The Organization of Industrial Production in Israel - From Diversity to Convergence?

The Organization of Industrial Production in Israel - From Diversity to Convergence? *

ALLAN LICHTENSTEIN

Introduction Israel’s industrial structure is characterized by an unusual organization of industrial production. Four production structures’ - private, government, Histadrut’ and kibbutz3 - function alongside each other.4 Historically, the four production structures articulated contrasting ideological values and fulfilled important social and national roles within the political economy. Over the last 25 years, the Israeli economy has restructured, prompting a reorganization and relocation of industrial production. As critical decisions are made to accommodate to the emerging challenges, traditional perspectives are being re-evaluated. Ultimately, the actions taken will redefine the roles of the production structures and the spatial distribution of industrial activities within the country. An examination of the diverse forms of industrial organization offers an opportunity to consider whether they can continue to strive for specific social and national goals, in addition to their economic functions, when operating within a global capitalist system.

The purpose of this paper is to examine the impact of the restructuring process on the organization and location of industrial production in the four production structures. In particular, I report how the reorganization and relocation of industry is articulated in changes in the production structures’ use of space, organization of the labour process, application of new technologies and availability of capital. My underlying concern is whether the spatial and economic arrangement that is emerging out of the restructuring

* This research was supported by the Geography and Regional Science Program of the National Science Foundation under grant number SES 90-14544. I wish to thank Susan Fainstein for her comments and support. The suggestions of an anonymous referee are also gratefully acknowledged.

I have coined the notion ‘production structure’ in order to broaden the definition of the firm. The intention is to account for the social, political and cultural attributes of the firm and thereby relate to, among others, specific social or spatial goals which a firm may undertake. My use of the notion of production structure draws upon Michael Burawoy’s (1985) idea of a factory regime. The Histadrut is the General Federation of Labor. It owns Hevart Ha’Ovdim, a holding company, which in turn owned Koor Industries, a manufacturing and industrial conglomerate. Recently, Hevrat Ha’Ovdim’s stake in Koor has been reduced considerably.

3 The kibbutz is a cooperative community organized on socialist principles. Although its economy was originally agricultural, industry now accounts for 65% of its total income.

4 This paper makes no reference to the Arab industrial sector. Its contribution to industrial organization and location is very small, and consequently its role in the industrial restructuring process is minor. On the other hand, this omission is not intended to diminish the importance of the Palestinian- Israeli conflict in shaping the political economy (Shafir, 1989).

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process will foster self-sustaining industrial growth in development areas and peripheral communities. Can a production structure retain its unique organization of production and remain economically vibrant when material conditions change and challenge its historical ideological aspirations? Or is a convergence taking place in the forms of industrial organization and the expression of ideological principles?

There is an earnest debate within the economic geography and regional development literature on the viability of local communities in an increasingly integrated global economy (Harrison, 1992). Many communities are dependent on the varying locational decisions of major corporations and the restructuring processes affecting the organization of production in different industries. Multi-branch plant firms are not constrained by political boundaries while the spatial distribution of production is rearranged in the light of advancements in technology and changes in factor costs (Dicken, 1992). The changing circumstances create what Sharon Zukin has termed an ‘opposition between market and place’ (Zukin, 1991: 5). As markets become globalized, the importance of place diminishes. The major industrial players in their decisions to relocate economic activities to places of better return show allegiance neither to place nor to community. Furthermore, as Ash Amin and Nigel Thrift (1992) have argued in relation to the viability of industrial districts, the possibility of self-sustaining growth for the majority of these localities is unlikely (Amin and Thrift, 1992: 585). In the long term, local small-scale place-bound industrial ventures have few chances to survive the competitive pressures of an increasingly global economy.

In Israel, diverse community structures (kibbutz, development town, community settlement, moshav) were created to implement specific social and political Zionist goals. The assumption was that they would promote population ingathering and dispersal, territorial settlement and certain modes of living (Kellerman, 1993), and yet also be viable. The factories built by the government, Histadrut and kibbutz production structures were, in many instances, to provide the industrial base for these communities. They would root the community to the place and, because of their commitment to social and political goals, would protect it from the destabilizing forces of market competition. The ensuing spatial distribution of industry would promote economic growth in development areas and the periphery.

