A wealth of opportunities

Interview: Attorney Shraga Biran, one of Israel's richest men, is a surprising advocate for change.

Shraga Biran_521 (photo credit: Marc Israel Sellem)
Shraga Biran_521
(photo credit: Marc Israel Sellem)
He lambastes neoliberalism, has a disdain for obsessive profiteering, slams the control of the system by those he labels the status quoists, warns of civil unrest if things are left unchanged and calls for a redistribution of state assets. Meet Shraga Biran, one of Israel’s most powerful and wealthy attorneys.
Biran doesn’t see himself in any way as a radical, at least not in the way the word has come to be employed in the vernacular. “A radical,” he notes, “is not someone on the extreme right or left, but someone who goes to the root of the matter.”
The root of the matter is what he sees as the current crisis of capitalism and the need for an injection of vitality into a system that has gone too far. How does he propose to go about that? By supporting the “opportunists,” the knowledge classes whose ideas power today’s economy but, for the most part, see little gain from the spectacular increase in wealth of recent decades.
In a book published this week in English, Opportunism: How to Change the World – One Idea at a Time (Farrar, Straus & Giroux) – a Hebrew version was published two years ago – Biran argues that in a world of intangible assets, everyone has the opportunity to partake of wealth if given the time and minimum economic foundation. He proposes a modernday New Deal to be implemented by a program of “social privatization,” a distribution of the wealth created by states, to facilitate opportunity. In addition, he calls for a shakeup of the current system of intellectual property so that ideas themselves can be rewarded – not just their expression – and for the creation of a “public market for private goods” that would sustain culture and creative thought, the well from which ideas spring.
What Biran would also like to do is to restore the good name of opportunity itself. The changes brought about by the information age have completely changed the face of capitalism, he says. Whereas once capital was built on exploitation and power, today it is ideas that drive the economy and therefore it has a potential to be a moral force. “In such an era,” says Biran, “opportunity can become a real asset. Opportunism is the driving force behind the generation of intangible assets in the sense that it can create insights and convert them into a valuable reality.”
Biran, 78, was born in Poland in 1932. When World War II broke out, he was seven years old. His mother and father were killed by the Nazis. He managed to cross the border into the Soviet Union by bribing a Nazi officer with a cellar full of vodka and then, after escaping the grip of the NKVD, was a child partisan living in the forests, eventually marching victorious with the Red Army into the Ukrainian city of Rovno.
The details are scant and Biran is reluctant to discuss them, dismissing them as irrelevant. But they are perhaps central to understanding him. Throughout hours of conversation, first at his Jerusalem home and later at his Tel Aviv law office, one theme recurs – an abhorrence of determinism, fatalism and the herd.
Biran describes himself as someone who has “always tried to shape his own circumstances.” He is an opportunist, driven by a belief in free will and the power of the individual to shape his own destiny – to create opportunity.
“I have always tried to be a master of a my own fate,” he says. “From the first moment I was left alone, I didn’t take the direction everyone took. As a boy, I decided that I would have a plan, that I would fight, and I joined the partisans. I always looked for another way.”
After the war, Biran came to Palestine, where he settled on Kibbutz Mesilot in the Beit She’an Valley and served in the Palmah. Having never had the opportunity to study, neither at elementary school nor high school, he went to the Kibbutz Seminar and earned a teaching certificate. As a student, he opened a school in Jerusalem’s Musrara neighborhood under the auspices of the Histadrut, managing it as a cooperative with other students who also taught there. The school gave an opportunity to those who hadn’t had the chance to complete their studies during the War of Independence to gain a matriculation certificate and go on to university.
At the same time, Biran studied economics and law at Hebrew University and went on to open a law office in Jerusalem together with Shmuel Tamir, a well-known attorney, despite their ideological differences. Biran came from the socialist Left, while Tamir was part of the Revisionist aristocracy and would later serve as justice minister in the government of Menachem Begin. The two took part in several major trials, the most prominent one being what came to be known as the Kastner trial, the libel suit issued against Malchiel Gruenwald, who had published charges that Rudolf Kastner cooperated with the Nazis by negotiating with Adolf Eichmann to save Jewish lives.
