The Populist Rage Against Teva Is Ugly and Idiotic

Now we all know: Teva Pharmaceutical Industries' new CEO Kare Schultz is moving into a $5 million luxury apartment in Jaffa, he drives (or did drive) a Maserati, and he likes to live well.

This information, courtesy of the Hebrew-language financial daily Calcalist, was brought to the public’s attention not so coincidentally, as Schultz unveiled plans to fire a quarter of Teva’s workforce.

The layoffs have provoked politicians and the media into a mix of rage over Teva’s incompetence and heartlessness, and pity for the workers being thrown into the street. The Maserati is a not-subtle hint at callousness towards the part of the hapless workers.

There’s room for rage and even for some pity in the Teva affair, but it’s overwrought. The angst is being animated by Trump-like populism that plays fast and loose with the facts. It identifies marks out enemies and questions their loyalty to society. It portrays ordinary people as struggling heroically (with the help of newspaper columnists and the loudest-mouth Knesset members) against self-serving, incompetent elitists.

Sometimes the populist appeal is direct. Sometimes its message is contained in subtle hints, a tried and true strategy employed by Prime Minister Benjamin Netanyahu, who wants to appear as both a responsible world statesman while appealing to the right-wing rabble whose support he needs on election day.

Someone who knows nothing

It’s that kind of rabble-rousing populism that can’t resist titillating the public with little details about Schultz’s high living. Like others beating the populist drum, Calcalist doesn’t make any direct connection, but the reader can only be left asking himself why Schultz  -- a Dane, who arrived in Israel just a few weeks ago – is driving an expensive car and buying a luxury apartment while he’s firing 1,700 of my fellow Israelis.

Histadrut labor federation Chairman Avi Nissenkorn played this same subtle game last week when he declared a nationwide strike in support of Teva workers: Teva is an Israeli company that was "built on Israeli brains" (which was a reference to the sole major proprietary drug sold by Teva, the multiple sclerosis treatment Copaxone, which was developed at the Weizmann Institute), Now someone who knows none of this glorious history is about to upset it all. No need to name names or nationalities.

Subtle xenophobia is the ugly side of the Teva populism that has welled up in the last week.

The economic populism that has accompanied it is less ugly, and is less hesitant about presenting itself in all its idiocy and nihilism.

There’s a lot to criticize about Teva’s failures over the last several years: Its board was dysfunctional, the company made a series of bad acquisitions, the company ultimately failed to find an alternative source of income when Copaxone lost its patent protection. Finally, Teva made a bad deal in its acquisition of Allergan, a unit of Actavis Generics, which saddled it with huge debt.

Always a failure?

But Teva also rose to be the world’s No. 1 company in the highly competitive generic-drug industry, which demands finesse in R&D, regulations and marketing. That is a remarkable achievement for a company headquartered half way around the world from its main market, the U.S. Teva also shepherded Copaxone through an unusually long and successful lifespan before, as was inevitable, its patents expired and generic competition sprang up.

For the populists, however, no really business is ever successful because it is "well run". That's forimaginary businesses. Now, for the sake of their own short-term, unrelated gains, the populists are rewriting the history of Teva to show that the company was always a failure.

Teva lived off the fat of Copaxone profits and happened to get in on the global generics business just as it was taking off. The tax breaks were offered by the Israeli government because Teva massaged the right politicians. The breaks boosted profits it never deserved in the first place. Its managers and workers milked dry the cow they had only gotten ahold of by luck. Now comes this high-living foreigner to slaughter the cow and every good Israeli should be enraged.

The populists praise the beauties of free markets and competition and seem to think that those things result in businesses that never make mistakes. These free businesses will constantly lower their prices, hire and never fire employees, adjust their businesses effortlessly as markets change and pay their CEOs less than whatever they are earning now. They’ll be smart and competitive and highly profitable while remaining good and patriotic Israelis.

Needless to say, this is ridiculous and even contradictory, but it is the kind of stuff that has been passing for commentary on Teva and why it has failed to pass the test.

We can't know if Schultz’s cost-cutting strategy will work. He is cutting expenses far more deeply than analysts had expected and could end up trimming so much that the company loses its competitive edge. Schultz has not laid out in much detail any plan for Teva’s future beyond that.

In the populist worldview, however, there’s no room for CEOs to make intelligent mistakes based on the best-available information at hand at the time. There are only incompetents who collect big paychecks and let others pay the price later. If Schultz fails, he’ll get no credit for trying, but join the populist rogue’s gallery. If he succeeds, it because he's just a lucky guy who should have been driving a used Kia.