Three important changes, however, have transformed the industrial structure. First, the focus of industrial manufacturing has been directed to high-technology export- generating industries (Bregman er al. , 1991). As these footloose industries position themselves for competing in the international market, they are both mobile and flexible in their locational behaviour (Markusen et al., 1986; Morgan and Sayer, 1988). Second, during the 1980s a programme of privatization of state-owned industries received added impetus (Refua, 1988). The Israeli state, like many of its counterparts in the west, has opted for a deregulated economy, preferring to expose the domestic economy to free market forces, private initiative and foreign competition. Third, a huge debt crisis enveloped the labour sector of the economy. This precipitated a major reorganization of both Histadrut and kibbutz factories and thrust them into competition with domestic and foreign suppliers. In addition, the crisis sparked a re-evaluation of the underlying ideological tenets of the labour economy (Helman, 1993; Rosner, 1993).

The perspective of this paper is that an analysis of the reorganization of industrial production must account for both global economic interaction and for domestic changes in the political economy. Although claims are often made that Israel is a unique case, many of the features of the restructuring process resemble those displayed in capitalist economies elsewhere. Increasingly, the categories and concepts appropriate to other contexts can be applied to the strategic policy decisions facing the four production structures. On the one hand, participation in foreign markets, both out of choice and because of the conditions of global competition, places pressure on the production structures to adopt prevailing business tenets and practices. On the other hand, as a result

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The organization of industrial production in Israel 425

of domestic interests and crises, the government, Histadrut and kibbutz production structures have chosen to prioritize the economic interests of their factories ahead of social and national goals. The reorganization and relocation of industrial production in both instances has extended its spatial distribution, making control of the division of labour problematic (Sayer and Walker, 1992). Consequently, when the production structures consider alternative courses of action, there are likely to be fewer divergences in their use of space, organization of the labour process, application of new technologies and access to alternative sources of capital.

The outcome of the restructuring process, however, is not predetermined. Although historical nationalist and socialist ideological goals are being undermined, this is not an inevitable process. Notwithstanding the narrowing of differences in the organization and location of production between the production structures, the articulation of the restructuring process varies across production structures. The Israeli case may offer insight into alternative ways of organizing industrial production within the juncture that has emerged between the capitalist system of the west and the socialist system which characterized eastern Europe before the fall of communism.

The argument presented in this paper builds upon material collected from a number of firm- and factory-level studies, as well as interviews conducted with prominent individuals connected to the four production structures (Lichtenstein, 1993). A comparative analysis of four production structures operating within a single national political economy made it possible to contrast the responses of each to the current changes taking place in the Israeli political economy.

The paper is divided into three sections. First, I describe how the variations in the organization and location of production in the four production structures articulate different ideological perspectives. Second, I examine some of the organizational and locational changes which have occurred in the four production structures as a result of the restructuring process. Specifically, I recount the changes in the production structures’ use of space, organization of the labour process, application of new technologies and availability of capital. Finally, I draw conclusions on the emerging trends in the organization and location of industrial production, and consider their implications for industrial development.

The articulation of different ideological perspectives in the four production structures In its simplest form, a dichotomous ideal-type model of the firm highlights the essential argument of this paper. The ideal-types are distinguished by the extent to which ideological principles regulate the organization and location of industrial production and the firm’s ability to control the division of labour (Sayer and Walker, 1992). Where ideological principles constrain an expansion of the division of labour, they facilitate an integration of labour within place-bound communities. For as Andrew Sayer and Richard Walker have written: ‘[Tlhe extent to which any class or group can control its economic circumstances is not only a function of its ownership or non-ownership of the means of production, but of the extent to which it can control the division of labor’ (ibid., 1992: 225).

