Middle Israel: Our very own Lee Iacocca

Like most Middle Israelis, Gaon was a natural enthusiast for the New Middle East.

amotz asa el 88 (photo credit: )
amotz asa el 88
(photo credit: )
Israel had never seen such a thing. Ten thousand people fired almost overnight in dozens of disparate factories across the country. It would prove to be a defining moment in the nation's economic history, one that would symbolize its socialist legacy's death, herald its capitalist aftermath and spotlight one unassuming, bespectacled and good-humored anti-hero. His name was Benny Gaon. It's been nearly 20 years since those days of awe, and - considering our current economic performance - it seems they happened not only in a different era, but also in a different country. Yet happen all this did, right here, when the Koor conglomerate was told squarely by American lender Bankers Trust that it would demand Koor declare bankruptcy unless it immediately repaid $80 million. It was but a detail in the overall picture of well more than $1 billion in losses and debts. It sounded like a requiem sealing a saga of resourcefulness, naivete and mismanagement. Koor was established in 1944 by the Histadrut labor federation, which shrewdly saw in Britain's wartime needs an opportunity to create thousands of jobs. The British needed bullets, uniforms, army barracks and what not, and Palestine was far from the battlefields and yet also in a position to ship goods both east and west. By the next decade the British were gone, but Koor stuck around to create some 200 industrial companies that produced anything from building materials and fertilizers to mortars and spaghetti, and employed 32,000 Israelis who eventually produced one-tenth of the entire GDP. By the late 1980s all this morphed into a multiheaded beast that had lost its strategic bearing and managerial discipline. As it faced collapse, the man tasked with doing something about the crisis lost no time doing what had to be done. BORN TO linguist Moshe Gaon, a scion of Jerusalem's centuries-old Sephardi elite, the frequently smiling Benny had a way with people of all backgrounds, which had previously helped him successfully manage the Co-Op Blue Square supermarket chain. Even so, he remained relatively anonymous, and if anything was known as the brother of Yehoram Gaon, the singer whose place in Israeli culture is on the scale of Frank Sinatra's in America. Now, however, Benny was playing first violin, and the audience were plugging their ears. In those days the entire country watched the same newsreel every evening at 8 p.m. on the country's only TV channel, and what they saw were flocks of German shepherds barking at nameless, blameless, helpless and now also jobless workers who demonstrated outside the plant that for years had fed their families, and now suddenly shut its heavy doors in their astonished faces. The barks of the hounds facing the poor workers of Soltam reached every living room - and shook thousands. Many were reminded of the Holocaust. Benny Gaon - who was being depicted as the ruthless manager behind a heartless capitalism - was also shaken. After all, he too was a product of a socialist establishment that, warts and all, hated the thought of confronting blue-collar workers. Still, as a businessman he knew that to save the majority of Koor's businesses and jobs he had to lay off one in three of its workers and then spin off scores of assets. The first to be sold, incidentally, was The Jerusalem Post, which to everyone's surprise fetched $17 million, more than twice the original expectations. "When I opened the envelopes of the bidders I thought that proposal was missing a decimal point," he told me more than half-a-decade later, still amused. To Gaon this meant that Koor could earn a fortune by selling some holdings and taking others public. Ultimately, after having sold on the stock market shares in companies like electronics manufacturer Tadiran, chemicals giant Makhteshim Agan and food producer Shemen, he managed to take Koor itself to Wall Street, after having firmly turned it around, with a net profit of nearly $0.5 billion, well more than its outstanding debts. Koor's subsequent travails and tribulations, and Gaon's own acrimonious departure from it and subsequent creation of the equally successful Gaon Holdings, are beside the point; what matters is that Gaon demonstrated that the capitalist transition was feasible, that Israel could excel economically no less than it had militarily, and that if his brother could be Frank Sinatra, then he could be Lee Iacocca. And like the man whose spectacular restoration of Chrysler made many look to him as a national inspiration, Gaon, too, was eager to help not just his company, but his entire country, lose weight and gain clout. BY THE TIME Yitzhak Rabin brought Labor back to power, it was clear that the original socialist ethos had died. Now its two major undertakers - Shimon Peres and Benny Gaon, who had led respectively its macro- and microeconomic heart transplant - set out to produce an alternative vision by leading the Middle East to beat its swords into plowshares. Like most Middle Israelis, Gaon was a natural enthusiast for the New Middle East. In 1993 he was in Casablanca for the inaugural conference on Middle East business, and soon afterward had Koor explore ambitious tourism projects in the region - convinced, like Peres, that Arab leaders were ready to globalize. Even after that tourism vision collapsed due to a lack of partners, he arranged a grand meeting of Israeli industrialists and editors with Yasser Arafat. I, too, was invited to that meeting, and will never forget how Gaon's dispirited people called to sheepishly announce its cancelation - by Arafat, of course. Like most Laborites, Gaon soon understood that the New Middle East would take longer to arrive than they originally promised. What, then, could Labor promise next? Gaon had an idea few others expected from anyone in Labor, least of all him: socialism. And so the man who had fired more people than any other Israeli finally stopped fast-forwarding the Middle East's history, and began rewinding Israel's, all the way to his lost political youth. The chase after the New Middle East's political elite was therefore out, and in came the rediscovery of Israel's social periphery. That is where he found Amir Peretz, whom Gaon helped wrest Labor's leadership from - how paradoxical - Shimon Peres. Alas, Peretz proved no more a redeemer than the New Middle East was redemption. Well before Peretz cleared the stage in disgrace, the same Middle Israelis who had been with Gaon when he stormed the Middle East were no longer there; to them, Peretz was a demagogue and his neo-Marxist bluster a farce. This week, as Benny Gaon passed away at 73 after a protracted battle with cancer, I felt an urge to eulogize with him the New Middle East he so quixotically pursued, the socialism he helped undo and the compassionate capitalism he so nobly hoped to introduce. But I couldn't. Benny, I reminded myself while recalling his perennially optimistic grin, so often saw through whatever obstructed the horizon, and even when it proved elusive he did what hardly anyone in his Labor milieu still remembered how to do: He believed.