Pierre Trudeau, Fidel Castro and Donald Trump

Pierre Trudeau, Fidel Castro and Donald Trump


Howard Adelman

I planned this morning to return to writing about the economy and Trump’s possible or likely contribution to a new economic financial collapse. However, one of the many responses to my blog on Justin Trudeau and Fidel Castro asked the following question:

“What would be the basis of the ‘love affair’ between the liberal PE Trudeau and the Marxist Castro? Their Jesuit upbringing? And that, literally in the shadow of the U.S. (for both) and during the cold war? This still sounds to me like defiance vis-à-vis the U.S. (but perhaps out of filial loyalty, rather than current calculations). Can you explain?”

I will add some partial notes to an attempted preliminary answer and explanation, in part because I want to draw out some comparisons between Pierre Trudeau and Donald Trump as a kind of introduction to the economic analysis I will undertake in my next blog. The comparison might seem very odd since Donald Trump, though he admires Putin, has only disdain for Fidel Castro and his brother, even though, when it was forbidden to do so, The Donald, in 1998 illegally under American law at the time, sent a team of his to investigate building a hotel and gambling casino in Havana, and this was well before this possibility of foreign investment in Cuba first opened up. His company spent $68,000 in Cuba illegally without the requisite U.S. treasury license.

Further, this offers me a chance to fill in some blanks. I had been intrigued about why Fidel Castro, a close personal friend of Pierre Trudeau and an honorary pallbearer at the latter’s funeral, had not granted Justin Trudeau an audience when Justin visited just a week or so earlier and when, just the day before, Castro had granted a visit to the leader of Vietnam. There had to be some serious explanation given Fidel Castro’s personal history with the Trudeau family. The explanation: Fidel was even sicker than anyone knew, for it is virtually impossible to imagine that he would not have wanted to see Justin given his personal connection to Justin’s father. After all, Fidel’s brother, Raúl, went out of the way to welcome Justin personally. Instead of a boring and very formal state dinner, Raúl took Justin and Sophie Grégoire Trudeau out to the Restaurante Café del Oriente in old Havana. It helped that Sophie was fluent in Spanish.

To demonstrate the close family connection, Justin Trudeau also met with three of Fidel’s sons where, as a present from the Cuban people and from the Castro family, Justin received a photo album of his father’s historic 1976 visit to Cuba and the adulation of the Cuban people for him. Remember, on that trip, Pierre had come with his wife, Margaret and his youngest son, Michel who was just under four months of age at the time. It was Michel who would years later die in an avalanche in British Columbia. The Justin Cuban visit had all kinds of nostalgia for Justin as it had in subsequent visits for his father. It just happened that many Cubans mistakenly thought that Justin was the grown-up Michel.

Professor Wright of Trent University (author of Three Nights in Havana) claimed that, “I had an impression that Justin was borrowing from his family’s history with Cuba to shore up the bilateral relationship.” I myself believe that the effort to pay “homage” to Pierre’s relationship with Cuba was not in service to advancing business interests, but was the real goal of the visit. Reinforcing family and the family connection came first. As Mark Entwistle, a former Canadian ambassador to and an expert on Cuba, opined, the Trudeau family connection with the Castros is a matter of deep affection, but it will have no effect on advancing Canadian business interests which will have to succeed or fail on their own merits.

This strength in the family connection, within and between families, is the first comparison I want to make between Pierre Elliot Trudeau and Donald Trump. Despite all the business that each of Pierre’s and Donald’s business and public lives required, both were very devoted to their children. Donald Trump remains so. And their children adored their own fathers in return as Pierre had respected his own father and as Donald Trump had admired his own father. Parent to child links were and are very important in both families. Justin replied to Tom Mulcair’s criticisms of his father, “Let me say very clearly, I’m incredibly proud to be Pierre Elliott Trudeau’s son. “And I’m incredibly lucky to be raised with those Liberal values” According to Justin, Pierre taught his sons “to believe in ourselves, to stand up for ourselves, to know ourselves and to accept responsibility for ourselves.” Donald used very similar words in describing what his father, Fred, had taught him. All the children in the respective families were devastated at the death of their fathers. Pierre’s father died when he was only fifteen, and he was admittedly wracked by that death. In addition, both fathers bequeathed an inheritance on their sons, though Pierre’s was much less than Donald Trump’s and Justin’s was even smaller again (1.4 million). But the Trudeau boys were taught to be frugal while Donald Trump acquired a taste for ostentation.

