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Crumbling from Within?

It would be ironic and profoundly tragic if Israel, after so much blood, tears, intelligence, idealism and dedication has been spent on her creation and survival, allowed herself to rot from within. Israel is a flawed but remarkable country. It has earned our loyalty and love. That is why a report such as this one is so deeply depressing.

Is Doron a wannabe Jeremiah peddling doom and condemnation in response to the everyday transgressions of a small section of the population, or is there indeed a deep rot that urgently needs to be rooted out? Has he the courage to face the truth and to speak out openly while others prefer to avert their eyes and to find excuses or minimise the danger? Is the truth somewhere in between?

But my guess is that there exists a real problem and it is up to Israeli society to take the necessary steps. Maybe the trial and conviction of Olmert is the first step in the process. Or is it a sop to the electorate while leaving the wound to fester?

I would like to hear from Israelis themselves; or from anyone with information or an opinion to offer.

Mike Berger


Olmert Isn’t Alone

by Daniel Doron in Israel Hayom

May 15, 2014

What does it say about Israeli society and the system of government when a prime minister is convicted of taking bribes?

There will always be a few rotten apples. But the Holyland case, and many other instances of bribery at the upper echelon, show us that the corruption spreading in the government is part of the system that allows politics to control the economy. Former Prime Minister Ehud Olmert had partners: mayors, city council members, the city engineers, cohorts on the planning committees and wheelers and dealers. But Holyland isn’t alone at the top. Every day, incidences of destructive corruption in the public and private sectors are discovered, from IDB and Hadassah to many municipalities and even the Keren Kayemet and the military chief of staff (all allegations, of course).

Corruption has become a national plague, an integral part of the Israeli regime of concentrated power. Knesset members and the government bureaucracy have gathered immense economic power. They gouge most of the population for taxes while exempting their cronies. They grant the inner circle monopolistic rights worth billions.

There are a few honest people among them, but is there any chance that anyone from that crop won’t become infested, that an open door won’t tempt thieves? Certain politicians and bureaucrats and their friends who serve the tycoons allow them and their huge companies to steal billions from hundreds of thousands of families who can barely stretch their budgets to the end of the month.

Power corrupts, and absolute power corrupts absolutely. A list of “pigocks” (“havasim” in Hebrew, a play on the words for “pig” and “peacock”) was recently published that included many former senior figures in the Treasury and the Bank of Israel. In exchange for bloated salaries and millions of shekels in bonuses, they “manage” the tycoons’ monopolies. To their discredit, they help tycoons wring all sorts of benefits out of the government, all sorts of privileges and monopolistic rights that squeeze the public, especially low-income citizens, out of billions by setting inflated prices. They receive giant salaries, even if they are the failing directors of businesses that earn profits only by exploiting the public.

Aided by top lawyers, who twist the law to their liking, and with the help of leading accountants, who make worthless presentations that obscure the bad situation of the tycoons’ businesses; with the aid of friendly bankers, PR people, and chirping media canaries, they have pulled billions in credit out of our pension funds and flung them at speculative projects. Billions in pension fund money have been wiped out and emptied the coffers of the Israeli economy, whose excellent human resources and the trillion shekels in foreign investment were supposed to make one of the richest economies in the world. These are the successful “captains of industry” whom attorney Ron Caspi warns us against restraining, lest they leave, abandoning us with nothing.

The Dankner family, for example, got the franchise to produce salt from government property at Atlit, near Haifa. As agricultural ground, it wasn’t worth much, but for some reason the Israel Lands Authority gave a green light to upgrade the lots for extended construction. Their value soared. The deal didn’t go through, but a letter of intent was enough for Bank Leumi to give the Dankners a loan of 358 million shekels ($103.5 million) to purchase some 12 percent of Bank Hapoalim and leverage their status in the bank to take control of IDB and other key companies, only to bankrupt them. The tycoons’ thievery has wrecked families.

It also undermines our security. Over a million young Israelis have moved to the U.S. and to Europe, not out of lack of patriotism but because they cannot support a family on 5,000 shekels ($1,400) a month when the price of an apartment is equal to 140 salaries and the price of products and services are twice of those in the U.S. The chance of promotion in the workplace is slim. Most employers are controlled by tycoons or by monopolistic unions rife with corruption that prevent outsiders from moving up the ladder.

Israel wouldn’t be the only country that corruption — which lets politicians, oligarchs, and monopolistic unions control the economy — causes to crumble. But it would be the first Jewish state, whose children gave their lives to found it, to be destroyed by people lusting after power and lucre, because most of its people — even the elite — are ignoring the fact that without bread there can be no ideals and that the economy is being exploited, and are saying nothing.

Daniel Doron is founder-director of The Israel Center for Social & Economic Progress (ICSEP), a public policy think tank, and a fellow of the Middle East Forum.


11 responses to “Crumbling from Within?

