David's Harp

The Public Isn't Anti-business, It's Anti-tycoon

Don't confuse the two: High-tech entrepreneurs are still admired and supported because what they do is real business.

If you needed a convenient example of the contrast in the attitudes toward government and business between Israel and the United States, you got one this week. While the U.S. Congress was shutting down the government in a quixotic, ideology-laden battle against the new health care law, which they see as a major expansion of government, Israeli cabinet ministers were approving a plan to form a government company to help solve the country's housing crisis.

The ironies in these two developments are too many to list. Suffice it to say that the U.S. government is already deeply involved in health care, through Medicare, Medicaid and the Department of Veterans Affairs. Obamacare, as its opponents call the Affordable Care Act, isn't going to strike at that cherished American freedom to be refused medical care because you can't afford it.

In Israel, it's government red tape that has been the main factor behind the surge in housing prices. Government companies hardly have an impressive record for speed or efficiency. In any case, the company doesn't yet exist and a key part of its program – what land it will be permitted to develop – has yet to be determined. It will be many years before the first rental apartment under its aegis becomes available.

What the two events do is to tell us something about the very different attitudes of Americans and of Israelis to government and, as a natural corollary, to business.

The conventional wisdom is that Americans distrust government and like business, whereas Israelis put more faith in government and are suspicious of the private sector.

In fact, opinion polls routinely show that both Americans and Israelis don't particularly trust either government or business. The question is which they trust less. On many big issues it's a zero-sum game that leaves you no choice but to be more favorably disposed to the one you find less loathsome.

Just not the facts, ma'am

None of these attitudes have much to do with experience. Americans have been badly abused by business in general and by Wall Street in particular, which was responsible for creating a financial inferno that was put out only thanks to government intervention.

Meanwhile, Israel has prospered over the past decade of relatively small government despite the shenanigans of the tycoons and their debts. But it had "lost years" in the 1970s and 1980s when the government and big labor were responsible for much of business, and the economy was enmeshed in rules and regulations.

Both countries, like the rest of the developed world, have seen the gaps between the richest and all the rest widen. But whom you choose to blame for that – the crushing hand of government or rapacious businesspeople – says more about which side you're on rather than any acquaintance with the facts.

Business in Israel enjoyed a brief period of respect in the first decade of this century. But judging by popular sentiment based on legislation, online posts and newspaper headlines, that respect has long since evaporated. The 2011 social protests embodied a new attitude – that the government should solve the problems of widening income gaps, the high cost of living, the disproportionately high burdens of taxes and army service on the secular middle class and the poor quality of education.

Although the tycoons can't really be blamed for these problems – they can be blamed for a lot of other ones, but not these – there was a distinct antibusiness sentiment in the protest tents. Nor has it abated. Quite the contrary. Nochi Danker, Yitzhak Tshuva, Moti Zisser and the like are routinely skewered in the media. Idan Ofer seems to have had enough and is picking up and moving to London.

Tearing down the pyramids

In the halls of power, the direction is clear. The tycoon's preferred corporate structure, the pyramid, is under legislative attack. The petroleum exploration companies have seen the terms for their licenses grow tougher. Israel Chemicals faces a second government committee examining its rights to exploit the mineral wealth of the Dead Sea. Israel's mobile operators have seen profit shrink to a fraction of their former heights. In the stock market, controlling shareholders and executives claim that draconian regulations deter companies from listing and investors from trading. The thrust of the recommendations issued by the government committee appointed in the wake of the social protests is for bigger government and more taxes.

Is this the end of the pro-business era in Israel? Is it going to be the 1960s all over again, with a bigger, more involved government and a cowed business sector?

Don't count on it. There isn't nearly as much antibusiness sentiment as there appears.

The tycoons may have morphed into Public Enemy No. 1, but there is sound economic logic behind that. Their businesses make their money less from being efficient and innovative than from operating in uncompetitive markets. The tycoons have amassed huge debts, much of it from disastrous foreign real estate investments, and now expect the saving public to eat most of the losses. They're hardly the poster boys for good business practice.

Waze may have been sold for a billion dollars but it and other high-tech startups like it don't create that many jobs, and the wealth they do amass often ends up in the hands of the foreign investors who financed the companies.

But high-tech entrepreneurs deserve credit for the remarkable businesses they have created, and without ripping anyone off or asking the public to absorb their losses when the business fails. Shai Agassi, the tech entrepreneur who totaled Better Place, certainly got his fair share of criticism for megalomania and other sins, but the hundreds of millions of dollars of losses he ran up were absorbed by his well-heeled investors. In the eyes of the public, Agassi was taking a risk with Better Place, but it was the kind of visionary risk that entrepreneurs are supposed to take.

The antibusiness sentiment that has developed isn't really antibusiness at all, it is anti-tycoon. For those who favor truly competitive markets, the sentiments of the day are really pro-business.

David Bachar