How Do the Powerful Families Affect Your Life?

An unusual conference in Tel Aviv sought to answer that very question for an unusual crowd on Tuesday.

An unusual conference in Tel Aviv sought to answer that very question for an unusual crowd on Tuesday.

How do the most powerful families in Israel affect your life? The people who showed up at the conference the Social Economic Academy hosted yesterday were wondering that very thing.

They were very different from those who usually attend economic conferences. Not a single tie or jacket was to be seen. The participants ranged from students to retirees and everyone in between. They came in sandals. They were there to understand how the economy's strongest families affect them personally, how these families' iron grip on the economy impairs democracy, and what they could do to heal Israeli democracy.

They learned that the control wielded by the big families goes far beyond economic assets. It disrupts the country's social, political and economic development.

They learned that the families' control is already straining Israeli democracy. They learned that 10 to 20 families have far more influence over the government than do the citizens at large, who vote only every three to four years.

In addition, the power these families have accumulated gives them enormous influence over the country's social and economic fabric. They control not only industrial and commercial companies, but also media outlets. This disrupts the media's critical faculties and the transparency crucial to a healthy society.

"The concentration that needs to be addressed is when one person controls several parts of the economy via an economic pyramid structure, because at the top of every big concern ultimately sits one person," said Davida Lachman-Messer, a former deputy attorney general. "Their economic power is also social and political power, and this makes them Israel's real centers of power. They weren't elected, but they decide who controls this country, how it looks and where our children will work."

The fact that these families also own media outlets means they can influence what's reported about them. They can block unflattering stories and promote stories that suit their interests. They thereby impair the media's role as watchdog.

The families' interlocking holdings exacerbate this concentration and the problems it creates, Lachman-Messer continued.

"The Idan Ofer and Mozi Wertheim groups own Bank Mizrahi-Tefahot," she noted. "Wertheim also has a direct holding in [Channel 2 television franchisee] Keshet, while Ofer has a holding in [Channel 2 franchisee] Reshet via Udi Angel [who was married to his sister, Liora Ofer]. Strauss sold shares of the latter company, and Tshuva's daughter received shares in Keshet. All these parties are big advertisers and also the owners of media outlets. And they have partners or friends who also own media outlets."

The big families are already influencing democracy and undermining the process that's supposed to give every citizen a vote, Lachman-Messer said: "The problem is already here. It's not something off in the future, it's here. And it's major. It also affects civil society [nonprofits and charities]. The large donors are the same people we encounter in the business pages. Ultimately, concentration - which is the existence of several people who control most of the production facilities in several branches of the economy, as well as the finance companies - is Israel's reality. I'm waiting for it to damage the economy, because only things that damage the economy get the government to take action.

"The Bank of Israel governor understands that concentration is bad for the economy," she continued. "It's bad for democracy, because a limited number of people can decide what laws are passed, who will be elected and who donates to what party. Israel has five million people who cannot compete against the fund-raising that each party receives from corporations. I'm pessimistic, but we need to keep fighting. If the economy is hurt quickly, there's a chance democracy will be saved. Democracy apparently isn't an important enough value for us."

Boring the public

Dror Strum, a former antitrust commissioner, said the discussion about concentration should be taken beyond the business pages, since this is a social and political problem that will only grow if it isn't fixed. "The existing legislative tools aren't enough to solve the problem," he said. "What's happening right now is they're putting us to sleep with this discussion of concentration. If I were to ask the public at large which is worse, the flotilla incident or economic concentration, most people would say the flotilla. Who understands what concentration is doing to our lives?"

It's important to convince the public of the need for legislation to fight the problem, he continued. Without public backing, nothing will change.

"In order to convince the public that concentration isn't just something in the business pages, we need to take the matter and show how it affects our assets and our children," Strum said. "Because the meaning of concentration is that in another 20 to 40 years, our children and grandchildren won't be able to get by in life if they don't go through one of five big families."

Evidence of the concentrated economic power in Israel can be seen when major international corporations try to enter the local market, he said. Nestle, for instance, usually sets up its own factories when it enters a new country. But in Israel, it was forced to use Osem as its manufacturer. Unilever also entered Israel through a local company, Strauss.

"There are two major measures of democracy," Strum said. "One is quantitative - one vote per person. There's also a qualitative aspect - how much the public can effect change, and whether big groups change things more than citizens do."

Trampling on the workers

Hanoch Livneh, who heads the tellers' union at the First International Bank of Israel (Beinleumi ), said the big families don't think about the workers, as they are primarily interested in making more money. Beinleumi is controlled by Zadik Bino, who also controls Paz and the Ashdod oil refinery.

"I work for one of these families, but I'm a socialist," Livneh said. "Most of the employees who work for the big families aren't unionized. They receive minimum wage and work under slave conditions. The controlling shareholders undermine protected positions whenever they can. You're working at a temple dedicated to profit above all ... You're not worth anything.

"They're 20 families, but they can't maintain control alone. They need a kind of intermediate level. Thus, they take the regulators ... They're close with all of them."

Citing examples of conflicts of interest created by concentration, Livneh stated, "When Beinleumi leases assets from Paz, who checks that the valuations are correct and whether a competitor has a better offer? When we belonged to Safra, why did the workers get only Cellcom phones? [The Safra family controlled Cellcom at the time].

"I know that my cellular company is [owned by] Nochi Dankner, who is also my flight abroad via Israir, as well as my insurance company and pension fund, as well as the building I'll build and my grocery store chain. What more do I need to understand the force of these things, and the fear of what it will bring?"

'Why are you interfering?'

Knesset Member Haim Oron (Meretz ) said that where money and politics mingle, it's hard to protect the public from the effects of concentration. U.S. Supreme Court justice Louis Brandeis' 100-year-old warnings about concentration threatening democracy still apply today, he said.

He cited the example of Nesher, a cement monopoly controlled by the IDB Group, which in turn is controlled by Nochi Dankner. There have been attempts to bring in competition through imports, but Nesher still controls at least 90% of the cement market.

"When I brought up the subject for public discussion, they told me, 'Why are you interfering? Let the free market solve the problem,'" he recalled.

"It's not like there's a marker that, if you can pass it, the problem will be solved - that if you pass a law, the concentration will disappear," Oron said. "You suddenly realize that Yitzhak Tshuva is involved in all the desalination plants. You need to ask yourself if, when urban water consumption is 80% desalinated, one party should be controlling all this. You fight so that Mekorot [the state-owned water company] gets a desalination plant. They tell you, 'They want another 30 cents.' You need to say you're ready to pay more because you want a public body to be involved in desalination."