We must dismantle the oligarch-owned monopolies that impoverish the Israeli consumer and choke our economy.
Filed under:
fundamentals • public policy
“Yes, break it up!” Ze’ev Jabotinsky, the prophetic liberal Zionist leader demanded in 1922, referring to the Histadrut labor federation monopoly. Under the pretense of securing employment for Jews during the Mandatory era, the Histadrut launched a class struggle meant to destroy the bourgeoisie and establish on its ruins a socialist utopia, as its top leaders openly asserted. It violently denied employment to workers not possessing its red membership card.
Then as now, the defenders of monopolistic practices have been trying to distract attention from the damage caused by their monopolies by character assassination and by incitement to discredit their critics.
Jabotinsky clearly stated that it is the right of every worker to organize and establish unions; that only when such unions become rapacious monopolies, as they are now, and use their excessive power for political control and to destroy competition, they should be broken up. Yet his Labor opponents, including their supporters in academia and the media, knowingly launched the big lie that Jabotinsky, who was a classic liberal, a man who advocated minority and women’s rights very early on (in his Betar anthem he wrote: “There [in the forthcoming Jewish state] shall live in well-being and happiness, the son of Arabia, the son of Nazareth and my son”) simply wanted to destroy any workers’ union.
Jabotinsky was a fascist “following in the footsteps of Hitler,” David Ben-Gurion averred in a Labor Party pamphlet of the mid-1930s. Therefore, Jabotinsky was beyond the pale and should be destroyed together with his party. Ben-Gurion’s followers soon took action and violently attacked Jabotinsky’s followers.
OUR CURRENT oligarchs and their henchmen are restoring to similar tactics to protect their monopolies. The Bank of Israel has just published an astounding document, a courageous analysis of the dangers posed by the concentration of political and economic power in the country. Issued by its Research Department (headed by the savvy Carnit Flug), the report recommends that steps be taken to curb the power of the oligarch-owned conglomerates that dominate much of the economy through their pyramid structure and cross-holdings in real (those that engage in trade or industry of goods and services, not money) and financial firms.
Such cross-holding give the conglomerates preferential access to credit, as well as to a lot of privileged business information that banks routinely receive from their creditors. The pyramid structure of the conglomerates has also allowed the oligarchs to control dozens of other firms. By simply controlling the mother corporation at the head of each pyramid, they control dozens of other companies in which they invested a very small share of their capital.
So with a few hundred million shekels, which they received as loans though their crony connections from the nationalized banks, about 20 families managed to take control of the major business groups, representing more than half the assets traded on the Tel Aviv Stock Exchange.
There is no comparable concentration of political and economic power in any other democratic country.
Such concentrated power led to the very damaging cozy relationship between oligarchs, politicians and large parts of the media – a relationship that has corrupted politics, the economy and public discourse and is damaging democracy.
AFTER THE Bank of Israel report, Prime Minister Binyamin Netanyahu announced that he will take “determined, focused and well-thought-out action” against oligarchic control over these pyramid groups, so as to avoid the danger of a domino-like financial collapse in case one of them gets into trouble, as they have recently.
Immediately, a number of top journalists have attacked the prime minister in an attempt to prevent him from taking action to dismantle the pyramid groups. The assault was led by prominent economic commentators who, for years now, have been trying to protect the bank oligopoly that was eventually partly broken up by the Bachar Commission reform of financial markets.
In their bitter, years-long attacks on the Bachar reforms, these pundits shamelessly spread disinformation, distortion and sometimes even outright lies. During the recent crisis some even tried to incite panic in financial markets in an attempt to destroy the new financial institutions competing with the banks. Now they claim that the prime minister is picking on the oligarchs to distract us from our real problems, the problems of the Negev and Galilee, the problems of poverty and the problems of our deteriorating educational system.
Those who make this spurious claim are aware that the problem of poverty can be greatly reduced within a few years once the conglomerates and their monopolies are broken up. Today, these conglomerates steal about a third of workers’ salaries by inflating the prices of all consumer goods. Breaking them up will lower prices and increase the purchasing power, especially that of low-income Israelis, and lift them out of poverty.
The monopoly defending pundits ought also to know that the Negev and Galilee are failing to develop because the banks have created a decades-long credit crunch, refusing to grant credit to small enterprises concentrated in the periphery. Instead most credit is allocated to their oligarch cronies for speculation in real estate abroad and in foreign currencies.
