It took several decades, but finally the Treasury noticed that
lack of
competition is costing the Israeli consumer hundreds of millions, probably billions, in "monopoly rents". And that lack of competition is also a major reason for economic stagnation.
In his "Estimates of the Damage Caused by Lack of Competition in Several Major Sectors" Treasury economist Dr. Eldad Shidlovsky has documented chapter and verse, the grave damage caused by lack of competition in the ports, electricity, fuel, banking, local telecommunications and milk.
His study revealed large cost differences between Israel and abroad, and a gross lack of efficiency resulting in low return on capital and large income gaps in favor of
workers employed in the non-competitive public-sector enterprises
Some of these differences were so outrageous that the study grabbed the media''s attention for a few days. Even media pundits who were unsympathetic towards Finance Minister Binyamin Netanyahu''s courageous attempt to break the
monopolies had to admit that the abuses of
monopoly powers must be curbed.
The media played up the stories of the Jaguar-driving head of a marine museum – not yet in existence – who earns NIS 60,000. Similar salaries are earned by certain union bosses for no-show jobs. Still, since the far greater damage the monopolies cause is very difficult to quantify, the media hardly discussed them.
Monopolies are like lumbering elephants. It is impossible to turn them into
competitive racehorses. Their dominance inhibits competition as they limit access to markets. The monopoly rents they impose raise the cost of labor and of doing business. They are therefore a major impediment also to export-oriented business.
Monopolistic port workers have very low productivity but earn three times the average wage and have very cushy work arrangements. This costs the economy about NIS 384 million annually. Ships forced to wait because the ports are so inefficient are paid $108m annually.
The port inefficiency imposes high costs on exporters and importers by damaging their competitive edge. It hurts low-income people who spend relatively more of their income on consumption.
So much for the Histadrut claim that by protecting the extraordinary privileges of unions it protects all workers.
The Israel Electric monopoly costs the economy an estimated $524m annually. The corporation employs 3000 unnecessary workers. They earn about twice the average wag, get free electrical and extraordinary pension benefits. The corporation return on capital fell from 3.1% in 1990s to 1.7% in 2000 and now is negative.
"The structure of the electric monopoly causes a grave distortion in the allocation of resources," Shidlovsky''s Treasury study concludes.
Inefficacy in the oil refineries costs the economy at least $150m to $200m annually. This is the result of poor use of capital investment and highly paid, bloated workforce. The bill is footed, of course, by the consumer
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