Israel: The Story of Hevrat Ha'Ovdim (1995)


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    This document has been made available in electronic format
         by the International Co-operative Alliance ICA 
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                         8 December 1995


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               The story of Hevrat Ha'Ovdim
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The labour-owned sector of the Israeli economy, amalgamated in
the framework of Hevrat Ha'Ovdim, is responsible for a quarter
of Israel's gross national product. This group, which
comprises various types of companies and co-operative
organizations, plays an important part in almost every facet
of the Israeli economy : agriculture, industry, building,
banking, insurance, trade, transportation and culture. The
total annual exports of Hevrat Ha'Ovdim organizations exceed
one billion dollars.

Today, its contribution is crucial, both to the growth of the
economy and as a decisive force in improving social and
economic standards within Israeli society.

The beginning some 90 years ago, were very modest, but vision
made up for lack of means. Towards the end of the 19th
century, the "Bilu" movement re-established Jewish agriculture
in Palestine by the foundation of the first "Moshavot"
(settlements). This changed the character of the small Jewish
community which had existed hitherto and which had been
composed primarily of small groups of religious Torah scholars
living in the holy cities (Hebron, Jerusalem and Safad).

This social change, which took place between 1905 and the
First World War, was the result of the "Second Aliya"
(Immigration). The aim of the pioneers of this Aliya was to
pave the way for the return of the Jewish people to their
homeland and to the building of a just and egalitarian
society. These socialist Zionist aims as well as the need to
create means of livelihood for the unemployed pioneers
(Halutzim) gave the impetus for the foundation of the
Labour-owned sector.

In 1910, a group of halutzim established an agricultural
settlement at the point where the Kinneret (Sea of Galilee)
meets the River Jordan. Degania, this first Kibbutz, was based
on the ideas of full social and economic partnership amongst
the members. A few years later, when Degania was
well-established, the members came to the conclusion that they
could not cultivate the available land without exploiting
outside labour. They therefore allocated a large part of their
land to another group of pioneers who founded Dagania "B".
These Kibbutzim were later joined by "Moshavim" (co-operative
settlements) in which each family lived separately and
cultivated its own farm. The "Moshav" was also based on the
ideas of self-labour and mutual aid amongst its members
utilizing co-operative purchasing and distribution of goods.
During the economic hard times of World War One, the
partnership between the urban and rural workers led to the
establishment of "Hamashbir" - a co-operative organization
supplying food to its members without profiteering by the
middlemen.

After World War One, the "Third Aliya" led to the foundation
of the Histadrut, the organization of all rural and urban
workers in Eretz Israel. The Histadrut did not confine itself
solely to trade union matters, for at that period the main
problem was unemployment and building an economy, and not
trade union struggles. The Histadrut saw as its mission the
creation of a just and progressive society as a basis for the
future Jewish state. In this way they arrived at original
solutions for the unemployment problems of the urban workers.
For example, the British Mandatory Government had a budget for
road construction, but there were no contractors in the
country able to take on the work. The Histadrut, therefore,
established a contacting "office" to take on the jobs and to
give its members employment. However as the Halutzim's
enthusiasm for manual work their ideological commitment were
greater then their professional expertise, the "office" soon
went bankrupt. Later its re-establishment lay the foundation
for tody-s large construction company, Solel-Boneh.

These initial enterprises of the labour-owned sector led to
the establishment of Hevrat Ha'Ovdim at the second convention
of the Histadrut. Hevrat Ha'Ovdim is a co-operative, whose
members are all members of the Histadrut and whose aim is to
initiate, co-ordinate, centralize and develop the economic
activity of both urban and rural workers. The name "Hevrat
Ha'Ovdim" has a double meaning in Hebrew - "Workers' Society"
and "Workers' Company", and expresses well the guiding
principles of the organization. These were that it should be
an instrument for the establishment of an economic
infrastructure owned by the workers and equally important, a
means for the creation of a just and egalitarian society in
Israel.
By the mid 1920's most of the main bodies had been
established, and in addition, a bank and an insurance company
had been founded. After the First World War, "Hamashbir" was
split into two co-operatives, owned both by the Kibbutzim and
the Moshavim. Hevrat Ha'Ovdim had special privileges in both
co-operatives : Hamashbir Hamerkazi - a wholesale supplier to
the co-operative settlements, and Tnuva - a co-operative for
the processing and marketing of agricultural produce.
Co-operative Consumer Unions, affiliated ot Hevrat Ha'Ovdim,
were founded in the cities. solel-boneh, in order to ensure
adequate supply of building materials and also in order to
provide employment for its workers, purchased two companies (a
glass factory and an iron foundry) which had gone into
bankruptcy. This laid the foundation for the development of
Koor Industries.

