Nov 11, 2013
Israel's move to a free market
A guest post by Dr. Harold Goldmeier
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Israel Economy and Finance Ministers Bennett and Lapid
established a joint committee to increase business competition and improve
consumer welfare. Eliminating trade barriers to imported goods is a mandate of
the committee to lower consumer
prices.
Salaries
in Israel are inexplicably low in other than select sectors like bio-med and
hi-tech industries. Taxes are insufferably high. This potent brew of high
consumer prices and taxes, and low salaries, decreases parity between
purchasing power and income. Working people and those on fixed
incomes like pensioners and single parents struggle, suffer depression and
exhaustion, emigrate permanently or work overseas extending the meaning of
brain drain. Sales suffer from the toxicity of this brew stifling
business growth and expansion. Knowing that companies fire
with impunity replacing with younger workers when older ones wage and age-out
makes consumers more thrifty. It also means having to choose between food
or medicine, and having negligible disposable income for travel, purchasing
homes, new clothes, entertainment, giving charity, and enrichment programs for
children.
Trouble
“getting by” forces people into black markets. One Israeli woman
with fifteen children confesses to not reporting her (religious) marriage to
the government, so she receives extra cash and benefits preferring officials
believe she is a single mother. Bloomberg News reports a trend
gaining traction with Americans in financial jams from the years long recession
selling their hair, breast milk, and reproductive parts. One young woman lists
her auburn mane for sale at www.buyandsellhair.com. The stuck economy in
the States has hair, eggs, and kidneys “among the top four auto refills for the
Google search query, ‘I want to sell my…’”
The
low level of competition among businesses in Israel contributes to price fixing
leading to the highest consumer prices possible before consumers revolt. The
markets, like gasoline, cottage cheese, and coffee, find their level.
Additional factors include the small size of the market, concentration of
ownership in the hands of a few, regulatory overload, and exclusive agreements
to corporations and individuals. Excessive custom duties like on e-commerce
imports, import quotas, government price determinations, and unreasonable
product standards on imported goods, contribute to anti-competitiveness further
limiting consumer purchasing power.
I
contributed an article to the Gale Business Insights Handbook of Global
Marketing published earlier this year. I recognize governments must
protect their markets from foreign dumping of products at low prices destroying
domestic markets. Florida tomato farmers faced this scenario two
years ago in the great
US-Mexican Tomato War. Government has an obligation to protect
against low quality, substandard goods like Chinese drywall simmering with mold
and mildew, and toys containing lead. It
will be the task of the joint committee to enhance and build on the momentum
for reform in Israel. Of utmost importance is to gain coherence of
policies passed by the Knesset when they overlap with directives and
administrative guidelines and existing legislation.
The
committee might develop a Consumer Price Impact Assessment required for
proposed laws and regulations with input from agencies like Antitrust Authority
and voluntary groups like Consumer Council. Among the consumer products that
might benefit from de-regulation and more competition are pharmaceuticals,
coffee, dairy products, cement, building materials, automobiles, and many
agricultural products for starters.
Government
regulators and lawmakers need to take heart to
Shel Silverstein’s explanation of HELPING: “And some kind of
help Is the kind of help That helping’s all about. And some kind of help Is the
kind of help We can all do without.”
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