During the ceasefire, Eli, the typically moderate and reserved president of the Manufacturers Association, took off his kid gloves.
“I heard Aridor’s statement on the radio,” Eli declared at a meeting that the Manufacturers Association convened in Nahariya, relaying the shock he felt at hearing Aridor’s accusations while on active duty as a lieutenant-colonel in the IDF reserves. “I am not willing to remain silent about it…. I do not understand why, in the midst of the war, while I am in uniform, I need to hear that I signed a contract of betrayal. Why must I be called a traitor while I am on reserve duty in uniform?”
Aridor was not impressed by Eli’s patriotism and service and continued his attack. In September 1982, he resolved to implement new anti-inflationary measures. The policy that the Finance Ministry had implemented up to that point had included protecting exporters by repeatedly devaluating currency, which fueled inflation, but protected manufacturers from the declining value of exported goods. Aridor decided to slow the devaluations, which had the potential to severely harm exporters. Eli spoke out against the plan, describing it as
…mistaken and likely to do serious damage to Israeli industry and the economy as a whole…. If Aridor supports the plan devised by his ministry, he will be causing damage in two ways: first, by allowing 150% inflation to continue and second, by increasing the population’s buying power, which will be directed toward cheap imports.
Upon hearing Eli’s remarks, Yakir Plessner, deputy governor of the Bank of Israel, observed that the president of the Manufacturers Association was speaking like a true representative of the interests of his constituency. He also attacked Eli personally, maintaining that he lacked the academic tools to contend with the crisis. Eli shot back:
I believe that it is not only my right to be critical when something unwise is done to industry, but that it is my obligation to do so…. I should mention that without such “tools,” I have already done more to benefit the Israeli economy than this official [Plessner] has…. I admit that I have an interest. Industry interests me, export is important to me, and I would like for there to be no imports.
The discord continued to escalate, with Aridor intensifying his attacks against Israel’s manufacturers and seeking to subject them to public humiliation. In October 1982, for the first time in the Manufacturers Association’s history, he refrained from honoring it with the presence of Israel’s finance minister at its annual meeting. Eli regarded Aridor’s snub as a declaration of war against Israel’s manufacturers and began attacking him at every possible opportunity.
“As a result of the Finance Ministry’s economic policy and the slowing of devaluations, many industrial facilities have encountered difficulties and exports have decreased sharply,” he stated in one of his many speeches during this period.
“When we criticize the government, we are treated with contempt. The government ignores the criticism and, as a result, ignores the problem. They neither tell the truth nor want to hear the truth. They sweep problems under the rug,” the media quoted him as saying.
“Overnight,” one journalist wrote, “Hurvitz, who is typically regarded as a modest man who keeps out of the headlines and avoids confrontations with government ministers, has emerged as a bitter foe of the finance minister.”
Eli did not limit himself to attacking the finance minister. He also released an alternative economic plan, which he drew up with his colleagues. His plan was based on broad government support for exporters and manufacturers, a realistic exchange rate, and direct incentives for exporters, as had been done during the Alignment government and which were funded by additional import taxes. Although the plan had no chance of being implemented, the journalist concluded, it was clearly “meant to goad the finance minister.”
Eli’s conflict with the finance minister was difficult for him. He had always viewed himself and behaved as a moderate, refraining from outspoken public criticism. Yet Aridor’s policies angered him. He was certain these policies would lead Israeli manufacturers into a dire crisis and this caused him to lose his composure and abandon his moderation. Meanwhile, 1982 appeared to have been a good year for the Israeli economy: unemployment was down, stores were filled with an abundance of products, the stock market was registering unprecedented gains, sales of new cars were at a high, and a wave of construction was sweeping the country. Eli was convinced that it was all part of a momentary surge that did not reflect the economic reality.
“The crisis is just around the corner,” he insisted to a journalist, who was amazed he could criticize the finance minister when economic conditions were seemingly positive.
Relying instead on his understanding of the crisis and the measures required to contend with it, Eli fought Aridor’s policy by all means possible. He received positive feedback, not just from his fellow industrialists, who, aside from a small minority that defended Aridor, supported Eli, but also from the Israeli public. Even after sources within the Finance Ministry had announced that Eli’s claims were “not factually based,” the feeling remained, and was transmitted by the media, that the policy of the Finance Ministry was no more than deception. This was apparently why the press was full of praises for Eli, and why, for example, the Yediot Aharonot daily newspaper named him as one of the five economic figures of the year.
On Thursday May 19, 1983, then-prime minister Menachem Begin convened an emergency meeting between government ministers with economic portfolios (Yoram Aridor, Gideon Patt, Simcha Erlich, and David Levi) and the heads of the country’s manufacturers, under the leadership of the president of the Manufacturers Association. Begin wanted a report on the state of the economy and the developments he could expect in the foreseeable future and, despite the well-known tension between Eli and the finance minister, invited Eli and his colleagues to the meeting. Prior to the meeting, Aridor demanded the immediate resignation of Arnon Tyberg for publishing a probing piece on the government’s poor functioning. Aridor asserted that the article’s aim was to slander him and threatened to cut all ties between his ministry and the Manufacturers Association. Eli responded immediately: “Mr. Aridor, we are not your employees. What Tyberg wrote is the truth.”
