Yesterday’s “Million Man March” in cities across Israel was the latest step in this Summer’s social protests against high prices across the economy. To be sure, there is much to protest with ever increasing prices on goods and services throughout the economy, from housing to dairy products, and from fuel to electricity.
In the midst of the nationwide upheaval caused by the high prices in Israel’s economy, our government saw fit last week to raise the price of gasoline despite a significant fall in the price of oil during the preceding month. They did this by significantly raising the excise tax on unleaded fuel. The partial offset achieved by lowering the fuel companies’ marketing margins simply added salt to the wound, turning legitimate profit by the fuel companies into added tax revenue for the government on an already vastly over-taxed commodity.
Yet many of the calls during the rallies last night were as irresponsible as the rapid and frequent price hikes and the government’s policies in response to them. Heeding calls among protest leaders to “explode the budget” – to throw money at the problems in society without regard for budgetary restraint – will lead only to Israel following in the footsteps of Greece, Portugal and the United States, countries whose economies are teetering on the brink of collapse because of serious financial mismanagement and populist spending policies.
To be sure, there are many ills with the structure of Israel’s economy. Chief among those ills is an issue that perhaps should have come to light as a result of the protests, but has been mainly ignored in Israel – the need for greater privatization in the economy.
Many people in the media and among the social protestors are calling for privatization to be rolled back, and they cite as prime examples of corporate greed the overinflated costs of dairy products and of other commodities that have been deregulated. But we are seeing in other areas of the economy that individual corporations or whole industries are far more receptive to public outcry, and far more flexible in coming up with solutions to consumers’ demands.
In the past two weeks, two of the country’s largest grocery chains have significantly lowered prices on a wide variety of basic goods in response to the protests. And creative solutions are coming from a variety of other directions in order to lower prices for Israeli consumers. Toys ‘R’ Us, which has not been targeted by the protestors, announced late last week that it will launch direct imports of certain toys in order to lower their prices by avoiding the mark-up charged by commercial importers.
What allows these changes to be made in the structure of Israel’s economy is the flexibility afforded these companies by private ownership. As in all societies, the government is not interested in making the highest profit or in retaining the highest number of consumers. They are interested in policy, and in the longevity of their own power. As such, they almost necessarily will not be as receptive to public sentiment, and the cumbersome structure of government bureaucracy will make it slower to implement any changes that are decided upon.
Private industry is where the necessary changes will come from, due to simple self-interest that works to everyone’s benefit. Where the government cannot make commodities more accessible to the public, they must privatize the vehicles for those commodities’ provision. Where gasoline prices are far too high due to over-taxation, the fuel companies must be given greater leeway in determining prices based on the market realities of both supply and demand, and the relationship between the government and the fuel industry must be streamlined and relieved of government over-involvement.
To be sure, the government must strengthen anti-trust and anti-monopoly legislation in order to ensure that the changes that need to take place actually do. But those changes need to come from the companies themselves based on market realities, and not through budgetary irresponsibility on the part of the government.
Prime Minister Netanyahu has so far proven that he understands the need for private enterprise to operate in structuring the market. It now falls to him to act on that understanding – for the benefit of us all.