How Israel’s Antimonopolists Helped Take Down Benjamin Netanyahu

The corruption exposed by Israeli antimonopolists has been a key driver of Benjamin Netanyahu’s current political woes. 

 

 

Benjamin Netanyahu addresses a joint session of Congress. Photo by US Government [Public domain], via Wikimedia Commons

 

If you pay any attention to the weird world of Israeli politics, you’ll notice that there was just a series of elections, and Benjamin “Bibi” Netanyahu, the right-wing prime minister of Israel who has dominated the country’s political landscape for a decade, and a close ally of Donald Trump did not do well. He didn’t quite get crushed, because there is now no majority to form a government, but his career is on the ropes.

 

While it wasn’t entirely framed this way in foreign coverage, corruption exposed by antimonopolists was a key driver of the political outcome. Netanyahu had a strategy to ward off charges of corruption: He sought to use a Trump endorsement and aggressive anti-Arab rhetoric to change the subject, in an attempt to fend off a centrist challenge.

 

Or that was the plan. So far, it hasn’t worked. And here’s why.

 

The Israel Antimonopoly Movement

 

In 2011, Israelis poured onto the streets in massive protests, partially inspired by the Occupy Wall Street-style movements sweeping over the rest of the world, like those in Tahrir Square in Egypt and the Indignados in Spain. (Occupy Wall Street came after the Israeli protests, but is the most well-branded of that global protest wave).

 

The last time I was in Israel was 25 years ago. I returned a few months ago; it is a very different country than the one I remember. Economically, the biggest difference is that the country is rich. There are skyscrapers in Tel Aviv, which there weren’t in the 1990s. Tech headquarters from multinationals like Microsoft dot the landscape. I ran into multiple businessmen from companies like Samsung and Intel, as well as venture capitalists bringing in Chinese tech investments.

 

The economy is divided into two segments. There is the tech sector, which created companies like Waze and is largely driven by engineers who come out of the military (half of Israelis serve in the military). Israeli tech companies compete globally, and the country’s tech sector ranks among the most highly sophisticated engineering and scientific communities in the world. Then there is the rest of the economy, which is that of a small nation-state strangled with monopoly distributors controlling everything from packaged goods to automobile imports. Israel’s prices are quite high, and a small number of politically-connected people are getting very rich off those high prices.

 

In 2011, Israelis en masse built the largest protest movement the country had ever seen, pouring into the streets for sustained protests over political corruption and the high cost of living in the country. It was the first time security was not the core political issue. In its first few weeks, the protests received a lot of positive coverage from the media, which led to rumors at the time that they were ginned up by the oligarchs, who owned most of the Israeli press, to go after Netanyahu.

 

As the protest continued, however, something strange happened. The tenor of the protesters changed. A business newspaper called The Marker, started by legendary Israeli financial journalist Guy Rolnik1)Guy Rolnik is one of the editors of this blog., had been reporting on the reason for the high cost of living since 2008. The problem, he argued, was that the non-export economy was controlled by a small group of oligarchs, each of whom owned or allied with a bank or insurance company around which was a satellite of companies placed into holding companies. Rolnik’s campaign, launched three years before the protest, was inspired by Louis Brandeis’s 1913 book Other People’s Money and How the Bankers Use It, which described the same problem in the US a hundred years ago.

 

 

Rolnik’s media coverage helped reshape the protests. After the first month on the streets, a new argument emerged among protesters, who started going after the oligarchs themselves.

 

“These days, the handful of wealthy families who dominate the Israeli economy are assuming a new role: one of the chief targets of the tent-city protesters who have shaken Israel in the past month.

 

The ‘tycoons,’ as they are known even in Hebrew, are suddenly facing enraged scrutiny as middle-class families complain that a country once viewed as an example of intimate equality today has one of the largest gaps between rich and poor in the industrialized world…

 

Those families — the Ofers, the Dankners, the Tshuvas, the Fishmans and others — account for the 10 biggest business groups in the country and together control some 30 percent of the economy. They will doubtless be among the targets at another set of street demonstrations planned for Saturday night.”

 

Some specialized in construction, others in media, telecommunications or natural gas. These oligarchs were accompanied by a network of public relations companies and corporate law firms, each of whom ringed and protected the oligarchs.

 

Enter Benjamin “Bibi” Netanyahu.

