The Israel Center
for Social & Economic Progress
an independent pro-market
public policy think tank since 1984
Winner of the 2005 Award for Institutional Excellence and the 2006 Templeton Award for Student Outreach
Log in or Register
The Jerusalem Post17 Oct ’10
The PM’s courageous decision to tackle economic concentration was misrepresented by several of our media publications—owned of course by tycoons.
reform • media
The facts are clear: An April Bank of Israel study affirmed that a few families control more than half the assets traded in the country, including banks and insurance companies.
Equally clear is the damage: Concentration of assets harms competition. Lack of competition enables a few tycoons to inflate prices, causing every family to pay a monopoly tax of between 20% and 30% on everything it consumes, according to Treasury calculations. This is particularly hard on lower-income families, who spend a higher percentage of their income on consumption.
Feeble competition results in inefficiency. Workers here produce only two-thirds of what Americans do per capita. The result is low salaries.
Low salaries and high prices make it hard for most families to make ends meet. It makes many of them poor.
Concentration also enables industrial and trade groups to own financial institutions. This means credit is offered mostly to big business groups and their cronies. Misallocation has made credit utilization inefficient (for decades, banks had more doubtful debts than capital), and has caused decades of non-growth.
Misallocation also causes a permanent credit crunch for small and medium firms—the engines of growth in every economy. This has had a national impact: the Negev and the Galilee, where mostly smaller firms operate, are credit starved and remain underdeveloped, losing their population.
As the Bank of Israel study indicates, economic concentration also poses a systemic risk to the economy. In the recent crisis, the near bankruptcy of some of the large business groups could have caused a general economic collapse, including of our pension system.
In addition, great economic concentration aggravates the already problematic relationship between capital, politics and the media. Our tycoons own most media outlets. This results in a perversion of public discourse that poses a serious challenge to democracy.
It is natural, of course, that our greatest tycoon, Nochi Dankner, who, with an investment of a mere $300 million, controls a pyramidal business conglomerate with combined assets of $35 billion (namely with an investment of less than 1%, he controls 60 firms and all the decisions taken by them) will deny that concentration exists in the economy, or that it is a problem. This very talented businessman is convinced that it is okay for one person to control dozens of managers and huge advertising budgets.
An affable man, he does not seem to realize the vast shadow such conglomerates cast, the chilling effects they have on competitors even when they try to restrain their power (and they do not). Who could dare compete with such a behemoth or cross it?
It is also not surprising that our tycoons, and especially Dankner’s IDB holdings, are spending huge sums on PR campaigns designed to deny and obfuscate the concentration problem. What is most worrisome is that a great part of the media is using its news and commentary pages to hide critical information.
LAST WEEK, the prime minister’s courageous decision to tackle the concentration problem—which he has often defined clearly—by appointing a commission was misrepresented by several of the tycoons’ publications. They simply refrained from mentioning the crux of his announced decision to especially address the pyramidal structure of our conglomerates.
A popular economic commentator in Yediot Aharonot went as far as to gloat that “the concentration [issue] is dead. The unbelievable has happened.
Despite a vociferous pressure campaign, despite publications that imitated leaflets distributed during the Chinese cultural revolution, despite the blackmail of members of Knesset, spokesmen and pundits [a serious charge totally unsupported by fact, D.D.] Prime Minister Netanyahu did not capitulate. On Wednesday he announced that he will not form a commission to examine ways to limit concentration in the Israeli economy. Pure and simple, Bibi buried this commission.”
This is of course the exact opposite of what happened.
Worse still, some economists and academics have been paid by the tycoons to concoct papers “proving” that no concentration existed. One paper used the statistics of the World Economic Forum to claim that Israel occupies a high place (20th) among 140 states in the “general concentration index” that measured averages.
The authors of the study “forgot” to mention another graph depicting the extent of market dominance – which deals specifically with conglomerate concentration. Here Israel placed 118 among the 140 nations, a bad place indeed.
The elimination of relevant data was not the sole example of how the authors attempted to muddy the water.
They employed many irrelevant and even misleading comparisons, drew questionable conclusions from their data and made ridiculous claims, such as that large pyramidal structured conglomerates have the advantage of efficiency of scale. As if there was a market for pyramidal-structured conglomerates in which they could prove their “efficiency.”
All these faults were exposed and roundly criticized. This did not deter the media from giving these “experts” wide, uncritical coverage. In fact most media items dealing with concentration featured on both the pro- and con-side spokesmen with distinct leftist agendas, as is generally the case here.
If one needed additional proof on how concentration perverts public debate, last week’s debate provided it.
The Jerusalem Post30 Jun ’15
Israel’s last elections proved how right David Ben-Gurion was when he said that, in Israel, whoever does not believe in miracles is not a realist.
PJ Media20 Jun ’15
The security challenges facing Israel obscure other deep concerns about the viability of Israel’s economic system.
The Jerusalem Post7 Jun ’14
Unless the laggard Israeli economy is reformed soon, its problems—including its morally debilitating corruption—may threaten its future.
Israel Hayom15 May ’14
What does it say about Israeli society and the system of government when a prime minister is convicted of taking bribes?
Israel Hayom23 Feb ’14
What kind of education should it offer and at what cost?
The Jerusalem Post9 Jan ’14
The productivity of Israeli workers is only two-thirds that of Americans, and their salaries are much lower.
The Jerusalem Post11 Jul ’13
As he completes an exceptionally difficult 8-year tour of duty during a worldwide financial crisis, Stanley Fischer has achieved a unique status.