Surely Kastner was an opportunist, I put to Biran, who said at the time of the trial that Kastner had sold his soul to the devil. Wasn’t he just seizing the opportunity to save lives? “What I am trying to prove is that an immoral opportunity is not an opportunity,” Biran replies.
“What I am trying to prove, and this is the gist of what I am trying to say, is that opportunity is something that is manmade, that it is man that creates opportunity, and opportunities are not part of some historical determinism.”
Later he would go on to set up his own practice, specializing in real estate, gaining a name as someone with an almost magical ability to gain zoning rights and amassing a fortune in the process. Biran is the legal force behind some of the country’s largest realestate projects, among them the Tel Aviv Wholesale Market, Ramat Rahel, Glil Yam and Airport City. In each project he has managed to gain building rights for his clients and has taken a cut of the project in return. He also has diverse investments in real estate, energy and retail. Once a penniless immigrant, Biran now has a fortune estimated to be worth several hundred million dollars.
You have said that the gap in wealth between the top deciles and the rest of the population is unacceptable. What needs to be done?
I think the time has come for a wall-to-wall national agreement based on an understanding that the current situation cannot continue. Does anyone think we can really go on with a situation where 68 percent of wealth belongs to the top decile, or in the United States, where the top two deciles hold 80% of wealth and the top percentile holds 20% of wealth?
Those social gaps cry out to the heavens. It is breaking the economy because there is no demand, and when there is no demand, the economy cannot grow. When people cannot make a bare minimum, then per-capita expenditure declines and the economy cannot recover. The problem is economic, but it is also a social problem. People won’t remain silent. People will not accept this situation over a sustained period.
Are you suggesting we could see civil unrest?
Without a doubt... We could see people turning toward fundamentalism that could change the face of Western democracy. Fundamentalism comes from poverty... Look at the situation in Israel. The bottom percentiles, over two million people, half of them don’t own apartments, their income is just above NIS 3,000. There is a danger of Israeli fundamentalism, just as in Gaza there is Hamas fundamentalism and in Iran there is fundamentalism.
At this moment of unprecedented economic and cultural renaissance, by pulling the blanket in one direction and leaving others out in the cold, you are creating a danger of fundamentalism. That is the alternative at the moment. The Bolshevik alternative has disappeared, and fundamentalism has taken over wherever there is poverty.
You have called for a redistribution of wealth, a nonrevolutionary revolution that would give people opportunity. Can you elaborate?
This is what I call social privatization because most assets today are in the hands of the state. I’m not a radical; I don’t suggest distributing assets in the hands of private individuals because first of all, you will create a new corrupt bureaucracy. I’m against a revolutionary revolution. I am against redistribution of distributed assets. What I am in favor of is distribution of undistributed assets; some 70% of wealth that exists today is new wealth that didn’t exist before 1980.
But we’ve already distributed a lot of wealth through elite privatization, so what’s left to hand out?
The neoliberals claimed that government was getting in the way and that the state should sell its assets to the highest bidder and in doing so created the oligarchs that didn’t exist prior to that. Israel sold off its assets and created the oligarchs who didn’t exist 30 years ago – most assets used to belong to the state or to the Histadrut, the Jewish Agency, Jewish National Fund. Very little was in private hands.
We can’t fix what has been done, but the state is today the greatest creator of wealth. Through regulation, over 55% of economic activity is by the state. The state owns lands, ports, airports and owns the regulatory power to create wealth.
You have to get used to one idea that proponents of neoliberal capitalism don’t want to get used to, and that is that the state is the greatest creator of assets. Regulation is no longer a mere matter of regulating economic activity; it creates wealth.
How would you distribute assets, then?
