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7 THE WOULD-B E PRIVATE SECTOR: THE O RIGINS Early Farming Days The history of the emasculation of the private sector is almost as long as the history of the renewed Jewish settlement of Palestine. The first settlement endeavors, we recall, were undertaken by courageous individuals who formed the first moshavot or farming communities based on individual property and effort. Many of these first beginnings encountered grave difficulties, however, as might have been expected under the circumstances. It is common in similar situations that many failures occur before a secure bridgehead is established, and so it was to be expected that some of the early enterprises might fail. Indeed, quite a few of the new settlements found themselves after a while in dire financial straits. Enter Baron Edmond de Rothschild, who became known in later years as the "famous philanthropist" and undertook to save the early settlers from financial demise. This would have been a blessing had the baron based the extension of financial facilities on economic considerations. For example, he could have extended credit commensurable with the enterprising qualities of the recipients, but this is not what happened. Rather, the baron viewed the whole undertaking as a philanthropic enterprise and never expected it to lead to financial self-sufficiency. The consequences were horrendous. In most of the colonies that enjoyed the baron's largess, the settlers were driven to a status of welfare recipients, losing their enterprising spirit. Fortunately, not all colonies subscribed to the baron's handouts, among them chiefly Rehovot and Gedera, both of which had been established just as the baron's operations were about to get under way. The settlers of both these colonies led the fight against the baron's welfare system.' Eventually, the baron pulled out quite disappointed, but continued to channel money through J.C.A., a foundation whose extension of credit was based a bit more on business considerations. 150 The Pollical Economy ofIsrael The baron's involvement in the settlement effort has been traditionally viewed as having saved the then-existing communities from ruin. This is, of course, impossible to prove, as is any similar assertion. Although the baron's intentions were, of course, beyond reproach, the legacy his operation left behind was certainly not conducive to the creation of a financially sound agricultural sector. The baron's episode is important because it affected a significant part of the fledgling farm sector and constituted a harbinger for things to come. The Ideological Background In general, it is impossible to delineate a clear boundary between the attitudes toward private capital, already discussed in Chapter 3, and attitudes toward the private sector. Because private business enterprises must be based on nonnational capital, and in any event must have free access to capital, any ideologies which are hostile to private capital are per force hostile to private enterprise. Nevertheless, the two need not be identical, because capital mobilized by the public sector can be put at the disposal of private enterprises, as has been the case in Israel. Furthermore, in the prestate days the leadership did not have the power to confiscate private capital, and so the route to cowing the private sector through restrictions on access to capitai was closed. The alternative methods chosen and the ideological foundations that guided them justify an inquiry independent of the analysis in Chapter 3. The objection to private enterprise was twofold. Private enterprise was considered both incompatible with the objectives of the Zionist effort and incapable of accomplishing those objectives. In other words, the objections were both ideological and practical. Private enterprise was also very often identified with industry and trade or, more generally, nonagricultural occupations . Because agriculture retained an ideological supremacy over all other occupations, private enterprise was viewed unfavorably because of its concentration in nonfarm enterprises. One of the clearest pronouncements reflecting the attitudes of the day toward free enterprise was made by Arthur Ruppin, who, having been more highly educated than most other leaders, possessed the gift ofbeing able to state the prevailing positions with clarity. He proceeded from the assertion, as a matter of fact, that the Zionist Organization, with its anticapitalistic bias, deliberately discouraged private enterprise. He then proceeded to defend the bias. In the first place, argued Ruppin, agriculture was more capable of absorbing mass immigration than industry. His reasoning was that agriculture required a smaller investment per new worker than industry. This was a fallacious observation that had been based on Ruppin's investigation of four industrial...


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