TEL AVIV (MarketWatch) — Israel’s traditional system of kibbutzim, or collective farms, is a form of communal settlement still responsible for a third of the nation’s agricultural production.

But as Israel’s economy basks in an International Monetary Fund-projected growth rate equal to three times the average of Western Europe, it‘s worth revisiting the kibbutz to see how it’s faring.

The kibbutz is an idea that grew out of the requirements of a state-in-waiting in the early 20th century. Under extreme conditions, pioneering Zionists needed to pool their meager resources together or perish. They needed, in other words, to create the conditions that could lead to the elevated status of the Israeli cow. Today, amid a recalcitrant landscape, the Israeli cow is one of the bovine universe’s most efficient milkers.

There are approximately 273 kibbutzim in modern-day Israel, employing about 30,000.

Equality, self-sustaining labor, cooperation in all areas of production and consumption, commitment to Hebrew culture — these, historically, were the central tenets of the kibbutz concept. And the goods made on Israel’s kibbutzim today still account for about 10% of all exports of industrial goods, according to The Kibbutz Industries Association, a trade body.

Dr. Shlomo Getz, a researcher at the University of Haifa with a special focus on the kibbutz, said that because Israeli’s economy is so strong right now — its gross domestic product is expected to expand by 4.8% this year — the total number of Israelis interested in living on kibbutzim has swelled by about 14% over the last five years to about 137,000 or 1.8% of the total population. However, he also said that the perception of the kibbutz in modern-day Israel is one of isolated groups serving narrow commercial interests.

“One of the problems with living on a kibbutz in Israel today is finding work on the kibbutz,” said Ron Shani, chief executive officer of AKOL, a small boutique software house that sits on Kibbutz Brur Hayil in the south of the country, near the border with the Gaza Strip. AKOL develops cloud-based agricultural software that helps farmers manage their fields and livestock in a country where the interests of private enterprise are often entangled with that of the nation’s. It’s precisely the kind of company that has ensured that the Israeli cow produces 12,000 liters of milk every year while the rest of the cow-milking world is stuck around the 4,000-liter mark.

“For our company, but also for Israel, it’s very important that we’re located on this kibbutz,” said Shani, who commutes several hours every day to Brur Hayil from the beach town, and tech hub, of Herzilya, just north of Tel Aviv. Shani said that his is a firm that at heart is a company of farmers that write code, not the other way around, and that there is a reason that AKOL hasn’t relocated to Tel Aviv.

“By being here, very close to the border with Gaza, where there’s absolutely no work, we can give back to the area, but also be closer to some of the community that we as a business serve — the farmers,” Shani said.

Ron Shani, chief executive officer of AKOL, in his office at the firm’s headquarters on Kibbutz Brur Hayil, in southern Israel. AKOL recently signed a development deal with IBM. Hjelmgaard/MarketWatch

Brur Hayil is a sleepy and mostly titular example of the collective settlement idea. Gone are many of the formal characteristics of shared living, such as graded salaries according to need, the steady absorption of new immigrants — in Brur Hayil’s case, from Brazil — and a sense of social cohesion and purpose. Gone, too, is the overt focus on agricultural production and communal partnerships. At Brur Hayil, for example, which sits on the western edge of the Negev desert, and which is home to about 260 residents, most of the kibbutz’s occupants are now forced to look off-kibbutz for employment opportunities. AKOL has been able to provide jobs to only about half a dozen of Brur Hayil’s members. These days, when Shani and his small staff want lunch, they hop into their cars and drive a few kilometers away to neighboring Kibbutz Or-Haner, where there is a fully functioning communal dining hall.

There are about 273 kibbutzim in Israel today, with just over a dozen of these deemed to be religious in orientation. A full 75% of the total are located in the outlying areas of the country, according to data provided by The Kibbutz Movement, a body that represents kibbutzim in dealing with Israel’s government and regional authorities. In 1950, two years after Israel took up its place in the community of nations, there were 214 kibbutzim, housing approximately 67,000 people. By 1990, there were 270.

