These Protests are no Media Hype - Saying No to Israel’s Rigged Economy

I enjoy reading the wide variety of opinions in the Jerusalem Post and elsewhere.   Particularly interesting for me are the “dyed in the wool” , true blue conservative pieces which for me would be mildly entertaining, if indeed  it were not so worrying, as it appears many of you identify with such approaches to life here in Israel. 

However in regard to the current protests in the country, even for the most avid free marketeer, anger, denial and what appears to be the inability to grasp the basic problems within the financial makeup of our country, is frankly inexcusable.

If we look at Israel’s record of privatisation and supposed deregulation over the years, we will see that the manner in which this was done has been disastrous for the country, while admittedly. extremely profitable for a fortunate and unscrupulous few.  The old government monopolies where privatised with the aim of making them more efficient.  Indeed in private hands they are more efficient, and more profitable however, they are still monopolies meaning, the market is anything but free. 

One example is the privatised and  “sole” cement manufacturer in Israel.  For some inexplicable reason cement is still labelled as a “strategic” product in Israel, thus a monopoly is maintained, where our now privately owned cement producer can charge artificially high prices and exercise undue control over the building industry.  This is the sad reality of the free market in Israel.

If you or I want to borrow money from a bank in this country we will be expected to secure any such loan with all our worldly goods as well as getting our four best friends to sign as guarantors.  If we get into difficulty and find ourselves unable to repay the loan, our goods will be taken from us.  We will be turfed out of our homes, and our friends will never speak to us again, as they too will have been called upon to cover our outstanding debts.  

We will also be blacklisted by the banks for the rest of our lives, making it almost impossible to recover. The bank on the other hand will have charged us exorbitant fees in the process while having taken no risk whatsoever.  It is little wonder the banks are so “strong” in this country. 

Then again, if you are one of the “chosen few” in the country who control business in this “anything but free” economy, you can borrow as much as you like from the banks, provide no personal guarantees whatsoever, make hay while the sun shines, and then decide not to repay the loan, when it all goes wrong. You will keep your “ill gotten” gains, your friends will continue to laud your brilliance and seek your favour, while the supposedly free market investors, i.e. you and I (the suckers), through our savings schemes and pension funds, will foot the cost of this apparently legal exercise, just one more example of the free market at work in Israel today.  

When a business “tycoon” can announce his intention not to repay outstanding loans of NIS2 billion in one company, and in the same week borrow another NIS 300 million for another of his companies, you know that the system is sick, if not wholly corrupt.

All you “free marketers” out there need to take a long hard look at yourselves and the country.  Perhaps you may also like to take a look at the wider world. The free market system, and here I mean the under regulated “laissez-faire” free market, has failed.  For those of you, who claim to abhor any form of government intervention in the economy, let me remind you that it was the mass intervention of governments in the economy and their readiness to come to the rescue of the banking system that saved your sorry asses and the world economy as a whole.  Free market practices in the hands of greedy and unscrupulous individuals led the world to the brink of disaster, and a recession from which it may take a generation to recover.

Unfortunately the rescue is now resulting in the failure of national economies across the world.  The free market and the banks in particular, gave us the debt crisis, however the banks have now recovered, paid back their loans to government and resumed their over inflated bonus cultures.  All’s well that ends well, I suppose. 

However, as a result of the debt crisis, countries in Europe are now failing financially and America, that bastion of free market economics; is essentially bankrupt.  The consequences of the free market running riot are now being paid for by ordinary working people throughout the world.

Despite the fact that we may not be bankrupt, this is also the case in Israel today.  We are forced to pay artificially high and unjustifiable prices for just about every aspect of our lives, as a result of the ludicrous concentration of wealth in the country and consequent lack of competition in the economy, caused by a host of flawed and negligent (I’m being kind) policies introduced by recent governments who blindly followed the gospel according to that false messiah Milton Friedman.  And this is why ordinary people across the board, are standing up and joining the protests.

The irresponsible and unregulated nature of the free market in Israel has led to an unsustainable situation where between 60% to 70% of bank lending capacity is swallowed up by a very small number of families, or organizations if you prefer.  What does that leave for the rest of us?  Cross ownership of industrial, manufacturing, consumer and financial services companies gives a very few, a strangle hold on our economy.  It leads to situations where supposedly independent investment decisions are anything but, and where tycoons are in effect lending money to themselves, our money by the way, again via our savings, investments or pensions.  Adding insult to injury, this also perpetuates the woeful lack of genuine competition across the economy.

It is this lack of any meaningful or effective regulation in our country which has led to this mess, and to a situation where the illusion of a healthy economy can be sold by ministers and conservative commentators, lauding our low unemployment figures and healthy balance of payments, along with the strength of the shekel.  However like most statistics, these can be manipulated and made to say whatever you want.

Low unemployment means very little when those working and working hard; are still unable to make it through the month.  A healthy balance of payments is of little consequence to a family who are unable to buy their own home or pay the exorbitantly high rent being asked in this supposed free market. 

Statistics and government spin does not help ordinary hard working people feed, clothe and educate their children.  Here we are not talking about the 25% of Israeli families living beneath the poverty line.  We are speaking about the supposedly middle class, middle income families, who make up the majority of our taxpaying citizens.

For any out there still in doubt the current protests which indeed began with less than one hundred protestors setting up camp in Rothschild Boulevard, but which can now attract over 5% of the population to come out on to the streets to protest; are no invention of the media.  They are genuine protests which have captured the imagination of the vast majority of people in the country across the political spectrum. 

They have captured the imagination because the issues raised in the protests are those which affect almost every person in this country, man women and child on a daily basis.  The issues of housing, education, health and the right to earn a living wage and live with dignity are not a media invention.  They are the very basis of a modern democratic and free, yes free society.  It is incumbent upon our government to ensure that the needs of the people are addressed and not to leave the vast majority of us to the mercy of the markets.

Reducing the tax burden on the rich, while increasing the tax burden on the middle class is not a recipe for economic success, it is a fraudulent exercise in economic apartheid, where the interests of the few are separated and prioritised over those of the country as a whole.  The government’s reluctance to tackle the concentration of wealth in this country has had dire consequences and raises suspicion of collusion. The people who suffer these consequences have finally had enough.  In the absence of responsible and effective leadership, the people have decided to stand up and take action. I have rarely been prouder to be Israeli.

In Israel today we need genuine freedom, freedom from irresponsible and ineffective government, freedom from the tycoons, freedom from the monopolies and freedom from a broken system which does not serve the interests of the country as a whole. 

Without the intervention of international governments in the recent past, the free market would have led to the end of society as we know it.  Socially responsible capitalism can only work where there is an effective and efficient system of regulation to correct the anomalies and the excesses of the free market.

That is not media hype.  That is the people taking action to reassert their authority over their elected representatives, and control over their lives.