The harm in centralization
Centralization harms competition, development, growth and the public welfare. It also leads to high prices and mediocre service in the absence of competition.
Israel has one of the most centralized economies in the West. About 20 groups control a large part of it, and in each of the main branches such as banking, insurance and cellular telephony only two or three players dominate.
The large business groups own both financial institutions and companies in areas such as real estate, energy, retail and the media. These overlapping holdings give the people in control great power that lets them push new competitors out of the market and further increase their strength. Centralization harms competition, development, growth and the public welfare. It also leads to high prices and mediocre service in the absence of competition. The great power of the dominant business groups in their relationship with politicians also creates a threat to democracy.
A market economy is essentially opposed to over-centralization, monopolies and cartels. Such an economy can work efficiently only when there are many players and fewer restrictions, providing access to new entrepreneurs as well as small and mid-sized businesses that compete with the giants.
A historical look shows that up to the mid-1980s the Israeli economy was even more centralized than it is today. Three bodies controlled it then: the government (through a large budget and many government companies ), the Histadrut labor federation (through Bank Hapoalim and the companies Koor, Solel Boneh and Hasneh ) and the two big banks, which also owned hundreds of firms. Everything was run from the top, with little competition and extensive damage.
The situation has changed since. The banks, Histadrut and government were compelled to sell companies, and the 20 business groups mentioned above bought these assets. As a result, the economy became more competitive, more advanced, more professional and much less political. But that is not enough because control by 20 dominant groups is too high a level of centralization. It's very problematic, so it is high time the matter was dealt with.
Prime Minister Benjamin Netanyahu recently declared he will work to reduce centralization in the economy; to that end he instructed his office's director-general to form a committee. Hopefully the committee will carry out its work quickly and act seriously to reduce centralization and improve the quality of life of ordinary citizens.
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