Justin’s father’s Jesuit upbringing partially explains his lifelong attraction to dogmatic and absolutist rulers. Among those, Castro was his most important friend. Pierre was the first NATO leader after the Cuban revolution to visit Cuba. Pierre’s huge portrait hung at Havana airport when he arrived and a quarter million Cubans, who had been given the day off, packed the streets of Havana waving Canadian flags as the entourage made its way through the city. Unlike virtually all Central and South American countries, Canada along with Mexico were the only countries in North and South America not to break off relations with Cuba.

The largest source of tourists to Cuba comes from Canada, and that has always been the case through thick and thin. Currently Canada sends 100,000 tourists per year to Cuba but American tourism will soon overwhelm the Canadian contingent. But the big difference came when Pierre Elliot Trudeau was elected Prime Minister of Canada. He and Castro formed a lasting bond. Pierre often took his family for holidays in Cuba. Pierre used to travel privately to Cuba and see Castro when there was no government business to do there. At home, Justin was passed this adoration of the Cuban leader by his father. After Pierre retired from politics, he continued to visit Cuba as a private citizen. Castro was not the only dictator Pierre felt he could do business with. His last international initiative was a visit to Nicolae Ceaușescu in Romania, the same dictator who was executed by his own people upon the overthrow of communism. Pierre in one of his flakiest efforts wanted to try to persuade Nicolae to partner with him in a joint effort to eliminate nuclear armaments totally.

Pierre first was elected Prime Minister of Canada on a wave of Trudeaumania. Donald Trump has been elected president of the United States, almost fifty years later, on a wave of Trumpomania, this time coming from the right reinforced by the so-called Reagan democrats. In the Canadian case, personality and not just populism – Diefenbaker had also been a quasi-populist – dominated the political scene in Canada. This is what just took place in America. In the case of Trudeau, an intellectual who was deeply devoted to ideas and abstract theory, reason presumably trumped passion. But not in the public arena. There, like Trump today, Trudeau made an instinctual connection with Canadians. They either loved or hated him. And Trudeau thrived in that public applause while, always at the same time demonstrating he was his own man and could flout convention. Does that not seem similar to Donald Trump?

John English, Pierre Trudeau’s biographer, also his admirer, credited Trudeau with holding Canada together against the forces of provincialism, separatism and disintegration. He made bilingualism official and it is impossible today to imagine that we would ever again have a leader who was not fluent in both official languages. But Trudeau overreached as was his want. The vision of most Canadians being bilingual or even being able to receive goods and services in French in British Columbia was a pipedream foisted on Canadians. Trudeau did repatriate the constitution, but only by alienating Quebec and without Quebec’s formal assent. Further, Canada in transforming itself into a country with a written constitution as its base also lost the flexibility of its informal foundations though, admittedly at a gain in clarity. As we move into the future, we will have to see whether the British historical foundations or the American legal foundations are more adaptable to the changing demands on a polity.

Trudeau also introduced the Canadian Charter of Rights and Freedoms, but was the Prime Minister who most abused those rights and freedoms by imposing the War Measures Act in the face of two kidnappings and one murder by extremist Quebec separatists in the 1970 October Crisis. When Tom Mulcair in Parliament reminded Justin Trudeau as Prime Minister what his father had done, Justin became defensive and effusive in praise of his father just as he had launched his political career in 2000 with his emotional and very effective eulogy to his father at his father’s funeral. But in 1970, over five hundred Canadians were rounded up and imprisoned without charge or even the protection of Habeus Corpus. I could imagine Donald Trump doing the same. It is ironic, but perhaps not so ironic, that the terrorist killers were released from jail earlier provided that they accepted exile in Cuba.