Today, 70 years after the foundation of Hevrat Ha'Ovdim and 85
years after the foundation of the first Kibbutz, the Hevrat
Ha'Ovdim family tree has many branches and offshoots, but it
is still comprised of two main branches : (1) enterprises and
companies owned co-operatively by all Israeli workers through
direct control of Hevrat Ha'Ovdim and (2) rural and urban
co-operative organizations owned directly by their members and
affiliated to Hevrat Ha'Ovdim. Today, Hevrat Ha'Ovdim (and the
Histadrut) membership numbers over 1,5 million.

The great agricultural achievements of Israel are, on the
whole, the achievements of the co-operative settlements. Six
hundred Kibbutzim and Moshavim supply more than 80% of
Israel's agricultural products, and a similar percentage of
the agricultural exports. Every winter jumbo jets fly daily
cargoes of fruit, vegetables and flowers to European markets.
Citrus, vegetables and cotton are transported by ships.

Agricultural research, technological advancements and joint
planning have resulted in an agricultural production ten times
larger than at the time of the foundation of the State of
Israel. Farmers have achieved record yields in various
branches. Tnuva, the marketing co-operative, has built modern
dairies in Emek Yizrael (Jezreel Valley), Jerusalem, Rehovot
and other places for the processing of milk products.
Kibbutzim and Moshavim in various parts of the country have
established 13 regional co-operative enterprises. Every such
enterprise contains many sub-plants which serve the
surrounding settlements. Animal food is prepared automatically
in a regional plant where computer-control ensures optimal
mixing :

As a result of technological improvements in agriculture,
fewer kibbutz members are needed to work the  fields. In order
to provide work to other kibbutz members and to maintain to
social framework, manufacturing plants have been established
in most of the kibbutzim in the last few years : Degania has a
factory for the production of industrial diamond cutting
tools; Ma'agan Michael has a plastics plant and Kfar Giladi
operates a quarry and also manufactures spectacles frames.
Altogether, there are more than 350 industrial plants in the
kibbutzim. The main areas of kibbutz industry are plastics,
metals, wood and optics.

Solel-Boneh has progressed from its beginnings as a small
contracting office, to becoming Israel's largest contracting
company. Its 5'000 employees have been involved in most of the
big construction projects in Israel - covering new
settlements, airfields, roads and ports. As in all enterprises
in which Hevrat Ha'Ovdim has a proprietary interest, one third
of the members of the board of Directors and one third of the
joint management in the branches are elected by the workers.
They also share in the profits. As in the other companies, the
balance of the profits are not distributed but are reinvested
to further the aims of Hevrat Ha'Ovdim. A Solel-Boneh
subsidiary, Solel-Boneh International, is active in the
developing countries in Africa and South America and is
involved in the execution of large construction projects :
roads and dams in the jungles, universities and housing
projects.

Shikun Ovdim initiates plans and oversees the construction of
housing projects for residents and new immigrants. Many
projects, consisting of tens of thousands of apartments in
Beer-Sheva, Jerusalem, Nazareth, Tel Aviv and other places,
were built by Shikun Ovdim

Koor Industries, Israel's largest industrial corporation, owns
over 100 manufacturing subsidiaries in various regions of the
country. For example, the first impetus for transforming
Beer-Sheva from a small village to a large city was provided
by various Koor enterprises which were established there in
the 1950's. These included "Makhteshim" which manufactures
agricultural pesticides (close to $100 million in exports);
"Harsa" which makes ceramic sanitary ware, and "Hasin Esh",
which produces refractory materials. Koor's electronics plants
produce telephone exchanges and communications equipment; its
metal plants produce pipes and steel bars. Other factories
produce glass, cement, shoes, and food. Some of the Koor
enterprises are owned jointly by Koor and private investors
form Israel or abroad.

