Israeli consumer 370.
(photo credit: REUTERS)
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.
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
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.
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.
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.
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
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.