Benjamin Netanyahu Sided With Israel’s Oligarchs — and It Led to His Downfall

The indictment against Israel’s prime minister exposes an entire ecosystem of institutionalized corruption, one which has been in place long before Netanyahu came to power.

 

 

Benjamin Netanyahu. Photo by MathKnight [CC BY-SA 4.0], via Wikimedia Commons

 

After more than three years of protracted investigations and numerous attempts at obfuscation and obstruction, Israel’s attorney general decided to formally charge prime minister Benjamin Netanyahu with bribery, fraud, and breach of trust.

 

The spectacular announcement likely marks the beginning of the end of Netanyahu’s political career, though he has no intention of resigning. In an emotionally-charged press conference, Netanyahu accused Israel’s judicial authorities of launching an “attempted coup,” claimed the charges against him were “blood libels” meant to “bring down a right-wing prime minister,” and called for an independent committee to “investigate the investigators.”

 

One should not make light of Netanyahu’s determination to remain in office at all costs, but he was already in an extremely vulnerable state even before the charges against him, having failed to form a government following his lackluster showing in Israel’s latest election in September. His departure, if and when it happens, would be an event of seismic proportions: Netanyahu is the longest-serving prime minister in Israeli history, after all, and during his latest ten years in office, he has attempted (and almost managed) to consolidate his power to near-autocratic levels.

 

But there’s a much bigger story here. The corruption scandals in which Netanyahu has been ensnared revealed more than just the misdeeds of one man. What they exposed is far more insidious: an entire ecosystem of institutionalized corruption in which opposing gangs of monopolistic oligarchs pressure politicians and policymakers for regulatory concessions that hinder competition, often by using the media outlets they own (and the journalists they employ) as leverage. This system has been in place long before Netanyahu came to power.

 

Naturally, the charges against Netanyahu have been the main focus of international media coverage, but they’re not necessarily the most important aspect of this story. Along with Netanyahu, Israel’s AG has decided to file charges against Arnon “Noni” Mozes, a media mogul whose empire includes Israel’s most influential tabloid and the country’s top news site; and ex-tycoon Shaul Elovitch, the former majority shareholder in Bezeq, Israel’s largest telecom company (Elovitch’s wife Sara has also been charged).

 

In the long-term, it is these charges against two of Israel’s most prominent businessmen that could turn out to be more significant. As Israeli political scientist Doron Navot previously told Haaretz in 2017, the real story isn’t so much Netanyahu’s individual corruption, “but the fact that it lays bare the power structure of Israeli society.” While Israeli politics is often perceived to be driven by ideological divisions between the left and the right vis-a-vis the settlements and the Israeli-Palestinian conflict, he added, what these corruption scandals revealed is that Israeli policies are largely driven by the business interests of few oligarchs. In Navot’s words, “There are no ideologies, no values, no settlements or occupied territoriesjust two rival elites fighting for spoils.”

 

The front page of Yedioth Ahronoth following the announcement of Netanyahu’s indictment.

 

A System of Institutionalized Corruption

 

The three cases in which Netanyahu has been charged are known as Case 1000, Case 2000, and Case 4000. Case 1000, in which Netanyahu is charged with fraud and breach of trust, concerns gifts worth a few hundred thousand shekels—cigars, champagnes, and the like—Netanyahu received from movie mogul Arnon Milchan and Australian billionaire James Packer in exchange for various favors. It is the least interesting case of the bunch, as Netanyahu is hardly the first Israeli prime minister to accept gifts from foreign benefactors.

 

Case 2000 and Case 4000, however, are truly revelatory in that they expose the nature of power in Israel in a way no scandal has done before. It is no coincidence that of the three cases in which Netanyahu has been charged, two concern the news media. As Israel’s economy became increasingly concentrated over the past two decades, the news media has been the main tool through which a small group of business tycoons exerted their influence over policymakers and regulators.

