In Israel, It’s the First of the Big Spenders

Tuxedo rentals may not seem like an obvious choice for an entrepreneur starting out fresh in a country that only yesterday held the necktie in disdain. But Judah Ohayon had experience in the “rag” trade and an eye for opportunity.

Ohayon, who recently emigrated from Canada, found that his new compatriots were throwing ever-bigger bar mitzvahs, fancier weddings and more elaborate diplomatic galas. Israelis wanted to keep up with the Cohens, so to speak, and Ohayon figured he could help them. He opened Classy, a smart store offering tuxedo sales and rentals.

“I told myself, ‘There are 4.6 million Jews and maybe 2% could rent a tuxedo.’ Also, a lot of Israelis don’t like to rent, they like to buy. I took my chances,” Ohayon said.

Business has not been bad in the two months since Classy opened its doors in downtown Tel Aviv, and Ohayon’s chances for success may be even greater than he calculated.

When the state of Israel was created 50 years ago, Israelis had little cash to spare and even less to spend it on. The country’s socialist founders had put their hoes to the ground to make a desert bloom--not a Bloomingdale’s. Their goal was to build a prosperous Jewish state, not necessarily a state of prosperous Jews.

Half a century later, it turns out that both desert and department stores have flourished. Israel’s population has more than quadrupled, and the increasingly open economy has grown by more than 50% in the last decade to more than $95 billion. Even the current slowdown that Israelis call “a recession” saw 2% growth in 1997.

As a result, Israelis have more money to spend. Per capita disposable income grew by more than 60% between 1980 and 1996.

But development also has meant growing inequality. In 1987, the top 10% of Israeli households earned five times more than the bottom 10%; nine years later, families at the top were earning 10 times more than those at the bottom. In other words, Israel’s rich are richer and its poor are poorer. The Jewish state is dividing into haves and have-nots.

Ohayon, the tuxedo retailer, is banking on the haves.

Years of experience in the clothing business taught Ohayon to spot a trend. He has joined a growing class of Israeli entrepreneurs who have taken note of the Israeli upper classes and are trying to tap into their ample income.

The result is a boom in marketing aimed at Israeli yuppies and the well-to-do. The last couple of years have seen the opening of Israel’s first wine bar, its first Calvin Klein boutique and its first Jaguar dealership. Tiffany is on its way.

El Al Israel Airlines began offering one-day shopping trips to London and, for its Orthodox clientele, daylong visits to the tombs of 18th century Jewish sages in Eastern Europe. The ticket price for each: $399 a seat.

Peltours travel agency has organized gourmet restaurant tours of Europe, while the new Carmel Forest Spa Resort caters primarily to Israelis who can afford the minimum weekend rate of $610.

These businesses reflect changes not only in the Israeli economy but in its society. The Israeli upper classes have more cosmopolitan tastes and fewer inhibitions about showing their money in public than they once had. A craving for mother’s cooking is giving way to a hankering for haute cuisine and fine wines. A frugality born of years of ration cards has been overtaken by a more individualistic consumer culture.

Big spenders, who once might have been branded as wasteful and even anti-Zionist for their flashy cars and gold credit cards, draw little comment today.

“Now, nobody gives a damn. If he has the money to buy a Jag, either he’s an OK guy or a mobster, but who cares? The slogan is ‘To each his own,’ ” said Amnon Dankner, who writes social commentary for the daily newspaper Maariv.

“All in all, I think this is quite good. It narrows the gap between us and Europe. It also might be the tumbling down of the last walls of Israel’s traditional, Puritan Zionism, of the strange phenomenon of austerity inflicted on people for the sake of preserving the old Zionist ethos that said you had to sacrifice the good life for the good of the country,” Dankner said.

Influx Fuels Economy

Israel’s economic growth was fueled by the influx of about 700,000 Russian immigrants in the early 1990s, who brought their skills to the work force and their shekels to the consumer market; by privatization and increased foreign investment following the signing of peace agreements with the Palestinians in 1993 and Jordan in 1994; and by the development of a lucrative high-tech sector.

The haves who benefited from this growth are Israeli investors who have made it big in the financial markets and in real estate booms. They are the founders of the new high-tech firms and their skilled employees, whose talents are in great demand. They are wholesalers and retailers who have profited from the fat years.

The have-nots are Israel’s 8% unemployed. They are laborers from Israel’s traditional industries, such as textiles, who have seen their jobs move across borders to Jordan, Egypt and elsewhere. They are unskilled and semi-skilled workers who have been priced out of the market by lesser-paid Palestinians and foreign laborers. And they are some of the new immigrants from Russia and second-generation Jews from Arabic-speaking countries who have fallen victim to subtle racism and the Jewish state’s shrinking safety net, caused by budget cutbacks.

Danker acknowledged a downside to the more stratified economy and new Israeli consumerism. As Israelis lose interest in the collective good, he said, society is becoming more segmented.

“Each group fights for its own interests without taking notice of the general interests of society. So you have Yisrael B’Aliya, a political party that looks after new immigrants; the ultra-Orthodox parties that look after the interests of yeshiva students; the National Religious Party to look after settlers. They all fight for themselves,” Dankner said.

He also complained that too much money is going into restaurants, wines and other niceties, and not enough into the arts, theater and publishing. “Of course, when you have so many nouveaux riches, it comes with a certain amount of vulgarity and hedonistic culture, without deep culture. That happens everywhere, in the United States too,” he said.

As in America, much of the new money goes into new cars.

