Netanyahu Could Lower Costs, but He Hasn't

There are many reasons for the high prices in Israel, and the prime minister should have dealt with all of them a long time ago.

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Our prime minister has an interesting trait. When he encounters a tough question with no good answer, he assumes a serious expression, looks his interlocutor in the eye and replies: “I’ll have to get into that personally,” and then we all miss a beat. He’ll get into it personally? Wow, that’s real news. Now everything will work out.

That’s exactly what Benjamin Netanyahu did on Saturday night when asked about his abject failure in lowering the price of living. He spoke as though he’s from Mars, as though he hasn’t been serving as prime minister for the past five years, during which the subject of the cost of living − for food and housing − reached the top of the civic agenda.

Let’s take for example one of his (many) interventions, which took place in 2012. It was a result of heavy public pressure to lower the prices of milk and dairy products.

Finance Minister Yuval Steinitz then issued a series of orders that significantly reduced the high customs duties imposed on dairy products, duties that reach 212 percent (!). Lowering the customs charges was meant to introduce competition from imports, which would lower prices. But the farmers and Tnuva began to pressure Netanyahu − who hastened to give in. He forced Steinitz to cancel the orders, and so with his own hands prevented a reduction in prices of dairy products. So does he have a connection to the subject, or not?

There are many reasons for the high prices in Israel, and Netanyahu should have dealt with all of them a long time ago. We have exaggerated customs duties on meat, poultry, fish, dairy products, fruits and vegetables, juices, canned goods, canned tuna, olive oil and honey, which reach insane heights of 70 percent to 170 percent, preventing imports and making it possible to raise prices.

Nor is the structure of the economy sufficiently competitive. We have a large number of monopolies and cartels, both in the public and the private sector − from the seaports to the banks to the five major food companies − which cause the high prices. We also have too much concentration in the import industries, with the Health Ministry and the Agriculture Ministry making it difficult for small importers to compete with the large ones, thereby enabling the large and exclusive firms to overcharge for many imported products, such as pharmaceuticals.

Then we have the Standards Institute, which prevents imports with the help of unique and superfluous standards, and we also have dumping fees that enable even monopolies like Nesher to prevent competitive imports of cement. And there are also the two major marketing chains, which control 58 percent of the supermarkets and therefore can raise prices as well as promoting large suppliers at the expense of the small ones that are trying to compete.

And there are the farmers, who are allowed by law to associate as wholesalers and to coordinate prices. And there are the agricultural production councils that are involved in setting production quotas, dictating prices nationwide and creating pressure on the government so that it won’t dare to allow competing agricultural imports to enter the country.

In the area of housing we have the benefit of the Israel Lands Authority, a clumsy bureaucratic body which controls 93 percent of state lands and makes sure to release an insufficient quantity of land to the market, so that the price only increases and inflates housing prices. And let’s not forget the planning procedures and building permits, which take too many years and add more fuel to the fire of rising housing prices.

To that we should add the tortuous bureaucracy that makes everything more expensive, the surfeit of regulation that represses activity, and kashrut, the dietary laws, which adds costs. If we season all this with high taxes, out-of-control property tax and all the fees and levies, we will easily understand why everything is so expensive here.

But Netanyahu is not connected to all that. He’s new in the country. He’s not in the picture. After all, he promised that “I’ll get into it personally.” So we’re reassured.

Minister of Strategic and Intelligence Affairs Yuval Steinitz, right, conferring with Prime Minister Benjamin Netanyahu.Credit: Daniel Bar-On