For example, I am trying to promote a law for urban regeneration. [Biran sits on a committee on urban regeneration founded by former housing minister Ze’ev Boim.] Israel has some 2,100,000 apartments of which some 750,000 are in poor areas. My suggestion was to provide property rights to those buildings, which has happened; and secondly, to set up a committee that through affirmative action would provide extensive building rights to the residents and not to developers. If you have an apartment today in a shikun [tenement], it isn’t worth much; but if you were to give 500% building rights, then you would have created new wealth.
So through such a regulatory act, you create assets. Regulation doesn’t just regulate, it creates enormous wealth, every day. It creates wealth for those who are connected politically. If you are connected, you get. If you’re not connected, you don’t get. What I am trying to explain is that through regulation you create wealth that has yet to be distributed. Band length, broadcast waves, that whole IT revolution that creates this new wealth is in the hands of the state, so it all depends on how you distribute it and to whom you distribute it.
So how would you distribute the kind of wealth generated through regulation?
In the hands of companies where control is in the hands of all citizens of the state as shareholders.
But if you hand out shares, isn’t there a danger of a repeat of what happened in Russia?
In Russia there was corruption, but there doesn’t have to be corruption everywhere. The privatization process in Russia created a historic opportunity for the Russian people who suffered so much in World War II. The Russian people finally had a chance to emerge from a period of darkness and to have the assets transferred to their hands and not to the oligarchs. But corruption ate up everything, and that corruption did not have to happen. Nothing has to happen. There is no determinism; not everything comes from above – everything is in the hands of people.
What about Israel’s natural resources?
I would distribute natural resources within the framework of social privatization. I say that even though I have a personal interest in the matter [Dor Alon, a company in which Biran is a major shareholder, has a 4% stake in the Tamar gas field.] On the one hand, there is a need to encourage entrepreneurship. But on the other hand, the part that belongs to the public should reach the public. I say give it to people so they can enjoy it now and not have to look to the next generations.
There is nothing more hypocritical than talking about the next generation. I say make people wealthier, empower them, give them education. Children of families with educational opportunities are the next generation.
This whole issue of the next generation is political demagoguery that doesn’t want to solve the social problems that are so acute here. Create work, create better education, take people out of pitiful housing, out of the poor neighborhoods. Instead of having 300 medications in the health basket, have 400; save children that can be saved. It’s a humanistic orientation that has no connection to Left or Right.
Do you really believe it is possible to develop an egalitarian society, or a society of equal opportunity?
I don’t believe in an egalitarian society, I don’t believe that everybody has to be equal. On the contrary, I believe in individualism. The idea of egalitarianism is utopian, futuristic and not one that can be realized, but I do believe that society can be just enough to provide each and every member of that society with the economic foundation that enables them to take advantage of the opportunities that the world provides.
The world today is a world of opportunities...if you are educated to be an entrepreneur, to be creative, to think, to get ahead, then you can, so long as you have a basic economic foundation – and that is something that can be delivered by social privatization. That is the only way. Nationalization has failed, elite privatization has failed. Social privatization is the only way to give people a minimum.
What is the essence of your message?
The essence of what I am proposing as a solution to the existing situation is that we are now living in a world of new ownership, the ownership of ideas, which is a moral ownership created in the mind of man without exploiting anyone, without exploiting people, without exploiting nations, without force, without battalions. It is a very moral ownership and one that will continue to take a more and more significant role in the world economy. If you grant ownership rights for ideas, conduct a reform of intellectual property, and if you give meaning to Jefferson’s slogan of sweat equity where the capitalist invests capital but the worker invests sweat, then today there is idea equity, which is what creates wealth today.
The state, as I have tried to explain, is the greatest creator of wealth through regulation. I am against redistribution of existing capital because that will lead to revolutions and the destruction of democracy as we have seen in the 20th century. But if you are talking about the distribution of wealth that has yet to be distributed, then you can create the democratization of wealth through affirmative action for the lower classes so that they can obtain education and compete...
