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"More serious ... is the effect of the Money Trust in directly suppressing competition," wrote Louis Brandeis (1856-1941 ), a great man and a great Zionist.
"But far more serious even than the suppression of competition is the suppression of industrial liberty, indeed of manhood itself, which this overweening financial power entails. The intimidation which it effects extends far beyond 'the banks, trust companies, and other institutions seeking participation from this inner group in their lucrative underwritings'; and far beyond those interested in the great corporations directly dependent upon the inner group. Its blighting and benumbing effect extends as well to the small and seemingly independent business man, to the vast army of professional men and others directly dependent upon 'Big Business,' and to many another.
"Nearly every enterprising business man needs bank credit. The granting of credit involves the exercise of judgment of the bank officials; and however honestly the bank officials may wish to exercise their discretion, experience shows that their judgment is warped by the existence of the all-pervading power of the Money Trust. He who openly opposes the great interests will often be found to lack that quality of 'safe and sane'-ness which is the basis of financial credit." ("Other People's Money And How the Bankers Use It," 1914.)
It took less than 10 years for the Israeli economy to become an atrophied, corrupt playing field for oligarchs. But the downslide ground to a sudden halt yesterday when the prime minister, the governor of the Bank of Israel and the Finance Ministry stood before the people of Israel and categorically admitted that the economy is concentrated in the extreme. This situation is harmful to freedom, competition, competitiveness, economic growth, wages and the very fabric of democracy itself.
The road to this moment was rocky, and the achievement is a rare and historic one. Admissions of this sort are usually made when the collapse is already in process, for a trivial reason. Before the collapse, in a concentrated, oligarchic, rotten economy, nobody in power wants the people to know the truth. The people live like in the film "The Matrix" - a virtual reality painted for them by the press, the decision-makers, the politicians, the professors and the jurists, who are part of the economic machine, or they depend on it for their living.
Economic concentration means the economy is dominated by a small handful of players who run things for their own good, not the public's. Israel didn't invent it. Brandeis inveighed against it a century ago.
For more than five years, this newspaper has been warning about the Israeli economy's concentrated structure and has been compiling the facts to support its argument. But it was only two years ago that the prime minister and Bank of Israel governor decided to take action to preempt the final implosion of Israeli democracy while the leveraged tycoons danced into the night.
Predictably, the establishment of a committee to study concentration in the Israeli economy, reach conclusions and make recommendations encountered a belligerent campaign by most of Israel's newspapers and business editors. They set out to defend their bosses and milieu tooth and claw.
Israel doesn't suffer from economic concentration, they wrote. The state of competition is dandy and there are no ties between wealth and government. Saying otherwise is populist.
But a very small group of public figures, economists, politicians and journalists dared to raise their voices. The list includes Knesset members Haim Oron and Einat Wilf, economists Dror Strum and Avi Ben-Bassat, public figures Yarom Ariav and Daniel Doron, and the leaders of the Movement for Quality Government in Israel, Eliad Shraga and Nili Even-Hen.
Most paid a heavy price immediately, finding themselves slimed by the tycoons' pet journalists for their pains.
Wakey wakey
The 10 regulators who sat on the economic concentration committee faced heavy pressure. There were the tycoons, who could potentially offer them lucrative jobs in the future. There were their pet journalists, most of whom didn't know the issue at stake particularly well. But most of the committee members had something else: integrity and independence. Only two or three were driven by fear or personal interests, and their presence hampered top-level analysis.
A year after the committee was set up, despite all the facts it had compiled, it seemed doomed.
And then came the grassroots upheaval. It began over the exorbitant price of cottage cheese, an Israeli favorite for breakfast, lunch and dinner. The phrase "economic concentration" began to be bandied about. People traded stories about it. Information that most of the media had ignored or suppressed broke out on the Internet.
The leaders started to realize that the perfect image transmitted by the Matrix was flickering, that the naked truth was taking shape. Prime Minister Benjamin Netanyahu called the committee members and was astonished to learn they were taking their sweet time. He ordered them to get a move on.
Gradually, politicians, academics and others found courage and began to speak out. The greater their number, the fewer their fears about speaking out. The words "economic concentration," "monopolies" and "competition" - which had been practically verboten in certain newspapers (except in the context of utter contempt ) - became common parlance.
As the bandwagon gained momentum, more and more economists, academics and political leaders jumped on. It's a shame they didn't find the courage earlier, but better late than never. Still, the riders need to be watched carefully for fear they really are warriors for breaking down the dominance of the many by the few, not a fifth column dedicated to undermining the revolution.
The composition of the committee, and the fact that it did most of the job with haste after the summer protests shook up our leaders, means that not all Israel's structural ailments were addressed.
Economic concentration will not suddenly evaporate with the enactment of new laws. Nor will it end four years later, by when the tycoons will have to decide whether they want to keep their financial companies or their industrial companies.
But Israel's economic leaders and the chairman of the economic concentration committee, Haim Shani, are due fulsome praise for establishing the panel, guiding it and standing strong as the pressures mounted.
The issue is extraordinarily complex. It's very difficult to clearly demonstrate the damage that economic concentration causes. Some of the issues are abstract such as the correlation among concentration, competition and competitiveness. They require knowledge of economics, finance, social sciences, antitrust law and lessons that can only be learned in the world of business.
The committee's recommendations will be undergoing lots of corrections and changes in the months to come. That's the work of the Knesset.
Some of the committee members themselves, including the Finance Ministry's budgets director, Gal Hershkovitz, want the recommendations to be stronger. But making that happen is the job of the parliamentarians, aided by economists, business people and the public. Their message must be crystal clear: We believe in the free market and in entrepreneurship. We are committed to strengthening Israeli business and excellence. We will succumb neither to "social justice" populism nor to the fury of the tycoons. We shall stay focused on our mission to build a better economic structure, diversified and free. This is crucial to democracy, to true social justice and to equality of opportunity.
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