Two weeks before the prime minister’s meeting, another tension-filled meeting had occurred between the finance minister and the heads of the manufacturing sector. The finance minister began his remarks with a slap in the face of the manufacturers, assuring them, “just as we have overcome the Arab boycott, we will overcome your boycott.” Three minutes into the meeting, the manufacturers walked out. Eli explained to the media, “The finance minister behaved childishly, insolently, and with a lack of respect for industry.”
The media coverage of the crisis should have elicited the admonishment of the prime minister, but Begin was not overly disturbed. On the contrary, he invited Eli and his colleagues to the emergency meeting convened two weeks later. Begin was worried and his concerns grew as time passed. The economic indicators, particularly the raging inflation and the drop in exports, grew worse with each month that passed. Begin also appeared to understand that Eli was serious and professional and that his abrasive statements were not intended as ridicule. During a four-hour meeting, the president of the Manufacturers Association and the other members of the delegation were asked to voice their views. Eli regarded it as an opportunity and, once again, did not refrain from criticism. He cautioned those in attendance that the policy of the Finance Ministry was liable to result in an economic crisis and Begin listened. It is no wonder that the press regarded the meeting as “a victory for Hurvitz in his struggle with Aridor.”
Eli’s fellow industrialists shared this view. During this turbulent period, Eli was about to finish his first term as president of the Manufacturers Association and there was no doubt he would be reelected. Nonetheless, the press printed rumors of an effort to oust him due to his disagreements with the finance minister and replace him with well-respected veteran textile manufacturer
Gershon Rozov. These rumors were categorically denied and at the June 1983 Manufacturers Association general meeting, Eli was praised for “his resilient steadfastness to safeguard industry” and reelected for a second term almost unanimously.
•••
The crisis which Eli had been warning about for two years eventually arrived, resulting in one of the worst economic downturns in Israeli history. Inflation spiraled upward from month to month, unemployment rose, exports dropped, and imports increased. The combination of this crisis, the war in Lebanon, and other government failures led Begin to resign as prime minister on September 15, 1983.
Three days after the formation of a new government led by Prime Minister Yitzhak Shamir at the beginning of October 1983, a report regarding finance minister Aridor’s intention to “dollarize” the Israeli economy was leaked to the press. According to the plan, Israeli currency would be linked to the US dollar in an effort to put an end to the printing of currency to finance the national deficit and to continue slashing the government budget. The plan would obviously drag the economy into a deep recession with the dismissal of workers, rising unemployment, and a drop in the standard of living. This was not what Shamir had in mind when he formed his government and when he learned of the plan, he forced Aridor to resign. In his stead, he appointed Yigal Cohen-Orgad.
Orgad was not afforded even a single day of grace. His appointment was immediately followed by the Israeli bank stock crisis. Over the years, the value of Israel’s bank stocks had been inflated far beyond their true value. This was done, to a large degree, by the banks themselves, which regulated their own stocks and artificially increased their value. Then the heads of Israel’s banks concluded that they could no longer continue regulating the value of their stocks and announced this to the public in early October 1983. This created the risk that the bank stocks would plummet, resulting in a collapse not only of the banks but also of the entire Tel Aviv Stock Exchange. Trading on the stock exchange was halted and Orgad took two dramatic steps to resolve the crisis. First, he immediately assured the public that the government would guarantee pre-crash share prices for all those who already held bank stocks and retained them for a period of five years. Then, he nationalized the banks.
Orgad’s actions proved effective for a large portion of the population, the banks, and many companies. However, all those unable to wait five years were left without a solution. The Tel Aviv Stock Exchange remained closed for two weeks to prevent a crash; bank stocks did indeed plunge sharply upon its reopening and holders of bank stocks suffered massive losses.
Eli and his fellow manufacturers regarded the bank stock crisis as clear evidence of the deterioration they had warned of. When Orgad entered the Finance Ministry, Eli and the leadership of the Manufacturers Association met with him and presented him with an inventory of their demands from the government, including a fundamental, unequivocal appeal, in Eli’s words, “to encourage exports at all costs…. It is the only way…. Each day that passes without measures to encourage exports will intensify the crisis.” Orgad was not certain he would be able to fulfill their demands, at least not immediately, as they insisted. Nonetheless, the meeting demonstrated that it was possible to forge a working relationship between manufacturers and the government that was fair, respectful, and not dominated by heated discourse.