On the one side is a firm which is motivated primarily by economic considerations. It is driven by the competitive dynamic and strives to maximize growth and accumulate profits. It pursues multiple strategies as it seeks alternative organizational and locational arrangements to reorder the division of labour. On the other side is a firm whose functioning is constrained by specific social, political and cultural objectives. The inclusion of these non-economic goals into the equation with economic objectives places



overt constraints on the organizational and locational behaviour of this type of firm. Implementation of these principles impedes an expansion of the division of labour. For our present purposes the former category of firms approximate the private firm, while the kibbutz factory represents the latter category of firms. The Histadrut and government production structures are variations lying between the two. All four production structures are influenced to varying degrees by the pervasive Zionist nationalist ideology and all four function within a predominantly capitalist market system.

Although private firms may have some characteristics that deviate from the model, the ideal-type private firm has a wide range of organizational capabilities which it is able to exercise in its attempt to cope with changing circumstances. First, the firm is not bound geographically to any specific location. It is able to relocate, spin off branch plants, merge with other firms, enter into partnerships and alliances of various sorts, or even close down plants (Bluestone and Harrison, 1982; Holmes, 1986; Massey, 1984). Second, the firm employs labour which it can hire and fire at will. In addition, it can vary the material rewards of its employees in order to attract specific labour skills or motivate worker performance (Morgan and Sayer, 1985). Third, the firm is free to choose a level of technological investment which it considers appropriate for its operation and which will promote maximum growth (Leborgne and Lipietz, 1988). Fourth, the firm is not limited in seeking alternative sources of capital. Among other means, it can raise equity in share markets through the sale of shares, it can invest retained earnings, it can borrow from any number of lending institutions, and it can enter into partnerships with other investors (Taylor and Thrift, 1983).

The typical ideal-type kibbutz factory is organized in sharp contrast to the private firm. In theory, the central ideological principles of the kibbutz, in particular ‘self- l a b ~ u r ’ , ~ collective ownership of the means of production, no differential compensation,6 and direct democracy, both restrain and augment the kibbutz factory’s organizational and locational options. Although the kibbutz factory functions within a capitalist setting, it is constrained in its use of space, in its choices to employ or dismiss labour and in its access to alternative sources of capital, while its need to invest in new technology is intensified. Consequently, the ideological principles facilitate the integration of labour within the territorial confines of the community. Spatially they link home and work, and their implementation fosters an egalitarian community and non- hierarchical social relations (Satt, 1991). The ideal-type kibbutz factory located within the perimeter of the individual kibbutz prohibits the employment of wage labour, precludes the use of monetary incentives to distribute work among its members, rotates managerial functions among a broad group of its members, practises collaborative management and facilitates investment in new technologies in order to replace labour with capital.

Organizational and locational changes in the four production structures The private firms proved to be the most flexible within the four production structures to adapt to changing economic circumstances. Since they embrace the dominant capitalist ideology, they do not confront ideological constraints in their responses to the demands of competitive pressures. All have reorganized the production process in recent years to improve their positions in their respective markets. Thus, private firms locate facilities abroad, invest in new technologies and have taken advantage of opportunities to raise

5 The principle of ‘self-labour’ is a rejection of the employment of wage or hired labour. Ideally, the kibbutz factory would be dependent on its own membership to carry out the various work tasks.

6 The principle of no differential compensation precludes any form of material compensation. Money incentives are not used to distribute work internally between members.


R e organization of industrial production in Israel 427

capital in foreign markets. Surprisingly, the private firm appears to be the most open to incorporating new managerial practices’ into the organization of the labour process.

Firms within the government production structure have adopted a policy of emulating the private sector. The government-owned chemical firms have broadened their spatial arrangements, introduced new labour-saving technologies and raised capital from private sources. Despite ideological commitment to promote employment in development areas and a need to lower unemployment, these firms have both reduced the workforce and introduced regressive labour practices. In view of the state’s policy to privatize government-owned firms, however, this production structure potentially faces substantial transformation.

Koor Industries (Histadrut) has sustained the most explicit and extensive restructuring of the four production structures. Originally established as a highly centralized conglomerate, Koor has been reorganized into a holding company with decentralized control and decision-making. Its commitment, as part of the political strategy of the labour movement, to locating production facilities in developing areas has been superseded by a policy that accepts only economic objectives as the criteria for spatial behaviour. With decentralization of management, individual factory management is responsible for negotiating with the workers, introducing new management and labour practices, considering technological improvements and, perhaps of most importance, obtaining its own sources of funding. Factories that fail to maintain a profitable level of operations are shut down.