But they try to distract our attention by falsely attacking the proponents of reform so that we will not support the liberation of the economy. Will we let them get away with it?
Log in or Register
Yes, break them up
The Jerusalem Post
30 May ’10
We must dismantle the oligarch-owned monopolies that impoverish the Israeli consumer and choke our economy.
Filed under:
fundamentals • public policy
“Yes, break it up!” Ze’ev Jabotinsky, the prophetic liberal Zionist leader demanded in 1922, referring to the Histadrut labor federation monopoly. Under the pretense of securing employment for Jews during the Mandatory era, the Histadrut launched a class struggle meant to destroy the bourgeoisie and establish on its ruins a socialist utopia, as its top leaders openly asserted. It violently denied employment to workers not possessing its red membership card.
Then as now, the defenders of monopolistic practices have been trying to distract attention from the damage caused by their monopolies by character assassination and by incitement to discredit their critics.
Jabotinsky clearly stated that it is the right of every worker to organize and establish unions; that only when such unions become rapacious monopolies, as they are now, and use their excessive power for political control and to destroy competition, they should be broken up. Yet his Labor opponents, including their supporters in academia and the media, knowingly launched the big lie that Jabotinsky, who was a classic liberal, a man who advocated minority and women’s rights very early on (in his Betar anthem he wrote: “There [in the forthcoming Jewish state] shall live in well-being and happiness, the son of Arabia, the son of Nazareth and my son”) simply wanted to destroy any workers’ union.
Jabotinsky was a fascist “following in the footsteps of Hitler,” David Ben-Gurion averred in a Labor Party pamphlet of the mid-1930s. Therefore, Jabotinsky was beyond the pale and should be destroyed together with his party. Ben-Gurion’s followers soon took action and violently attacked Jabotinsky’s followers.
OUR CURRENT oligarchs and their henchmen are restoring to similar tactics to protect their monopolies. The Bank of Israel has just published an astounding document, a courageous analysis of the dangers posed by the concentration of political and economic power in the country. Issued by its Research Department (headed by the savvy Carnit Flug), the report recommends that steps be taken to curb the power of the oligarch-owned conglomerates that dominate much of the economy through their pyramid structure and cross-holdings in real (those that engage in trade or industry of goods and services, not money) and financial firms.
Such cross-holding give the conglomerates preferential access to credit, as well as to a lot of privileged business information that banks routinely receive from their creditors. The pyramid structure of the conglomerates has also allowed the oligarchs to control dozens of other firms. By simply controlling the mother corporation at the head of each pyramid, they control dozens of other companies in which they invested a very small share of their capital.
So with a few hundred million shekels, which they received as loans though their crony connections from the nationalized banks, about 20 families managed to take control of the major business groups, representing more than half the assets traded on the Tel Aviv Stock Exchange.
There is no comparable concentration of political and economic power in any other democratic country.
Such concentrated power led to the very damaging cozy relationship between oligarchs, politicians and large parts of the media – a relationship that has corrupted politics, the economy and public discourse and is damaging democracy.
AFTER THE Bank of Israel report, Prime Minister Binyamin Netanyahu announced that he will take “determined, focused and well-thought-out action” against oligarchic control over these pyramid groups, so as to avoid the danger of a domino-like financial collapse in case one of them gets into trouble, as they have recently.
Immediately, a number of top journalists have attacked the prime minister in an attempt to prevent him from taking action to dismantle the pyramid groups. The assault was led by prominent economic commentators who, for years now, have been trying to protect the bank oligopoly that was eventually partly broken up by the Bachar Commission reform of financial markets.
In their bitter, years-long attacks on the Bachar reforms, these pundits shamelessly spread disinformation, distortion and sometimes even outright lies. During the recent crisis some even tried to incite panic in financial markets in an attempt to destroy the new financial institutions competing with the banks. Now they claim that the prime minister is picking on the oligarchs to distract us from our real problems, the problems of the Negev and Galilee, the problems of poverty and the problems of our deteriorating educational system.
Those who make this spurious claim are aware that the problem of poverty can be greatly reduced within a few years once the conglomerates and their monopolies are broken up. Today, these conglomerates steal about a third of workers’ salaries by inflating the prices of all consumer goods. Breaking them up will lower prices and increase the purchasing power, especially that of low-income Israelis, and lift them out of poverty.