 

Demonstrators in Tel Aviv on August 6, 2011. Photo by avivi [CC BY-SA 2.0]

 

Bibi’s Israel

 

When the Occupy-style protest in 2011 started, Netanyahu had been prime minister for two years. Having grown up partially in Philadelphia, Netanyahu is a brilliant and Machiavellian leader, a former Boston Consulting Group employee who understands right-wing American populist politics and the business structures and power of concentrated finance. His political genius lies in importing American right-wing political strategies to Israel, innovating on top of them to make them more outlandish, and winning elections. Starting in 2009, he firmly wedded Israeli politics not just to American government, but to the Republican Party.

 

Netanyahu had been the leader of Israel in the 1990s, and had been involved in a host of economic choices in the early 2000s to deregulate different industrial sectors. But despite his important career, like Trump, the Israeli establishment jeered at him as a clown and a demagogue, good at whipping up anti-Arab sentiment and a dangerous actor, but not a man worthy of respect.

 

When the people rose up in protest, Netanyahu was both afraid and spied an opportunity. At first, the protesters were whipped up and encouraged by the press as a curiosity, as a large group of people upset with the government. Soon, however, protesters began attacking oligarchs, and something weird happened—the media coverage changed. As the New York Times reported, “A television journalist, who spoke on the condition of anonymity because of the delicacy of the matter, said his station would probably not do a program on wealth concentration to avoid upsetting the station’s owners.”

 

Despite Netanyahu’s right-wing leanings, he had reasons of his own to dislike the media monopolists. “But many of the moguls are somewhat to Mr. Netanyahu’s left on foreign policy,” wrote the Times. “And their newspapers can be merciless on him. Other newspapers accuse the prime minister of being in bed with the rich.” Netanyahu’s perspective wasn’t crazy; in 1995, the Israeli Antitrust Authority declared the main newspaper in Israel, Yedioth Ahronoth, a monopoly.

 

This newspaper is controlled by the secretive media baron of Israel, a man named Arnon “Noni” Mozes, and served as a protection racket for the other tycoons. Mozes was able to port this newspaper to the web, and his website is read by roughly 25 percent of Israelis every day. And Mozes had been fairly vicious towards Netanyahu.

 

Faced with mass protests on the one hand over the cost of living and jeering oligarchs on the other, the far-right wing Netanyahu decided to side with the protesters. This was a remarkable change in Israeli politics. For decades, Israeli politics focused on the problem of security, but in the background, the tycoons manipulated the politicians for their own ends. Netanyahu flipped the script, he had the government attacking the tycoons.

 

Netanyahu taking a committee he had created in 2010 but that had laid dormant, a committee with important Israeli thinkers that had the capacity to research the Israeli monopoly problem. It was massively prestigious; for example, Israeli-American and later Federal Reserve Vice Chair Stanley Fischer was on it. Antimonopolists demanded this committee act, and it did. Netanyahu then went after the Israeli telecom sector, introducing competition into the telephone and data markets. Consumer prices dropped by 90 percent, and Israel went from one of the most expensive telecom markets in the world to one of the least expensive. In 2013, the Knesset passed the Anti-Concentration Law, formally titled “A Law for Promotion of Competition and Reduction of Concentration,” which was passed by every party in the Knesset with no objections.

 

This law eliminated the heavily-indebted pyramid companies that had allowed a small number of families to control the Israeli economy. It also restructured the banking system, establishing a separation between banking and commerce. The anti-monopolist went further, sending several of the tycoons to jail. In 2018, the Israeli Supreme Court sentenced Nochi Dankner, who until 2014 was the most powerful businessman in the country and a close ally of politicians from both the left and the right, to three years in prison. Dankner had been revered, and owned a telecom company, a broadband provider, a giant supermarket chain, and a cement monopoly. When these laws kicked into effect, it turns out his empire was a house of cards, and he went bankrupt. Then the government put him on trial for stock manipulation.

 

Years later, the antimonopoly movement coalesced into institutions. Movement leaders formed crowd-funded advocacy groups, such as the well-respected Lobby 99, so named after the Occupy Wall Street “We are the 99 percent” slogan.

