn’t take it any longer! It was hard work; you guys work hard in Israel. I didn’t like the kibbutz. Nice Jewish boys from Long Island don’t like to get up at six in the morning to pick bananas. At six in the morning you should be sleeping! And bananas? All summer long I found ways to get out of work.
I think I've mentioned this to listeners before--picking fruit and cleaning out irrigation lines with a pin. Squatting on the ground every 18". They are just far enough apart so that if you crouch down to get one, you can't reach the next one. So you have to get up, crouch down again. It's a fantastic motivator to actually stay in school.
The kibbutzim didn't scale up very well. They never did, even before the market reforms began to take place in earnest. Abramitzky puts it this way:
Kibbutzim have always been relatively small. They vary in size from about 100 to just over 1,000 members, with an average of 440 members (as of 1995). The majority of kibbutzim have between 200 and 600 members. Why are kibbutzim so small? Why not create a single kibbutz with 100,000 members that would be more self-sufficient instead of many small ones? Kibbutzim have struggled with the issue of size from the very beginning, recognizing the trade-off between returns to scale, on the one hand, and the strong social ties and idealistic core, on the other.
This is an important piece of information for anyone who wishes to impose socialism on an entire society via the political system, or for anyone who wishes to resist such efforts. Indeed, why not have just one large kibbutz? The various levers of control over the slacking, brain drain, and adverse selection problems would not be as effective in a large, relatively anonymous commune. Social censure against slackers is harder when you aren't intimately involved in each neighbor's business (which becomes impossible when the population gets too large). And why bother to punish slackers when so little of the benefits of enforcement accrue to you? A larger collective means the costs of profligate consumption and the benefits of work effort are more diffuse, less likely to be noticed or remedied by any individual. Re-read the paragraph above about the exclusivity of the kibbutzim. Kibbutniks coldly knew that they could not simply scale up their tiny paradise to an entire society. Presumably some of them went a step further and realized that you couldn't simply throw together the rejects, those who wished to join a kibbutz but weren't allowed in, into their own commune and expect success. Successful kibbutzim required tremendous amounts of labor from ideologically dedicated individuals, tapping from the most talented and highly educated pool of applicants in human history. The suggestion that an entire nation could be run in this way is almost a sick joke.
This book undeniably has some lessons for the age old debate on "socialism versus capitalism." When someone who is skeptical of socialism tries to point to the many, many examples of socialism being tried in the 20th century, they are typically rebuked with "But that's not real socialism!" "Real socialism" supposedly doesn't use coercion or have dominance hierarchies, so the many failed examples of politically imposed socialism aren't seen as legitimate specimens. It would be harder to rule out the example of the kibbutzim. These were voluntary societies of ideologically committed socialists, with plenty of material endowments and human capital to keep them going. They still broke down, declining in number and discarding their ideals in a trajectory that any cold-hearted capitalist could have predicted.
_____________________________________
I found this part interesting:
Kibbutzim did not make use of external pension funds, because this seemed redundant given the system of mutual aid. However, as many skilled members started to leave their kibbutz, there was no one left to support the older generation. To get a sense of the magnitude of the problem— as of 2010 about 30– 50 percent of kibbutz members were retired. In an attempt to provide a decent standard of living for the retired population, in 2005 the government required kibbutzim to pay a pension of 35 percent of the average wage.
Catch that? The government told the kibbutzim that they had to increase the compensation paid to their retired members. Were the elderly kibbutzniks inadequately cared for? Or was the government of Israel simply wrong about the necessity of this measure? It is just surreal to me that the government would observe all this community and "equal sharing" and rule it inadequate.