Following its debt crisis the kibbutz movement has re-evaluated its underlying ideological constraints. Some of the core characteristics of the kibbutz factory - its tendencies to rely on and use flexibly its internal labour supply and to limit the range of alternative sources of capital it could select - are slowly being modified. The kibbutz factory is making use of external labour sources in various ways in an attempt not to deviate from the principle of not employing hired labour on the production floor. It is also seeking out alternative sources of capital, particularly in the form of strategic partners in the private sector and preferably located in a foreign country. More recently, some kibbutz factories have sold shares on the Tel Aviv stock exchange. On the other hand, transition to private sector strategies is less apparent in the adoption of alternative spatial arrangements. Although there are examples of factories that have been built outside the kibbutz, including the establishment of branches in foreign locations, there is a strong commitment to locating the factory within the boundary of the kibbutz. Most kibbutz factories remain geographically adjacent to the living area of the kibbutz.

The spatial organization of industry Each production structure differed in its spatial response to changing circumstances and in its efforts to meet the challenges of global competition. Nevertheless, each has recognized that space can be used to gain competitive advantage and thus that location is crucial to the financial success of the firm. Moreover, the priority given to potential economic benefits over political goals in deciding on an appropriate location has reduced the influence of the socialist-nationalist ideological values and epitomizes the emerging dominance of a free- market ideology. Thus, some convergence in spatial behaviour of the four production structures is taking place. Only certain aspects of the location of the kibbutz factory provide an exception to this trend.

The private production structure, historically the least constrained by nationalist spatial goals, is the most locationally dispersed of the four production structures. It, more than the other three, has used space to gain competitive advantage. With the state’s

7 This refers to practices such as total quality management, quality circles and just-in-time inventory procedures.

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emphasis on exports, itself a national goal, private sector firms are cognizant of the advantages alternative locations offer in relation to a supply of skilled labour, technological expertise, additional sources of capital and access to the market. Consequently, they have spatially divided the production process both within Israel and between Israel and suitable locations abroad.

Within Israel, a spatial division of labour has emerged which has been reinforced by the incentive policy the government uses to promote industrial activity in development areas (Bar-El and Felsenstein, 1989; Felsenstein, 1992; Razin and Shachar, 1990; Schwartz, 1985). Assembly and routine production tasks are undertaken in peripheral locations, whereas the skilled jobs are likely to be located in the central metropolitan areas. The extension of the production process abroad, often through the creation of strategic partnerships with foreign companies, has offered crucial linkages to export markets, new sources of expertise and improved opportunities for raising capital.

The government-owned chemical firms, because of their extractive basis, are less able than the private sector firms to distribute their production process spatially. None- theless, the establishment of marketing and complementary production facilities in Europe by the Dead Sea Works and Dead Sea Bromine Companies demonstrate their use of space to gain access to foreign markets. Privatization of these companies either on their own or as part of Israel Chemicals could extend their spatial dispersion, if privatization involves closer linkages to international companies.

The Histadrut production structure, as a result of the restructuring of Koor Industries, has abandoned its initial spatial goals. The labour movement’s use of space for political objectives through the creation of employment opportunities in development areas has ceased to be a viable enterprise. Koor will no longer undertake tasks supporting spatial goals unless the specific task is economically feasible. Locating factories in development areas will depend solely on the economic opportunities facing the individual firm and not, as in the past, on the potential to fund such projects from the profits of other firms within the conglomerate.

Within the kibbutz there are strong incentives to retain the locational constraint and to resist the competitive pressures to redistribute the production process. All the factory managers interviewed acknowledged that locating the factory within the boundary of the kibbutz remains very attractive and provides definite advantages. The economic and social benefits that accrue from the spatial unification of home and work continue to reinforce this form of organization.