In this regard, Pierre Trudeau is best known for his intellectual defence of federalism and the advantage of giving provinces semi-sovereign powers in areas that were closest to the desires and needs of the populace. But Pierre was a very strong defender of centralized power. Donald Trump is as well. He will not cede control of federal lands to states and believes that states cannot be trusted with administering federal lands. Their behaviour would be unpredictable. Pierre Trudeau alienated the West, and specifically Alberta by imposing federal control over the ownership and extraction of fossil fuels in his National Energy Policy (NEP). Donald Trump also sees energy policy as central to his administration and backs the continuation of drilling and fracking, including on federal lands, and rejects the efforts of some liberal states to promote renewable energy. Ironically, even in medical care, even with respect to Obamacare that he officially opposes, he would remove state barriers on insurance companies which, ironically, will allow a more centralized and unified medical care insurance system to emerge.

But isn’t Donald Trump an American firster – make America great again – and a hyper nationalist with isolationist propensities, while Pierre Trudeau was a cosmopolitan in support of free trade? I will go into that later when I deal with economic and foreign policy. But domestically, in terms of federalism, Donald Trump is a believer in a very strong central government. After security, the next two priorities for a Trump government will be education and health care, traditionally areas of state control. Even Pierre Trudeau never went that far in centralizing power in Ottawa. It will be ironic that the candidate most critical of the swamp in Washington will be the president that will most extend the reach of, and hence, bureaucracy in, the central government. On the issue of a federal state that shares sovereign powers with sub-states like provinces and American states, Trump will move even more power to Washington, perhaps more than any other president prior to his rule.

But Trudeau was a social democrat. Trump is a conservative Republican. But is he really? He is a populist primarily and will use the state to reinforce and strengthen his image in the eyes of the people. He may not pour his energies into a national energy policy – good for renewables – but he may very well throw money about on infrastructure, education and, ironically, even health. For though he denounced Obamacare as a bad system, he never denounced having a system that took care of the health of all Americans. A federal model of using money and spending to strengthen federal jurisdiction will make previous aims of former presidents seem totally modest in comparison.

Here again, Pierre was anti-nationalist and contended that nationalism evokes emotion and particularist obsessions, whereas cosmopolitanism builds its allegiances on a state serving and stressing the cohesion among all. For Trump, the all will be all Americans who follow and support him and thus a strong nationalism and a strong central government will be reinforcing. As with Pierre Trudeau, the rights of aboriginal nations will suffer under Donald Trump’s rule.

Pierre Trudeau undermined rather than advanced Canadian stability and its strength and presence in the world. While he ran as an intellectual federalist, he did more than any predecessor to undermine the federal nature of the Canadian polity. For Trudeau set a precedent for reducing the French role in the political life in Canada, not strengthening it. In terms of cultural presence, it was strengthened, but not in terms of political presence. Trump too will resist the tendency to advance multiculturalism through a political agenda and, especially resist the growth of the Hispanic community in the United States. After all, within two decades, America will have a larger percentage of Hispanics than Canada has of francophones. French may have been advanced under Trudeau but not the French political role. Culture is not politics. Trump too will more deliberately resist the growth of Hispanic culture as a political force. Of course, he will do the same for African Americans because he is a believer in the fact that an American is an American, full stop.

In foreign policy, Pierre Trudeau shuttled among many capitals to try to enhance Canada’s role and presence in the world continually shrank while he was Prime Minister even as he was cheered as a leader around the world in a way that Donald Trump will never be. I mentioned his flaky visit to Nicolae Ceaușescu in Romania not long before his downfall to enlist his aid in dismantling the system of mutual deterrence using nuclear weapons. Pierre Trudeau was convinced that the Americans, and its president, were leading the world forward to nuclear destruction. But it was Ronald Reagan, openly despised by Trudeau, who made the treaty with the Soviets to get rid of 90% of the tools of massive nuclear destruction. Further, and more significantly in light of the current controversy over Justin’s eulogy to Fidel Castro. The latter was both the instigator for bringing nuclear arms into Cuba and believed that even if Cuba engaged in a nuclear war over Cuba, Cubans would gladly be incinerated to help destroy capitalism.