  1. Geoff Boner May 17, 2014 at 10:12 am

    There is some truth in Daniel Doron’s post, but this is not all the truth. Israel is a rapidly expanding economy with a result that people in positions of power were able to gain control of many of the assets of the country. when the State came into being everything was controlled by the government. This means that most of the economy was in government hands. Eventually it became clear that this restricted growth and expansion. The government thus sold off assets to anyone who was willing to take on the challenge, had the means and was connected to the government. This lead to a massive expansion of the economy. See the following table comparing the situation in 2014 to thay in 1984.
    2014 1984. 1. Population of Israel 8.2 million 4.1 million 2. Annual inflation rate 1.5% 447% 3. Annual Bank Rate 5% 771%
    4. Government deficit as percentage of National Product 2.5% 17% 5. Security expenses as percentage of National Product 5.5 % 20% 6. Foreign currency reserves 90 billion dollar 3.3 billion dollar. 7. Exports 90 billion dollar 10 billion dollar 8. Export of IT 28 billion dollar 0 9. Percentage of women employed 53% 30% 10. Production of goods and services 320 billion dollar 30 billion dollar 11.Gross National Product per person 39000 dollar 7000 dollar
    This figures show an amazing expansion. This has led to a small number of families controlling the economy and at the same time becoming extremely wealthy. Some of these so-called tycoons used their money or influence with the governing bodies to advance their wealth. This has become evident and major efforts are being made to change things. The Olmert trial was an example of these efforts. He used his connections with the wealthy to improve his position and was expected to repay them. The Justice department investigated and now he has been tried and found guilty. Several lesser government members have also been tried and found guilty. A large conglomerate such as IDB has been taken out of the hands of Nochi Dankner. The Haddasah hospital got into financial difficulties because of poor management, decreasing government support of the health sector and the Madoff affair in the United States. At the present time a recovery program is being prepared for the hospital, which will allow for more government control.
    I would thus not describe Israel as a country which is imploding but one with many problems both external and internal and is doing the most to solve these many problems.
    Remember that Israel has a free press, which views government policy with circuspect and is not afraid to publish anti-government articles and reveal the facts of corruption at all levels of life.


  2. Mike Berger May 17, 2014 at 10:09 am

    Of course I mean country!! Heh-heh


  3. Mike Berger May 17, 2014 at 10:06 am

    To Rhoda, Charles, Monty, Bev, Stephen et al. Thanks for your comments. Most of us find this sort of criticism of Israel distressing for various reasons – certainly I do. But at the same time I am not surprised. I don’t think it is “Capitalism” Rhoda – it’s Human Nature! That’s not a glib comment. Tons of evidence from the historical record, social sciences and evolutionary studies show quite clearly that a subset of humans will seek to exploit others given the opportunity. That doesn’t depend on whether one lives in a free market or socialist system or indeed in a theocracy or any other. It is mitigated by cultural and political norms, by vigilance and by consequences. It will never be stamped out completely but living in a small country may make it easier. Probably that is what Israel has to do if it is not to see her social fabric being undermined; though it will attract determined opposition from the beneficiaries of the crony system. To Charles: I don’t think the Jewish society you describe ever fully existed but it is an ideal to aim for. Bev. I think people have been impressed by the jailing of Olmert and wish they could see such a thing happen here. BTW despite the ignorance and some evidence of anti-Jewish prejudice, the anti-semitism survey in this cuntry showed that most South Africans favoured Israel over Palestine. Considering the sheer volme of anti-Israel propaganda, that is remarkable and leads one to believe that if hit over the head hard enough, reality can penetrate even the most obstinate of skulls. So let’s hand in there and how about a few more Israelis replying?


  4. Charles Smith May 16, 2014 at 10:15 pm

    I have always had a feeling that the special characteristics of the Jewish people, which they practiced in their daily lives – tenacity in surviving under extreme duress, lack of violence among themselves, consideration for their fellow citizens, love of life, excelling in cultural and technical activities, etc. etc. – was due largely to their being under extreme pressure due to anti-semitism through the ages. It galvanized them into a close-knit group with high ideals and unbelievable potential. True, not all peoples react that way, but it seemed to bring out the best in the Jews. At the same time, I feared that if and when the pressure would cease and the Jews would become “free” like other peoples, they would lose their special characteristics and become like the others in all ways. I’ve always felt that if the Arabs had any sense they would have left the Jews alone completely and removed all threats to them. The Jewish State might already have self-destructed ages ago under those circumstances.
    Corruption is part of the human being – not every one, but the genes are there and are expressed in a certain very large percentage, if given the circumstances to allow it. So, as Israel becomes more successful, even opulent in many quarters, and relatively secure (compared with the last 2,000 years), out come the gremlins lurking in the shadows and waiting for their turn.
    That’s the story in a nutshell. Meanwhile the forces for life and successful communal existence are still quite strong here and are openly fighting the rot, which is more than one can say of many other places. So, so far so good. Let’s hope it keeps up.


    • montlaskymontlasky May 17, 2014 at 9:19 am

      Resilient enough to stand up to 25% of the world being anti semitic. That’s quite a number to handle or to change the world’s way of thinking. Israel continues to confound the world despite this handicap and is still one of the worlds strongest democracies.


  5. Bev Goldman May 16, 2014 at 12:37 pm

    Memories of the new (and admittedly the old as well) South Africa? What a dreadfully uncomfortable article – and with its distribution which is inevitably going to be widespread (Israel’s enemies will make many meals out of it – wait and see), the fallout is going to be tough. Funny how we always thought Jews were more “moral” than the rest of the world – or we liked to think so, anyway – but reading this makes one ….embarrassed? Angry? Frustrated? All the above and more. Oh dear!


  6. Mike Berger May 16, 2014 at 10:50 am

    No Monty I am not. I presume you want to make the point that Israel is not alone. I agree but that does not really address the issue, does it?


  7. montlaskymontlasky May 16, 2014 at 10:43 am

    Are you talking about South Africa?????


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