Nobel Prize-winning economist Gary Becker has a fascinating post on Israel's kibbutzim. The kibbutzim are Israeli agricultural communities initially organized on socialist lines, mostly between the 1910s and 1950s. Originally, most kibbutzim followed strict socialist policies forbidding private property; they also required near-total equality of income regardless of differences in productivity, and in some cases even abandoned specialization of labor. In recent years, Becker points out, most of the kibbutzim have had to abandon these policies, due to the perverse incentives they create and their inability to to hold on to their more talented younger residents.
As Becker puts it, "nowhere is the failure of socialism clearer than in the radical transformation of the Israeli kibbutz." If a socialist experiment could ever succeed, it should have done so in this case. Most kibbutzim were founded by highly motivated volunteers strongly committed to socialist ideology. For many years, kibbutzim had great prestige in Israeli society, and many of the nation's early leaders were kibbutz members. After Israel became an independent state in 1948, the kibbutzim also benefited from extensive government subsidies. Unlike other socialist experiments, the failure of the kibbutzim cannot be ascribed to lack of ideological fervor, inadequate resources, or hostility from the surrounding "capitalist" society. Despite these advantages, kibbutzim failed to achieve a high level of economic productivity, and even failed to retain the loyalty of many of their own members. Over time, many kibbutz residents became frustrated with the perverse incentives created by socialism, and many also yearned for the individual freedom and privacy created by private property rights.
Only by watering down or abandoning their comitment to socialism have kibbutzim been able to survive. If socialism cannot work under the highly favorable circumstances of the Israeli kibbutz, it almost certainly cannot work anywhere.
Of course there is one advantage that socialist governments enjoy that the kibbutzim did not. Unlike a kibbutz, a totalitarian socialist state can use its secret police to suppress dissent and force the people to work for the state whether they want to or not. This explains why Israel's kibbutzim have mostly abandoned socialism, while North Korea and Cuba have not. When given a choice (as in Eastern Europe after 1989), the people of socialist states have rejected socialism even more decisively than most Israeli kibbutzim eventually did.
The failure of socialist kibbutzim does not prove that small, voluntary communities should abjure all communal property. To the contrary, scholars such as Elinor Ostrom have shown that voluntary social groups can often manage common property resources effectively if they also have private property as well. In Israel itself, the less famous moshavim have enjoyed much greater success than the kibbutz model. Unlike the original kibbutz, moshav members hold their land as private property and are paid at least in part on the basis of performance; at the same time, moshavim also often have considerably communal property as well, managed by rules that try to curtail free-riding and the "tragedy of the commons." Small-scale experiments in limited communal property can sometimes work. Indeed, they are perfectly consistent with free-market libertarianism, so long as they remain purely voluntary in nature. By contrast, the kibbutz experience shows that experiments in full-blown socialism are likely to fail even under very favorable conditions. A free society should not ban the formation of voluntary collectivist communities. However, their debilitating shortcomings provide a valuable lesson in the virtues of private property.