Taking Stock

Who's Calling Erel Margalit a Communist?

Even a venture capitalist proposing measures to enhance competition in business risks being tarred by powerful interest groups.

When venture capitalist Erel Margalit leaped into politics two years ago, he figured he’d take flak for his wealth; that they’d say he couldn’t understand the problems of ordinary Israelis. He probably didn’t figure the attack would come from the other flank. 

“Seems Shelly Yacimovich infected Margalit with communism,” the manager of a large consumer products company remarked, after Margalit proposed to fix the antitrust law by forcing companies with great clout in their industry to publish financial statements. Margalit’s proposal had been coordinated with the antitrust commissioner, David Gilo.

“Margalit himself is a businessman, so his proposal surprised me,” the source continued. “Instead of Knesset members dealing with the banks and the fees they charge, they’re attacking owners of supermarkets and food companies, because it’s sexy. His proposal is populist.”

But Margalit shouldn’t be surprised. Historically, attacks labelling politicians, regulators and journalists as commies or socialists have not followed proposals to levy taxes or institute more central planning. The opposite is the case. The commie slur has come precisely when the proposal involved attempts to create a freer market, by boosting competition. That is when the McCarthyites of the Israeli business sector begin to warn anybody dreaming of competing that they’ll be labeled communists. The next stage is to be labeled Stalinist, ayatollah-ist or even worse.

The most extreme example arose just before the social-justice protests broke out in the summer of 2011, when anybody trying to point out the evils of business concentration and trying to reverse it (which means, anybody pro-market, pro-competition and opposed to big business benefiting from the status quo) was denigrated and delegitimized from all directions, even NGOs funded by or tied to big business.

Dubbing a businessman of Margalit’s caliber a communist and dismissing proposals to force powerful companies to publish financial statements as communism simply means the public doesn’t distinguish between “pro-business” and “pro-market” policies. Blurring the distinctions is convenient not only for giant companies and monopolies, but also for the public-sector unions (which are a sort of independent tax militia) and the politicians that represent their interests.

The corporate giants, monopolies, exclusive importers and industries with political clout, which are protected by regulation, are the biggest enemies of the free market and competition. Free markets and competition favor the consumer over time and act against the interests of the existing players, which have to become more efficient and innovative in order to compete. Some find that, after decades of slothful practices, they can’t do it.

In some cases, the owners of the great companies forge strategic alliances (open or hidden) with their workers. Neither want competition.

Take the case of Israel Chemicals, when it wanted to fight the government’s intention to increase the royalties the company pays for exploiting Israel’s natural resources. It didn’t send in lawyers; instead it sent its union reps and mayors from southern Israel to brand the plan “anti-worker,” rather than a boon to the millions of Israeli taxpayers, poor, disabled and unemployed.

In fact, most of the powerful interest groups want to prevent a free market from arising in their fiefs - and they almost always win the day, given their organization, access to information and ability to plan ahead for protracted battles.

Most Knesset members don’t want to pursue difficult and endless wars with these interest groups. They’d rather expend their energies on more simpler and more colorful battles against some other political party or ideological group, rather than against a powerful interest group.

Margalit was known in high-tech circles not only as a venture capitalist who made it big, but as a supremely involved person. That’s not usually a recipe for success in politics, but if he wants to take on the interest groups, he could theoretically turn his disadvantages into advantages. He’s rich? Great; he doesn’t need to worry about a job the day after. He understand numbers and data, which will help in the fight against the giants that are damaging the economy and impeding economic growth,

The problem is that battles of that sort require consistency, the ability to run long distances and to shrug off the slurs. In fact, if you aren’t mocked and clawed and delegitimized by the interest groups (directly or through their pets in the press,) apparently you aren’t doing it right; you’re not spearheading the revolution, you’re using cosmetics.

Margalit has the means and knowledge to fight for the free market and against the monopolies. Does he have the character for a long, painful fight, that will cost him in the short run?

AP