Mirror, Mirror on the Wall, Is Russian Oligarch Arcadi Gaydamak the Image of Us All?

The Russian oligarch was a convenient scapegoat for Israel’s ills, but he was only one in a long line of corrupt operators, most of them homegrown.

Tomer Appelbaum

He appeared on the Israeli arena a decade ago. He bought companies, networked with politicians, bought journalists, ran for Knesset, distributed millions in donations and became Israel’s savior during the Second Lebanon War, stepping in when the government, as usual, failed to take care of communities in the line of fire.

The media followed him ceaselessly, championing him as the great benefactor and the great hope before turning on him. Now he was a crook, a charlatan or a clown, his goals as murky as the source of his great wealth. He departed from Israel as suddenly as he had come, leaving behind a trail of debts and losses and the sighting of occasional “Gaydamak, buy me!” bumper sticker.

At no stage during his rise or his fall did we want to stop and think, or look in the mirror and ask ourselves, is Arcadi Gaydamak the story? Is the man really so captivating and important? Or is this man from Moscow, whom we raised to star status only to revile as the Devil really just a cruel and accurate reflection of the ills of Israeli society, in the government, the financial market, the media?

We did not look in the mirror. We did not reach conclusions. We focused on “Arcadi Gaydamak” or worse, the “Russian oligarch,” not on the image of Israeli society reflected in his face. And since we did not look in the mirror and realize that he is just a metaphor for us all, we were unprepared to understand the people who sprouted up during his era: the Olmerts, the Dankners, the tycoons, the people with cash-filled envelopes who fed off ties between business, the government and the media.

Some did similar things but with more style, or at least the kind of style we can appreciate, because they’re sabras, our guys. Like Gaydamak, they too bought companies, donated hundreds of millions, bought newspapers, forged relations with politicians and some, after all that, still went bust with a bang. The difference was that they had more patience. They’d been here forever; Gaydamak came and went within three years.

But they’re our boys

Since they were ours and had relationships and loyalties with the Israeli establishment — politicians, the press, academia — going back decades, they could tap public money and retirement savings through ownership of legitimate monopolies and various government benefits with much more skill and elegance than Gaydamak. So there he is back in Moscow, humiliated and remote, while they’re still getting screen time and column inches in media outlets owned by their good buddies from the good old days.

Now we have a new “devil.” He’s no new immigrant like Gaydamak: He’s been here for a very long time and is much more firmly entrenched in the Israeli establishment. But this time too, everyone wants to box him into a false narrative that he represents some kind of unique problem within a certain party, a certain culture. In this case it’s Yisrael Beiteinu, headed by Foreign Minister Avigdor Lieberman.

For two weeks now the press has been discussing the many ways top Yisrael Beiteinu figures are suspected of extracting money from the state; millions that went to machers with ties to the party.

But it doesn’t matter how the story of Yisrael Beiteinu turns out. Gaydamak, the Dankners, the Olmerts, the Hirchsons and the Sharon “ranch forum” are not unique cases, nor are they ties to a specific political party: It’s just our faces in the mirror.

If another political machine designed to enrich bureaucrats and politicians has indeed been uncovered and people do end up going to prison, it will mainly because they weren’t sufficiently connected, or elegant, or they took shortcuts.

A decade ago I reported on the findings of a Wall Street Journal investigation into an oligarch who had come to Israel and bought a newspaper. His representative in Israel threatened to sue and requested a meeting. He presented his claims, most of which I rejected. Toward the end of the meeting he asked me — Say that everything you write is true. Do you think your tycoons, your sabras, Dankner, Fishman, Ofer, Mozes, made their money differently? Don’t they run the state? Haven’t they been connected for decades to the government and to two banks? Do you really think it was their exceptional talent that brought them their monopolies and companies? I was silent.

Like Gaydamak, like that oligarch, Yisrael Beiteinu didn’t invent anything. This isn’t a story about Yisrael Beiteinu, it’s about the face of Israel’s politicians and public sector. What Mapai, the precursor to the Labor Party, did during its decades in power and what Likud did during its years in power, Yisrael Beiteinu allegedly did more recently. And if they did it more crassly, it’s mainly because they aren’t entrenched enough in the establishment.

Auntie needs a job

The police suspect that top Yisrael Beiteinu figures — politicians and government officials — directed money into nonprofit associations in exchange for kickbacks or fees paid to middlemen cronies. But before turning up our noses, let’s stop and ask ourselves how this showy corruption is different from crony appointments in government.

Most of the public sector, which employs more than a million people (out of a total population of eight million), is imbued with a culture of cronyism. It’s so entrenched that it’s taken for granted. In some places, mainly in state monopolies and local governments, it is accepted practice for extended families or the associates of a certain party, to control hiring and promotions.

Hiring and advancing a friend or relative doesn’t have the visceral impact of an envelope stuffed with cash, but the principle is the same: A decision is made on personal, not substantive, grounds.

This week the police recommended filing corruption charges against Benjamin Ben-Eliezer, a senior minister in several governments. Surprise, surprise. A state comptroller’s report eight years ago exposed how Ben-Eliezer built up his status in the Labor Party by placing dozens of cronies in jobs at government companies.

Some of the bright young things in Labor today, children of the 2011 social protest, arrived in Knesset two years ago thanks to Ben-Eliezer.

