Israeli wealthy class grows, transforming a country

HERZLIYA PITUACH, Israel (JTA) — Some of the wealthiest Israelis live on Galei Tchelet Street in this coastal town on a narrow road that seems to groan under the weight of its many mansions.

Rooftops and balconies of the grand homes peek out from beyond the walls covered in oleander and bougainvillea and the security gates that surround them, an eclectic mix of boxy white modern structures and sprawling Tuscan-style villas perched on a bluff overlooking the Mediterranean.

That such streets and tony neighborhoods exist in Tel Aviv suburbs such as the one in Herzliya Pituach, Kfar Shmaryahu and others — along with the new wave of luxury residential skyscrapers in Tel Aviv itself — attest to the new level of wealth bring achieved by a small but growing pool of Israelis.

Money, much of it fueled by Israel’s technology boom, is transforming a country once considered a bastion of socialist, even Spartan values.

“There is a real race on here now to make money,” said Amir Kurz, a writer for the business magazine Calcalist.

“If we once thought we lived the life of a socialist country, today everyone wants to study business and earn big,” Kurz told JTA. “Once the Israeli role models were figures from the army or cultural scene. Today it is businesspeople, the allure of joining the ranks of the wealthy. The goal is to be among those lucky few who, for example, are part of the high-tech boom and cashed in.”

Wealth watching has become something of a national sport in the last decade.

The Marker, Haaretz’s financial section, now publishes an annual magazine detailing the fortunes of the 500 richest people in Israel. The magazine estimates the accumulated wealth of this elite group at $75 billion. Israel’s overall gross domestic product is about $194 billion.

Between 2005 and 2007, Israel produced more millionaires per capita than any other country, although the rate has since slowed. The 2009 Merrill Lynch World Wealth report found that Israel now has 5,900 people with at least $1 million in liquid financial assets.

Israel never truly was the egalitarian utopia envisioned by its founders. But for most of its history, Israelis tended to earn and live modestly, and there was a sense of camaraderie in the country based on the perception that people lived basically on the same playing field, said Tal Shavit, head of the finance department at the College of Management in Rishon Le-Zion.

Now, however, there is a class of Israelis for whom horse farms, private jets, pool parties, vacation homes in Italy and yachting are a part of life.

Israel’s acceptance in May into the Organization for Economic Cooperation and Development — the OECD, a European-based forum of top developed economies and democracies — represented a milestone in the country’s economic development.

At the same time, however, Israel has one of the highest rich-poor gaps in the developed world, with poverty rates exceeding 20 percent. Of Western countries, only the United States has higher poverty levels.

Research from the Adva Institute of Policy Research, an Israeli think tank that focuses on social policy, has shown that higher income groups have been the main beneficiaries of Israel’s economic growth, but not the middle and lower income groups.

“Israel is getting wealthier, but there is also much more poverty and crime,” Shavit said.

“I think we are slowly becoming more like America, for good and bad. But unlike America, we are in a daily crisis for survival, and so perhaps we are not ready to be like everybody else. A large socioeconomic divide weakens us as a society. What has helped us until now to be resilient as a nation was our sense of solidarity. Today there is a growing ethos of the individual before society, and once it was the other way around.”

Much of Israel’s wealth is concentrated among a few families that own newspapers, banks and leading companies. The wealthiest 16 families own 20 percent of the top 500 companies in Israel, according to a recent Israel Channel 10 report.

Nochi Dankner, for example, is the CEO of the cellular phone giant Cellcom, the Israeli insurance giant Clal and a major Israeli supermarket chain, Supersol.

“When we Israelis go out in the morning, there is no chance we will not, throughout the course of the day, put money in Yochi Dankner’s pocket,” said Kurz, the financial journalist. 

Sheri Arison, Israel’s richest woman with $3.4 billion in net worth, inherited two of the largest companies in Israel, Bank Hapoalim and the construction company Shikun & Binui. She recently paid $4.3 million for a 2,045 square-foot apartment along the Tel Aviv beach, according to the business daily Globes. At $2,100 per square foot, it was one of the most expensive residential real estate deals in Israeli history.

Gil Shwed, founder and chairman of Check Point, the first company to market firewall products for securing computers, is an example of Israel’s new moneyed class; he is worth some $650 million.

Another Israeli who made millions in high tech is Avi Naor, a former CEO of Amdocs, one of Israel’s most successful high-tech ventures. Today he devotes his time to charity, focusing his efforts on improving road safety in Israel. Naor founded the organization Or Yarok (Hebrew for “green light”) after his teenage son was killed in a traffic accident.

Naor’s work is an example of the philanthropy that some among Israel’s new wealthy class have taken on in recent years.

Despite Israelis’ fascination and even pride in the growing ranks of the wealthy, there is also some resentment, as seen in calls to cap executive salaries. Tapping into that, a Knesset bill co-sponsored by Likud and Labor lawmakers was introduced this spring that seeks to keep CEO salaries at no more than 50 times the salary of the lowest-paid employee in the company.

Top managers can earn as much as $523,000 a month, compared to the $1,440 monthly income earned by the average Israeli, according to the Adva Institute. 

“Israel now worships the golden calf of the free market: privatization and sink-or-swim competition,” Yossi Melman, a senior writer for Israel’s daily Haaretz, wrote in a blog for the Washington Post.

The government and analysts like Melman have concerns that so much wealth concentrated in the hands of so few gives the few too much political influence and is unhealthy for the Israeli economy.

Prime Minister Benjamin Netanyahu has said that one of his administration’s priorities is trying to fight the concentration of wealth.

A 2009 Bank of Israel report found that Israel has among the highest such concentration of wealth in the Western world and that much of it was familial. The concentration of wealth could become problematic for the country, the report said.

“That could have ramifications for the stability of the financial system and for economic activity,” the report said, “because both the control and ownership of the firms, and their performance and effect on the public’s well-being, depend on the nature of relationships within the families, and the strategies and tastes ‏(and whims‏) of a few people.”