The monopoly defending pundits ought also to know that the Negev and Galilee are failing to develop because the banks have created a decades-long credit crunch, refusing to grant credit to small enterprises concentrated in the periphery. Instead most credit is allocated to their oligarch cronies for speculation in real estate abroad and in foreign currencies.
But they try to distract our attention by falsely attacking the proponents of reform so that we will not support the liberation of the economy. Will we let them get away with it?
More recent commentary
The New Republic
19 May ’11
Economic Miracle
A Middle East peace strategy that could actually work.
The Jerusalem Post
15 Mar ’11
The government-tycoons-media triangle
Israel needs to slash its state budget by as much as possible if it wants a chance at fighting waste and corruption.
The Jerusalem Post
9 Mar ’11
Welfare and rebellion: The economic factor in the Arab uprisings
Too little attention has been paid to how Egypt’s socialist past and welfare-state present shaped the current rebellion.
The Jerusalem Post
7 Feb ’11
Is all quiet on the economic front?
The Herzliya Conference has become an important international event, but one central issue is absent: Israel’s debilitating economic concentration.
The Jerusalem Post
22 Jan ’11
Teaching an elephant to dance
It’s highly unlikely that government can ever learn to make long-term plans and execute them efficiently.
The Jerusalem Post
23 Dec ’10
Hellenization and Enlightenment: Post-Hanukka ruminations
How can one dare compare narrow-minded religion with the all-embracing faith of universality and equality that is socialism?
The Jerusalem Post
1 Dec ’10
Would Milton Friedman have approved?
Many of the social and economic troubles we are experiencing are due to the public’s lack of understanding of the need for economic literacy.
The Jerusalem Post
17 Oct ’10
Perverting public discourse
The PM’s courageous decision to tackle economic concentration was misrepresented by several of our media publications—owned of course by tycoons.
The Wall Street Journal
8 Oct ’10
Breaking Israel’s monopolies
Economic concentration hurts the country’s viability and the chances for peace.
The Jerusalem Post
4 Oct ’10
Israel’s progress undermined
A damaging ethos of ‘welfarism’ and distributive politics has come to dominate not only academia but our cultural, military and even our business elites.
The Jerusalem Post
19 Aug ’10
Unable to decide
The reformers must know the importance of the reform’s success both for Israel and for their careers, and what damage they will incur if it fails.
The Jerusalem Post
13 Jul ’10
Elana Kagan, terrorism and the law
Kagan’s admiration for Justice Aharon Barak’s philosophy may have revealed her own predilection for radical judicial activism.
The Wall Street Journal
18 May ’10
Land of silicon and money
The OECD’s invitation to Israel is a “seal of approval” but the country still needs more reforms.
The Jerusalem Post
10 Feb ’10
The surprise of it all
The world’s astonishment at Israel’s response to the Haiti disaster is insulting. What we saw there was Israel’s true face.
The Jerusalem Post
10 Jan ’10
Hi-tech prospects and pitfalls
Individual initiative and freedom are essential for creativity—in hi-tech as in all other spheres.
The Jerusalem Post
14 Oct ’09
A woman who knew her worth
As far as Rose Friedman was concerned, public kudos did not matter that much. She persisted in being a rose, no matter what.
The Jerusalem Post
22 Sep ’09
Movies in Nablus, dramas in Bethlehem
Lasting peace must grow from the bottom up, from an “economic peace process” that proves what advantages peace has to offer on a daily basis. It cannot come from signing peace agreements with radical and corrupt entities propped up by corrupting Western handouts.
The Jerusalem Post
15 Aug ’09
Israel’s ‘scrambled’ economic system
A courageous recent film has exposes the strong connection between Israeli oligarchs and bureaucrats. Unfortunately however the film’s simplistic pseudo-Marxist treatment is more misleading than revealing.
The Jerusalem Post
24 May ’09
The economy: look to the future
Netanyahu paid heavily to pass a budget in time; his “partners”’ bargaining tactics, bordering on blackmail, reflect poorly on our politics.
The Jerusalem Post
4 May ’09
Reform: prospects and pitfalls
Binyamin Netanyahu’s recent economic plan has great promise but faces obstacles—such as the media and the Histadrut—that may undermine its success.
