Executive Summery

When Did Businesspeople Become the Bad Guys?

This is the narrative that businesspeople in Israel have been walking around with lately. They are wondering: What crime did we commit? Do we not contribute to growth?

Tomer Appelbaum

They wander among us irate and insulted. They don’t understand how it happened to them. They are self-made. They started from nothing. They worked hard, got ahead, made money, so why do we bear them a grudge?

Not too long ago they got cover stories written about them, they starred on the lists of the rich and successful. Their every sally to a social event was recorded. We called them the economy’s bigwigs, successful people. How did they suddenly start to feel haunted? When exactly did they become exploiters and robber barons? What happened that suddenly people are looking at their salary slips, their sources of income, their businesses?

What crime did we commit, they ask, what did we do that was bad? Are we not paying taxes? Do we not employ workers? Do we not contribute to growth?

This is the narrative that businesspeople and top managers in Israel have been walking around with lately. It started a little after public protests broke out, and has not subsided since. We saw a similar phenomenon in the world after the 2008 global financial crisis, following the fall of the Lehman Brothers investment bank. The regulatory attack (which didn’t really happen) on financial institutions created an anti-business atmosphere.

This atmosphere has subsided in the world meanwhile, because funding conditions for investments are the easiest in history due to near-zero interest rates – and this doesn’t really help. Moreover, the financial institutions are too big to fall, and were in the sights of the governments and central banks. If they were too big to fall then, they are even bigger now.

But in our neck of the woods, so businesspeople, PR consultants and their trained spokespeople tell us, this atmosphere still exists. There is no mood to invest. No one treats them with equanimity. They are out for them. The regulator, the politicians, the press, the public and the social networks.

Why bother launching a new product? Why celebrate some success? Why publicize our businesses? It’s best to lay low, work under the radar, they say. It’s better to invest abroad, they say. There’s less bureaucracy, less regulation, more compliments. What do we have to look for here?

We’ll soon see what we have to look for here, but before that a brief reminder about what happened between the 1980s and now: After an economic crisis in which the Israeli economy practically went bankrupt in the 1980s, the economy entered a recovery track following a stabilization program. Reforms, privatizations, opening markets to competition, the government exiting the capital markets, opening up to imports, exterminating inflation, managing the state budget responsibly.

All these did the economy good. They brought in foreign investors, created business opportunities for many and opportunities for personal growth for many others. Each reform created here a new layer of wealth. Every market opened to competition provided opportunities for progress for many.

The professionalization of the economy in a variety of fields enabled people with an education, entrepreneurial skills or business talent to succeed, and in many cases – in a big way. In the background two other major things happened: the arrival of a million immigrants to Israel during the 1990s and enormous technological developments here and globally.

Two things that were less nice also happened: The gap between rich and poor widened, and poverty in Israel grew. Growth did not trickle into every home. Many were left behind. How did the nouveau riche solve the problem? They gave a little at the office. They contributed to all kinds of projects and issues the government neglected, plugged holes and quietened their conscience. They continued earning millions of shekels annually, charge exorbitant prices for their services and products, but you know what? They gave to the community, from company funds. It is even tax deductible.

But the moment arrived when the public rose up. These leftovers were not enough. It was dissatisfied with the nonexistent social contract here, the cost of living, housing prices, social services and lack of job security. So it took the streets and then went home, but the disquiet permeates the air because the problem wasn’t solved. They weren’t solved because a coalition of people benefiting from the current arrangement doesn’t want them solved.

The source of wealth of key people in the Israeli economy is often in government protections, monopolistic pensions, historic arrangements that no one dare touch and in being close to decision makers. These are the people who are most threatened by reforms and ideas of reducing concentration and increasing competition. These are the people who claim there’s an anti-business atmosphere here.

A status quo prevails here in which the business sector behaves as a victim and lowers its profile, and part of the public – mainly the young – don’t see here a possibility of buying an apartment and earning a decent living because of the high prices of living and employment instability.

What can solve this status quo? Exactly the formula that worked in the 1980s: vigorous government action to open markets to competition, reforms and intensified land privatization. And who is against this? Those who enjoy the current situation, both because it could hurt business and because the public focus moved from covering business successes and get-rich stories and achievements of executives to important socioeconomic problems like housing prices, availability of health services, exorbitant pension management fees and distributive justice in the natural gas market. It’s uncomfortable for them, those whose luck improved, that the focus switches to social problems. They expect others to do what they did to succeed: work hard and don’t rummage through other’s business, pay slips, tax payments or reduced benefits.

Is it possible? Can the current level of social mobility mirror that of a decade or two ago? Are there enough new economic opportunities? Can the housing market again become affordable for hundreds of thousands who can’t buy a place? Can the economy be reignited, when the business sector whines that no one is treating them nicely? Can the economy be reignited if the new government doesn’t advance a host of reforms to simultaneously address the cost of living and housing market, as well as provide new business opportunities?

Many people who made money, got ahead in the last two decades, did so thanks to reforms and initiatives that opened the economy. Now it’s the other’s turn.

P.S.

So what do businesspeople who feel haunted have to look for here? Well, their families are here, so it seems, no? Second, their customers are here. They are senior partners in their business. They are not just consumers. They invest in their companies’ shares. Third, let’s be honest, your funding comes from here, from the public’s bank deposits, from their pensions and life insurance. And fourth, you don’t really need vigorous regulation, an inimical public atmosphere or politicians chasing headlines who will torpedo your businesses to get elsewhere. If you’ll have a good opportunity abroad you won’t hesitate to take it, whether or not you receive praise here.

Fifth, and most importantly: You can learn to live in a country where gaps widen, the number of poor grew and number of youth losing hope about their economic future grew, but you don’t really want to live in such a country. So if the new government will really introduce reforms that hurt your business a little – think about all this.