“First of all, Cuba would have burned in the fires of war. Without a doubt the Cuban people would have fought courageously but, also without a doubt, the Cuban people would have perished heroically. We struggle against imperialism, not in order to die, but to draw on all of our potential, to lose as little as possible, and later to win more, so as to be a victor and make communism triumph.” As Che Guevara put it, we are “a people prepared to suffer nuclear immolation so that its ashes may serve as a foundation for new societies. When an agreement was reached by which the atomic missiles were removed, without asking our people, we were not relieved or thankful for the truce; instead we denounced the move with our own voice.”

One major difference between Trudeau and Trump is that while the Soviet leaders ignored or at best patronized Pierre Trudeau, Donald Trump will be feted by the Russians. In the history of Canadian foreign relations, Pierre Trudeau was exemplary in undermining our commitments to our allies and we have never recovered from the political and defense devastation that he bequeathed to Canadians. NATO was weakened under Trudeau. So was the international Organization for Tariffs and Trade. Donald Trump will follow in Pierre’s footsteps in this regard and pay little attention to the consequences of his policies on traditional alliances, though, unlike Pierre Trudeau, Donald Trump is likely to go on a spending spree on the military, an area on which Trudeau was a skinflint. But as Pierre Trudeau demonstrated in the past, Donald Trump in the future will demonstrate an extraordinary indifference, not only to authoritarianism, but to totalitarianism and its spread in the rest of the world.
Pierre Trudeau avoided military service in WWII. Donald Trump managed to evade the draft and military service in the United States. While Donald Trump will spend lavishly on defence, he will not use that strength to really challenge Russia and China in their areas of prime interest. The Ukraine recognizes it is being abandoned further to the maws of the Russian bear. The Baltic states fear it. Signals have already been sent to Japan and Korea that they will be more on their own and cannot rely on Pax America.

Perhaps the closest resemblance between Donald Trump and Pierre Trudeau is their disdain for journalists and the media. Donald’s is so fresh in our memory, we need hardly be reminded of it. But we should recall that when Pierre Trudeau left office and rode off into the sunset in his antique convertible Mercedes, he turned Richard Nixon’s words on their head. Nixon, when he lost his campaign for the presidency in 1960, told the press that he would no longer be around to be picked on. Pierre when he left office chuckled and said that the media would no longer have him around to beat up on them. Asked if he had any regrets, Pierre replied, “Yes. I regret that I won’t have you to kick around anymore.”

But it is on the economy that Pierre Trudeau and Donald Trump really resemble one another most. Pierre was and Donald Trump is an economic ignoramus. Donald Trump will inherit an economy that is well on the path to recovery from the 2007-08 financial collapse, even though the recovery remains halting and far from setting the U.S. on a solid financial foundation. That was the case in Canada in the early sixties. Canada was then an economic powerhouse. But in Canada in 1979, a year when both the Tory and the Liberal governments provided extraordinary initiative in bringing refugees to Canada, the foundations for the 1979 recession were set in motion as well as for the disaster of 1989-1994 that was the worst economic period in Canada since the Great Depression. Pierre Trudeau bore the major responsibility. He increased the Canadian debt from 1968 to 1984 to $157.2 billion, a 738.7% increase. He would not introduce the requisite taxes to pay for the government’s expenditures, which tripled. Canada went through the worst period of inflation in its history. Interest rates became sky high. In fact, by 1993, Canada was even flirting with defaulting on our debt. As in the United States, the middle class was left with greater burdens as their effective salaries stagnated. Brian Mulroney, with all his faults, but mainly the Chretien government with Paul Martin as finance minister, brought Canada back from the brink.

I suggest we can expect the same from Donald Trump and I will subsequently try to show why. But I want to add another note of comparison, this time applicable to both Pierre and Justin as well as Donald Trump. All gained power, in spite of being underrated as underdogs when they pursued the leadership of their own respective parties and then the leadership of the country. I end with one further remark. Pierre Elliot Trudeau at the rally in Cuba in 1976 that I referred to above, shouted out, “Viva Castro.” Justin in November 2016 was simply reiterating the sentiments of his father.

