The monopolies are to blame, stupid
It's difficult to keep track of all the price hikes these days, but they all have one common denominator: They stem from monopolies and cartels, most of which are owned by the government.
It's difficult to keep track of all the price hikes these days, but they all have one common denominator: They stem from monopolies and cartels, most of which are owned by the government. These enterprises exist in a protected world; they dominate the market; and they have no genuine competition, so they can raise prices even at a time at which the economy is in a deep recession.
Electricity: The Electricity Authority granted the Israel Electric Corporation a 7-percent price hike, which takes effect today, July 5. The previous price rise, of 5 percent, was in May of this year. Employees of the IEC continue to receive free electricity up to 25,000 kilowatts a month - some 3.5 times the average consumption. The cost of this bonus is NIS 130 million; but a monopoly has to persuade the relevant authority, not the consumers.
Water: The Mekorot Water Company is also known for its surplus manpower and high salaries. This week, the price of water for local authorities and industry rose by 15 percent, but the price of water for agriculture was left intact, even though the reform of the water economy is intended to put the price paid for water by local and regional councils on a par with the price paid by the farmers. The problem is that home consumers of water do not have an advocate in the Knesset, whereas the powerful agricultural lobby immediately mobilizes for blocking action.
Public transportation: Bus and rail fares have gone up by 5-7 percent. Public transportation fares are jacked up twice a year, based on the increase in the cost-of-living index - this to ensure that the government subsidy does not become too onerous a clause in the state budget. But the price of public transportation in Israel is relatively high by world standards, while the use by public transportation needs to be encouraged because it reduces the crowding on the roads. So it was wrong to oblige bus and train travelers to finance the new security outlays as well.
Cement: The Nesher company, which produces cement, had an easy time convincing the relevant official in the Industry and Trade Ministry that three countries - Romania, Turkey and Jordan - have banded together so as to liquidate Nesher and have flooded the country with cheap cement. Reuven Pesach, the official in question, "investigated" and discovered that cement dumping does in fact exist. He even knows how much reasonable profit Nesher should make. In the meantime, no levy has been imposed on imports, because Turkey is threatening retaliatory action; but Nesher was authorized to raise its prices by 2.5 percent.
Edible oil: At the request of Industry and Trade Minister Dalia Itzik, the Knesset Finance Committee this week authorized the extension of the levy on the importation of edible oil, "in order to protect the local industry." But who will protect the local citizen who pays more for the oil?
Bezeq: The rates of Bezeq, the national telecommunications provider, went up in May. True, the monopoly would like us to believe that this was a "neutral" price hike, meaning that while local calls became more expensive, the price of intercity calls went down by the same rate. But the bottom line is that Bezeq's revenues will increase as a result of the change - meaning that the public, again, will pay more.
HMOs: The Kupat Holim health maintenance organizations raised the price paid by the public for visiting specialist doctors and buying medicines by NIS 1. This doesn't sound like much, but it's actually a 5-percent hike - because the HMO cartel isn't afraid of competition.
Interest: The Bank of Israel raised the interest rate by 4.5 percent this month and last, hence we will pay more for our overdrafts and mortgages. The governor, David Klein, decides on the interest rate solely from the perspective of controlling inflation, but in the meantime, the public pays more.
Bank commissions: The banks lost a lot of money by extending excessive credit to large businesses. To compensate themselves, they are now raising the commissions they take from households by 5-7 percent. The very fact of the increase proves that a cartel (led by Bank Leumi) exists because in a situation of sophisticated competition, the banks would not be able to take this action. The supervisor of banks at the Bank of Israel, Yitzhak Tal, said nothing, because he prefers the banks to turn a higher profit: This is good for their stability and prevents crises. The only problem is that the supervisor is supposed to protect the consumer public.
Property tax: Even though prices did not go up in 2001, the cabinet and the Knesset authorized the local authorities to raise property taxes (arnona) by 2.5 percent. After all, it's easier to take from the public than to streamline and economize.
Taxes: Higher taxes on work went into effect at the beginning of the week. Employer indemnity was offset by 1 percent and all the ceilings on National Insurance and the health tax were abolished. This comes on top of the 1-percent hike in value added tax - from 17 to 18 percent. The state thus raises taxes instead of cutting expenses, generating more and more price rises.