 

Then, two years ago, Netanyahu reversed course. He backed away from the antimonopolists, and began to cast them as left-wing rabble-rousers. This strategy shift was part of a deal he was trying to cut with Mozes. He and Netanyahu hated each other, but Netanyahu realized that Mozes could be useful to his ambitions. So the two negotiated a deal; Netanyahu would help eliminate competition in media against Mozes, and Mozes would keep Netanyahu in power for as long as Netanyahu wanted.

 

This change in strategy was another massively important shift in Israeli politics. Instead of tycoons controlling politicians, or the government going after tycoons, the new recipe Netanyahu was trying to put in place was the Prime Minister controlling the country through the tycoons.

 

But this dynamic hasn’t quite worked, and the deal ended up not going through. Mozes and Netanyahu were bitter enemies, and so they didn’t trust each other. Netanyahu had the conversation recorded by an assistant. And what do you know? His assistant was caught for unrelated scandals, and the police found the recordings.

 

“According to a report Sunday in the daily Haaretz, officers are in possession of “a series” of audio recordings of Netanyahu that appear to corroborate the suspicions, part of a mysterious investigation whose details have remained hazy.

Channel 2 reported that Ari Harow, Netanyahu’s former chief of staff, recorded the conversations between Netanyahu and Mozes, at the prime minister’s request. The recordings were found by police at Harow’s home.

The evidence, the reports said, doesn’t necessarily point at financial favors, but rather indicates an attempt to forge a ‘quid pro quo pact’ under which the unnamed businessman would help Netanyahu shore up his leadership, and receive ‘achievements estimated to be worth a fortune’ in return.”

 

Rolnik’s The Marker, as well as the newspaper Haaretz, its owner, has been exposing these rotten deals by Netanyahu, and Netanyahu is also being investigated for taking favors in office. Netanyahu’s arguments about why he recorded the meeting with Mozes were themselves remarkable, something out of House of Cards. He claimed that he was being extorted by Mozes, “I’m under constant extortion with this man. He stabs, stabs, stabs.” Netanyahu claimed that he recorded the meeting as insurance, to prevent Mozes from once again “ruling the state.”

 

This sordid episode reflects the raw power arrangements underlying Israeli politics. And the damage, to both Netanyahu and Mozes, is significant.

 

“This is a very weird story, and it shows how the power of concentrated corporate structures just cannot be separated from larger cultural and political trends.”

 

Corruption and Israeli Elections

 

Over the past six months, elections in Israel for Netanyahu have become more than just a question of political success or failure. If he was not able to retain power, he would likely be indicted on corruption charges. And if he could retain power, he would have to get the Knesset to grant him immunity, which will cause a national crisis if the Supreme Court and the Knesset clash.

 

Netanyahu’s political strategy to deal with corruption during the election has been to foment more autocratic anti-Arab rhetoric, seeking to maintain his power through a coalition of right-wing settlers and ultra-religious Orthodox. He used Trump-like strategies, including statements about fake news, to deny reports of corruption.

 

It didn’t quite work, though it didn’t quite fail. In the recent elections, Netanyahu did not perform as he needed to, but the opposing parties didn’t win either. No one has a majority, and the swing vote rests in the hands of both Arab parties and a right-wing secular politician opposed to both the Palestinians and the ultra-Orthodox. So far, Netanyahu has not been able to form a government, and the opposition, led by a man named Benny Gantz, will now try.

 

Netanyahu has been the dominant presence in Israeli politics for over ten years, and his prestige was heavily damaged by the results. He is no longer perceived as invincible. Israel may now have to go forward to a third election, and Netanyahu may actually be unable to avoid a trial.

 

So there we go. One of the more influential right-wing leaders in the world, a man obsessed with power, had his dark secrets exposed. And those secrets run straight through the murky world of monopoly tycoons.

 

This is a very weird story, and it shows how the power of concentrated corporate structures just cannot be separated from larger cultural and political trends. The people involved in every area of politics at the top are the same. At any rate, if Israelis, in one of the most complex geopolitical situations in the world, can address their oligarchs, then people everywhere can do it too.

 

Editor’s note: A previous version of this article appeared in BIG, Matt Stoller’s newsletter on the politics of monopoly. You can subscribe here. Matt Stoller is the author of the upcoming book Goliath: The Hundred Year War Between Monopoly Power and Democracy and a fellow at the Open Markets Institute.

 

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.

References   [ + ]

1. Guy Rolnik is one of the editors of this blog.