With the extraordinary help of Alex Zisman


Tycoons and Monopolies I.14.04.13

Tycoons and Monopolies I 14.04.13


Howard Adelman

Economic development depends in good part on entrepreneurs. The vast majority are small, but some have become very rich. There are at least seventeen Israeli billionaires in Forbe’s Israel list not counting billionaires who hold Israeli citizenship but whose primary residence is now elsewhere. I have already referred to the richest, the Ofer brothers (Idan and Eyal) and Arison brother (Micki) and sister (Shari) in previous blogs. Since the Arisons largely inherited their money from their father who died in 1999, I will only tell one story of Shari Arison who was voted the 56th greatest Israeli in 2005 because of her philanthropic work. In March 2009, she sponsored the annual Good Deeds Day in Israel to inspire and recruit thousands of volunteers. As part of the event, a Palestinian youth orchestra from Jenin performed classical Arabic tunes and songs of peace in a concert honouring Holocaust survivors. Subsequently, the conductor was condemned by Jenin politicians, fired from his job and expelled from Jenin. Such are sometimes the unintended bad effects of good deeds.

Israeli billionaires are sometimes accused of bad deeds. Focusing on the Israeli documentary, The Shakshuka System (Shitat Hashakshuka), written by the Israeli investigative journalist, Miki Rosenthal and directed by Ilan Aboody, I will re-introduce the Ofer brothers. Shakshuka refers to an Israeli hot breakfast concoction of poached eggs cooked in a tomato and olive oil sauce with lots of spices and an assortment of other ingredients often mixed in – sausages, tuna, spinach, feta cheese. Since the film was broadcast, the term now has a secondary meaning in Israel to refer to mixing of government and big business in the process of devolving state assets onto the private sector. A lawyer working for the Ofer family can be given the credit for this neologism for he described the process for calculating the purchase price of state assets as combining various offers and making a shakshuka out of them.

The film combined a Monopoly Board, cartoons and official records, history and interviews, to explain how the Ofer brothers and the Israel Corporation purchased what were state assets at what were alleged to be bargain basement prices. But the film starts with the end, the effort of the Ofer family to suppress the film and prevent it from being shown on Israeli TV. Eventually they not only failed, but their own film made to counteract the critical film, and shown back-to-back on Channel 1 (the Israeli version of CBC), evidently, according to a radio survey, garnered a credibility of only 10% while the Rosenthal-Aboody film had a credibility of 90%. However, in the process of making the film, Rosenthal lost his job with Channel 2 (the Ofers actually bought the channel as part of its campaign). Nevertheless, the film garnered far more publicity than it would otherwise have if the Ofers had not launched such a strenuous campaign to suppress it. The Ofers also agreed to pay NIS 40,000 to settle their suit against Rosenthal et al out of court.

In the film, as in a Michael Moore documentary but without Moore’s narcissism, no one from the Ofer family, its hirelings or the government is willing to talk to Rosenthal about the process of privatization, but in the tradition of investigative journalism, the narrative relays how the government sold state assets in the resource industry cheaply while the companies continued to pollute and hired former state employees in charge of the sale to work for the Ofers immediately after the purchase. Other than introducing a new meaning to a Hebrew word, as a result of making the film, Rosenthal and Aboody have been frozen out of many work opportunities. At the same time, the Ofer brothers blame the film for making government officials unwilling to meet with them lest those officials be suspected of collusion.

We should not, however, stereotype billionaires, though when at the end we discuss the Eastern European Israeli billionaires, one may be tempted to do so. The billionaires in Israel represent a widely divergent group both in background, how they made their fortunes and any conclusions that can be drawn for their impact on the Israeli economy. The most well known in Canada is David Azrieli because he is a Canadian as well as an Israeli citizen and is included in the Canadian rather than Israeli list. He made his money (currently a fortune estimated in excess of $3 billion), like many of the very rich who made fortunes in Canada, as a property developer in both Israel and Canada where he is ranked as the 9th wealthiest Canadian by Forbes.

