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 Post30 May ’10
We must dismantle the oligarch-owned monopolies that impoverish the Israeli consumer and choke our economy.
fundamentals • public policy
“Yes, break it up!” Ze’ev Jabotinsky, the prophetic liberal Zionist leader demanded in 1922, referring to the Histadrut labor federation monopoly. Under the pretense of securing employment for Jews during the Mandatory era, the Histadrut launched a class struggle meant to destroy the bourgeoisie and establish on its ruins a socialist utopia, as its top leaders openly asserted. It violently denied employment to workers not possessing its red membership card.
Then as now, the defenders of monopolistic practices have been trying to distract attention from the damage caused by their monopolies by character assassination and by incitement to discredit their critics.
Jabotinsky clearly stated that it is the right of every worker to organize and establish unions; that only when such unions become rapacious monopolies, as they are now, and use their excessive power for political control and to destroy competition, they should be broken up. Yet his Labor opponents, including their supporters in academia and the media, knowingly launched the big lie that Jabotinsky, who was a classic liberal, a man who advocated minority and women’s rights very early on (in his Betar anthem he wrote: “There [in the forthcoming Jewish state] shall live in well-being and happiness, the son of Arabia, the son of Nazareth and my son”) simply wanted to destroy any workers’ union.
Jabotinsky was a fascist “following in the footsteps of Hitler,” David Ben-Gurion averred in a Labor Party pamphlet of the mid-1930s. Therefore, Jabotinsky was beyond the pale and should be destroyed together with his party. Ben-Gurion’s followers soon took action and violently attacked Jabotinsky’s followers.
OUR CURRENT oligarchs and their henchmen are restoring to similar tactics to protect their monopolies. The Bank of Israel has just published an astounding document, a courageous analysis of the dangers posed by the concentration of political and economic power in the country. Issued by its Research Department (headed by the savvy Carnit Flug), the report recommends that steps be taken to curb the power of the oligarch-owned conglomerates that dominate much of the economy through their pyramid structure and cross-holdings in real (those that engage in trade or industry of goods and services, not money) and financial firms.
Such cross-holding give the conglomerates preferential access to credit, as well as to a lot of privileged business information that banks routinely receive from their creditors. The pyramid structure of the conglomerates has also allowed the oligarchs to control dozens of other firms. By simply controlling the mother corporation at the head of each pyramid, they control dozens of other companies in which they invested a very small share of their capital.
So with a few hundred million shekels, which they received as loans though their crony connections from the nationalized banks, about 20 families managed to take control of the major business groups, representing more than half the assets traded on the Tel Aviv Stock Exchange.
There is no comparable concentration of political and economic power in any other democratic country.
Such concentrated power led to the very damaging cozy relationship between oligarchs, politicians and large parts of the media – a relationship that has corrupted politics, the economy and public discourse and is damaging democracy.
AFTER THE Bank of Israel report, Prime Minister Binyamin Netanyahu announced that he will take “determined, focused and well-thought-out action” against oligarchic control over these pyramid groups, so as to avoid the danger of a domino-like financial collapse in case one of them gets into trouble, as they have recently.
Immediately, a number of top journalists have attacked the prime minister in an attempt to prevent him from taking action to dismantle the pyramid groups. The assault was led by prominent economic commentators who, for years now, have been trying to protect the bank oligopoly that was eventually partly broken up by the Bachar Commission reform of financial markets.
In their bitter, years-long attacks on the Bachar reforms, these pundits shamelessly spread disinformation, distortion and sometimes even outright lies. During the recent crisis some even tried to incite panic in financial markets in an attempt to destroy the new financial institutions competing with the banks. Now they claim that the prime minister is picking on the oligarchs to distract us from our real problems, the problems of the Negev and Galilee, the problems of poverty and the problems of our deteriorating educational system.
Those who make this spurious claim are aware that the problem of poverty can be greatly reduced within a few years once the conglomerates and their monopolies are broken up. Today, these conglomerates steal about a third of workers’ salaries by inflating the prices of all consumer goods. Breaking them up will lower prices and increase the purchasing power, especially that of low-income Israelis, and lift them out of poverty.
The monopoly defending pundits ought also to know that the Negev and Galilee are failing to develop because the banks have created a decades-long credit crunch, refusing to grant credit to small enterprises concentrated in the periphery. Instead most credit is allocated to their oligarch cronies for speculation in real estate abroad and in foreign currencies.
But they try to distract our attention by falsely attacking the proponents of reform so that we will not support the liberation of the economy. Will we let them get away with 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 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 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