Dime-store Demagoguery

The battle between the good guys and the bad guys began immediately on the government's first day.

The battle between the good guys and the bad guys began immediately on the government's first day. Ehud Olmert is the bad guy. He raised the price of bread at the last moment of his term as industry minister. Opposite him stands the absolute good: Eli Yishai, the incoming industry minister. Enraged and furious, Yishai promised to reinstate bread subsidies and held his ministry's first meeting in the Angel Bakery - thus gaining a few minutes of televised glory.

Yishai is not the only good guy. Social organizations sharply protested the price hike, MK Yitzhak Levy (National Union) and MK Ran Cohen (Meretz) presented urgent motions for the agenda, Yoram Marziano (Labor) called it "daylight robbery," Shelly Yachimovich (Labor) is threatening not to vote for the budget and demanding to reinstate the subsidy. The Likud (Benjamin Netanyahu) even presented a no-confidence motion in the government, which really takes the cake.

And what is all the fuss about? It's all because the price of standard, price-controled bread rose by NIS 0.25. Until yesterday it cost NIS 3.45. Now it costs NIS 3.70.

The bread price saga has been accompanying us since the establishment of the state. Until 1990, bread and other basic commodities were substantially subsidized. The argument was that lower-income classes would collapse without the subsidies, but the truth was that the politicians were seeking power and influence; therefore, they maintained the subsidization.

In 1990 the subsidization was abolished and nobody collapsed. On the contrary, everyone benefited. Basic products were no longer wasted, billions were saved in the budget, inflation was curbed, subsidizing plants and the wealthy ceased and farmers stopped overfeeding their cows with bread.

However, as in many other cases, the government did not know where to draw the line. Instead of letting market forces work on basic commodities (bread, eggs, chicken, milk), it kept them price-controlled, thus creating a new problem and new distortions, which keep blowing up in its face at regular intervals. Every six months, the bakeries holler that they're losing money and intend to stop production. Then there is no choice but to raise prices, which goes straight to the headlines. Then the good politicians ride the wave of populism. They even know exactly what the poor people eat. Interestingly, people in Angel Bakery say the poor people who reportedly cannot afford these things - are the ones buying pitas and sliced bread, which are much more expensive than the standard bread.

As though man lives by bread alone. Mark Moshevitz, the legendary owner of Elite, said the best time for the plant was when its prices were supervised and controlled by the government. Then you had to convince only one official in the Industry Ministry that a price hike was necessary, and he was always persuaded. The public, believing that the "price control" was serious, bought the products without checking prices and without arguing, and Elite had a ball.

The same is happening now. A committee of four officials has taken over the role of the market forces. They take the figures provided by the manufacturers, who exaggerate upward, of course, and determine the price hike. They haven't learned what even Russia and China have realized already, that no official can set the right price, only the market forces can.

To make things even crazier, the price committee has decided this time that the bakeries must not give the marketing chains any reductions. Because despite all their wailing, it seems the bakeries have been giving the chains reductions of up to 20 percent, and then claiming that they are losing money.

The government's price control causes another evil - the disgraceful handling of standard bread. Since this is a "price-controled" commodity, the bakeries don't bother to wrap it up, but throw the loaves into an open cardboard box at the store entrance, exposed to the mercies of bypassers. In the supermarket branches, standard bread is also laid on the shelves unhygienically in a manner unheard of in the Western world.

The solution is easy and simple: Stop the government price control and let the market forces go to work. The result will be improved bread quality, improved packaging and reduced prices, following the ensuing competition among the bakeries. But if this disaster should occur and bread turns into an ordinary product - what would Eli Yishai, Ran Cohen and Shelly Yachimovich do? How would they prove that they are the good guys?