Trained as an architect in the Technion (though he never graduated) and having served in the IDF, he was one of the first Israeli migrants to Montreal in 1954. The Azrieli School of Architecture and Urbanism at Carleton University was named after him, not only because of his $5.1 million donation, but because of his commitment to high quality architecture in his developments. In Israel, the Jerusalem Shopping Mall, as well as twelve other super malls in Israel, and the Azrieli Center in Tel Aviv, are now landmark developments. Azrieli has a controlling share in Sonol, Tambour and Supergaz. There is no indication that his contribution to the Israeli economy (and the Canadian economy) has been anything but positive.

However, he has donated funds to Im Tirtzu, self-described as a centrist organization combating efforts to promote a boycott of Israeli academic institutions. However, Im Tirtzu is known for its denial of the Nakba, condemnation of artists who support Palestinian nationalism, its campaign against the New Israel Fund for funding the "lies" that were fed into the Goldstone Report, and especially its criticisms of biases in political science departments of universities. In the case of Ben Gurion University of the Negev, the organization claimed that 9 of 11 professors in the department were left-wing activists who supported the boycott of Israeli academic institutions. Although the heads of Israel’s seven leading universities condemned Im Tirtzu‘s "dangerous attempt to create a thought police," the Israeli Council for Higher Education appointed an international committee to investigate the allegations but it too became controversial because well-known scholars were rejected from being appointed to the committee and the original chair also resigned. The committee did conclude that the curriculum of the department was indeed imbalanced and recommended closure unless changes were made.

Then there are the American billionaires who are also Israeli and not included in the list. Micki Arison is classified as American because he runs Carnival Lines out of Miami; both he and Shari were born in the USA and retain their American citizenship. Noam Gottesman, who founded GLG Partners, a wealth management firm, which he sold but still controls TOMS Capital, has lived in London and New York and is not an Israeli resident. Other Israeli-born billionaires have made their fortunes in America. Arnon Michan, the Hollywood producer (Pretty Woman, L.A. Confidential and numerous other movies) built his initial fortune in Israel by developing and expanding his father’s fertilizer company into a large chemical business. He has always had an intimate relationship with Israel, having served in the Israeli intelligence and is credited by Shimon Peres for obtaining what was required to build Israel’s nuclear capacity — as well as other forms of arms dealing. (Meir Doron and Joseph Gelman (2011) Confidential – The Life of a Secret Agent Turned Hollywood Tycoon). He has no current impact on the Israeli economy except as a goodwill ambassador and financial backer of the Israeli Network which re-broadcasts Israeli programs to Canada and the United States.

Marc Rich is another billionaire born in the USA with Israeli citizenship, but he lives in Switzerland. He fled the USA to escape indictment for tax evasion, running an export oil scam and involvement in the illegal trading with Iran in 1983 but was pardoned by President Clinton in 2001. A more interesting billionaire personality from an Israeli perspective is Haim Saban, another Hollywood mogul who owns Univision, the Spanish-language media giant. He sold Fox Family Worldwide, a co-venture with Robert Murdoch, to Disney in 2001 and made $1.5 billion. He has retained a continuing commitment to and involvement in Israel but is formally classified as an American billionaire. His main efforts are directed towards ensuring American support for Israel rather than having any direct impact on the Israeli economy. He supplied the funds to build the headquarters in Washington of the Democratic National Committee and founded and funded the Saban Center for Middle East Policy at Brookings.

The big Israeli billionaire movers and shakers in the Israeli economy, other than those discussed above, can be divided into five groups:

a) Mizrachis – Israeli Jews born in Arab countries;

b) the Ashkenazis;

c) the older Israeli-born businessmen;

d) the Young high-tech Sabras;

e) the East Europeans, the most colourful collection of all.

I will discuss the Mizrachis in this blog, then the other Israeli billionaires in subsequent blogs. Since the Toronto International Jewish Film Festival is now on, I will delay some of these economic blogs to review some of the films I see.