The Weekly Standard7 Jun ’13
When Israel finally discovered a bonanza of natural gas about five years ago everyone was happy. But then fierce arguments broke out—and rightly so.
The Weekly Standard22 Apr ’13
The economic future of Israel now rests in the hands Netanyahu, Lapid and Bennet. Will they succeed in fulfilling the most difficult and complex mission of liberating Israel’s economy?
Israel Hayom2 Jan ’13
The Israeli government could eradicate poverty by breaking the monopolies and spurring competition.
The Jerusalem Post7 Dec ’12
Our socialist and statist heritage bred our inefficient system. But foreign aid and remittances were serious enablers. The struggle against political and economic concentration could finally permit Israelis to overcome this destructive heritage.
Israel Hayom8 Nov ’12
The time to prepare the reforms is now, so that after the Israeli elections, the prime minister can immediately devote his time to moving them forward.
The Financial Times21 Jun ’12
Israel Hayom6 Jun ’12
To grapple with the impending crisis, Israel’s government must improve the nation’s competitiveness.
The Jerusalem Post7 May ’12
The Wall Street Journal3 May ’12
Reform-minded Prime Minister Benjamin Netanyahu is stymied by bureaucrats and monopoly tycoons.
Middle East Quarterly30 Mar ’12
As the high hopes for a brave new Middle East fade rapidly, Western policymakers must recognize that promoting market economics and its inevitable cultural changes are far more critical to the region’s well-being than encouraging free elections or resolving the Arab-Israeli conflict.
The Jerusalem Post17 Feb ’12
The choice is between an efficient, growth-inducing market economy or a welfare state, meaning a huge government that actually harms the poor and inhibits prosperity.
The Jerusalem Post25 Oct ’11
Aversion toward the rich has had strong roots in Zionism since its early leaders embraced Marxist practices.
Is capitalism in crisis? Of course.
The Jerusalem Post10 Aug ’11
The tent-dwellers’ revolt calls for the enforcement of ‘the will of the people’ (like all autocrats). It refuses to rely on Democracy.
The Jerusalem Post9 Aug ’11
David Lewis, the exceptional entrepreneur and philanthropist, and head of the Isrotel Group dies at 87
The Jerusalem Post20 Jul ’11
Although MKs appear concerned over rising costs, it was they who allowed this injustice to occur in the first place.
The Jerusalem Post28 Jun ’11
Who is to blame for the shameful situation in which millions of Israeli workers – who earn about half what American workers earn – have to pay double for goods?
The New Republic19 May ’11
A Middle East peace strategy that could actually work.
The Jerusalem Post15 Mar ’11
Israel needs to slash its state budget by as much as possible if it wants a chance at fighting waste and corruption.
The Jerusalem Post9 Mar ’11
Too little attention has been paid to how Egypt’s socialist past and welfare-state present shaped the current rebellion.
The Jerusalem Post7 Feb ’11
The Herzliya Conference has become an important international event, but one central issue is absent: Israel’s debilitating economic concentration.
The Jerusalem Post22 Jan ’11
It’s highly unlikely that government can ever learn to make long-term plans and execute them efficiently.
The Jerusalem Post23 Dec ’10
How can one dare compare narrow-minded religion with the all-embracing faith of universality and equality that is socialism?
The Jerusalem Post1 Dec ’10
Many of the social and economic troubles we are experiencing are due to the public’s lack of understanding of the need for economic literacy.
The Wall Street Journal8 Oct ’10
Economic concentration hurts the country’s viability and the chances for peace.
The Jerusalem Post4 Oct ’10
A damaging ethos of ‘welfarism’ and distributive politics has come to dominate not only academia but our cultural, military and even our business elites.
The Jerusalem Post19 Aug ’10
The reformers must know the importance of the reform’s success both for Israel and for their careers, and what damage they will incur if it fails.
The Jerusalem Post13 Jul ’10
Kagan’s admiration for Justice Aharon Barak’s philosophy may have revealed her own predilection for radical judicial activism.
The Jerusalem Post30 May ’10
We must dismantle the oligarch-owned monopolies that impoverish the Israeli consumer and choke our economy.
The Wall Street Journal18 May ’10
The OECD’s invitation to Israel is a “seal of approval” but the country still needs more reforms.
The Jerusalem Post10 Feb ’10
The world’s astonishment at Israel’s response to the Haiti disaster is insulting. What we saw there was Israel’s true face.
The Jerusalem Post10 Jan ’10
Individual initiative and freedom are essential for creativity—in hi-tech as in all other spheres.
The Jerusalem Post14 Oct ’09
As far as Rose Friedman was concerned, public kudos did not matter that much. She persisted in being a rose, no matter what.
The Jerusalem Post22 Sep ’09
Lasting peace must grow from the bottom up, from an “economic peace process” that proves what advantages peace has to offer on a daily basis. It cannot come from signing peace agreements with radical and corrupt entities propped up by corrupting Western handouts.
Recognized by the IRS as a charitable organization pursuant to Section 501(c)(3) of the Internal Revenue Code.
Tax ID # 13-3129249
Copyright © 2001-2021
The Israel Center for Social & Economic Progress
“Where there is
there is no Torah.”
Pirkei Avot (Ethics of the Fathers)
Contributions made out to Friends of ICSEP can be mailed to:
Fox Associates, 100 Front St., West Conshohocken, PA 19428, USA