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Labour and the Political Economy in Israel$

Michael Shalev

Print publication date: 1992

Print ISBN-13: 9780198285137

Published to Oxford Scholarship Online: October 2011

DOI: 10.1093/acprof:oso/9780198285137.001.0001

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(p.342) Appendix 2: The labour movement economy (Chevrat Ovdim)

(p.342) Appendix 2: The labour movement economy (Chevrat Ovdim)

Labour and the Political Economy in Israel
Oxford University Press

Since the early years of statehood, the Histadrut-linked sector of the economy has employed roughly a quarter of the entire labour force, dispersed across a wide variety of economic branches.3 This represents a substantial increase in both size and scope in comparison with the pre-sovereignty period. In that period, with some exceptions (notably in construction and transportation), Histadrut-owned or affiliated economic activity was concentrated in the agricultural collectives or activities ancillary to agriculture. Until the 1940s the major activity of the labour-movement economy was thus confined to branches which did not attract private capital. As a result, it failed to participate in the two sectors of the economy which experienced the most rapid secular growth during the inter-war period, namely, citrus growing and manufacturing.

Nearly all the economic activities of the Histadrut are carried out within the framework of a special roof organization, Chevrat Ovdim (literally, ‘Workers’ Society’). Beginning in the mid-1980s the labour-movement economy experienced an unprecedented crisis, the long-term consequences of which are still uncertain. However, in the more typical circumstances prevailing earlier in the same decade, Chevrat Ovdim claimed at least one-third of employment in four key branches of manufacturing—basic metals, non-metallic minerals, electrical and electronic goods, and plastics. In addition, Histadrut-linked enterprises accounted for 15 per cent of construction activity. Moreover, the labour organization’s bank was the biggest lender in the country and its affiliated collective settlements produced 86 per cent of agricultural output. The settlements, which operate in industry as well as agriculture and are employers in their own right, contribute about a third of the total labour force encompassed by the Histadrut sector. Economically they are neither owned nor controlled by Chevrat Ovdim, although they are active in its administration and are its principal ideological defenders. The strictly corporate component of the Histadrut sector, comprising about 30 per cent of its work-force, is known (p.343) internally as the ‘administered economy’. It is made up of large enterprises or holding companies of which the Histadrut is typically the sole or majority owner.4 The overall structure of Chevrat Ovdim, and some of the prominent concerns and activities associated with it, are indicated in Figure A2.1.

Fig. A2.1. The structure of the labour-movement economy

Source: Based on a chart that appeared in Ma’ ariv, 19 April 1989.

Historically, the labour-movement economy owes its origins to the economic difficulties faced by the early waves of would-be Jewish settlers in Palestine, rather than to any preconceived ideological project. Some voices within the labour movement genuinely believed in the virtues of decentralized self-management, and left-leaning elements hoped that the labour economy would eventually become the cornerstone of a future socialist society. But collectivism as an end in itself played only a secondary role. The principal (p.344) original functions of Chevrat Ovdim were: (a) to contribute to building up a Jewish-only labour market in which workers would be insulated from Arab competition; (b) to assist in the making of the ‘national home’ by providing jobs for immigrants and engaging in land settlement; (c) to aid the Labour Party (and its forerunners) by facilitating mass political mobilization, providing gainful employment to party leaders and loyalists, and attracting outside recognition of the labour movement’s contribution to nation-building; and (d) to promote a political culture of loyalty to the labour movement.

The realization of these objectives required a structure antithetical to the frameworks of producer and consumer co-operation that developed within the Western labour movements. Ghevrat Ovdim was based on central direction and political control. Thus, while all Histadrut members are nominally shareholders, they receive no dividends and have no voting rights. Instead, under its 1923 constitution Ghevrat Ovdim is governed by the identical structure which rules the Histadrut proper. Practically speaking, however, centralization was always problematic. From the beginning, the kibbutzim and other co-operatives resisted Histadrut authority. The executives responsible for managing the labour organization’s corporations also came to enjoy considerable operational autonomy in return for expanding their enterprises and respecting political criteria in staff appointments.

It was only in the course of World War II that the Histadrut’s direct activity as an employer and entrepreneur expanded into industry. Subsequently, during the first decade of statehood, with the aid of especially favourable treatment by the state, the labour-movement sector of the economy achieved its contemporary dimensions. In the same period there was also a process of internal concentration, with most of the remaining independent producer and credit co-operatives (outside of agriculture) being swallowed up by the ‘administered economy’. The aggressive expansion of the Histadrut’s construction and industrial holding company (Solel Boneh) led by the late 1950s to party-imposed organizational and personnel changes which reaffirmed Ghevrat Ovdim’s politicization but were followed by an effective halt to its expansion. From the mid-1960s a new efficiency-oriented cadre of managers took over in Histadrut companies. By exploiting the labour organization’s relatively easy access to investment funds and taking greater recourse (p.345) to joint ventures with private capital, they stimulated a new phase of growth and managerial autonomy.

Officially, the labour movement defends the ‘administered economy’ on the grounds that it is a more generous employer than the private sector, that its wages and conditions play a vanguard role in collective bargaining, and that it offers greater opportunities for worker participation in management. Each of these claims is only partially true at best. Wage levels in Histadrut firms are no higher than could be expected in view of their size, capital-intensiveness, monopolistic advantages, and mostly-Jewish labour forces. Their usual practice in wage-setting is to adopt standards already set by collective bargaining in the private sector, with the addition (as in other large companies) of negotiated enterprise-level supplements. Numerous experiments in worker participation in management have been intended mainly to appease left-wing circles within the Histadrut. In practice, participation is far closer to the precepts of ‘human relations’ than to syndicalist ideas of workers’ control. Finally, informed opinion is unanimous that the Histadrut’s interests as an employer have exercised a substantial restraining influence on its pay demands as a union, an effect with far greater macro-significance than any reverse influence of Chevrat Ovdim as a ‘pattern setter’ in collective bargaining.


(3) . Barkai (1964) is the only comprehensive study of the economic magnitude and composition of the labour-movement economy. Corresponding nformation on the pre-sovereignty period is available in Meunzner (1942); Horowitz (1948); and Sussman (1969a). The contemporary data cited in this appendix are drawn from an official publication (in Hebrew) entitled Chevrat Oυdim 1982. The organization and rationale of Chevrat Ovdim are reviewed by Daniel (1976); Kleiman (1964a and 1987); and Barkai (1982). Ben-Ner and Estrin (1988) have examined the determinants of wages in Histadrut industry, Rosenstein (1969) and Bar-Haim (1988) are authorities on its workers’ participation schemes, and Ben-Porat (1973) has discussed collective bargaining in Histadrut-owned enterprises.

(4) . In addition to the members and employees of the settlements, and the ‘administered economy’, Chevrat Ovdim includes a number of corporate-like but more autonomous enterprises originally founded by the settlement movements; and also, some urban producer cooperatives, the most important of which are the two bus services which monopolize public transportation in Israel.