In 1979, then-Prime Minister Menachem Begin’s government searched the national motor vehicles registry for Cadillacs that it might borrow use in a motorcade for Egyptian President Anwar Sadat during his historic visit to Israel. According to a former official in that government, there weren’t enough of them, and the idea was abandoned.

Ninety-four Cadillac Sevilles have been driven off the lot since they began selling in Israel four years ago with a price tag of at least $121,000 each, the result of high import taxes. Jaguar has sold 109 cars from the luxury Tel Aviv showroom it opened three years ago--from the popular Sovereign, about $137,000, to high-end Jags for $182,000. And the various companies that market four-wheel-drive automobiles in Israel sell about 3,000 a year altogether. Nissan, which has half the market, sells its Terrano for about $40,000.

On the cultural front, Tel Aviv does have a $60-million, 1,500-seat Performing Arts Center that opened in 1994, offering a variety of events that are widely attended. But at least as popular as the opera is a trade fair with the latest in wedding extravaganzas. About 15,000 Israelis who apparently wish to spend a fortune on their nuptials stopped by the weekend Wedding Celebration in nearby Ramat Gan last month. Among the offerings: a crusader wedding in a fortress; a Chinese wedding with lanterns and imported waiters; and underwater wedlock.

“It used to be that the guests came to please the bride and groom, but today the bride and groom come to please the guests,” said Hanna Akerman, who did public relations for the fair. “It is very much a matter of show. Show is an integral part of the life of those who have it. They want to impress, to compete with their neighbor.”

Free Wedding for Poor

One promotional gimmick for the fair was a free wedding for a poor couple from the Negev development town of Ofakim, the site of recent riots over unemployment. “Everything was paid for. Recital halls in Tel Aviv gave the room and the food. A jewelry store on Dizengoff [Street, Tel Aviv’s main commercial thoroughfare] donated the rings. . . . The couple was in total shock--they had never been to a hotel or a hall before,” Akerman said enthusiastically.

Wedding producers are not the only ones targeting those who would seem to have money to burn. El Al offers “flights to nowhere” for anyone who thinks airplanes have more charm than legroom. Companies may rent an aircraft for an evening to throw a party while circling the Mediterranean at several thousand feet.

In fact, Israelis who can afford the pseudo-flights do not need them. They are taking real trips in record numbers each year. According to the Israeli Central Bureau of Statistics, 2.65 million Israelis traveled abroad in 1997--more than three times as many as 10 years before.

“This year was a record year, but every year breaks the record of the year before,” said El Al spokesman Nachman Klieman. “The culture of travel has grown. Disposable income has grown, but fares have not increased.”

More Israelis are visiting more places in the world and seeing more of what other countries have to offer. This exposure accounts for much of the demand for fancier goods and better services at home, retailers and marketing experts say. Israelis see wine bars in California, health spas in Germany and gourmet restaurants in France, and they want to have the same here.

A good example is Comme Il Faut, the Tel Aviv boutique and line of women’s clothing by Carole Godin. The company, whose French name could be translated “well-bred,” offers tailored outfits in quiet colors and soft fabrics--silk vests with chenille blazers, light wool jackets with velvet vests--and each piece of clothing has a bit of poetry sewn into the lining.

The customers for the $500 jackets and $1,000 coats are lawyers, judges, artists, stockbrokers--”women who know the value of good clothes,” said manager Michal Cohen.

For those who will pay, Israel’s fanciest mall opened in the Tel Aviv suburb of Ramat Aviv in September. Its underground parking lot is full of BMWs and off-road vehicles that never see the dirt. The coffee bars are crowded with yuppies dressed chicly in black. The shops include Calvin Klein and Ralph Lauren.

This is a far cry from Israel’s rugged pioneer days--and from its so-called development towns, where many of the poor and unemployed live, in the desert. Israel’s trademark sandals and Bermuda shorts are nowhere to be seen in this mall, with its Bally Shoes and Benetton stores. Nor does one find those Cabinet ministers who still refuse to wear a tie to work. This is the home of Happy Tie silks, of Armani, Versace and Hugo Boss.

‘It Is a Good Change’

“Since the beginning of the 1990s, people have been willing to spend more money for luxury,” said Eitan Pollak, one of the owners of the Vendome men’s clothing store. “People understand more about luxury, quality, service. It is a good change. We have become more like a normal country. And it is good for the economy.”

Businesspeople and the rich always bought these things, Pollak said. “But they used to buy in Europe and the United States. Now they can buy it here.”

Shoppers at Ramat Aviv agree, among them Anat Klein, 32, a Tel Aviv gymnastics teacher, and her brother Arik Shifroni, 30, an Israeli furniture dealer who lives in Australia.

“When we were growing up, we had one television station in Hebrew, and what they showed us, we thought that was the world. Then we got cable and could see how it is in Italy and Brazil,” Shifroni said as he toured the mall with camera in hand.

“This is good for the economy. It creates jobs and taxes. This is progress,” he said.

“Yes, it is progress,” his sister agreed. “Change is here, and you can’t be disconnected from the world.”

Ohad Himmel, a 30-year-old lawyer from Tel Aviv, drives a hip and expensive Honda 600, vacations abroad once a year and enjoys the best restaurants in Tel Aviv--particularly those serving oysters flown in fresh from Europe.

“My parents sometimes say, ‘I don’t know where you got these tastes of yours,’ ” Himmel said. “I think whatever you do [with your money] is OK. It has been this way for a long time.”

Not so long, really.

FRIDAY: Israel’s “development towns” were erected in hope but now are home to joblessness and despair.