Some 85% of global wealth is in intangibles. Wealth today has changed completely from what it was 50 years ago, and because it is intangible, it is also infinite because ideas can be used infinitely. It is no longer the classic capitalism of mines and railways and sweatshops. The origin of wealth is in ideas, in the individual’s thought. It is an economy of ideas.
You have proposed the establishment of an idea bank so that ideas and not only their expression, for example as patents, can be rewarded. How would that work?
The fact that there is no ownership of ideas is absurd. It keeps in place the current situation where ideas can be appropriated without remuneration, and for those who have the means to register patents to create wealth from them. Secondly, you create a situation where the ideas of employees are appropriated by employers without giving ownership rights to the real inventors. If you don’t give people the opportunity to own their ideas, their inventions, their methods, then you are abandoning them to those battalions of attorneys working for the corporations who have the means to employ them.
But if I have an idea, how do you plan to defend it?
From the insemination of the egg to the birth of a beautiful child after nine months, there are many stages to go through. In the development of an idea, there are many stages; there is no need to start with a patent. What I have suggested is an idea bank – which wouldn’t be for every crazy person with an idea, but for ideas where it can be proven that there is an opportunity, not a proven idea but an opportunity to create wealth, one that has the potential to create some kind of technological or systemic innovation. So once an idea has been formulated, one that has the potential for something new, one that has potential for the creation of wealth, then it should be registered.
One of the things that this would achieve is that it would be open to the public, and the public would be able to benefit from that idea. One of the main claims against giving copyright to ideas is that it would block the development of those ideas; but in fact, the situation would be exactly the opposite. The idea would be open to the public and thus to development, but registration would ensure that if someone else develops that idea and creates wealth, its inventor would have a part in that wealth.
It would be very complicated to create the legal framework for something like that.
Yes, it is very complicated, but were you to ask me to prepare a paper on how to do it, then within a year it could done down to the final detail because ideas can be defined. An idea is an idea because it is defined, because it is not fluid or abstract. An idea is something that can be defined, in philosophy, in logic, in math, in any scientific system. Anything that can be defined can be given a symbol, so a solution is possible.
Another suggestion you have raised is a public market for private goods, a sort of guaranteed market for culture. Can you explain?
The status of the creative classes in literature, in art, etc., is in crisis. That is why I have suggested a public market for private goods. There is a need to change the market; you cannot compare a market of goods to a market of ideas. If you see the state as the greatest creator of assets in this age of intangible assets, then let the state create this public market and support it. Just as someone can travel on Route 6 for a toll or can watch TV if he pays the license, then let people have access to every possible book, and by clicking on their choice, the most popular writers will get the most and the less popular writers less and everyone will get their share with an assured minimum.
Isn’t that populism, paying by the common denominator?
Of course it’s populist, but that’s the nature of democracy. Personally I am against populism. I feel it is one the great disasters of our age. For me there is nothing worse, nothing as dangerous, nothing as anticultural as the crowd.
With all the accessibility to information that exists today, there is an opportunity not to have to follow the crowd; there is an opportunity for privatization of the individual, to “uncrowd” the crowd, to release the individual from the mass.
How does the 2008 financial crash fit into your theory?
The last economic crisis wasn’t a recession, it wasn’t cyclical; it was a crash, a depression. It was a structural fault in the American economy. An analysis of the situation shows that the US wasn’t suffering from a lack of services or goods, the problem was demand as a result of the fact that the American middle class over the course of 30 years lost what had been a central tenet of the American economy, namely that its income went up with the rise in productivity.
It was a shared economy in which one would get a share not in wealth but in growth. During that time productivity went up by 90%, while wages hardly moved. To artificially keep up demand, credit was pumped into the market and when the time came to pay that credit back, there was no way to pay it back because wages hadn’t risen.
The problem of American capitalism is not one of supply but one of demand. If you want to solve the problem of demand, then you have to create income for the middle classes. If you don’t generate income, then you won’t have demand, and the crisis will continue.