While Ben-Eliezer was minister of national infrastructures and was supposed to reform the Israel Electric Corporation, he and ministry officials appealed to the IEC at least 100 times with requests to arrange jobs and to discuss raises, promotions and other benefits for Ben-Eliezer’s friends and associates, most of them from the Labor Party.

The state comptroller relates the case of Z., who began working at the IEC in April 2005. Fortunately for Z., he was also a member of the Labor Party central committee and chairman of one of its branches. On Z.’s hiring form, the IEC director of human resources noted that the candidate is “close to the infrastructures minister.” There was also the case of H., also a Labor Party central committee member, and a former aide to the minister and a deputy mayor; he began at the IEC in September 2005. The logistics and assets branch manager at the IEC wrote on his resume, “By request of our minister, see if you can help. Maybe a special agreement/contact for a certain term.”

The workers and managers at the IEC aren’t morons. When the cabinet minister who is responsible for the company asks them to hire, promote or help out a Labor Party central committee member, they understand that the minister didn’t check whether the individual has a degree in physics or in electrical or industrial engineering. And if the minister is prepared to use taxpayer money (electricity fees) to advance his political power, why shouldn’t they help themselves to millions of dollars in kickbacks from suppliers of turbines or of anything else?

Figures who are familiar with the secret police investigation tell me that the corruption that is about to be exposed has a new dimension, after all: a cold, cynical view of authority as a resource to be exploited. Unlike the Ben-Eliezers, who exploited power to strengthen their political status or, allegedly, took bribes from tycoons, there could be a new trend here: of groups with complete contempt for the democratic game. They see no difference between public and private money. Are there politicians and groups in politics that operate as a profit-making enterprise, and who care nothing about, well, politics?

Frequent talk show guests

Perhaps, but at the end of the day it’s all the same. Ben-Eliezer, like Lieberman and dozens of other leading politicians and cabinet ministers, is a regular television guest. How many times has he been asked about the jobs for the boys? How often has there been a discussion of what it means when many of the jobs, promotions and procurements in the government are decided on alien interests, not on merit? How many discussions have there been of merit, and questions about conflicts of interest? How many times has Ben-Eliezer been asked, and Silvan Shalom after him, about the management of Israel’s energy economy, the IEC, the gas monopoly and the culture of cronyism in the public sector? How many times have the talking heads discussed using the peace process or the security situation as a smokescreen, to distract attention? Not many.

Yet there is nothing more important than discussing quality, integrity and professionalism in government and the public sector. The best gauge of the quality of government is how appointments and decisions are made: on the basis of skill and merit, or on the basis of alien interests.

Crony appointments detract from efficiency and erode public confidence in government. The erosion creates a vicious circle, leading citizens to act in their own best interests, even at the expense of society when necessary.

Crony appointments are an organizational and societal cancer because they lead to a second stage — the creation of a ruling oligarchy that thinks it can do as it pleases. Crony appointments make everybody want to be well-connected because they realize that’s how it works.

The next stage — which could be the escalation in the Yisrael Beiteinu case — is the sense that if we are a ruling oligarchy, we and our cronies can do as we please because nobody will talk, because we rule. Even the treasury officials will bow their heads because they have to rely on powers that may constitute part of the coalition needed to advance reforms; they will pay without asking too many questions or keeping track of the money because it’s difficult to investigate if some association kicked back money to the one looking out for it.

What the people really want

The question is what the public would prefer: to change the system or to join it.

The working assumption of economic conservatives is that the public sector will inevitably serve mainly itself: the politicians and functionaries. That is unacceptable, because even the most conservative economist understand that the public sector is the only one that can provide public products and services like the army, police and education.

The working assumption on the economic left is that all one needs is to give more money and expand the public sector. But in countries like Greece and Italy we see that the size of the public sector doesn’t assure a welfare state, let alone competitiveness. We also see countries with a relatively small public sector, such as Switzerland and Singapore, with a high standard of living and relatively little inequality.

The inquiries and arrests in the last month, from Yisrael Beiteinu to the IEC to Ben-Eliezer, and before them the Olmert tapes, teach us nothing new about Israel’s public sector. All they show is that social capital in Israel has eroded even more, as has the public’s faith in government.

There are no shortcuts: Without building social capital and a strong public sector, Israel will not be able to change its economic and social trajectory. Yet no politician has raised the flag of quality, professional, ethical government that condemns cronyism and alien interests in decision-making.

The 2013 election produced 47 new Knesset members and two new parties. We were wrong to think they could usher in a new politics. It quickly turned out they had no interest in a protracted war over norms in government. Yair Lapid quickly embraced the chairman of the Histadrut labor federation, which has been supporting nepotism and corruption in the public sector for decades — he just appointed his life partner to a million-shekel-a year-job. Naftali Bennett has spent most of his screen time talking about Jews and Arabs, wars and territories. And why should he bore us with quality in government? Did that ever win anybody a single vote?

No, the norms we saw this month in the police interrogation rooms are not unique. They are embedded deep in Israeli society. Until a new civilian leadership arises that grasps this as the most important challenge of Zionism today, nothing will change, and we will keep blaming our troubles on the devil of the day, without so much as glancing in the mirror.