 

Both Case 2000 and Case 4000 revolve around attempted bribery deals: one successful, the other not. Case 4000, in which Netanyahu is being charged with bribery, fraud, and breach of trust, saw Bibi receiving favorable coverage from Walla!, a popular news site owned by Elovitch, in return for regulatory concessions worth billions to Bezeq, the telecom monopoly that Elovitch controlled at the time. The main concession Elovitch sought from the government was stymying competition in landline and broadband, as well as regulatory approval for a strange circular deal in which Bezeq purchased Elovitch’s private holdings in a satellite television service provider called Yes. In return for these measures, Netanyahu and his family were allowed to skew the coverage of Walla!  heavily in their favor. 

 

The texts and emails revealed throughout the investigation show the Netanyahus haranguing Elovitch, Elovitch’s wife, and other executives at Walla! with bizarre and incessant requests to take down certain stories and promote others, to change headlines or pictures, and to avoid covering things like protests against Netanyahu. 

 

Case 2000, which revolves around the failed negotiations between Netanyahu and Mozes, concerns a similar deal that never went into effect. According to the indictment, in 2014—ahead of an election that took place months later—Netanyahu and Mozes met to negotiate a deal in which Mozes would reverse his outlets’ coverage of Netanyahu, which at the time was overwhelmingly negative. In return, Netanyahu would push for a law that would weaken the Sheldon Adelson-owned Israel Hayom, a pro-Netanyahu free daily which in the past decade has become the biggest competitor to Mozes’s newspaper Yedioth Ahrnonoth.

 

“As Israel’s economy became increasingly concentrated over the past two decades, the news media has been the main tool through which a small group of business tycoons exerted their influence over policymakers and regulators.”

 

To understand the significance of the case, and why the implications for Israel’s political economy go beyond Netanyahu, it’s important to consider the unique role that Yedioth and Mozes’s other outlets have played in Israel’s political discourse. The two crown jewels of Mozes’s media empire are Yedioth, which has been the country’s major newspaper for decades and was officially considered a monopoly until 2010; and Ynet, Israel’s most popular news site, which millions of Israelis regularly check several times a day. In American terms, the combined influence of Mozes’s media empire exceeds that of any single news outlet and is closer to the power that the three major TV networks had in their prime.

 

His media empire allowed Mozes to act as Israel’s primary shaper of public opinion. Netanyahu himself, in fact, has often described Mozes as the most powerful man in Israel and his main political opponent. For three decades, Mozes had used his clout to hinder competition and promote the interests of his own businesses and those of his friends. Mozes’s people would keep track of friends and foes through a system of reward/punishment known as the “white” and “black” lists: those on the “white” list were worthy of frequent positive coverage; those on the “black” list were ignored or ruthlessly attacked. Both lists included politicians from both the left and the right. 

 

In an environment where capital and political power had been largely symbiotic, Yedioth became the most important actor: regulators, politicians, bankers, and prominent businessmen flocked to it and feared it in equal measure.

 

For many years, Netanyahu and Mozes had been nemeses. Netanyahu, who started out as a political outsider to Israel’s political elite, resented Mozes’s ability to set the public agenda. Since the late 1990s, he had been trying to create a right-wing counter to Mozes’s media monopoly. He tried to accomplish this with the help of Israel Hayom (which took a significant chunk of Yedioth’s earnings, but was always seen as propaganda and therefore never became influential in the public sphere), and later through his dealings with Elovitch and Walla!.

 

Netanyahu’s war with Mozes was part of a larger battle between himself and the old guard of Israel’s tycoons, which led him to take on monopolists in the telecom sector and later pass Israel’s historic anti-concentration law in 2013. But around 2015, Netanyahu switched tactics: having sufficiently weakened the tycoons, he was now going to use them to solidify his power.

