[Marxism] Israel's crony capitalism
lnp3 at panix.com
Fri Aug 12 07:34:08 MDT 2011
NY Times August 11, 2011
Protests Force Israel to Confront Wealth Gap
By ETHAN BRONNER
TEL AVIV — They are mainstays of the society pages and glossy
magazines. Some are praised for the hospital wings they have
built, others are gossiped about for their quirks.
But these days, the handful of wealthy families who dominate the
Israeli economy are assuming a new role: one of the chief targets
of the tent-city protesters who have shaken Israel in the past month.
The “tycoons,” as they are known even in Hebrew, are suddenly
facing enraged scrutiny as middle-class families complain that a
country once viewed as an example of intimate equality today has
one of the largest gaps between rich and poor in the
The tent-city protesters, who have shifted the public discourse by
demanding affordable housing and other essential goods, issued a
document this week calling for a new socioeconomic agenda. Topping
their goals: “minimizing social inequalities.”
“What is keeping people on the streets is the question that if we
are all having a hard time and we are all working and paying
taxes, who is making the profits?” said Daphni Leef, the
25-year-old filmmaker who began this protest movement with a
Facebook posting and remains at its center. “We know there are
certain families that have a lot of money and a lot of influence
and there is no transparency. People feel deceived.”
Those families — the Ofers, the Dankners, the Tshuvas, the
Fishmans and others — account for the 10 biggest business groups
in the country and together control some 30 percent of the
economy. They will doubtless be among the targets at another set
of street demonstrations planned for Saturday night.
“It is becoming clearer to more and more people that this issue of
concentration of wealth has become more important,” said Einat
Wilf, a legislator who submitted a bill last year aimed at
tackling the issue. “As a result of the protests, there is much
more political will to fight it than in the past.”
Others counter that wealth concentration is only one of a number
of factors contributing to the current middle-class lament and
that focusing on it exclusively diverts attention from other
equally important matters. They point to things like a swollen
defense budget, subsidies for the ultra-Orthodox and the cost of
settlements in the West Bank and East Jerusalem, where the
Interior Ministry said Thursday that it would build 1,600 units
and announced plans for 2,700 more.
But the issue has had strong populist resonance. Although Israel’s
economy is strong, the data on wealth concentration, published by
the Bank of Israel, are unsettling. A small group of family-owned
companies control banks, supermarket chains and media, cellphone
and insurance companies. They borrow heavily, posing risks for the
larger economy and, through a web of interconnecting enterprises,
make it harder for others to get into the markets they dominate.
“These are called pyramid schemes because through shares in one
company they take control of a second company and, through that,
of another one on down a chain of holdings,” said Eytan
Sheshinski, an economist at the Hebrew University of Jerusalem.
“They are able to move profits through the pyramid, which cannot
happen in the United States because of the tax system there.”
Still, the Bank of Israel study shows that while the United
States, Britain and Germany have much less concentration of wealth
than Israel, it is not so different from several other
democracies. Based on the holdings of the 10 largest business
families, Israel is in about the same situation as Switzerland,
France and Belgium, and its wealth is far less concentrated than
is the case in Sweden.
Last fall, Prime Minister Benjamin Netanyahu formed a committee to
examine the concentration of wealth and find ways to reduce the
power of monopolies.
“A pyramid is a tool to leverage heavily your capital, and retain
control over large economic entities,” said Prof. Eugene Kandel,
Mr. Netanyahu’s chief economic adviser, in an interview. “We know
from looking at other countries that large and leveraged business
groups can slow growth, cause instability and hinder competition.
The committee appointed by Prime Minister Netanyahu works to
prevent this from growing into a large-scale program in Israel.”
Daniel Doron, who directs the Israel Center for Social and
Economic Progress, a pro-market research organization, said he was
convinced that the way in which failing state assets were
privatized in the 1980s and ’90s led to dangerous consolidation,
just as it did in the former Soviet Union and some Arab countries,
like Egypt and Syria. Banks, construction and mining companies,
all owned by agencies of the state and all in varying degrees of
trouble, were sold to those who could afford to buy them.
“It was basically selling assets to cronies,” Mr. Doron said. Once
the economy started to pick up in the late 1990s, these companies
used their powerful market positions to increase fees sharply, he
said, adding, “Today, the whole Israeli economy is built on
rapacious elites fleecing consumers.”
At the time of the sell-offs, some say, the right favored them for
ideological reasons while the left wanted to get the economy out
of the hands of the government, which the right often controlled.
The result — a limited number of individuals maintaining a hold
over many national assets — has Israelis, both left and right,
worried. Perhaps the best example is Nochi Dankner, chairman of
IDB Holdings. His group controls Super-Sol, the largest
supermarket chain; Cellcom, the largest mobile phone company;
Netvision, one of the largest Internet companies; and Clal
Finance, one of the largest financial institutions. He just bought
a controlling share of Maariv, one of the largest newspapers. Mr.
Dankner declined to comment for this article.
Control of media companies, especially as they have become less
profitable, is one aspect of wealth concentration that has many
here especially concerned. Commercial television stations are
partly owned by tycoons, as are several of the newspapers. Sheldon
Adelson, an American Jewish casino owner and friend of Mr.
Netanyahu’s, publishes a free Israeli newspaper widely seen as
promoting the prime minister’s agenda.
Guy Rolnik, editor of The Marker, a financial daily owned by
Haaretz that has attacked concentration of wealth, said the issue
had gotten short shrift in the media because of who owned the
companies and fears of losing advertising. Often newspapers seem
to be the tools of moguls battling one another as well as certain
A television journalist, who spoke on the condition of anonymity
because of the delicacy of the matter, said his station would
probably not do a program on wealth concentration to avoid
upsetting the station’s owners.
But many of the moguls are somewhat to Mr. Netanyahu’s left on
foreign policy, and their newspapers can be merciless on him.
Other newspapers accuse the prime minister of being in bed with
the rich. Still others say his focus on the tycoons is an attempt
to draw attention away from the cost of settlements and his failed
Mr. Netanyahu’s committee is expected to make recommendations in
the next month or two. They may include a change in the corporate
tax code as well as antitrust regulations making it harder or
illegal to own across sectors, resembling steps taken in the
United States in the first half of the 20th century. But they will
not recommend the kind of income redistribution many protesters
“It used to be politically impossible to go after the cartels, but
now that 300,000 people have gone out in the street, we have a
mandate,” an aide to Mr. Netanyahu said. “But the prime minister
is not going to make this a socialist country again.”
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