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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
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The Wall Street Journal3 May ’12
Reform-minded Prime Minister Benjamin Netanyahu is stymied by bureaucrats and monopoly tycoons.
fundamentals • reform • limiting government • welfare
Last summer’s peaceful mass demonstrations in Israel protested economic hardships resulting from excessive government interference in the economy.
The protests were ignited by Izhak Elrov, a young religious father who started a Facebook page calling for the boycott of one consumer item, cottage cheese, which was selling in Israel for double what it cost abroad. Mr. Elrov protested that price-gouging by Israeli monopolies had inflated the price of most consumer goods and services by 100% to 300% over average European and American prices. One hundred thousand Israelis “liked” his page. Hundreds picketed supermarkets.
Mr. Elrov’s one-issue boycott eventually was taken over by populist groups demanding cheap housing and free preschool education, then it was seized upon by well-funded leftist political groups pushing an “Occupy Wall Street” anti-capitalist agenda and trying to unseat Benjamin Netanyahu’s pro-market government. By summer’s end, the protests had fizzled, with many Israelis disenchanted by these hidden agendas.
But the core truth of Mr. Elrov’s lament remained. Even before the cottage-cheese boycott, the prime minister had appointed a commission to deal with Israel’s extraordinary concentration of political and economic power. The latter had become the center of public furor after an April 2010 Bank of Israel report affirmed that “some 20 family business groups, structured as pyramids, control some 25% of firms listed for trading, about half of the market share.” The report also noted that a mere handful of business groups received over 60% of Israel’s available credit, which they invested in highly leveraged and speculative real-estate ventures.
Clearly, such concentration creates great risk for Israeli financial markets. It also denies small and medium-size businesses access to credit, blocking Israel’s engines of growth. Two major regions, the southern Negev and the northern Galilee, with mostly small businesses, have suffered a permanent credit crunch. Living on average monthly salaries of $2,400, according to official figures, and having to pay for most consumer goods and services at prices similar to those in New York City, most Israeli families have difficulty making ends meet.
Unfortunately, political necessity dictated that the commission Mr. Netanyahu charged to investigate these problems was composed partly of regulators who had failed in the past to tackle excessive concentration. One result is that its final recommendations, released last month, did not call for banning all pyramid-structured holding companies. The commission called for a separation of ownership between financial and nonfinancial firms. But it fixed too high a threshold—an annual turnover of $1.6 billion dollars—for the separation. Still, even these limited recommendations could improve Israeli credit allocation and competitiveness.
Following last summer’s protests, Mr. Netanyahu appointed another commission, this one to deal with issues of preschool education, cheaper housing and lower consumer prices. As a result, “free” elementary school education was extended to children ages 3 to 6.
Mr. Netanyahu’s government recently appointed a legal group to draft legislation based on the recommendations of “the anti-concentration” commission. But that group is composed mostly of the same regulators who are halfhearted about reform. And if the recommendations get to legislators, they will face a tough battle in the parliament, where the tycoons and their powerful lobbyists will fight them.
Strong vested interests blocking progress are not unique to Israel. Everywhere, powerful elites manage to erect entry barriers that cut competition, reduce efficiency and lower productivity. Generally impoverished Islamic countries are extreme examples of the ravages caused by such entrenched elites.
Mr. Netanyahu, Israel’s first prime minister to understand economics, realized that economic viability is essential to Israel’s survival and initiated bold reforms. He faces resistance from his bureaucracy and some coalition partners serving the tycoons and their lobbyists. Despite this and great challenges such as Iran and the prospect of new elections, Mr. Netanyahu could still convene a special session of parliament before the fall elections and pass the reforms he deems essential.
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
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 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.
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.
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