The working conditions enjoyed by Koor's 33'000 employees are
better than those of other industrial workers in the country.
They serve as an example and a goal which the Histadrut
attempts to emulate in order to improve the working conditions
of other workers in the country.

Bank Hapoalim is one of the hundred largest banks in the world
today. Its group has more than 350 branches in Israel which
provide special services to workers as well as a network of
branches abroad. It is the central financial instrument of the
labour sector, serving industry, agriculture and construction.

The big supermarkets of the Consumers' Co-operative Union are
located in every part of the country from Eilat to Kiriat
Shemonah. They ensure the supply of a wide selection of food
and grocery products at fair and uniform prices to residents
in all parts of the country. Hamashbir Lazarchan, owned
jointly by Hamashbir Hamerkazi and the regional Consumer
Co-operatives, operates a chain of department stores. They
provide furniture, clothes, appliances, toys and other
consumer goods in major cities as well as rural centres.
Eighty percent of urban and rural public transportation is
provided by Egged and Dan, the bus co-operatives. Trucking
co-operatives handle half of the freight in the country. Other
urban co-operatives deal in printing, baking and metal
working.

Co-operative activity amongst Israeli workers is not only
limited to the economic sphere. Kupat Holim, which provides
health services to Histadrut members and their families (75
per cent of the population), and which belongs to them, also
functions on this basis. Furthermore, the mutual aid principle
on which it is founded means that every member pays
progressive membership fees based on his salary and without
regard to the size of his family and medical needs. The member
and his family enjoy all the health services they require.
Kupat Holim owns and runs more than 1000 clinics, 125
laboratories and 5000 hospital beds. The mutual aid principle
also guides the activities of the seven Pension Funds
affiliated to the Histadrut and Hevrat Ha'Ovdim, which provide
pensions to all of Israel's workers and their families.


Background

Hevrat Ha'Ovdim (The Labour Economy) has played a central role
in the development of the economy and nation building since
its establishment in 1923.

In the pre-independence period as well as during the first few
years after the establishment of the state of Israel Hevrat
Ha'Ovim gave highest priority to job creation and to the
prevention of unemployment through the establishment of
factories enterprises and plants throughout the country.

In order to achieve this objective a wide-ranging economic
policy was undertaken. This contributed significantly to the
absorption of new immigrants, the creation of job
opportunities, the provision of housing and the settlement of
distant border areas. This policy was directed by a far
reaching  vision and was rich in economic initiative. However,
it was sometimes distant from the considerations of financial
efficiency and as a result serious financial difficulties
emerged in some of the Hevrat Ha'Ovdim enterprises. The crisis
of the 1980's (like others which have occurred previously) was
mainly the result of a failure to adapt in good time to new
economic realities. In order to meet the challenges posed by
these crisis a far reaching programme of efficiency was
adopted. It included changes in the financial structure,
revitalization of human resources and the adoption of a shrewd
business approach. All these yielded a remarkable increase in
worker productivity and in profitability in the 1990 - 1992
period. After many years of losses during the 1980's the
consolidated net profit of the Labour Economy enterprises in
1992 reached the sum of NIS 697 millions. Compared to a profit
of 380 million NIS in 1991 and a loss of 764 million NIS in
1989.

As the Israeli economy moves towards the middle of the 1990's
we find that a large number of the Hevrat Ha'Ovdim enterprises
are now in the final stages of the recovery process. This has
involved difficult and painful changes designed to revitalize
them and to increase their profitability. This goal has been
achieved, but leaves Hevrat Ha'Ovdim with a more limited
ability to undertake missions in the general area of national
economic development.

Hevrat Ha'Ovdim is gearing itself up for the future. Its
enterprises, its economic infrastructure, its ability to
organize and execute new initiatives with all continue to be
involved in the process of national development and the
expansion of the economy.

The labour economy will act to stimulate new business
initiatives with special emphasis on information and
knowledge-intensive sectors and on research and development.
It will continue to emphasis the significance of profitability
of production and of exports as central factors in the
development of economy policy.