On the other hand, countervailing pressures have emerged due to labour shortages, the need to be closer to both domestic and export markets and the possibilities of enjoying government subsidies when locating in development areas. Consequently, examples of kibbutz factories locating outside the boundary of the kibbutz have recently emerged. In other instances, kibbutz factories are seeking new spatial arrangements, particularly in the form of strategic partnerships with foreign private firms. They provide technological expertise, capital and access to foreign markets. In addition, kibbutz factories have created partnerships with other kibbutzim and have set up contracting arrangements whereby certain specialized tasks, such as marketing and engineering, are out-sourced or where part of the manufacturing process is done on another kibbutz.

Despite these arrangements, there is no dislocation of jobs because the principle of full employment prevails and thus all kibbutz members are employed at all times. The kibbutz factory, unlike the private sector firm, does not seek to spatially extend the production process to locations of cheap labour alternatives. It faces a labour shortage both because ideological principles constrain the employment of hired labour and because the resident labour supply is either unqualified or unwilling to work in certain jobs. Thus, although the kibbutz factory must supplement its limited labour resources, kibbutz members are not being replaced by alternative sources of cheaper labour. Production and management remain on the kibbutz, and the community retains its integrity.


The organization of industrial production in Israel

The organization of labour process Managers within the four production structures have found it necessary to reorganize the labour process in response to competitive pressures and the particular circumstances facing each one. Within the private and government production structures, changes in organizational practices are part of the ongoing process of free-enterprise business management. The changes instituted by both Koor and the kibbutz factory are influenced by accepted practices within capitalist economies and are contrary to their respective historical ideological values. Paradoxically, whereas the private firms appear to be moving towards encouraging greater participation of their labour forces within the decision-making process, in the kibbutz factory there are indications in some of the factories of less desire by the managers to involve their fellow members in the management process. This is in sharp contradiction to the decision-making process that characterizes kibbutz agricultural production. In a few cases, the lack of participation of members has been recognized and attempts are being made to rectify this condition.

It should have been expected that the kibbutz factory would provide the example of best practice for the other three production structures, yet it is in the kibbutz factory that some of its socialist ideological values are being overturned in practice. The kibbutz is not always an example for new managerial practices, despite its history in agriculture of successful implementation of many of those practices which currently are being undertaken by the modern firm. Some kibbutz factory managers prefer a more autocratic style which precludes the participation of their fellow members. The trend in many kibbutz factories to institute a board of directors that includes non-member professionals is also indicative of an emerging top-down approach. In fact, it is the private firm that has displayed the greatest initiative in the implementation of new managerial practices.

Some of the socially inequitable consequences of the restructuring process from the perspective of the worker have materialized within the organization of the labour process in all the production structures. In the private, government and Histadrut firms, there is an ongoing push to reduce the size of the labour force and thereby lower labour costs. Private and government firms, for example, employ contract and temporary labour to handle fluctuating labour demand. In the government firms, contract labour also bypasses union agreements, not only resulting in cheaper labour, but adding flexibility. The drastic reorganization of Koor Industries resulted in a large reduction in the workforce. More workers were fired by Koor than by any other concern during the equivalent period. This was particularly critical in development areas, which suffer higher unemployment rates than the central areas of the country. Moreover, Koor’s new decentralized organizational structure means that bargaining is to be conducted at the level of the individual firm, severely curtailing the negotiating strength of the workers. The kibbutz factory, despite its ideological objection to employing hired labour, has devised various techniques to circumvent this by what in effect represents the employment of temporary labour to do production tasks. It does, however, employ hired skilled and professional workers, and also uses outside consultants. This hired labour usually enjoys welfare benefits, although they are unlikely to participate in the decision-making process and are not unionized.

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The application of new technologies The firm-level stiddies revealed that in all cases the application of new technologies was an integral facet of the production process. All interviewees emphasized that improvements in performance were attained with new technologies, particularly where automation enhanced efficiency and the quality of the products manufactured. Nevertheless, there was the realization that the successful introduction of new technologies depended on their integration into the production process as a whole. This was particularly important for the Histadrut and kibbutz factories where some expressed the view that an over-investment in technology, without taking sufficient consideration for adapting its use to the



requirements of the process, contributed to the financial crises in each production structure. The debt crises in turn resulted in lower levels of investment in both the kibbutz and Histadrut production firms, raising concerns about their capabilities to remain at the cutting edge of their specific industries.

