Your business: suffer the helpless consumers

Several consumer products might benefit from deregulation and more competition.

By HAROLD GOLDMEIER
November 11, 2013 22:27
4 minute read.
Israeli consumer

Israeli consumer 370. (photo credit: REUTERS)

 
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Economy and Trade Minister Naftali Bennett and Finance Minister Yair Lapid established a joint committee to increase business competition and improve consumer welfare. Eliminating trade barriers to imported goods is a mandate of the committee to lower consumer prices.

Salaries in Israel are inexplicably low in other than select sectors such as the bio-med and hi-tech industries. Taxes are insufferably high. This potent brew of high consumer prices and taxes, and low salaries, decreases parity between purchasing power and income. Working people and those on fixed incomes such as pensioners and single parents struggle, suffer depression and exhaustion, emigrate permanently or work overseas, extending the meaning of brain drain.

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Sales suffer from the toxicity of this brew, stifling business growth and expansion. Knowing that companies fire with impunity, replacing employees with younger workers when older ones wage and age out, makes consumers more thrifty.

It also means having to choose between food or medicine and having negligible disposable income for travel, purchasing homes, new clothes, entertainment, giving charity and enrichment programs for children.

Trouble “getting by” forces people into black markets. One Israeli woman with 15 children confesses to not reporting her (religious) marriage to the government, so that she can receive extra cash and benefits from officials who believe she is a single mother. Bloomberg reported a trend gaining traction with Americans in financial jams from the years-long recession: selling their hair, breast milk and reproductive parts. One young woman lists her auburn mane for sale at buyandsellhair.com. The stuck economy in the US has hair, eggs and kidneys “among the top four auto refills for the Google search query, “I want to sell my…” The low level of competition among businesses in Israel contributes to price fixing at the highest consumer prices possible before consumers revolt. The markets, including gasoline, cottage cheese and coffee, find their level. Additional factors include the small size of the market, concentration of ownership in the hands of a few, regulatory overload and exclusive agreements to corporations and individuals. Excessive custom duties on e-commerce imports, import quotas, government price determinations and unreasonable product standards on imported goods contribute to anti-competitiveness, further limiting consumer purchasing power.

I contributed an article to the Gale Business Insights Handbook of Global Marketing published earlier this year. I recognize governments must protect their markets from foreign dumping of products at low prices that destroy domestic markets.

Florida tomato farmers faced this scenario two years ago in the great US-Mexican tomato war. Government has an obligation to protect against low quality, substandard goods such as Chinese drywall with mold and mildew and toys containing lead. Government has a right to protect against cheap foreign goods made by child workers who receive slave wages prevalent in the clothing and diamond industries.Israel needs a committee to examine trade barricades and the restrictive business environment. Consumer unrest stems from rising expectations of the middle class for lower-cost goods they buy overseas. Israel is on a seesaw teetering between a new capitalistic economy and the unwillingness in some elite circles to forgo its socialist roots.

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Israel is more like Nigeria, which too strictly controls country- of-origin product registration. Ghana and Israel impose excessively high import taxes and customs duties. They ban certain goods and apply quotas to others.The plethora of Israel’s business laws and regulations reflect shades of Poland before 1990. Poland was a communist country with centralized government planning enforced by a web of administrative procedures and regulations. Their economy ground to a near halt, but it later prospered in a liberalized economy.

Israel never had great quantities of raw materials to export.

New gas fields discovered in the Mediterranean are changing that equation. Those fields must be managed in the most transparent way possible with complete openness by the companies to avoid market manipulation and unfair competitive advantages. Otherwise, consumers will face higher prices for natural gas and increases in costs throughout the product chain. Israel’s committee must ensure that trade-distorting practices will not be tolerated, or there will be higher consumer prices for products requiring natural gas.

The 2011 OECD report on enhancing market openness concludes that Israel “has opened its economy to international trade and investment by lowering tariffs and improving domestic regulatory environment for business.” It will be the task of the joint committee to enhance and build on the momentum for reform in Israel. Of utmost importance is to gain coherence of policies passed by the Knesset when they overlap with directives and administrative guidelines and existing legislation.

The committee might develop a consumer-price impact assessment required for proposed laws and regulations with input from the Antitrust Authority and the voluntary Consumer Council. Among the consumer products that might benefit from deregulation and more competition are pharmaceuticals, coffee, dairy products, cement, building materials, automobiles and many agricultural products.

Government regulators and lawmakers need to take heart to Shel Silverstein’s explanation of HELPING: “And some kind of help Is the kind of help That helping’s all about. And some kind of help Is the kind of help We can all do without.”

Dr. Harold Goldmeier is the managing partner of Goldmeier Investments LLC and an instructor of business and social policy at the American Jewish University, Aardvark Israel Gap Year Program, Tel Aviv.

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