Taking Stock / There's No Justice

You've heard this complaint before: Over-regulation is depressing Israel's economy. Jerusalem is crawling with bureaucrats and authorities whose sole raison d'etre is to formulate regulations/rules/limitations/licenses/permits/laws that impede the smooth progress of the business sector.

All we need is a strong prime minister/finance minister/industry minister to kick those bureaucrats in the butt/clip their wings/circumvent them/weaken them/crush them like cockroaches and the economy will soar like a veritable eagle. Foreign and domestic investors will arise anew, the scent of freedom and achievement will perfume the air and we shall all stride together into a new economic era.

Here is a little anecdote. The Justice Ministry, the most despised regulator of the lot, which is always sticking its beak into economic affairs whether it has jurisdiction or not, had a surprising initiative. The ministry decided to amend the Companies Law and exempt companies with hardly any turnover from the requirement to employ an auditor to prepare their financial statements.

What? Did hell freeze over? The Justice Ministry wants to reduce supervision over small companies? Could it be that small businesses can save themselves the cost of hiring auditors?

Yes. The rationale behind the amendment is simple enough. In the case of a company that's barely twitching anyway, whose liabilities and debts are by definition small in scale, there is no reason to force it to prepare financial statements from day one. The costs involved can be onerous for a small company, or one at the start of its life.

What happened when Justice presented its amendment? Did business elements applaud, did the economic organizations give it a standing ovation, did they praise officialdom for scaling back regulation to stimulate business, when Israel needs it the most?

Not exactly - in fact, not at all. Even before Justice had unrolled the mere idea of the amendment, the Association of Certified Public Accountants declared war. Outrageous, it shrieked, it is unthinkable to exempt small companies from audits.

The battle does not pit the business sector against regulation; it pits the ones with monopolistic power against the rest of the business sector.

Take the example of the accountants. The regulator sought to ease the burden on small businesses, but the mighty accountants' guild, with its clout in the Knesset, set out to quash the initiative. Why? Because it wants small businesses to continue paying accountants for audits. Threatening letters originating from Likud members with clout, who happen to be accountants handling small companies, have been making the rounds in the Knesset in the last couple of weeks, calling on the parliamentarians to defeat the Justice initiative.

What about the small businesses? Who's representing them in this fight? Nobody, of course. Small companies don't have the power that the monopolies or big business have. They are too large a community, with no party affiliation, which is frighteningly reminiscent of the citizens of Israel, who are famously and perennially shortchanged on representation in the Knesset.

This is a good place to note that the big monopolies and businesses contribute very little to Israel's economic growth. Sometimes their only contribution results from their weakening.

What is Israel's main engine driving growth? The small and medium-sized businesses, of course. The ones being milked and crushed by the big monopolies and businesses.

So next time one of the really powerful business leaders whimpers to the press about regulation destroying Israel's economic growth, one might kindly remind him that he shouldn't speak in its name, as he isn't responsible for it, at best, and he's probably trying to depress it, at worst.