Despite a new spirit of compromise, Israel’s economic crisis intensified during Orgad’s tenure as finance minister. It eventually became clear that the bank stock crisis was a continuation of the overall decline. The Shamir government was unable to stem the erosion. During 1983, inflation rose at an annual rate of more than 200% and continued to rise at the beginning of the following year. Between January 1983 and 1984, the value of the US dollar against the shekel tripled, from 35 shekels to the dollar to more than 110. The value of the shekel continued to plummet and Eli realized that the new government was not capable of resolving the crisis. He therefore continued to assert that “the government is not taking sufficiently bold measures to curb the serious crisis facing the economy.”
•••
The protracted crisis also impacted the political realm; the fragile coalition on which Prime Minister Shamir had been relying to govern the country collapsed in March 1984, hastening early elections. Most Knesset members41 supported holding early elections in July of that year, despite the opposition of the Likud party.
During the stormy four-and-a-half month election campaign, which focused primarily on the economic crisis and the war in Lebanon, it became evident that Eli had become quite popular. The success of Teva, in addition to his work as the president of the Manufacturers Association, led Shimon Peres, the Alignment’s candidate for prime minister, to try to recruit Eli by offering him the post of finance minister or minister of trade and industry, in the event that his party won the election.
Peres had good reason to approach Eli. Although he currently represented the employers, was the CEO of a pharmaceutical group with thousands of employees, and maintained a distinctively capitalist image, Eli was a former kibbutznik from Tel Katzir with clear political leanings toward the Israeli Labor party. Eli also did not deny the fact that, like the Israeli left wing and the Alignment under Peres’s leadership, he viewed withdrawal from all or part of the territories occupied during the Six Day War as a desirable diplomatic solution for the State of Israel.
Moreover, Teva personnel were well aware that Eli regarded the employee – the production worker – as someone to be respected and given incentives, a predisposition that was also well known among Israel’s industrialists. He took pride in the fact that Teva employees had never gone on strike and he always managed to reach an agreement with them. More importantly, unlike most of his colleagues, he favored a strong Histadrut.
I believe that workers should be organized…. The Histadrut is an influential force in the economy and is positive in essence…. We must work with it to demarcate the boundaries of our life…. The difference between me and my colleagues who oppose the Histadrut in general, and the unionization of workers at their companies in particular, is my conviction that this backing [the unionization] strengthens the workers.
Eli’s positive views on organized labor also had an extremely practical side. As he noted, “Unlike many colleagues who always positioned themselves against the Histadrut, I saw the Histadrut as a partner with interests that may have differed from mine, but that would make my life easier once I took care of my workers.”
During his struggles with the government as president of the Manufacturers Association, and most visibly during the negotiations surrounding the package deals, some of his colleagues accused Eli of being overly supportive of the Histadrut’s demands – during a time of economic crisis – and of making excessive concessions on “the employers’ vital interests to the benefit of the hired workers.”
“Hurvitz sold us out to the government too easily and at too low a price,” some of his colleagues asserted accusingly, after he signed another package deal.
Eli did not deny this. He regarded safeguarding the interests of the workers as the right thing to do in the long run and as something that would also ultimately serve to protect the manufacturers and the employers. He made no public declaration of his political leanings, but they were evident to all. It is therefore no surprise that Peres sought him as an Alignment candidate for the position of finance minister.
Eli had other plans. He had no interest in a career in politics and he explained this to Peres and his Labor Party associates. Doing so would undoubtedly require him to leave Teva and the industrial sector, which he had no desire to do. He was willing to advise, explain, and persuade, but preferred to distance himself from party politics. He was interested in other things.
“Under no circumstances will I go into politics, even though that is where the power lies,” he clarified, explaining why he refused Peres’s offer. “I mean no disrespect to Knesset members and ministers, but t
he atmosphere in which they work is not the atmosphere I would choose for myself. I would characterize myself as a manufacturer. I love this profession, while in politics, love has no place whatsoever.”
•••
The tie in the parliamentary elections of July 24, 1984, led to the formation of the national unity government that Shamir had advocated during the election campaign. Although the Alignment under Peres’s leadership had won three more mandates than the Likud (44-41), the results in practice were a parity of sorts once the political leanings of the smaller parties toward the two major parties were taken into account. Since neither Peres nor Shamir was able to form a government that excluded the rival party, avoiding new elections required the two blocks to share power.
As the government was being formed, the economy continued to deteriorate. As head of the Coordinating Bureau of Economic Organizations, Eli was convinced of the need to stop the decline, come what may.
“It is impossible to operate with an annual inflation rate of 373.8%!” he argued adamantly.
This is why, even before the new government was formed, he signed a new package deal with the Histadrut and the government that instituted a price freeze and major budget cuts across all sectors in an effort to stabilize the economy and halt inflation and the decline of the shekel. He regarded the dynamics of building the deal as a positive development in itself.
Eli Hurvitz and the creation of Teva Pharmaceuticals: An Israeli Biography Page 23