But these numbers do not reflect the contribution kibbutzim make to Israel’s coffers, nor their disproportionate presence in the literally dozens of different industries they partake in. In 2010, for example, total revenues from kibbutzim were just over $13 billion and they operated across sectors as diverse as medicine, chemicals, irrigation, textiles, software, paper, communications and wine. With a modest segment of the labor market, with just over 30,000 workers, kibbutzim account for 5.2% of Israel’s investments and 9.2% of its industrial employment, according to the Kibbutz Industries Association.

Kibbutz Sasa, in the north of the country near the border with Lebanon, is a good example of how a relatively prescribed form of economic activity has changed in recent decades. Through its Plasan business, the members of Sasa manufacture the mine-resistant armor that grace the underbellies of the explosion-retardant vehicles used by the U.S. military in Afghanistan and other trouble spots. And it’s a big business. Plasan has sold hundreds of millions of dollars worth of armor to the U.S. Defense Department alone, and it has strategic partnerships and subcontractors all over the world.

But Sasa hasn’t always prospered as a direct result of the high-stakes, R&D-intensive defense business. Before the founding of Plasan, the several hundred residents of Kibbutz Sasa earned their living almost entirely from agriculture. And now, Plasan, as well as its sister company, SasaTech, which develops and manufactures detergents and chemicals, recruit staff from both within and beyond the boundaries of the kibbutz.

Despite this shift to technology, Sasa remains committed to the old socialist ways. The chief executive officer and founder of closely-held Plasan, Dan Ziv, for example, in an interview a few years ago with the Israeli business daily, The Marker, said: “If you want to make a million dollars, make sure you make $200 million, one million for each kibbutz member.” Ziv is reported to eat a perfunctory lunch each day with the other members of Sasa in the compound’s relatively spartan dining hall. Budgets may have ballooned, Plasan’s orders book may have swelled, but Sasa’s organizing principle of cooperative life has not.

In some ways, kibbutzim across Israel still fulfill a basic practical role in a country that suffers from a dearth of first-class infrastructure.

“When we decided to build our winery, we decided to build it in the center of Israel,” said Roni Saslove, a wine maker at Saslove Winery, which is located about half an hour from Tel Aviv, on Kibbutz Eyal. A kibbutz is almost like a womb, said Saslove. To a certain degree it’s self-sufficient, because you tend to have people with many different abilities and skills-sets located right on the kibbutz, she said. “Whether you need a tractor, a welder, an electrician, you have everything right at your disposal, so it’s a natural setting for a company.”

Not that long ago, Shimon Peres, Israel’s president, visited the wine maker’s vineyards in the Galilee, in the north of Israel. “When Peres came to visit he loved the wines and said we’re doing something absolutely wonderful,” Saslove said. “But he also offered a recommendation: ‘Whatever you need done, do it yourself.’”

Women training at Kibbutz Mishmar HaEmek during the 1948 Arab-Israeli War.

For others, the kibbutz now mostly plays a ceremonial role. “For us, it’s simply a coincidence that we started on a kibbutz,” said Assaf Barnea, the chief executive officer of Kinrot Ventures, a water-technology start-up incubator that maintains an office on Kibbutz Lavi, in the Galilee, in northern Israel, but that conducts most of its business dealings through its office in Herzilya. Barnea, a former professional basketball player, said that his company remains committed to the campus-like atmosphere that you find on Lavi, and that it permits a sheltered space for some of his entrepreneurs and researchers to brain-storm ideas, but that to a certain degree, it’s also used as a marketing tool. When they signed recently a strategic partnership with General Electric Co.’s GE, +1.79% water unit, for example, Barnea said that Kinrot Ventures decided to make that announcement at an event held on Kibbutz Lavi. View a slide show of the Israeli kibbutz then and now

“In recent years a fresh, new trend has been noted as many kibbutzim have begun to witness growing numbers of young singles and families longing for a collective-community quality of life; a rural environment; a praiseworthy educational system; and the ability to work and make a living according to one’s own talents and interests,” is how The Kibbutz Movement describes the current economic and cultural trajectory of life on the 21st-century kibbutz in Israel. “This has transformed the kibbutz into an attractive lifestyle, more than ever before.”