The introduction of fundamental reform for Israeli economic concentration is no easy task. Economic concentration has created companies that possess massive economic and political power. It is difficult for the government, and even harder for Knesset members, to confront them. As we have recently learned, tycoons also rely on lobbyists who control the Knessets legislation by pledging to help some MKs get re-elected with their connections and financial assistance. We should praise Prime Minister Benjamin Netanyahu, Finance Minister Yuval Steinitz and Bank of Israel Governor Stanley Fischer for establishing the Economic Concentration Committee to create more competition in the market. We should also praise its recommendations, even if they are imperfect. The committee did indeed recognize that there are dangerous, damaging pyramid companies; but instead of banning them altogether or allowing only subsidiaries, they allowed the pyramids controlling shareholders to maintain them. This constitutes capitulation to the tycoons, and rewards those who exploited a loophole in the law to discriminate against new companies. Also with respect to separating real and financial holdings, the committee also set an arbitrary threshold by which companies that have an annual turnover of NIS 6 billion would not be allowed to hold financial companies. This is instead of setting the limit at NIS 3 billion, as suggested by Prof. Avi Ben-Bassat, a senior fellow at the Israel Democracy Institute and head of the project on structural reforms in the Israeli economy. This move would have prevented monopolies over financial companies, as recommended by Dror Strum, director of the Israeli Center for Economic Planning, who was charged with handling antitrust matters. Unless there is significant public pressure, chances are slim that the recommendations by the government, Knesset committee or plenum would be improved. There is a fear that certain Knesset members will use lobbyists to try to water down the reform, render it ineffective and endlessly postpone its implementation. Yet even if by some miracle the reform is implemented without a hitch, we still have to deal with the governments concentration and inflated size, which leads to a lack of competition in education, health care, and the supplies of electricity and water. The governments activities create many barriers to competition and encourage the tycoons private concentration. Citizens often have a love-hate relationship with their governments. They hate them when they are disappointed in their inability to create heaven on earth. Israelis indulge in the illusion that governments are designed to benefit the people, that they are concerned and ethical parents to their citizens. We have not internalized that governments are really just unstable coalitions formed by politicians whose main concern is to ensure their position, doing so largely at the publics expense. Politicians do not hesitate to confiscate a significant part of our income to fund activities that benefit them, even if they are damaging and failed, as is the case with many of the governments financial activities. Free education, for example, is a terrible idea that exacts a double price: We pay once through high taxes that fund the bloated, damaging bureaucracy of the Education Ministry and a second time with private funds, intended to repair the damage caused by the monopoly on national education. The same can be said for the health care system, which is expensive, discriminatory and ineffective; as well as our barely existent internal security and a dysfunctional justice system that encourages breaking the law. The government, which is also the largest consumer in the market, does its business mainly with large companies and discriminates against smaller firms. This only intensifies the problems of economic concentration. The government is also the largest employer in the market, and its conduct helps to corrupt labor relations. Israels governments have consistently allowed, and even helped, the monopolistic Histadrut labor federation (which represents worker unions of the big public companies that are in fact monopolies) to extort outrageous salaries and perks with no correlation to actual output. It has allowed for the politicizing of the workplace and has compensated employees for their participation in political disputes at the expense of consumers who pay inflated prices and at the expense of other workers and the unemployed, who have no political clout. Scandals involving state-owned land, which citizens are prevented from enjoying the fruits of because it is instead given to those who have connections, money and power, are just another example of what happens when a political body is entrusted with managing resources, controlling the economy and is given the authority to collect oppressive taxes. Israeli consumers will finally understand the effect economic concentration has on them when the reduction of this concentration, even minimally, increases competition, significantly reduces market prices and brings them great relief, along with expanded purchasing power. Perhaps then, the consumer will act to limit the damaging power of the government as well.