 

It was around that time that Netanyahu and Mozes began negotiating their failed deal: As Yedioth’s profitability was crushed by Israel Hayom, the war between the two escalated, until a proposed law that would have banned the free distribution of Israel Hayom triggered the 2015 general election and led Netanyahu and Mozes to meet and attempt to work it out. “I will do everything I can to make you stay [prime minister] for as long as you like,” Mozes was taped telling Netanyahu. The mutual lack of trust, however, doomed the negotiations, and the deal never panned out.

 

The meetings between Netanyahu and Mozes were tapedaccording to Netanyahu’s former chief of staff Ari Harow (who has since turned state’s witness), by Netanyahu himself. It is those tapes that led to the police investigation that later turned into Case 2000. Beyond the shock of hearing these two bitter rivals discussing a deal, the real revelation was that the failed negotiations between Mozes and Netanyahu in 2014 had been preceded by other, successful ones. “We’ve been here before,” Mozes could be heard telling Netanyahu, alluding to previous arrangements between the two, “this is our fourth election: ’96, ’99, 2009, and now.”

 

It is these transcripts, as well as the other transcripts revealed over the course of the drawn-out investigations into Netanyahu’s dealings, that are the true legacy of Netanyahu’s corruption scandals. For decades, Israelis thought that their politics was being driven by arguments between the left and the right over issues like security, settlements, and secular-religious divides. Netanyahu is far-right and Mozes is, ostensibly, from the center-left, and their squabbles allegedly revolved around ideological issues. What these scandals uncovered, however, is the existence of a shadow political system in which tycoons and politicians treat the whole thing as a scripted pro-wrestling match: I will do this, and then you will do that, but we won’t really hurt each other, and we can agree on the outcome beforehand.

 

The underlying cynicism of all this is overwhelming. For democracy to work, voters have to believe that elected officials have their best interests at heart and that they can rely on the press to depict reality as honestly and accurately as it can. Can Israelis trust the integrity of the political process after learning that an entire election was triggered by a business dispute between newspaper publishers? Can they trust the press, after they learned that the publisher of the country’s most influential media outlets treats his own journalists as chattel? 

 

Israelis, as it were, are already outraged. The corruption investigations against Netanyahu, Mozes, and Elovitch are not isolated incidents. Rather, they should be seen as the culmination of a process that began with the huge social justice protests that took over Israel in the summer of 2011 and reflected widespread discontent with Israel’s steep cost of living, the result of a highly-concentrated economy that allowed a small number of tycoons like Elovitch to wield tremendous economic and political power. This widespread discontent led to the passing of the anti-concentration law in 2013, which spurred the fall from grace of some of the country’s most powerful businessmen and empowered journalists, regulators, and law enforcement agencies to pursue corruption investigations.

 

Without this public outrage, which manifested in weekly protests and massive outrage on social media, it’s entirely possible that Netanyahu would have succeeded in killing the investigations. That he couldn’t is the silver lining to this story: unlike many developed democracies in which political leaders suspected of corruption were not held accountable, Israel’s democratic institutions worked as they should. Despite Netanyahu’s constant attempts to delegitimize and weaken the country’s judicial system and law enforcement agencies, his own AG was left with no choice but to charge him. The current attempts to hold President Trump and his administration accountable for their many misdeeds are a testament to how remarkable that achievement is.

 

Nevertheless, the indictment against Netanyahu marks the beginning, not the end, of a long and laborious process. The corruption uncovered by the Netanyahu scandals precedes Netanyahu himself, and getting rid of him won’t end it. Netanyahu’s main political challengers, in fact, are themselves affiliated with either Mozes or other tycoons. In order to rehabilitate their democracy, Israelis would have to stop oligarchs from further using their media holdings to threaten or curry favor with elected officials.

 

One thing they can’t say anymore: that they didn’t know.

 

The ProMarket blog is dedicated to discussing how competition tends to be subverted by special interests. The posts represent the opinions of their writers, not necessarily those of the University of Chicago, the Booth School of Business, or its faculty. For more information, please visit ProMarket Blog Policy.