The confused citizen's guide
Questions & Answers
Q: What is so bad about centralization?
A: Centralization results in destroying competitiveness and the creation of monopolies which inflate prices by tens of percents. Consumers and especially the disadvantaged ones are forced to pay unnecessary billions for each product they buy, to a group of tycoons that have took over the economy and are extorting the public each day.
Q: To what degree is the Israeli economy centralized?
A: Ten monopolistic business groups control 30% of stock market assets. In the UK the ten biggest groups control about 5% of the market. Twenty oligarchic families control about half the value of shares traded. This kind of centralization is typical of countries such as Sudan or Zimbabwe, not a western Democracy.
Q: What is so terrible about centralization?
A: centralization suppresses competition, when there is no competition us consumers have no choice from where to buy a product or a service, and the manufacturers overcharge (food, clothing, housing, bank commissions, electricity, cell phones and many more examples).
Q: Does centralization affect us?
A: Absolutely, we are extorted and pay a third of our income to exploitive monopolies which control the market and overcharge as much as they please.
Q: So what, the market is a little centralized, does it affect prices?
A: Absolutely, food prices in Israel are almost identical to those in the USA, but salaries are about half, which means that we pay double the price in terms of buying power. The reason is inefficiency and lack of competition. Abolishing centralization will result in more manufacturers competing for clients in each industry, competition will boost efficiency and lower prices, and by that the public's buying power will increase. The result is that hundreds of thousands of poor Israelis will rise above the poverty line thanks to a substantial growth in their salary's buying power.
Q: What is so bad about having 20 families controlling half the market – they bought the companies with their own money, haven't they?
A: Even if they did use their own money they should not have been allowed to create this kind of centralization with its aforementioned problems. However, in a centralized market, notice that the tycoons do not spend their own money to take over many companies; they use their control of financial institutions to receive hundreds of millions in loans. They receive these loans without sufficient guarantees and in favorable conditions, and by that corrupt both the economy and the credit market.
Q: How does centralization effect the overall economical development? (esp. the Negev area and the Galilee)
A: The tycoons' and their mega-companies' control of the credit market prevents small businesses, which are the majority of Israel's businesses and have no banking connections, from having proper access to credit. This is the main reason why the Negev area and the Galilee, which are composed mainly of small and medium businesses, fail to develop. They have a permanent credit crunch. Most of the loans are taken by tycoons for real-estate speculation or to gamble on foreign exchange.
Q: OK, so a tycoon bought 20% of some company, and is paying himself an exaggerated salary while the share holders get pissed off. Why should I care? I never bought a stock in my life.
A: Even if you don't know this, you are invested in stocks. Our pension funds, on which we rely in our old age, invest billions of NIS in the stock market, in monopolistic companies with low profits. This very well may be your money spending on exaggerated salaries and donations to the needy in the name of the shareholders, donations that are actually made from your money and raise the tycoons' popularity at your expense.
Q: So we have rich mega-companies, so what, at least we will have "stability" in the next crisis.
A: On the contrary. A tycoon-held company might make business decisions in favor of "the Big Boss" and not its businesses. Inefficiency might ultimately lead to the company's collapse.
Q: They say that one of the tycoons owns both a company and a bank, what does that mean?
A: It means that the bank in which we deposit our savings is giving billions' worth of loans to the tycoon's company even without guarantees and despite the high risk. A bank that takes a risk like that, might one day collapse, and with it – our savings.
Q: Tycoons who are that big can never go bankrupt, right?
A: Yes they can. In fact, size can be a source of inefficiency. Furthermore, when such a big business entity collapses, many parts of the economy fall with it. Even those who are not working directly for the tycoon, but for a company that sells products to his company, might find themselves unemployed after a bankrupt. It’s a danger to the whole economy.
Q: Let's say we reduce centralization a little; we'll still pay the same prices, won't we?
A: We'll pay a lot less. Today we pay inflated prices because we have no real options to choose from. Just try and remember how much we used to pay for long distance calls before the market was open for competition, how much a cell phone cost before Cellcom came along and broke Pelephone's monopoly, and how our TV was like when we had only one channel. Once there's competition the manufacturers have no choice but to increase efficiency and lower prices. The struggle against centralization will benefit the public a great lot.
Q: I heard the economy is centralized because we have a small country. So, there isn't anything we can do, is there?
A: Yes there is. Ireland is a lot less centralizes than Israel and the population is similar in size. When it comes to economy, the size of population or territory is not what matters, but the size of the markets with which the country trades, for example China and Hong Kong (before it was consumed by China).
Q: Israel has always been centralized, is there anything at all that can be done about it?
A: Absolutely! Israel has been a lot more centralized till the 80's and conducted reforms have improved the situation. The tycoons are now fighting against the reform because they know that such change is possible, and they want to keep the power to expropriate prices and extort the public.
Q: How can the small shareholders, the ones that hold most shares and have no time to deal with managing the company, oversee the acts of a sophisticated tycoon that bought 20% of the company?
A: By selling their shares once the company is not functioning properly and by involvement in corporate management and appointing a board of directors, by which they can demand accountability from the public representatives on the board.
It's important to change the legislation to increase the power of public representatives against the majority shareholders.
Just look at the efforts the tycoons and their media servants are putting, how many resources they are spending to stop the reform, and you will realize that for them danger is imminent, which means that there is a real possibility to create a successful reform.
We can and should dismantle the malignant centralization!
The Committee to examine economic centralization should make recommendations for action soon.
If you wish, act and press on – we will achieve our goal!