Shlomo Eliahu came to Israel as a child of fourteen from Baghdad and made his fortune, and reputation for integrity and responsibility, in insurance and banking. He owned large stakes in Bank Leumi and the Union Bank of Israel (Bank Igud) which in turn owned 9.9% of Bank Leumi’s shares, but very recently had to sell his personal stake in Bank Leumi to consolidate his takeover of Migdal Insurance and Financial Holdings and escape the requirements of the Israeli anti-monopoly laws. He is one of the two billionaires who has run for and had a seat in the Knesset, first as part of DASH, the Democratic Movement for Change, in 1978, and then in 1980, as part of Ahva until 1981. He then went back to making money. In 2012, that effort landed him in trouble with the law for he was fined almost $3million for non-payment of taxes between 2007 and 2009 when he took NIS 74.3 million out of Israel without notifying the authorities, in part ostensibly for gambling in London. There were rumours of money laundering but no evidence that I could find and a spokesperson for the Eliahu group explicitly denied it.

When Italian insurance giant Generali was due to sell its interest in Migdal to Eliahu, and Elihau was about to sell his shares in Bank Leumi, as stated above, to satisfy the new anti-trust laws, Bank Leumi lent Eliahu NIC2billion to buy Generali’s 69.1% controlling share of Migdal. Eliahu sold another block of shares in Leumi for NIS200million thereby raising about two-thirds of the needed price of his purchase of Migdal. After Eliahu completed the purchase of Migdal, the share price rose 40% and Eliahu joined the billionaire class.

I tell this story because all sales were private. But if it was a state sale to a private entrepreneur and the share price went up 40% after the sale was completed, there would have been accusations that the stock was sold too cheaply and that politicians and civil servants had colluded with Eliahu to help him make his fortune. The reality is that once you have a fortune, it is easier to enlarge it for there are fewer competitors in the buying sweepstakes for states privatizing their holdings.

Eliahu retained his personal political conscience. He railed against the high cost to Israelis of buying a home because of the scarcity of land and sites on which to build. He called for land to be privately owned so a base for personal capital would be created. "Why have Israelis, exemplary children, been sentenced to a country that does not care to give them a piece of land? To build a home?…We have a lot of land. In two years, I’ll build you hundreds of thousands of homes at a construction cost of $1,000 per square meter. $20,000 for a young couple, an 80% mortgage, and you’ll have a reasonable home for a family.”

Yitzhak (Isaac) Tshuva, another Mizrachi Israeli, seems to have been apolitical. He was born in Libya. He came to Israel as an infant in the Jewish exodus from Arab countries following the War of Independence. Starting as a contractor and developer, he has maintained his down-to-earth modesty though he came to own some very posh investment properties through his wholly owned property company, El-Ad, in New York, Florida and Los Angeles, including the landmark Manhattan Plaza Hotel which he recently sold after renovating and selling off a large number of condos.

Tshuva also controls the Delek Group, a global integrated energy company based on the Israel Fuel Corporation which he acquired from private interests rather than the state, but in gaining control, he pushed aside the establishment very wealthy Recanati family which made him some enemies in establishment circles. The Delek Group was part of the conglomerate that discovered and brought on stream the Tamar gas reservoir; Delek owns about one-third of Tamar. (See my blog on the energy sector.) He is an example of a Horatio Alger story of a self-made billionaire who made his money through hard work, discipline and dedication. Though in his early years he received state contracts – such as for building the Bar Lev Line along the Suez Canal – there was never any suggestion that he obtained those contracts other than through competition and an excellent business reputation. He has also had but survived serious setbacks, losing half a billion dollars when financial markets took a dive in 2008.

Tshuva has one ambitious plan that would have a tremendous political impact – to develop a 106-mile canal to bring Red Sea water to help refill the Dead Sea as well as develop hotels, restaurants and parks along its length. Tshuva is working with Jordan and the Palestinian Authority as well as the Israeli government to advance the project.

One last aside on the Recanati famil fortune which controlled the IDB Group and bought a controlling share of Gmul at a premium price just when the stock market hit the skids. When he lost about a half billion dollars and had to liquidate assets to satisfy creditors, he stepped aside. Leon Recanati lost control but retained his (and his family’s) reputation as a businessman of honour and integrity.


Tycoons and Monopolies.I.14.04.13.doc