A storm of protest has broken out over the new budget proposal presented by Finance Minister Lapid. I understand these protests, and if I was Yair Lapid I would have done some things a little differently (e.g increased the income tax on the higher earners more and the lower earners less; I would have increased V.A.T. by a higher percentage just on luxury goods– and not increased it on the food and daily needs). However, frankly, any of these changes are really in margins. The real problem is that prices in Israel are some of the highest in the world, while incomes are not anywhere near that level. That is the cause of all the anger. Nearly two years after “The Cottage Cheese Strike” began, the cost of cottage cheese remains incredibly high. Years after the government announced that we have a serious problem with the cost of housing, the cost goes up another 6%– this year alone.
To fight these twin and related phenomena– effectively caused by a lack of competition– there are a couple of simple, but radical solutions. First, allow the free import of all food into this country. As long as an item has passed either American or European standards, its imports should be allowed. All importers should be given six months to add Hebrew labeling to the packing. Until then, consumers can decide whether or not s/he wants to buy a product of which they might not fully understand the ingredients. Second, find a way to encourage Wal-Mart to open 6 Superstores here. Six Wal-Mart’s will do for the general cost of living in this country, what Ikea did for the cost of furniture. Finally, auction off ½ the state-owned land in the areas that are in and around the major cities over the course of the next year. With the proviso being that housing on that land is completed within 3 years. Then, I guarantee you the price of apartments will stop their climb and decrease.
Yes, there are some challenges and problems with these ideas. For example, we need to be careful that we do not ignore all planning. We also do not want to put all Israeli farmers out of business. Lastly, we need to make sure only quality construction is used. These ideas should however serve as the outlines of the needed revolution in our economy. Small changes will not have any serious effect on the cost of living and housing. Only radical changes can lead to improvement and economic relief.
Lapid’s plan helps decrease our budget deficit. Doing that is a necessary evil, that will not help the economy, but will potentially avoid future disaster. Bringing prices in Israel, more in line with our incomes will bring about the economic revolution that everyone is calling for.