Credit Crunch Reveals Ugliness of Israel Economic System

Comparing the best places to work here and in the U.S. is a depressing exercise.

We admit it. We were not knocked for six. Not one hair fell from our heads as the budget for 2009 and 2010 began to crumble last week.

The three years of prosperity here and around the world that poured money into the national coffers helped us repress, for a time, the truth about Israel's economy.

When the crisis arrived and tax revenues started to shrink, the true ugliness of the Israeli system surfaced anew.

Israeli society is divided into three groups: the oligarchs and their associates, the powerful unions with their hand constantly ready to grasp, and the unrepresented public.

The oligarchs are well represented in the government, Knesset and media. The powerful trade unions are even better represented. That leaves the third group, which isn't represented at all: the middle class and down the ladder. They feed at no government trough, they have no powerful union shaking the tree, they have no monopoly to keep them in clover.

Of course, there are any number of people who purport to represent that third group, but come the crunch, they prove their true intentions: The group they really represent are the rich and powerful.

This year is going to be a tough one for the economy: shrunken tax revenues, plunging exports and the global credit crunch. Tens of thousands of people will lose their jobs, hundreds of thousands will see their income shrink. Dreams will shatter, despair will spread.

Are the people of Israel their brothers' keepers? No more than Cain was, apparently. When the moment of truth arrives and the pain of 2009 has to be shared out, the true face of the economy appears. The only ones who'll be taken care of this year are the powerful.

For 20 years the Finance Ministry has been talking about the need to equate salaries in the defense establishment with those in the public sector. No, the ministry isn't referring to the fighters, who take up only about 15% of the budget. It's talking about the system responsible for civilian jobs in the army, the thousands of superfluous workers, the tremendous waste, the corruption.

But it's all talk. The moment of truth arrived last week. These self-proclaimed champions of the weak and needy are, by their actions, protecting the strongest echelons of society.

The defense establishment remains the flabbiest system in the economy, but it's only one of them.

After three years of Benjamin Netanyahu touting his "reform of the ports," the state comptroller's report last week revealed what TheMarker has reported time and again: the great reform of the ports was a bluff. They were not reformed. Israel's ports remain among the most backward in the world and the public pays for their low productivity. The Israeli public got almost nothing for the NIS 1.2 billion bribe paid to the port workers to "acquiesce to reform."

"Mommy," asks the soldier as the end of his stint nears, "where should I get a job?"

Read the state comptroller's report, child. Read the papers and keep track of the budget discussions in the Knesset and cabinet. Then you'll know where you should aspire to work. Not that you can, child, unless you have a "rabbi" embedded in the enterprise. Nepotism rules. Have a cousin in place? Then Bob's your uncle.

Last week TheMarker Magazine published the annual survey by TheMarker with Business Data Information, ranking the companies that are best to work for. The results are always interesting for employers and workers alike, but they're also depressing.

Truth be told, the idea wasn't an original one. We took it from Fortune, an American magazine that runs a similar list every year. Now look at the two lists of the 20 best places to work in Israel and the United States (see Page 11 for the lists).

Twelve of the 20 companies in Israel are monopolies, cartels and oligopolies. All are protected in some way from the regulator. Of the other eight, five are the Israeli branches of American companies. Only three remain: Teva Pharmaceutical Industries, Strauss and Super Pharm.

No wonder it's a pleasure to work at Hapoalim and Leumi. The two banks don't compete over retail banking. They stuff themselves with service fees in good times and bad. They almost never fire anybody and wages track the consumer price index.

This year, most of their customers may be in difficulty, but the banks' rank in the list simply rose.

Israel is a land rich in monopolies and cartels, concealed or blatant, public or private. The U.S. has plenty of them too, but they don't dominate the list of the 20 top companies.

The best company to work for in 2009 was NetApp, which makes computer and telecommunications equipment. Then comes investment firm Edward Jones, followed by Boston Consulting, search engine giant Google, food market Wegmans, communications equipment maker Cisco, biotechnology star Genentech, Methodist Hospital, Goldman Sachs, and in 10th place, Nugget Market.

The broader list of the best American companies to work for isn't confined to high-tech firms that lavish pay and stock options on their workers. In 24th place you'll find Starbucks.

What characterizes the best American companies to work for?

The same things that characterize Starbucks: innovation, creativity and mainly, the company isn't a monopoly.

What characterizes half or more of the Israeli companies ranked best to work for? An immutable attachment to the public teat, or a tentacle attached to our bank accounts - the arm of a creature that sucks and sucks and sucks, and there's nothing we can do about it. We didn't choose it, but there's no alternative.

The 2009 budget, the reforms on paper and the state of regulation in Israel today have nothing to tell us. They bring no message of change. This year and next, the best jobs in Israel will be at the monopolies, and most people will be forced to buy goods and services from companies they didn't choose.