The confused citizen's guide
Questions & Answers
Q: What is so bad about centralization?
A: Centralization results in destroying competitiveness and the creation of monopolies which inflate prices by tens of percents. Consumers and especially the disadvantaged ones are forced to pay unnecessary billions for each product they buy, to a group of tycoons that have took over the economy and are extorting the public each day.
Q: To what degree is the Israeli economy centralized?
A: Ten monopolistic business groups control 30% of stock market assets. In the UK the ten biggest groups control about 5% of the market. Twenty oligarchic families control about half the value of shares traded. This kind of centralization is typical of countries such as Sudan or Zimbabwe, not a western Democracy.
Q: What is so terrible about centralization?
A: centralization suppresses competition, when there is no competition us consumers have no choice from where to buy a product or a service, and the manufacturers overcharge (food, clothing, housing, bank commissions, electricity, cell phones and many more examples).
Q: Does centralization affect us?
A: Absolutely, we are extorted and pay a third of our income to exploitive monopolies which control the market and overcharge as much as they please.
Q: So what, the market is a little centralized, does it affect prices?
A: Absolutely, food prices in Israel are almost identical to those in the USA, but salaries are about half, which means that we pay double the price in terms of buying power. The reason is inefficiency and lack of competition. Abolishing centralization will result in more manufacturers competing for clients in each industry, competition will boost efficiency and lower prices, and by that the public's buying power will increase. The result is that hundreds of thousands of poor Israelis will rise above the poverty line thanks to a substantial growth in their salary's buying power.
Q: What is so bad about having 20 families controlling half the market – they bought the companies with their own money, haven't they?
A: Even if they did use their own money they should not have been allowed to create this kind of centralization with its aforementioned problems. However, in a centralized market, notice that the tycoons do not spend their own money to take over many companies; they use their control of financial institutions to receive hundreds of millions in loans. They receive these loans without sufficient guarantees and in favorable conditions, and by that corrupt both the economy and the credit market.
Q: How does centralization effect the overall economical development? (esp. the Negev area and the Galilee)
A: The tycoons' and their mega-companies' control of the credit market prevents small businesses, which are the majority of Israel's businesses and have no banking connections, from having proper access to credit. This is the main reason why the Negev area and the Galilee, which are composed mainly of small and medium businesses, fail to develop. They have a permanent credit crunch. Most of the loans are taken by tycoons for real-estate speculation or to gamble on foreign exchange.
Q: OK, so a tycoon bought 20% of some company, and is paying himself an exaggerated salary while the share holders get pissed off. Why should I care? I never bought a stock in my life.
A: Even if you don't know this, you are invested in stocks. Our pension funds, on which we rely in our old age, invest billions of NIS in the stock market, in monopolistic companies with low profits. This very well may be your money spending on exaggerated salaries and donations to the needy in the name of the shareholders, donations that are actually made from your money and raise the tycoons' popularity at your expense.
Q: So we have rich mega-companies, so what, at least we will have "stability" in the next crisis.
A: On the contrary. A tycoon-held company might make business decisions in favor of "the Big Boss" and not its businesses. Inefficiency might ultimately lead to the company's collapse.
Q: They say that one of the tycoons owns both a company and a bank, what does that mean?
A: It means that the bank in which we deposit our savings is giving billions' worth of loans to the tycoon's company even without guarantees and despite the high risk. A bank that takes a risk like that, might one day collapse, and with it – our savings.
Q: Tycoons who are that big can never go bankrupt, right?
A: Yes they can. In fact, size can be a source of inefficiency. Furthermore, when such a big business entity collapses, many parts of the economy fall with it. Even those who are not working directly for the tycoon, but for a company that sells products to his company, might find themselves unemployed after a bankrupt. It’s a danger to the whole economy.
Q: Let's say we reduce centralization a little; we'll still pay the same prices, won't we?
A: We'll pay a lot less. Today we pay inflated prices because we have no real options to choose from. Just try and remember how much we used to pay for long distance calls before the market was open for competition, how much a cell phone cost before Cellcom came along and broke Pelephone's monopoly, and how our TV was like when we had only one channel. Once there's competition the manufacturers have no choice but to increase efficiency and lower prices. The struggle against centralization will benefit the public a great lot.
Q: I heard the economy is centralized because we have a small country. So, there isn't anything we can do, is there?
A: Yes there is. Ireland is a lot less centralizes than Israel and the population is similar in size. When it comes to economy, the size of population or territory is not what matters, but the size of the markets with which the country trades, for example China and Hong Kong (before it was consumed by China).
Q: Israel has always been centralized, is there anything at all that can be done about it?
A: Absolutely! Israel has been a lot more centralized till the 80's and conducted reforms have improved the situation. The tycoons are now fighting against the reform because they know that such change is possible, and they want to keep the power to expropriate prices and extort the public.
Q: How can the small shareholders, the ones that hold most shares and have no time to deal with managing the company, oversee the acts of a sophisticated tycoon that bought 20% of the company?
A: By selling their shares once the company is not functioning properly and by involvement in corporate management and appointing a board of directors, by which they can demand accountability from the public representatives on the board.
It's important to change the legislation to increase the power of public representatives against the majority shareholders.
Just look at the efforts the tycoons and their media servants are putting, how many resources they are spending to stop the reform, and you will realize that for them danger is imminent, which means that there is a real possibility to create a successful reform.
We can and should dismantle the malignant centralization!
The Committee to examine economic centralization should make recommendations for action soon.
If you wish, act and press on – we will achieve our goal!