Widespread criticism of the high cost of living and the recent wave of price increases has put pressure on the government, which has responded with band-aid measures to calm the public. It started with letters to the big food importers calling on them, even begging them, not to raise prices. That was followed by an appeal to the price committee jointly run by the finance and economy ministries to examine the degree of economic concentration in the sectors where prices are expected to rise.
These measures caused a few food importers and manufacturers to freeze planned price increases, but it is clear to everyone that they are only delaying the hikes until after Passover. The basic problem remains: The Israeli economy is too highly concentrated and suffers from too many monopolies and cartels, and government measures to lower barriers and introduce more competition meet resistance from interest groups.
These interest groups have in recent years benefitted from a weak Competition Authority, whose status was severely undermined when Benjamin Netanyahu’s government circumvented it in order to implement the natural gas framework. The authority’s weakness has been evidenced by the plethora of mergers and acquisitions by big corporate groups and their entry into new markets, enhancing their power and thwarting competition.
Thus, for example, the Shufersal grocery chain bought New Pharm; discount food retailer Rami Levy acquired Cofix, Good Pharm and Israir; and apparel retailer Fox controls a wide array of brands, including American Eagle, Mango and Terminal X. This has turned the big retail chains and importers into powerful, multipronged entities and a major cause of Israel’s high cost of living.
The 2013 Business Concentration Law solved many problems, including corporations with cross-holdings in financial and non-financial businesses and corporate groups structured as pyramids. But the war against concentration must continue while the growing power of big corporations and the interrelationships between them are carefully monitored and their contribution to the high cost of living fully recognized.
Israel’s cost of living is 20 percent higher than the OECD average, even though several reforms were instituted following the 2011 cost-of-living protests, like Open Skies, the banks being ordered to divest their credit card businesses, and changes in product standard regulations. The government itself is no less responsible for the high cost of living because of how it neglected the Competition Authority and let it lose its teeth, because it gives in to interest groups opposed to increased competition, and because it controls more than 90 percent of the country’s land, which it refuses to market at a fast enough pace to stem the rise in housing prices.
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The current government is severely limited in many areas because of its eclectic composition, but when it comes to increasing competition and reducing economic concentration, the coalition parties have no reason not to be in complete agreement. The “change” government must act resolutely to lower the cost of living and not limit itself to band-aid measures.
The above article is Haaretz's lead editorial, as published in the Hebrew and English newspapers in Israel.