The holy trinity
The high price levels in Israel do not derive from a failure of the market economy, which simply does not exist in large and important parts of the system.
In what kind of economy are we living - an open and free-market economy or a distorted economy in which few exploit the many? An answer to this can be found by taking a look at what can be called "the holy trinity."
One of its elements consists of the wealthy who control the large business pyramids. A second element is made up of the large workers' committees that control the government monopolies. The third is the Israel Lands Administration, which controls land and, through it, housing prices.
This so-called holy trinity is what is causing the inflated prices and the excessive cost of living from which we are all suffering.
But even if we agree that this holy trinity lies at the heart of the Israeli economy's problem, there is still a debate raging here as to the solution.
Some say the solution has to be greater government involvement, a larger budget, price controls and a strengthening of regulation. The people who think this believe the high prices are proof that the market economy has failed and it is necessary therefore to go over to socialism, or, under its more moderate name, social democracy.
On the other side are those who understand that the holy trinity is not part of the market economy but rather a major deformation originating in the socialist system that used to be followed here.
Anyone who is a believer in competition and a market economy is opposed with all his heart to the excessive power of the tycoons and the large business pyramids they have built. He knows that the condition for a free economy and fair prices is a large number of companies and businesses competing among themselves for the consumer's pocket. Only when the market is decentralized and there are no pyramids is it possible to arrive at fair prices and "normal profit" for entrepreneurs. But this cannot happen when there is an excessive extent of concentration in the economy.
The second element in the trinity is also sucking our marrow. It consists of the large government monopolies such as the Israel Electric Corporation, the seaports and the Airports Authority, which create a non-competitive labor market and high prices. Anyone accepted into their ranks wins a high salary, excellent social benefits and total job tenure; but the rest of the workers in the economy have to pay the price - inflated bills.
The large workers' committees in these monopolies receive preferential employment conditions with the help of strikes and sanctions, which always enjoy the sweeping support of the Histadrut labor federation; as a result, you will never hear Histadrut head Ofer Eini speaking out against the monopolies and the cartels.
The third element in the trinity is the main factor in the high housing prices. This is the Israel Lands Administration, which holds 92 percent of the state's lands. Since it does not release sufficient amounts of land for construction into the market, the price of land goes up - and with it, the price of housing. Whereas elsewhere in the world the land constitutes a third of the price of a home, here it accounts for half the price and even more.
The problem of the holy trinity cannot be solved with the help of socialist methods of more government involvement and a war on privatization. What has to be done is exactly the opposite - competition in each of the three elements of the trinity must be increased.
The power of the tycoons must be reined in and their pyramids must be broken up. The large workers' committees must be dealt with so they will stop abusing the public and causing price hikes. This can be done with the help of a comprehensive reduction in customs duties on all industrial, agricultural and food products, which will bring about competition in imports and a reduction in prices.
The third element should simply be shut down. That is to say, all the state lands should be sold to the general public, thereby ending the life of the last dinosaur, the ILA, which controls land and causes its tragically high price. Only then will a young couple be able to buy a home at a reasonable price.
It has to be understood that the high price levels here do not derive from a failure of the market economy, which simply does not exist in large and important parts of the system. Therefore, instead of criticizing something that doesn't exist, it is necessary to increase competition, open the economy to imports and dismantle the pyramids, the large workers' committees and the ILA. The faster we break up the holy trinity, the better it will be for all of us.
קראו כתבה זו בעברית: השילוש הקדוש שאחראי ליוקר המחיה