Breaking Israel’s oligopoly: How consumer welfare can save the economy - opinion

The worst problems are those that are self-inflicted – problems we have the power to solve but allow to persist through inertia, corruption, and neglect. In Israel, a nation perpetually distracted by external threats, the economy has become a source of growing frustration for its citizens.

The disparities are staggering: The economic system places a disproportionate burden on the lower and middle classes while enabling structural advantages for a privileged few. And yet, despite its dysfunctions, Israel continues to grow, innovate, and compete in the global marketplace. This paradox demands scrutiny.

The economic ailments themselves are not mysterious. Any engaged citizen can rattle off the fault lines: overregulation, a lack of enforcement, stagnant income tax brackets that haven’t been reformed in nearly three decades, and deeply entrenched concentrations of wealth. But these all point to a single, unaddressed core value: consumer welfare.

Among all Organization for Economic Co-operation and Development countries, Israel ranks among the lowest in this regard. Understanding the systemic neglect of consumer welfare provides a key to unlocking solutions to many of Israel’s most persistent economic challenges.

Let’s define the term clearly. Consumer welfare refers to the benefits people receive from purchasing and using goods and services.

The deeper truth is structural. Internal policy inertia, regulatory capture, and a culture of protectionism have compounded the unavoidable burdens of national defense into a broader system of economic dysfunction.

ISRAEL’S ECONOMY functions as an oligopoly, a market dominated by a small number of interdependent firms that suppress competition, control pricing, and stifle employment growth. Anyone living here recognizes the symptoms: identical pricing between major food retailers, stifling regulatory hurdles for new businesses, and yet a suspicious ease for the existing giants.

Fighting the economic cartels in Israel

From the Rothschild Boulevard protests to parliamentary committees and political parties promising reform, many have tried, and most have failed. Even modest successes have proven fleeting.

Golan Telecom, once a breath of fresh air in the telecom sector, temporarily drove prices down by offering competitively low rates. Fifteen years later, it was swallowed by the very oligopoly it disrupted, and prices have steadily climbed ever since. The cottage cheese protests of the early 2010s forced a parliamentary response, but implementation was partial and slow.

Carrefour’s 2023 arrival in Israel was marketed as a revolution in food pricing. Yet within a year, its imported products were priced no differently than the Israeli brands they were meant to challenge. The illusion of reform serves the entrenched far better than reform itself.

The root of the problem is cultural as much as economic. Consumer welfare is not just an economic principle; it is a civic value. Israel’s socialist origins, its constant state of alert, and a political system plagued by instability and low voter accountability have all eroded public expectations of economic fairness.

Without a cultural demand for dignity in the marketplace, the structure will not change. And yet, the pressure is mounting. As threats escalate on Israel’s borders, the call for relief within the home grows louder. Inequality, cronyism, and economic stagnation are no longer tolerable side effects of national resilience. They are obstacles to it.

To restore balance and ensure prosperity, Israel needs more than marginal fixes; it needs structural reimagining. That begins with elevating consumer welfare to a guiding national principle.

THE KNESSET should enshrine consumer welfare in law, requiring all legislation, regulation, and enforcement to prioritize consumer benefit over monopolistic entrenchment. This provides the legal basis to dismantle protective licensing regimes and reshape market dynamics around fairness, not favoritism.

Tax brackets must be overhauled to reflect the lived economic reality of Israeli citizens. Today’s system defines upper-income earners by outdated thresholds that ignore the true cost of living in Israel. The result is a tax structure that burdens the very middle class it should be empowering, penalizing families and professionals who are merely trying to stay afloat.

A genuine reform must raise the upper tax thresholds to reflect Israel’s inflated housing, education, and consumer costs while relieving the middle class to unleash disposable income, fuel entrepreneurship, and stimulate broad-based growth. At the same time, the stifling bureaucracy around business creation must be dismantled to open the floodgates for innovation and upward mobility.

Breaking Israel’s import monopolies is equally urgent. This means radically simplifying customs protocols, ending protectionist practices disguised as regulation, and ensuring transparent, competitive access to distribution channels in key sectors like food, appliances, and transportation.

We must also rethink how national wealth is distributed. Israel should establish a sovereign wealth fund modeled after Norway or Alaska, funded by natural gas revenues and other national assets. But instead of parking these funds in distant investments, a meaningful share should be distributed annually to citizens as cash dividends.

This would transform Israel’s natural resources into shared civic wealth, creating a real economic stake for every Israeli in the nation’s success. Tying eligibility to civic contributions, such as national service or volunteerism, would deepen the connection between citizenship and shared prosperity.

At the same time, long-term consumer welfare cannot be achieved without addressing Israel’s hidden labor gaps. A serious effort must be made to integrate the haredi sector into the formal economy. This means targeted and meaningful vocational education and workforce incentives, integrating their religious requirements into their overall employment, and new frameworks for civic contribution that link national dividends to participation. A nation cannot build a just economy when entire populations remain disconnected from productivity and shielded from contribution.

Finally, Israel should embrace the power of civic tech. A state/start-up partnership could launch a national digital platform where consumers anonymously pool purchase data to expose inflated pricing and monopolistic practices. Imagine an AI assistant, a kind of Waze for your wallet, guiding consumers to the best deals while flagging corporate abuse and feeding enforcement data to regulators. Transparency is no longer a luxury; it is the front line of economic justice.

It is long past time to place the Israeli citizen – the worker, the parent, the student, the small business owner – at the center of the economy. Consumer welfare must become more than a policy footnote; it must be a cultural norm. Only then will Israel fulfill its promise, not just as a Start-Up Nation for the few but as a fair and flourishing society for the many.

The writer is the co-founder of the Jewish National Initiative and a hi-tech executive.