In the summer of 2011, a social protest broke out in Israel against the high cost of living. It came in two waves, each taking on the name of a product whose prices have soared in recent years: the first, “The Cottage Cheese Protest,” and the second, “The Housing Protest.”
The dairy and real estate markets did not become the focus of the protests by accident. In both cases, the government is deeply involved: It directly controls around 97 percent of the real estate market, and through regulations and heavy tariffs prevents competition in the food industry.
Surprisingly, however, the protestors demanded even stronger governmental involvement and regulation. “We want the government to solve these problems,” they shouted, not unlike similar protesters in the US, of which New York City Mayor Michael Bloomberg said, “We don’t know what we want, but we want it now!” All this reminds us of the Spanish philosopher Jose Ortega y Gasset, who said: “When the masses are hungry, the first things they burn are the bakeries.”
Opposing such trends, the Israeli Freedom Movement demanded that taxes and government intervention be curbed. Its members point out that the main cause of the rise in prices is government intervention. Such intervention distorts the market, creating on the one hand poorly run national companies controlled by workers (Israel Railways, the ports and the Israel Electric Corporation) and on the other hand giving rise to tycoon-owned corporations that benefit from legislative protection that prevents free trade and competition. The result is a caricature of capitalism. It is, in essence, protectionism in the guise of capitalism.
The Israeli Freedom Movement took legal action with regard to one of the most well-controlled markets in Israel, the honey market, by submitting a petition to the Israel High Court of Justice.
The introduction to the petition states: “This petition deals with one product – honey – but the ruling on this issue will have ramifications for numerous other products in Israel whose prices are significantly higher than those in developed countries. As will be made clear, the high food prices in general, and the high price of honey in particular (which is sometimes up to three times its price in other countries) are the direct result of limiting imports by means of draconian tariffs and broad-based regulations.
These empower large Israeli corporations in the food market, in violation of constitutional principles and freedom of competition.”
The Israeli honey industry is, incredibly, operating under Emergency Orders, which protects entrenched interests by disallowing an open, competitive market.
Current legislation holds absurd rules. One such rule is the following: “No one is allowed to transport honey in amounts that exceed 6 kilograms without the written consent of the council and in accordance with its terms” (Directive for Control of Commodities and Services – the Creation and Selling of Honey – 1977).
Akiva Bigman, in an article from December 9, 2011 (Makor Rishon), writes about a certain Tzachi Goldenberg of Moshav Gamzu who decided to devote his life to raising bees and producing honey. But Goldenberg had no idea what he was getting himself into. Granted, he knew that he would be working with insects whose sting could be painful, but didn’t know that dealing with the honey industry can cause much greater pain.
He first discovered this on his wedding day, when Honey Council inspectors arrived and confiscated 40 of his teeming hives that were at peak output. Since that day, Goldenberg has been involved in a drawn-out legal suit. While his hives were returned to him during the proceedings, they were without the honey and with the requirement that he pay the local council’s confiscation fee.
“My son has suffered through a number of lawsuits,” says Yossi Goldenberg, Tzachi’s father, who is a citrus grower in Moshav Gamzu. “He applied for a license to keep bees, and following a lengthy struggle, his request was approved, but limited to a small number of hives.
Subsequently, a fellow farmer on the moshav who grew avocados asked Goldenberg to move the bee hives next to the avocado fields so that the bees could pollinate the avocado flowers and thereby create a higher yield. When the council got wind of this, they came and confiscated the hives.”
Goldenberg is just one of many Israeli citizens forced to live under the tyranny of a state that is functioning like a dictatorship that controls people’s income through emergency edicts and regulations.
The honey industry is an example of market concentration and the choking of free competition: “Yad- Mordechai Strauss Hives” controls 63% of the Israeli honey market and “Emek Hefer Apiary” controls another 25%. The remaining pitiful 12% is divided among numerous other small honey makers.
The petition’s introduction also notes that the case is based, beyond legal issues, on “economic studies that prove that reducing tariffs and open markets are the best way to diversify products and reduce prices. In addition, the petition’s arguments are significantly strengthened by the Trachtenberg Committee for Social and Economic Change, which recently released its recommendations, stating that the food industry in Israel was least open to competition compared to other industries. Whereas throughout the world food prices stabilized between 2007 and 2010, in Israel prices were rising.
“According to the Committee, this is due, in part, to the high concentration of power in the production and the import of food, and the high tariffs and other protections that the state has been according the food industry for a long time. The food industry is an example of the web-like regulatory decisions that the Knesset has passed, and that the government enforces, which, although not always intentionally, create a protective shield for a small number of local manufacturers and importers.”
Although out of financial consideration the High Court petition was eventually withdrawn, the public debate that has begun – raising the curtain on conventional lies such as that Israel possesses a free market – is definitely underway.
The writer is the director of the Ayn Rand Center Israel and is a founder and spokesman for The Israeli Freedom Movement.
Translated by Hannah Hochner. This article originally appeared in Hebrew in the online Maraah-magazine.co.il.