The Jerusalem Post
11 Apr ’09
Big government? Yes, but there’s a reason
Is Binyamin Netanyahu’s government too big? Yes. So why would Netanyahu create such an unwieldy beast?
The Jerusalem Post
30 Mar ’09
To bail or not to bail
Should the government bail out those of our tycoons who cannot redeem NIS 100 billion worth of bonds?
The Wall Street Journal
12 Mar ’09
Mideast peace can start with economic growth
Billions of dollars in foreign aid to the Palestinians has resulted in war not peace. There’s a better way.
The Jerusalem Post
22 Feb ’09
Warning cries from Herzliya
The government is dysfunctional. The question is why—and how to mend it.
The Jerusalem Post
2 Feb ’09
A lesser economic evil
All government deficit spending is bad. But sometimes deficits are unavoidable. And some deficits are better then others.
The Jerusalem Post
22 Dec ’08
Spinners and cheaters
Why not exploit the crisis to destroy what little freedom Netanyahu’s reforms brought to the economy? Why care if the country will lose its only hope of deliverance from the economic retardation caused by our statist heritage?
The Jerusalem Post
3 Dec ’08
Precipitating the next collapse
Focusing on a putative pension crisis distracts our attention from the real serious crisis that a worldwide recession is bound to create here.
The Jerusalem Post
22 Oct ’08
The panic-mongers’ one-note chorus
The country, the pundits conclude, must return to the good old days of “social democracy.”
The Jerusalem Post
15 Jul ’08
The banks are bamboozling us again
In the name of stability the comptroller has ignored many of the banks’ offenses.
The Jerusalem Post
29 Apr ’08
An Irish-style banana republic
It must be either naiveté or cynicism that allows “Israel 2028” to recommend a reform that will make government a larger and a more efficient instrument for economic growth.
The New York Sun
29 Apr ’08
Israel still doesn’t get economy
Israel’s elites—especially the chattering classes in the press and the academy—are hostile to capitalism because our universities’ social sciences and liberal arts departments are dominated by post-modernist and neo-Marxist professors.
Ideas matter. Hostility to capitalism exacts a great price from the Israeli economy and from its hapless workers.
inFocus
2 Apr ’08
US charity to Israel reconsidered
Jewish institutional efforts must now undergo a period of reform and greater accountability. Some charitable efforts should be privatized. Individuals or groups of donors must take personal responsibility for specific projects, to ensure that funds are dispensed in a responsible and cost effective manner.
The Wall Street Journal
8 Mar ’08
Israel’s no-win strategy
Israeli politicians are preoccupied with political machinations designed to buy support from powerful interest groups by distributing government largesse. This causes not only the factionalization of politics and growing corruption, but consumes time and energy that leadership should use to address life and death issues.
The Jerusalem Post
20 Feb ’08
Dangerous infatuation
Government can no more control powerful economic forces than it can the rise and fall of tides. To effectively fulfill its nightwatchman role—to protect us from internal and external violence and to enforce contracts—government must be kept limited.
The Jerusalem Post
22 Jan ’08
What’s ‘public’ about their broadcasting?
Our “public channel,” funded by a compulsive tax, does not need to be pluralistic or even-handed.
Like other public institutions that lack well-defined ownership, Channel 1 has consequently been taken over by bureaucrats and by undemocratic workers’ unions.
The Jerusalem Post
21 Nov ’07
A year without Milton Friedman
This man did more good for humanity than any other.
The Jerusalem Post
17 Oct ’07
Getting beyond the teachers’ strike
As long as education remains a government monopoly, it is bound to function like all other government monopolies, where union bosses fill the vacuum that lack of defined ownership creates, and monopoly power allows them to blackmail the public.
The Jerusalem Post
19 Sep ’07
A healthy dose of skepticism
In the wake of the Second Lebanon War, there is hope that the phenomenal performance of the economy will finally make Israelis realize the crucial role it plays in their lives.
The Jerusalem Post
14 Aug ’07
How to grow Israeli hi-tech
At the recent Merage Foundation conference to help Israel’s hi-tech sector grow, calls were heard for more government “direction”. This despite sixty years of massive government intervention and “development efforts” that have led mostly to massive failures and waste.
The Jerusalem Post
18 Jul ’07
A president of visions
President Shimon Peres, we all know, is a man of visions. Some have been better than others. The less successful ones, that translated into costly, failing and even dangerous policies, were those that denied reality.