In most instances, the application of new technologies resulted in the replacement of labour. Although this raised productivity and thus the competitive capability of the firm, in the cases of those firms located in the development areas it probably exacerbated unemployment. Technological sophistication often requires an up-skilling of job requirements and thus demands that the labour force be adequately trained to undertake these new jobs. This is particularly pertinent to the development areas where education standards often lag behind those of the centre of the country.

The introduction of new technologies to the production process in the kibbutz factories has been of particular importance. They were central both to overcoming the constraint of a labour shortage and to averting the need for the kibbutz member to undertake repetitive, boring job tasks as well as work which was too physically demanding. The kibbutzim thus made every effort to raise the technological level of the production process. Often, this is done in-house by their own engineers and involves development and adaptation of machinery through the computerization and automation of the production process. Thus, only those areas of the work process for which mechanized solutions have not been found remain to be done manually.

The extension of technology and the manufacturing of sophisticated products designed for specific niche markets, however, has deepened the division of labour within the kibbutz factory and consequently added new contradictions in relation to the principle of hired labour. Whereas the application of technology was intended to solve the problem of reliance on manual production labour, it increased dependence on skilled professional workers, who often were not available in the individual kibbutz. Moreover, it introduced rigidity into the organization of the labour process since engineers, computer analysts and other skilled workers, having undertaken training in highly specific tasks, are unlikely thereafter to participate in the rotation process.

The availability of alternative sources of capital The changing opportunities to raise alternative sources of capital have crucial implications for the restructuring of the production process in the firms of all four production structures. The use the private, Histadrut and kibbutz firms have made of new sources of capital have repercussions for both their internal organization and spatial distribution. To the extent that the government production structure is privatized, it too is likely to undergo substantial transformation and to reorganize spatially. Historically, there were differences in the ability of the firms in the four production structures to raise capital. The Histadrut firms enjoyed advantages as a result of their privileged position in the political economy, while ideological constraints limited the kibbutz. Now, firms in all four production structures compete within virtually the same market. Even the kibbutz factory has begun to raise capital on the stock exchange (New York Times, 8 July 1993).

Thus, the narrowing of differences between firms in the four production structures is also expressed in the similar opportunities available to each to access alternative sources of capital. All firms are seeking new sources of capital and all are dependent on the open market, the stock exchange and bank lending. All of the private firms examined in the case studies have established links with either foreign firms or wealthy Jewish families living abroad. Some of these have also raised capital on Wall Street through stock issues. Consequently, their production activities have expanded into foreign locations. The government-owned chemical firms have issued stock on the Tel Aviv stock exchange, thereby diluting the state’s share in the ownership and increasing their obligations to the general public. Possible links wjth foreign sources of private capital in the situation of privatization could also result in an extension of production to locations outside of Israel.


The organization of industrial production in Israel 43 1

Historically, the labour economy developed under very different circumstances to the private sector in relation to its ability to raise capital. Both Koor and the kibbutz factories enjoyed the protection of mutually supportive financial arrangements that provided the necessary collateral and guaranteed a ready supply of capital. Following the debt crises within the kibbutz and Histadrut production structures, and the slowdown in prevailing economic conditions, these advantages were annulled. This demanded that the factories within Koor and the kibbutzim be more independent in their raising of capital. In turn, this has bound these factories more tightly to the capitalist financial system and compelled them to adopt the practices of the system.

Koor’s decentralization policy places the burden of raising capital on the individual firm. Since these firms can no longer rely on the inevitable support of the holding company, factory management has been compelled to be more rigorous in its business practices. Investment opportunities and the organization of the production process, including the size of the workforce, have undergone large cutbacks.

The decision of various kibbutz factories to seek new sources of capital poses the possibility of fundamental changes to the organizational structure of the kibbutz factory and consequently to its social structure. In many respects, the policy to find strategic partners in the private sector, particularly foreign companies, who can provide capital, knowledge and markets represents a radical departure from previous ideological positions. By linking with private capital, the kibbutz factory will be brought directly into its sphere of control. The introduction of capitalist management procedures into the decision-making process could render obsolete many aspects of the organization of production which were influenced by ideological values, including the principles of collective ownership of the means of production and direct participatory democracy. Moreover, it means that parts of the production process will be located beyond the boundary of the kibbutz.

Conclusion Industrial organization and location is shaped by the developmental dynamic of capitalist industrialization. As the four production structures focus their activities on the international market and respond to domestic crises, they are restructuring industrial production. Fewer disparities exist among firms in the four production structures in their use of space, organization of the labour process, application of new technologies and access to alternative sources of capital. Moreover, the historical ideological differences are also disappearing, placing less restraint on an extension of the division of labour. In the face of changes in economic circumstances, material experiences are undoing ideological commitment. Practice is deviating from traditional ideological positions. Consequently, there is a growing convergence between the four production structures in both industrial organization and ideological outlook.

It is the leading private sector firms, organized under free-market principles, which depict the mode of industrial organization being emulated. The desire of the state to privatize government-owned industry signifies a departure from its historical ideological position. Government ownership of strategic industrial enterprises had been considered crucial for the promotion of national tasks and regional development. Socialist and nationalist ideological tenets no longer constrain the organization and location of production in the Histadrut production structure. Notwithstanding the narrowing of differences, variations persist. The ideological values of the kibbutz factory continue to articulate certain features of its organizational and locational structure. To this extent, the kibbutz factory is an exception and there must be caution in making generalizations on the four production structures.



As a consequence of the restructuring process and the priority of economic goals, industrial growth in peripheral areas has been thwarted. Private, government and Histadrut production structure firms will only invest in the periphery when there are definite economic benefits to be gained. Nationalist ideological aspirations, particularly in the Histadrut production structure, have ceased to be a consideration for locating industrial enterprises in development towns. In the private sector, a distinct spatial division of labour favours foreign locations and the centre of the country at the expense of the development areas. Moreover, differaces between the periphery and the centre are likely to be exacerbated by qualitative variations in the tasks undertaken. Industrial projects in the periphery are characterized by a demand for lower technological skills and require a narrower range of managerial functions. The changing priorities of the production structures have reordered organizational and locational strategies, thereby inhibiting the sustainability of local industrial undertakings that previously depended on non-economic considerations for their viability. The diverse community structures which were set up to promote nationalist goals are increasingly subject to the upheavals of market forces. Consequently, the possibilities for equitable regional development are decreasing.

Whether the process of change in the kibbutz is so entrenched that its survival is uncertain does not mean that it does not offer insight for organizing industrial production in other communities. For lessons to be learned from the kibbutz, it does not have to be emulated nor does its reproduction have to be guaranteed. A solution for fostering industrial development within either the Israeli periphery or in other place-bound communities does not lie in setting up kibbutz clones. What is important both for the kibbutz itself and for other communities is to appreciate the kibbutz’s emphasis on place- bound economic growth, which has emerged from the relationship between ideological principles and spatial organization. The experience of the kibbutz broadens the knowledge which is being recounted in the literature of the various industrial districts and industrial networks (Pyke and Sengenberger, 1992; Pyke et al., 1990). Its model offers a third-way solution for organizing industry which lies between free market competition and centrally planned economic development. It is one in which the organization of industrial production is grounded in specific ideological values that blunt an extension of the division of labour, thereby facilitating an integration of labour within a spatially confined community.

Within the kibbutz production structure, the preference is to locate factories within the territorial boundary of the kibbutz. A strong identification and commitment of the community to the factory accrue from the spatial unification of home and work. Specifically, the benefits which the kibbutz factory has derived in practice motivate the kibbutz community to seek unique on-site organizational solutions. This success, despite their retention of a distinct, yet changing, ideological identity, is no longer the result of their privileged position within Israeli society. The experience of the kibbutz factory thus suggests that, where a community owns the means of production and is committed to retaining the integrity of the locality, there are opportunities for industrial development within place-bound communities.

Allan Lichtenstein, 112 South Second Avenue, Highland Park, NJ 08904, USA

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The Organization of Industrial Production in Israel - From Diversity to Convergence?

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